Chapter

Country Surveys

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
September 1974
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Afghanistan

Exchange Rate System

The par value is 0.0197482 gram of fine gold per Afghani, corresponding to Af 45 = SDR 1. No exchange transactions take place at the par value. The Afghanistan Bank (the central bank) charges commissions ranging from 110 of 1 per cent to ½ of 1 per cent on exchange transactions. The Bank’s official buying and selling rates for the U.S. dollar are Af 44.70 and Af 45.30, respectively. The official selling rate applies to certain foreign exchange payments by the Central Government (debt service, contributions to international organizations, salaries of foreign experts, and the foreign exchange requirements of Afghan embassies and missions abroad). The official buying rate applies to the proceeds of exports of natural gas (which is exported only to the U.S.S.R.); to 40 per cent of the foreign currency salaries of foreign employees of the Government, government enterprises, and domestic companies; and to purchases of bilateral agreement currencies for maintenance in Afghanistan of embassies and state trading organizations by the respective bilateral partner countries.

Special arrangements are applicable to karakul, cotton, and wool. The proceeds from exports of karakul are eligible for settlement either at an effective exchange rate of Af 75 per US$1 (official exchange rate plus exchange subsidy of Af 30 per US$1) or at the free market rate, if lower than Af 75 per US$1. The surrender rate for proceeds from wool exports to the convertible currency area is Af 65 per US$1 (official rate plus subsidy of Af 20 per US$1), while that for wool exported to bilateral countries is Af 60 per US$1 (official rate plus subsidy of Af 15 per US$1). The surrender rate for proceeds from cotton exports to bilateral countries is Af 60 per US$1 (official rate plus subsidy of Af 15 per US$1), while the proceeds from exports of cotton to the convertible currency area are eligible for settlement either at Af 70 per US$1 (official rate plus subsidy of Af 25 per US$1) or the free market rate, whichever is lower. As at the end of 1973, the exchange subsidies on karakul and cotton were inoperative since the free market rate was well below Af 70 per US$1.

All other transactions take place at free market rates through either the banks or the bazaar; proceeds from the export of walnuts received over bilateral payments accounts are subject to an exchange tax of 9.5 per cent. The Afghanistan Bank maintains its operational free market selling rate for the U.S. dollar within Af 2.0 per US$1 of the daily free market rate quoted in the bazaar. On December 31, 1973, the free market rate of the Afghanistan Bank was Af 58.00 buying, and Af 60.00 selling, per US$1, and the free market rate in the bazaar was Af 58.50 buying, and Af 59.00 selling, per US$1. The Afghanistan Bank also posts free market rates for deutsche mark, French francs, pounds sterling, and Swiss francs, which reflect their relative values to the U.S. dollar in international markets, and free market rates for the Indian rupee and Pakistan rupee, which are determined by demand and supply for the currencies concerned. The Afghanistan Bank from time to time buys and sells in the free market bilateral agreement dollars and bilateral agreement sterling resulting partly from loans for consumer goods under certain of Afghanistan’s bilateral payments agreements; most of this exchange sold by the Bank is purchased by government commercial and industrial enterprises for their imports from the countries concerned. The selling rate for U.S.S.R. clearing dollars was Af 70.50 per US$1 on December 30, 1973, and that for Chinese clearing sterling (the People’s Republic of China) was Af 200.00 per £ stg. 1. On the same date, the selling rate for clearing dollars under the payments agreements with Czechoslovakia and Yugoslavia was Af 65.50 per US$1.

Administration of Control

Foreign exchange is controlled by the Government through the 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, with the exception that the export of cotton is reserved for seven authorized companies.

Prescription of Currency

Settlements with countries with which Afghanistan has bilateral payments agreements1 must be made in the foreign currencies specified in the agreements. The proceeds from exports of karakul, wool, and cotton to other 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. Imports of a few items (e.g., some drugs, liquor, arms, and ammunition) are prohibited on public policy grounds or for security reasons; in some instances, however, special permission to import these goods may be granted. The importation of certain other goods (e.g., a few textiles and selected nonessential consumer goods) also is prohibited. There are no quantitative restrictions on other imports. Most bilateral agreements, however, specify quotas (and sometimes prices) for commodities to be traded, and the Government facilitates the fulfillment of the commitments undertaken in the agreements. On the whole, trade with bilateral agreement countries is carried out on a compensation basis and usually both imports and exports are arranged by the same trader; imports against exports of cotton and wool are carried out by the Government or government agencies, or the proceeds of exports are allocated for the Government’s external debt servicing.

Payments for imports through the banking system to payments agreement countries may be made only under letters of credit. Payments to other countries may also be made 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. A deposit of 100 per cent of the value of the imports in afghanis calculated at the prevailing free market rate, or in foreign exchange, is required upon establishment of a letter of credit. Such deposits may be used as collateral to obtain loans from commercial banks. The Afghanistan Bank is authorized to refuse to sell foreign exchange for the importation of a group of consumer goods that are regarded as nonessential. However, exchange for these items may be purchased either from the commercial banks or in the bazaar.

Payments for Invisibles

Central government payments for foreign debt service and certain other invisibles are made at the official rate. All other payments are settled at free market rates. Travelers are not allowed to take out more than Af 500 in domestic banknotes.

Exports and Export Proceeds

Exports are not subject to license. 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). Karakul is not exported to payments agreement countries.

Exchange receipts from exports of karakul, wool, and cotton must be surrendered at the appropriate exchange rate (see section on Exchange Rate System, above). The net proceeds of all other exports must either be sold at free market rates to a domestic bank or be used by the exporter or a third party to pay for imports.

Proceeds from Invisibles

Forty per cent of the foreign currency salaries of foreign employees of the Afghan public and private sectors must be converted into afghanis at the official rate, but the remaining 60 per cent may be remitted abroad or exchanged at the free market rate. Except in the case of India, receipts over bilateral payments agreement accounts from the embassies and state trading organizations of the countries concerned for their local expenses in Afghanistan are converted at the official rate. All other receipts from invisibles are sold at free market rates through either the banks or the bazaar. Travelers entering Afghanistan may not bring in more than Af 500 in Afghan banknotes.

Capital

Foreign investment in Afghanistan requires prior approval and is administered, as is domestic private investment, by an Investment Committee composed of five cabinet ministers. The Foreign and Domestic Private Investment Law (February 10,1967) provides for a number of benefits, which include (1) income tax exemption for five years, beginning from the date of the first sales of products resulting from the new investment; (2) exemption from import duties on essential imports for five consecutive years after approval of the investment; (3) exemption from taxes on dividends for five years after the first distribution of dividends, but not more than eight years after the approval of the investment; (4) exemption from personal income tax and corporate tax on interest on foreign loans which constitute part of an approved investment; (5) exemption from export duties for ten years after the approval of the investment; and (6) mandatory purchases by government agencies and departments of their requirements from enterprises established under the law where such products are substantially competitive with imports in price and quality. The law also establishes that an investment approved by the Investment Committee shall require no further license to operate in Afghanistan.

Principal and interest installments 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 25 per cent of the total registered capital. All the foregoing transfers are made through the free market. Joint ventures of foreign and Afghan capital are encouraged, but no specific percentages of domestic participation are prescribed and 100 per cent foreign-owned investments are not precluded by law.

Gold

Residents may freely purchase, hold, and sell domestically gold in any form in Afghanistan. Imports of gold are restricted. Exports of gold and silver in any form other than jewelry require licenses issued by the Council of Ministers; such licenses are not normally granted except for exports by or on behalf of the monetary authorities and industrial users. 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. The import duty on gold is 1 per cent.

Changes during 1973

February 13. Following the announcement that the U.S. dollar was being devalued, the official rate for the U.S. dollar was maintained unchanged at Af 45 = US$1.

February 25. The bilateral payments agreement with Bulgaria was terminated. Henceforth all settlements took place in convertible currencies.

March 21. The surrender rate for proceeds from karakul exports was changed from Af 65 per US$1 (official rate plus exchange subsidy of Af 20 per US$1) to either Af 75 per US$1 or the free market rate if lower than Af 75.

The surrender rate for proceeds from wool exports to the convertible currency area was changed from Af 55 (official rate plus exchange subsidy of Af 10 per US$1) to Af 65 per US$1. The surrender rate for proceeds from wool exports to bilateral markets was changed from Af 45 to Af 55 per US$1 through the introduction of an exchange subsidy of Af 10 per agreement dollar.

The surrender rate for cotton exports to bilateral markets remained unchanged at Af 52 per US$1 and that for cotton exports to multilateral markets remained at Af 70 per US$1.

All foreign exchange payments of the Government previously settled at the official rate were shifted to the free market late, with the exception of debt servicing, contributions to international organizations, salaries of foreign experts, and the foreign exchange needs of Afghan embassies and missions abroad. As a result, the Government ceased to make exchange for imports available at the official rate.

April 9. The Afghanistan Bank’s selling rate for clearing dollars under the payments agreements with Czechoslovakia and Yugoslavia was raised from Af 65.50 to Af 70.50 per US$1.

May 24. The bilateral payments agreement with Poland was terminated. Henceforth all settlements were made in convertible currencies.

July 9. The Afghanistan Bank’s selling rate for Chinese clearing sterling (the People’s Republic of China) was reduced from Af 221.50 to Af 211.50 per £ stg. 1.

July 16. The surrender rates for proceeds from exports of the remainder of the 1972II3 cotton crop were changed. For exports to the convertible currency area the rate was changed from Af 70 per US$1 (official rate plus exchange subsidy of Af 25 per US$1) to either Af 70 per US$1 or the free rate, whichever was lower. For exports to bilateral markets, the surrender rate was changed from Af 52 to Af 60 per US$1 through an increase in the exchange subsidy from Af 7 to Af 15 per agreement dollar.

The surrender rate for proceeds from wool exports to bilateral markets was changed from Af 55 to Af 60 per US$1 through an increase in the exchange subsidy from Af 10 to Af 15 per agreement dollar.

July 20. Residents’ access to the free market for certain current payments and certain outward capital transfers was restricted. A limit was imposed on the amount of foreign banknotes that travelers were allowed to take out without central bank permission; this limit was the equivalent of US$50 a person a trip.

August 18. The Afghanistan Bank’s selling rate for Chinese clearing sterling (the People’s Republic of China) was reduced from Af 211.50 to Af 200.00 per £ stg. 1.

October 6. The proportion of the foreign currency salaries of foreign employees which must be converted into afghanis at the official rate was increased from 30 per cent to 40 per cent.

November 12. Payments for imports through the banking system to all countries, except those with which Afghanistan has bilateral payments agreements, were allowed to be made against bills for collection or against an undertaking by the importer to import goods equal to at least the value of the payment made through the banking system. Previously such payments were allowed only under letters of credit.

November 21. The Afghanistan Bank’s selling rate for clearing dollars under the payments agreements with Czechoslovakia and Yugoslavia was reduced from Af 70.50 to Af 68.50 per US$1.

November 28. The Afghanistan Bank’s selling rate for clearing dollars under the payments agreements with Czechoslovakia and Yugoslavia was reduced from Af 68.50 to Af 65.50 per US$1.

December 26. The prohibition on the import of cotton yarn was terminated.

Algeria

Exchange Rate System

The par value is 0.180000 gram of fine gold per Algerian Dinar, corresponding to DA 4.93706 = SDR 1 or DA 4.09257 = US$1, and Algeria avails itself of wider margins. The exchange rate for the French franc is a fixed rate of DA 1 = F 1.12499; this rate is applied irrespective of the exchange market for which the settlement is eligible in France.1 The Central Bank of Algeria deals in French francs and the other French Franc Area currencies at fixed rates. Buying and selling rates for specified currencies of countries outside the French Franc Area2 are established by the Central Bank, generally on the basis of the daily rates quoted on the French official exchange market and other exchange markets abroad. The exchange rate applicable to “agreement dollars” is the average rate for the U.S. dollar in the Paris official exchange market on the day preceding the entry on the clearing account. The Central Bank charges on its transactions in foreign currencies a commission ranging from 0.2 per mill to 0.4 per mill, depending on the nature of the transaction, and a tax of 6 per cent on the amount of the commission. A premium is granted on the conversion of convertible currencies repatriated by Algerians working abroad.

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 outside Algeria cover for documentary credits. There are no forward exchange facilities.

Administration of Control

The Ministry of Finance and the Central Bank have general jurisdiction over exchange control. The Central Bank assists in the formulation of the exchange legislation and regulations and is responsible for their execution and for their application by the authorized banks. In addition, three commercial banks and the Postal Administration have been given authority to carry out some of the details of exchange control. Import and export licenses and global import authorization are issued by the Ministry of Commerce. Import and export licenses require the visa of the Central Bank. The Office National de Commercialisation (Onacx), the Office Algérien Interprofes-sionnel de Céréales (OAIC), the Office National de Commercialisation des Produits Vitivinicoles (ONCV), the Société Nationale des Tabacs et Allumettes (SNTA), the Société Nationale d’Edition et de Diffusion (SNED), the Société Nationale de Siderurgie (SNS), the Société Nationale de Constructions Mécaniques (Sonacome), and other similar organizations have a monopoly over the import of a large number of commodities. The Société Nationale pour la Recherche, la Production, le Transport, la Transformation et la Commercialisation des Hydrocarbures (Sonatrach) has a monopoly over imports and domestic sales of petroleum and petroleum products, and handles most exports of these commodities. Investment of foreign capital in excess of DA 500,000 in Algeria requires approval by a National Investment Committee in order to obtain the benefits of the Investment Code. All foreign borrowing requires the prior approval of the Minister of Finance.

Prescription of Currency

Algeria has certain traditional ties with the French Franc Area. The Central Bank does not maintain an Operations Account with the French Treasury and Algeria in principle applies its exchange controls to transactions with all countries.3 Settlements with other countries in the French Franc Area are generally made in French francs. Settlements with countries with which Algeria has concluded bilateral payments agreements are made through special accounts under the terms of the agreements. Some of these accounts are denominated in Algerian dinars and others in U.S. dollars of account. Algeria maintains payments agreements with Albania, Bulgaria, the People’s Republic of China, Czechoslovakia, Egypt, Guinea, Hungary, North Korea, Poland, Romania, the U.S.S.R., and Yugoslavia.4 Specified settlements with Morocco are channeled through a dirham account at the Bank of Morocco. Settlements with other countries may be made through the Paris exchange markets in French francs or in the currency of the country concerned.

Nonresident Accounts

For residents of countries outside the French Franc Area, the regulations pertaining to nonresident accounts are similar to those applied until early 1967 in France; most of these accounts are Foreign Accounts in Convertible Dinars, which are held by diplomatic missions, or Internal Nonresident Accounts which are denominated in convertible dinars. For residents of other French Franc Area countries, there are three types of accounts in Algerian dinars: Individual Suspense Accounts, Franc Area Accounts, and Final Departure Accounts. Except as described below, all operations through these accounts are subject to authorization.

Individual Suspense Accounts may be opened without authorization and may be credited with payments from any country.

Franc Area Accounts may be opened only with prior authorization from the Central Bank. They may be credited freely for authorized imports from the French Franc Area, and with proceeds from the sale of convertible currencies; with proceeds from the sale of freely disposable funds (other than notes and coins) in the currencies of other countries of the French Franc Area; and with interest on the balances of Franc Area Accounts. The Central Bank may authorize the crediting of other payments. They may be debited freely for any payment in Algeria to a resident of any country in the French Franc Area (including Algeria); for any transfer to the credit of an account of a person residing in a country in the French Franc Area other than Algeria; and for any amount due to the bank with which the account is kept, for interest, commissions, or repayment of capital claims. Transfers between these accounts are free.

Final Departure Accounts may be opened, without prior authorization, in the name of any person residing in Algeria, but not of Algerian nationality, who intends to leave Algeria for another country in the French Franc Area. These accounts may be credited freely with an amount equivalent to the holdings at 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 sales are made through the intermediary of a notary public; with the proceeds of the sale of securities and the cashing of coupons; and with any other payments, up to DA 1,000. The Central Bank may authorize the crediting of other specific payments. These accounts may be debited without prior approval for certain payments in Algeria on behalf of the account holder. Outward transfers require individual approval; accounts holding balances up to DA 10,000 have been released for transfer abroad.

The Central Bank of Algeria maintains special accounts for central banks of the countries with which Algeria has concluded payments agreements.

Residents and nonresidents may maintain certain accounts in Algeria that are fed with the proceeds from the conversion of convertible currencies (comptes épargne-devises). Depositors receive a premium equivalent to one eighth of the amounts deposited.5 Withdrawals may be made in Algerian dinars only.

Imports and Import Payments

Imports from Israel, Portugal, Rhodesia, and South Africa are prohibited. Certain imports are prohibited regardless of origin. Commodities listed under some 600 tariff headings and subheadings are liberalized and do not require import licenses. All other imports are permitted, in principle, in accordance with an annual import program. This is implemented mainly through global import authorizations (autorisations globales d’importation or AGI) granted to public enterprises. A small number of restricted commodities (produits contingentes) requires an individual import license (autorisation préalable d’importation or API), unless covered by a global import authorization. Imports made “without payment” (sanspaiemeni), i.e., imports which do not involve compensation of any kind, require no authorization, and are not charged against the global authorizations of public enterprises; however, imports of automobiles “without payment” require the authorization of the Minister of Finance. The Government in principle has the monopoly over the importation of many commodities through Onaco, OAIC, SNTA, ONCV, SNED, SNS, Sonatrach, Sonacome, and other similar organizations, but imports are not necessarily restricted to the monopoly holders.

All imports must prior to the transaction be domiciled with an authorized bank, to which the necessary import documents must be presented and through which all payments related to the transaction must be made. Unless the Central Bank approves otherwise, advance payments may not exceed DA 5,000 or 20 per cent of the import value, whichever is smaller. Payments for imports may be approved by, and settled through, the Postal Administration up to an import value of DA 5,000. All individual import licenses require the visa of the Central Bank.

Some imports may be paid for as soon as the transaction has been domiciled. For other imports, unless earlier payment is to be made in accordance with the provisions of the import license or of a commercial contract approved by the authorities, payment to the foreign exporter may be made only after the shipping documents have been presented to the bank; the importer may in this case, after having domiciled the import, open a documentary import credit payable upon presentation of the shipping documents.

Goods subject to import license and quota restrictions may be freely imported in small parcels, provided that the value of a shipment does not exceed DA 60 and the same addressee does not receive more than one parcel a day and that the parcels he receives during the year do not exceed DA 240 in value.

Payments for Invisibles

All payments for invisibles to all countries require the approval of the Central Bank. However, when supporting documents are presented, 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 either by the Central Bank or the Ministry of Finance. Certain public enterprises, however, which receive special exchange allocations (budget devises) may use these freely for payments for specified invisibles, including transportation and other services contracted abroad. The transfer of family remittances is suspended.

Residents of other French Franc Area countries working in Algeria under the program for technical cooperation may transfer abroad a certain percentage of their net salaries, as follows: 50 per cent for single persons and married persons having their families in Algeria; 70 per cent for persons having their families abroad; and 100 per cent for employees who spend their vacations abroad (the transfer being limited to the duration of their absence from Algeria). For other workers from French Franc Area countries who have contracts with employers and hold the necessary employment documents, the amounts that may be transferred are 30 per cent, 50 per cent, and 100 per cent, respectively, for the groups enumerated above, and transfers are also permitted when the worker’s family is staying with him in Algeria. Residents of other countries who are employed in Algeria under the program of technical cooperation are permitted to transfer abroad 30, 50, and 100 per cent, respectively. For workers from other countries, who have contracts with employers and hold the necessary employment documents, the corresponding percentages are 25, 45, and 100. The payments must be transferred once a month on the basis of the remuneration for the previous month. Persons making such transfers of savings are not entitled to allocations for other personal transfers (e.g., for educational purposes).

For residents traveling by air or sea to other countries, including countries in the French Franc Area, the foreign exchange allocation is equivalent to DA 100 a person a trip (DA 50 for children under 15) and is issued on presentation of a valid passport and travel documents; for overland travel, the allocation is DA 100 a person a year for adults and DA 50 for children under 15. These allocations are not applicable to persons living in border areas. Foreign travel requires the approval of the wali of the traveler’s place of domicile. Algerian workers who hold a card of the Office National de la Main-d’Oeuvre (Onamo) are entitled to the equivalent of DA 500 a person for the first trip abroad, and to the equivalent of DA 200 a person for each subsequent trip. Foreign exchange for private business travel, unless debited to an EDAC or EDAB Account (see Exports and Export Proceeds, below), is subject to authorization by the Central Bank and allocations cannot exceed DA 1,500 a trip.

Pilgrims traveling to Saudi Arabia may obtain Saudi Arabian rivals up to the equivalent of DA 1,600 a person; the allocation can be taken up in the form of a check by those traveling by air or sea, and in banknotes by those traveling overland. Travelers may take out Algerian dinar banknotes up to DA 50 a person. Nonresident travelers may also re-export any foreign currency declared upon entry.

Exports and Export Proceeds

All exports to Israel, Portugal, Rhodesia, and South Africa are prohibited and exports of hydrocarbons to the Netherlands and the United States are suspended. Certain exports, including used equipment and machinery, livestock, firearms, ammunition, explosives, and certain radio equipment, are prohibited regardless of destination. Some exports to the French Franc Area, all exports to countries outside the French Franc Area that are not included in the free export list, and all exports to countries with which Algeria has bilateral payments agreements require licenses. The export of specified products is reserved for certain state trading organizations. Some commodities may be exported, subject to individual prior approval, on the basis of linked transactions (transactions liées) involving at the same time an authorized import transaction.

With certain exceptions, exports must be domiciled with an authorized bank. Prior registration is not required for exports that are made on a firm sale basis, provided that they do not exceed DA 5,000 in value and that they are payable in not more than 60 days. After customs clearance, such exports must be registered, if they were not registered earlier. If the payment period is more than 30 days, the exports may be registered only after authorization is given by the Central Bank. Sales on consignment are expressly subject to authorization by the Ministry of Finance, and registration must always take place prior to customs clearance.

The proceeds of exports of commodities other than hydrocarbons, including those to the French Franc Area, must be repatriated immediately after the payment becomes due; the due date of the export contract must not be later than 60 days following shipment, except when prior authorization from the Central Bank is obtained. Those nationalized petroleum companies holding mineral rights in which the Algerian Government has acquired majority control must repatriate to Algeria the proceeds from their exports of hydrocarbons calculated on the basis of a reference price per barrel that is fixed by agreement with the companies concerned. For one petroleum company holding mineral rights, however, there are different repatriation requirements.

Exporters may retain 2 per cent (1 per cent for consignment sales) of the export proceeds of all commodities other than hydrocarbons in special accounts, unless exports are made on a compensation basis (échanges compensés). These accounts are of two kinds—ED AC (Exportateurs-dinars convertibles) and EDAB (Exportateurs-dinars bilatéraux). Balances are nontransferable and may be used by the holder himself for business travel, certain services of foreign technicians, and imports of spare parts.

Proceeds from Invisibles

Proceeds from invisibles must be repatriated and surrendered. Savings repatriated by Algerians working abroad are eligible for an “encouragement premium.” There are no restrictions on the import of foreign banknotes, coins (except gold coins), 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 banknotes up to DA 50 a person. Nonresident travelers are not permitted to bring in Algerian banknotes.

Capital

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

A new Investment Code, superseding that of 1963, was promulgated by Ordinance No. 66-284 of September 15, 1966. It provides for state guarantees in respect of foreign investments of more than DA 500,000 in the industrial and tourist sectors. The new code provides for a retransfer guarantee in respect of the sale or liquidation proceeds of invested foreign capital, and establishes that profit remittances on such investments will be permitted up to 15 per cent 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 Ordinance No. 66-284.

Gold

Residents may purchase, hold, and sell gold coins in Algeria for numismatic purposes. Imports and exports of gold in any form require licenses issued by the Central Bank; such licenses are not normally granted except for imports and exports on behalf of authorized industrial and dental users, and licenses for imports for industrial use have not been issued for some time. Under the terms of Ordinance No. 70-6 of January 16,1970, unworked gold for industrial and professional use is to be 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. Furthermore, locally produced gold must be sold to this agency. As at the end of 1973, Agenor had not yet come into operation and some of its functions continued to be performed by the Central Bank (e.g., the issuance of import licenses for dental gold). Commercial imports of jewelry and of other articles containing gold are prohibited.

Changes during 1973

January 1. Ordinance No. 72-68 of December 29, 1972 containing the 1973 budget introduced a new customs tariff. The import tariff henceforth comprised only a normal tariff, for goods originating in countries that accord Algeria most-favored-nation treatment, and a special tariff, which could be applied to imports originating in certain countries or groups of countries in return for similar advantages extended by them, notably countries in the Maghreb group. The new customs tariff no longer provided for a separate minimum preferential tariff for goods of EEC origin, nor for a general tariff (with rates three times those of the normal tariff) for goods originating in countries (including Hong Kong and Japan) other than most-favored-nation and EEC countries. The special tariff was not applied to EEC countries, which consequently lost the tariff preferences they previously enjoyed. The rates of the new normal tariff, however, generally were identical with those of the former preferential tariff.

February 1. Notice No. 72 of the Ministry of Finance was issued concerning transfers abroad in accordance with contracts concluded by national public enterprises with foreign enterprises.

February 13. Following the announcement that the U.S. dollar was being devalued, Algeria maintained the value of its currency unchanged in terms of gold. The effective parity relationship for the U.S. dollar, previously DA 4.54729 = US$1, became DA 4.09257 = US$1.

February 20. Circular No. 21 of the Ministry of Commerce revised certain procedures for imports within the framework of global import authorizations.

June 12. Notice No. 73 made imports “without payment” of automobiles subject to authorization by the Minister of Finance.

June 18. The 12½ per cent “encouragement premium” introduced by an Order of the Ministry of Finance of August 1, 1972, and paid on the convertible currency savings of Algerians working abroad, henceforth was granted immediately upon conversion of the foreign exchange.

June 18. The import facilities for Algerians working abroad were improved. Henceforth, they could also bring in an automobile, provided they had stayed abroad at least three years.

July 10. Notice No. 75 reintroduced privileges (similar to those previously granted by means of EFAC—Exportations-Frais Accessoires—accounts) for certain export proceeds. Exporters of all commodities other than products of the petroleum and gas sector could retain 2 per cent of the repatriated foreign exchange in special foreign currency accounts (1 per cent for exports sold on a consignment basis). There were two types of accounts: EDAC (Exportateurs-dinars convertibles) and EDAB (Exportateurs-dinars bilatéraux). No more than DA 10,000 for each export transaction could be credited to these accounts, and at no time could the balance in any one account exceed DA 100,000. Balances were personal and nontransferable but could at any time be converted into dinars. They could be used for business travel, payments for services performed by foreign nationals visiting Algeria briefly, imports of spare parts, and for any other transaction that the Central Bank might authorize. There were special provisions for exports made by public sector companies. Notices Nos. 501 and 31ZF were revoked.

July 20. Algeria established an initial par value of 0.180000 gram of fine gold per Algerian dinar, corresponding to DA 4.93706 = SDR 1. Algeria also availed itself of wider margins. The effective parity relationship for the U.S. dollar remained unchanged at DA 4.09257 = US$1.

July 27. Notice No. 76 modified Notice No. 71 of July 10, 1972 concerning the allocation of foreign exchange to nonresident travelers of Algerian nationality at the time of returning to their country of residence. The allocation continued to be limited to 10 per cent of the amount of foreign exchange converted at the time of entry, but ceased to be subject to a ceiling of DA 500.

August 4. Amounts up to DA 10,000 held in Final Departure Accounts were released for transfer abroad.

October 1. Ordinance No. 73-54 created the Central Reinsurance Company.

October 17. Exports of hydrocarbons to the United States and the Netherlands were suspended.

Argentina

Exchange Rate System

On January 9,1957, a par value for the Argentine Peso was established by Argentina with the Fund. However, exchange transactions no longer take place at rates based on that par value.

All exchange transactions take place in a dual exchange market. In principle, the commercial market covers trade transactions and the financial market all other transactions, but in practice many import and export transactions are settled entirely or in part at the financial exchange rate, and at the end of 1973 no transactions took place entirely at the commercial rate. In the commercial market, the Central Bank of Argentina deals with banks and authorized institutions at the rate of $a 5.00 per US$1, buying and selling. In the financial market the exchange rate, which in principle is a fluctuating one, has been stable since May 1972; on December 31, 1973, it was $a 9.98 (selling) per US$1.

The effective exchange rate for nonpromoted exports (including the basic traditional exports) and for many imports is a mixing rate derived from the conversion of 26 per cent of the amounts concerned at the commercial rate and 74 per cent at the financial rate. Promoted exports (i.e., commodities listed in Decree No. 3255/71, as amended), exports from Tierra del Fuego, all imports of goods in List 2 of Circular R.C. 446, imports from LAFTA countries of most goods on the lists of Decrees Nos. 7250/72 and 7251/72, all imports on a compensation basis of goods covered by Decree No. 2618/68, and exports and imports of books, newspapers, periodicals, and gold are settled entirely through the financial market. Imports of pearls, diamonds, platinum, and palladium also are settled entirely at the financial rate.1 All foreign exchange received by residents that does not constitute export proceeds must be sold in the financial market.

Sales of foreign exchange to residents for travel purposes (other than official travel) are subject to an exchange tax of $a 2.00 per US$1. Certain remittances of profits are subject to a tax of 20-40 per cent. Exchange transactions between banks and individuals, other than transactions in banknotes, are subject to a tax of 1 per cent (10 per mill) on sales to customers and 3 per mill on purchases.

Forward exchange transactions may be concluded between individuals and authorized banks or among authorized banks at the prevailing financial rate, subject to freely agreed premiums or discounts. Forward exchange purchases by the public are restricted to those concluded as part of a swap transaction, or to cover import payments made under documentary credit, bank collection, or bank guarantee. Swap operations must be submitted to the Central Bank for prior approval. Forward exchange purchases covering import payments require a 40 per cent deposit in local currency for a period of 180 days; this deposit may not be financed by local banks. Forward exchange contracts connected with imports may be extended for a period of up to 180 days from the date of their original maturity; those corresponding to exports may be extended only once, for a period of 30 days (or, where shipment is unavoidably delayed, for the period of the delay). Such contracts may be settled through clearing in the exchange market. The Central Bank intervenes in the financial forward exchange market as a seller of U.S. dollars at a premium which at the end of 1973 was 20 per cent per annum.

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 include exchange agencies and exchange houses.

Prescription of Currency

Virtually all payments between Argentina and Bolivia, Brazil, Chile, Colombia, Mexico, Paraguay, Peru, Uruguay, and Venezuela are made through accounts maintained with each other by the Central Bank of Argentina and the central banks concerned, under reciprocal credit agreements within the framework of the LAFTA multilateral clearing system. Transactions with other countries must be settled in convertible currencies. Proceeds from exports to 14 countries in Western Europe and to Canada and Japan must be received in the currency of the importing country.2 Import payments to these countries may be made either in the currency of the country concerned or in U.S. dollars. All settlements with other countries with which no reciprocal credit agreement is in force must be made or received in U.S. dollars or in any of the 16 currencies referred to previously.

Nonresident Accounts

Authorized banks may open accounts in pesos and in foreign exchange in the name of any nonresident, provided that the accounts are fed 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 of exports.

Imports and Import Payments

Imports are in principle free of import and exchange licensing.3 However, all imports by the public sector require the prior approval of the Ministry of Commerce. Furthermore, certain imports of luxury goods or nonessential goods are prohibited. All imports require a sworn declaration of need submitted by the importer (declaración jurada) to the Ministry of Commerce. Also, sales of foreign exchange for virtually all imports with foreign financing of less than 180 days require the prior approval of the Central Bank. Most goods of LAFTA origin are exempt from the import suspensions.

Independently of these temporary measures, goods imported by official agencies require approval by the Ministry of Economy if payment is extended over a period of more than 180 days. Furthermore, all public sector imports are screened by a special body, the Asesoría de Importaciones del Sector Oficial. Imports of some vehicles, tractors, and engines are prohibited.

Import taxes include the following: a consular fee of 1½ per cent payable normally in foreign currency on most import invoices; statistical taxes of 1½ per cent or 310 of 1 per cent applicable to all imports; a stamp duty of 0.6 per cent; taxes ranging from 4 per cent to 10 per cent on imports of paper products, certain types of timber and timber products, and forest products; and sales taxes ranging from 3 per cent to 20 per cent. All maritime imports are subject to a tax of 10 per cent on the freight.

Authorized banks are prohibited from opening documentary credits in respect of public sector imports (other than for those originating in LAFTA countries) except with prior authorization from the Government. Furthermore, the Central Bank requires authorized institutions to advise it of all requested payments covering imports for which no banking documents are submitted, in which case Central Bank approval is required. The same requirement applies when documents submitted do not specify the date of payment, or if the date originally indicated by the correspondent has been changed, and when bills or drafts expire more than five days prior to the date on which the transfer is required.

An advance import deposit of 40 per cent of the c. & f. value is required on many goods from all sources except when imported by the public sector, by some firms established in the Province of Tucumán, by certain institutions, or according to the intended use of the goods; goods imported from LAFTA countries are exempt if the goods are included in Argentina’s concession lists (including the special lists for Bolivia, Ecuador, Paraguay, and Uruguay). The commodities that do not require an advance deposit include most raw materials and fuels, many capital goods, and many semimanufactured goods for the production of nontraditional exports. The deposit is payable in pesos and calculated at the current exchange rate for the commodity to be imported. It must be lodged before any of the following actions can be undertaken: opening a letter of credit; withdrawing shipping documents from the intermediary banks; purchasing forward exchange; or clearing goods through customs. The deposit is automatically refunded after 180 days.

Payments for specified capital goods imported by private firms (with the exception mainly of those in lists applicable to LAFTA countries) when valued at over US$10,000 and purchased with foreign or domestic credit, must be made in installments over a period ranging from at least two years to at least five years after the date of shipment, depending on the total value of the goods. Payment in cash at the time of delivery is permitted, however, subject to prior Central Bank approval, if the importer uses exclusively his own funds. The prior approval of the Central Bank is required also when the terms of payment are not in accordance with the prescribed minimum terms or when the amount payable exceeds the equivalent of US$1 million. Advance payments for imports other than capital goods are permitted only in exceptional circumstances.

Payments for Invisibles

With the exception mainly of travel expenses, family remittances, and remittances of profits, dividends, and royalties, payments for invisibles may be made freely through the financial market. However, allocations of foreign exchange for licensing fees, royalties, and technical services are subject to prior approval by the National Registry of Contracts, Licenses, and Transfer of Technology. Persons and firms eligible for remittances of profits, dividends, and royalties are not granted foreign exchange but instead are permitted to subscribe to negotiable five-year U.S. dollar-denominated external bonds issued by the Government. These may be freely exported and imported. Since mid-1973, however, no such bonds have been available.

The sale of exchange for private travel abroad normally is limited to US$30 a person a day, up to US$900 a person a trip (half of these amounts for children), or, for neighboring countries, US$10 a person a day, subject to a limit of US$300 a person a trip. The exchange must be purchased in the financial market and is subject to an exchange tax of $a 2.00 per US$1. Of the travel allocation for bordering countries, up to the equivalent of $a 100 may be taken out in the form of U.S. dollar banknotes or travelers checks or the equivalent of $a 500 in banknotes of the country of destination; the limit on banknotes and travelers checks is $a 500 for travel to other countries. Travelers may take out any amount in domestic banknotes and coins except gold coins.

Exports and Export Proceeds

Exports are generally free of direct controls but minimum export 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 proceeds from all exports must be repatriated and surrendered; the proceeds must not be less than the index value or the f.o.b. value declared on the shipping permit. Exporters of traditional commodities are required to receive the foreign exchange proceeds either before shipment or under an irrevocable documentary credit payable against shipping documents, and they must sell these proceeds within 10 working days after shipment. The proceeds from promoted exports (listed in Circular R.C. 424) must be surrendered within 180 days of shipment, and payments may be received against drafts, in addition to the forms of payment prescribed for traditional exports. There are separate arrangements for exports of books, newspapers, and periodicals; the proceeds of newspapers and periodicals must be surrendered within 360 days of shipment and the proceeds of books within 18 months of shipment. The full proceeds from promoted exports listed in Decree No. 3255/71 (as amended) and from all goods exported from the special customs territory in Tierra del Fuego are eligible for the financial rate, while all other exports are settled at the mixing rate (74 per cent at the financial rate and 26 per cent at the commercial rate).

Many products are subject to export taxes (derechos de exportación) calculated on the basis of the f.o.b. sales value or on index values. The tax must be paid before shipment of the merchandise or within the following 30 days when there is a bank aval that guarantees its payment. All exports are subject to a 2 per cent tax on the freight. Certain other taxes on specific exports are also levied. These include a 1.75 per cent tax, the proceeds of which are destined for the National Institute for Agricultural Technology, on exports of agricultural and livestock products. Many exports, particularly nontraditional exports, are eligible for export incentives of various kinds.

The Central Bank has established a system of special financing, to be granted to Argentine exporters through banks, with a view to promoting certain exports of goods and services. The National Export Credit Insurance Commission provides credit insurance for exports of capital goods and consumer durable goods.

Proceeds from Invisibles

Exchange derived from invisibles must be surrendered in the financial market within 30 days of receipt. Travelers may bring in freely any amount in domestic or foreign banknotes and coins.

Capital

Exchange proceeds from capital inflows received by residents must be surrendered in the financial market within 30 days of receipt. There are no limitations on inward capital transfers by residents or nonresidents. Outward capital transfers are restricted. Argentine “External Bonds” may be exported freely. Sales of exchange in connection with investments, placements, or deposits within Argentina or abroad require the prior approval of the Central Bank. Argentine industrial or commercial firms require the authorization of the Central Bank to enter into swap operations under which loans may be accepted in a convertible currency. Foreign borrowing by the public sector is regulated by Decree-Law No. 19328 of October 29, 1971.

The former Foreign Investment Law (Decree-Law No. 19151 of July 30, 1971) provided that all new foreign investments must have government approval and must be registered. Profits and dividends could then be remitted from the end of the first year of operation. The firms concerned were permitted to receive domestic short-term credit up to 50 per cent of their registered capital and accumulated reserves; this limitation did not apply to export credit. Foreign companies established in Argentina prior to the promulgation of the law were required to register their capital in the investment register in order to be eligible for remittances of profits and dividends or for repatriation of capital. Implementing regulations were contained in Decree No. 2400 of April 27, 1972.

A new Foreign Investment Law (Law No. 20557 of November 7, 1973) provides that all new foreign investment must be made under the terms of a contract negotiated with the “Authority of Application.” The law distinguishes, according to the degree of foreign ownership, between national, mixed, and foreign companies. In the case of companies with 51 per cent or more foreign participation, the contract must be approved by the Congress; for companies with between 20 per cent and 51 per cent foreign capital, the contract needs approval by the President. Repatriation of capital may not take place until at least five years after the investment was made, and the annual amount of repatriation must not exceed 20 per cent of the capital eligible for repatriation. No repatriation of capital is permitted if it endangers the continued existence of the firm. Each contract establishes a maximum limit of domestic short-term indebtedness, and no long-term domestic indebtedness may normally occur.

Remittances abroad of profits and dividends are limited to 12.5 per cent or a rate exceeding by 4 percentage points the rate for time deposits of 180 days in the foreign country concerned, whichever is higher, calculated on the basis of the foreign capital eligible for repatriation. Existing foreign and mixed companies in Argentina may remain subject to their previous regulations or negotiate a contract under the new law. However, if they choose the former option, their remittances of profits and dividends become subject to a special transfer tax varying with the annual amount of the remittance as a percentage of foreign capital invested.

Gold

Residents may hold gold coins and gold in any other form in Argentina or abroad. They may sell gold in coins and bars in Argentina to institutions and houses authorized to deal in foreign exchange, but the regulations permitting nonbank residents to buy gold coins and bars from these firms are in suspense. Imports of gold must be settled through the financial market. Imports by industrial users are subject to a statistical duty of 610 of 1 per cent, and those by others are subject in addition to sales tax. Exports of gold may be carried out by institutions and houses authorized to engage in exchange transactions; they require the prior approval of the Central Bank and the proceeds must be received in convertible currencies.

Changes during 1973

January2. By virtue of the Central Bank’s Telephone Communication No. 2705, the validity of import letters of credit was restricted, with minor exceptions, to 180 days (one year for capital goods covered by Circular R.C. 328).

January 4. Export rebates for cane sugar exports were introduced of 15 per cent of the value of the export.

January5. A large number of the goods whose importation had been suspended for 90 days from October 20, 1972 by Decree No. 7251/72 were assigned to List 2 of Circular R.C. 446 (permitted imports payable entirely at the financial rate). One item was shifted from the list of Decree No. 7251/72 to List 1 of Circular R.C. 446 (permitted imports payable at the existing mixing rate for imports, i.e., 74 per cent at the finan dal rate and 26 per cent at the commercial rate), and one from the list of Decree No. 7251/72 to the list of Decree No. 7250/72 (goods whose importation had been suspended for 180 days by Decree No. 7250/72). (Circular R.C. 455.)

The temporary import bans imposed by Decrees Nos. 7250/72 and 7251/72 were not applicable to the goods listed when they originated in LAFTA countries and were covered by Argentina’s National List, its special list (for Bolivia, Ecuador, Paraguay, and Uruguay), any complementarity agreement, or the list of Decree No. 4091 /72; these exempt imports were payable entirely at the financial rate if listed in Decree No. 7250/72 and at the ruling mixing rate if listed in Decree No. 7251/72.

January 16. A number of items were added to the list of those exempted from the 40 per cent advance import deposit. (Circular R.C. 458.)

January 22. A large number of import products on the list of Decree No. 7251/72 were assigned to Lists 1 and 2 of Circular R.C. 446 or to the list of Decree No. 7250/72, most of them to List 2. A few items were transferred from List 1 to List 2. (Circular R.C. 460.)

January 30. A number of import items from the list of Decree No. 7251/72 were assigned to List 2 and the list of Decree No. 7250/72, most of them to the latter. (Circular R.C. 461.)

February 5. Private exports of wheat flour were suspended by Decree No. 992. (Private exports of wheat had been suspended on December 12, 1972.)

February 20. The mixing rate for the exchange proceeds from promoted exports (nontraditional exports listed in Decree No. 5062/71, as amended) was modified by an increase from 74 per cent to 90 per cent in the portion that could be sold in the financial market, and a corresponding reduction from 26 per cent to 10 per cent in the portion that must be sold in the commercial market. (Circular R.C. 463.) The exchange proceeds from traditional exports continued to be settled 74 per cent at the financial market rate and 26 per cent at the commercial market rate. (Circular R.C. 441.)

February 21. It was announced that the new exchange rate for promoted exports announced by Circular R.C. 463 was applicable only to items listed in Decree No. 3255/71, as amended. (Circular R.C. 464.)

February 21. A few import items were transferred from List 2 to List 1. (Circular R.C. 465.)

March 14. The full exchange proceeds from exports from the special customs territory created by Law No. 19.640 in Tierra del Fuego could, with retroactive effect to March 1, be sold entirely in the financial market. (Circular R.C. 467, implementing Decree No. 1261 of February 14, 1973.)

March 26. The Central Bank invited subscriptions to a third series of U.S. dollar-denominated external five-year bonds (1973 External Dollar Bonds), authorized by Decree No. 2082 of March 19. Such bonds would again be available for the settlement of obligations abroad resulting from dividends, profits, royalties, and other liabilities that had fallen due. (Circular R.C. 469.)

April 18. The temporary ban on imports of goods in the list of Decree No. 7250/72 was extended for another 180 days from April 23, 1973. (Decree No. 3042/73.)

April 23. Proceeds from exports to 14 countries in Western Europe and to Canada and Japan had to be received in the currency of the importing country, rather than, as previously, in U.S. dollars. Import payments to those countries could be made either in the currency of the country concerned or in U.S. dollars, while all settlements with other countries (except those with which reciprocal credit agreements were in force) had to be made or received in U.S. dollars or in any of the 16 currencies indicated in the first sentence. (Circular B. 1018/R.C. 470.)

April 24. Decree-Law No. 20299 and Decree No. 3145/73 established an expanded and liberalized facility for export credit insurance.

April 26. The proportion of the exchange proceeds from promoted exports (listed in Decree No. 3255/71, as amended) that could be sold in the financial market was increased from 90 per cent to 100 per cent. The exchange proceeds from traditional exports continued to be settled 74 per cent at the financial market rate and 26 per cent at the commercial market rate. (Circular R.C. 471 of April 30.)

May 3. A number of import items were added to Lists 1 and 2 of Circular R.C. 446 and to the list of Decree No. 7250/72. Two items were transferred from List 2 to List 1. (Circular R.C. 472.)

May 10. The ban on imports of specified nonessential goods (which had been introduced on June 30, 1971 by Decree No. 2118/71 and extended on May 15, 1972 by Decree No. 2867/72) was extended until May 15, 1974. (Decree No. 4134/73.)

May 14. Banks were authorized to grant financing facilities under Circular B.689/R.C. 378 for the manufacture of promoted exports requiring inputs imported under the temporary admission regime. (Circular B. 1024/R.C. 473.)

May 21. Decree-Law No. 20421/73 and Decree No. 4670/73 modified the legislation governing the travel tax. The President was empowered to set the tax at any level between zero and 100 per cent, but for the time being the rate of $a 2.00 per US$1 was maintained unchanged. Exempt were purchases of exchange for official travel and transactions connected with the sale of round-trip tickets by transportation firms operating in Argentina. (Circular R.C. 476 of June 8.)

May 22. Under Decree-Law No. 20447/73 Argentina reserved the right to transport 50 per cent of its total external trade in ships of Argentine registry. The Decree-Law also established the legal basis for regulating liner conferences operating in Argentine ports. Coastal and river shipping were reserved for Argentine vessels. A credit and subsidy scheme for the state-owned shipbuilding industry was also authorized.

May 23. Decree No. 4877/73 regulated the automobile industry’s trade with other LAFTA countries.

May 24. A number of import items were added to Lists 1 and 2, and one to the list of Decree No. 7250/72, while others were shifted from List 1 and the list of Decree No. 7250/72 to List 2. (Circular R.C. 474.)

May 24. The import of specified commodities, whether used, reconditioned, or not, was prohibited for one year. (Decree No. 4628/73.)

May 25. The exemption from export duties for promoted exports listed in Decree No. 3255/71 (as amended) was extended to the same goods also when re-exported or secondhand. (Decree No. 4534/73.)

May 25. Decree No. 4656/73 suspended exports of various types of raw hides.

July 1. The special tax on exports of agricultural and livestock products, the proceeds of which were earmarked for the National Institute for Agricultural Technology, was increased from 1.5 per cent to 1.75 per cent. It was to increase to 2 per cent with effect from January 1, 1974. (Decree-Law No. 20340 of May 3.)

July 10. Various types of hides and wool were removed from the list of promoted exports in Decree No. 5062/71. (Decree No. 497/73.)

July 18. Physical and juridical persons domiciled or resident in Argentina were required to surrender, by sale in the financial exchange market within 30 days after receipt, all foreign exchange earned in Argentina or abroad (other than export proceeds). Argentine insurance companies were exempted up to amounts representing their technical reserves. Previously, the only surrender requirements were in respect of foreign exchange earnings from exports. (Circular R.C. 478.)

July 31. Exports of bread wheat and wheat flour were prohibited. (Decree No. 277/73.)

August 3. Exports of specified oilseeds and of sunflower oil were suspended. (Decrees Nos. 352/73 and 353/73.)

August 6. The extension to Cuba of credits totaling US$200 million a year was announced. On August 24 an economic cooperation agreement with Cuba was signed.

August 10. Remittances of export commissions on specified live animals, meat and meat products, vegetable oils, foodstuffs, hides and skins, and wool were limited to 2 per cent of the f.o.b. value. (Circular R.C. 479 of August 8.)

August 10. Certain additional import items became exempt from advance import deposit. (Circular R.C. 481.)

August 10. Several import items were shifted from the list of Decree No. 7250/72 to Lists 1 and 2. Payments for imports of all goods subject to the existing temporary import bans had to be made entirely at the financial rate when the goods originated in LAFTA countries and fell under one of the following headings: (1) the Argentine National List; (2) the list of special concessions granted to Bolivia, Ecuador, Paraguay, and Uruguay; (3) any complementarity agreement; or (4) the list of Decree No. 4091/72 as extended by Decree No. 2649/73. (Circular R.C. 482.)

August 10. Decree No. 504/73 suspended temporarily imports of certain parts for loudspeakers, radios, and television sets.

August 16. Exports of specified oilcakes were suspended, except when an amount twice as large as that to be exported was sold for domestic production of poultry feed. (Decree No. 643/73.)

August 23. Law No. 20522 provided for the return to Argentine control of seven banks which had been acquired by foreign interests since 1966. The banks could either be incorporated in the state banking system or would continue to operate as private banks.

August 24. Rediscount limits and interest ceilings for various kinds of loans and advances by commercial banks were established. Loans for prefinancing of promoted exports became subject to an interest rate ceiling of 8 per cent per annum, and loans for export financing to a maximum of 6 per cent per annum. All financing in excess of the rediscount limits was subject to prior Central Bank approval, with the exception of export financing. (Central Bank Circular B.1058; this Circular was modified by Circulars B.1066 and B.1067 of September 27 and Circular B.1074 of October 8.)

August 27. Exports of animal fat and tallow were suspended. However, the Ministry of Economy was authorized to grant export quotas. (Decree No. 838/73.)

August 31. Rice exports were made subject to quantitative restrictions. (Decree No. 999/73.)

September 1. A new meat law reserved all external trade in animal products for the State, which was empowered, however, to permit participation by private firms. (Law No. 20535.)

September 4. Insurance companies’ permitted holdings of foreign exchange were reduced. Any excess had to be sold in the financial market before September 30. (Resolution No. 11221/73 of the Superintendency of Insurance.)

September 10. The validity of the declaración jurada for imports was extended from four to nine months. (Resolution No. 83/73 of the Ministry of Economy.)

September 11. Decree No. 1089/73 extended until the end of 1977 the import prohibitions established by Decrees Nos. 7250/72 (as amended) and 2118/71 (as amended). (See entries for January 5 and May 10, above.)

September 23. Exports of potatoes were suspended. (Decree No. 1499/73.)

October 3. The Junta Nacional de Granos was appointed the only buyer for the 1973/74 wheat crop. (Decree No. 1682.)

October 8. The credit facilities for promoted exports were improved both for preshipment and postshipment finance. (Circular B.1074.)

October 25. Additional goods were listed, for a period of one year, as eligible for the incentive system for exports of manufactured goods. (Ministry of Economy Resolutions Nos. 535/73, 536/73, and 546/73 of October 25.)

October 26. Further import items were added to Lists 1 and 2. Some import items were shifted from List 1 to List 2 or vice versa. Imports on a compensation basis of goods covered by Decree No. 2618/68 had to be settled entirely at the financial rate. (Circular R.C. 486.)

October 29. A number of exchange control regulations were revised, the delegated powers of the authorized banks were expanded, and the exchange allocations for certain purposes were reduced. The allocation for travel to countries other than neighboring countries was maintained at US$30 a person a day, subject to a limit of US$900 a person a trip. The allocation for travel to neighboring countries was maintained at US$10 a person a day, subject to a limit of US$300 a person a trip. Allocations for study abroad were up to US$300 a person a month, and those for family remittances up to US$50 a month for each remittor and beneficiary. The rules governing the export of Argentine or foreign securities were modified. There were no changes in respect of import payments or the servicing of foreign credit. Circular R.C. 445 and Telephone Communications Nos. 2469, 2474 (except the provisions regarding forward exchange contracts related to exports), 2532, and 2706 were revoked. (Circular R.C. 485 of October 26.)

November 7. A new Foreign Investment Law (Law No. 20557) was approved. Implementing regulations would be issued within 120 days. Preference would be given to new investment in priority sectors. New foreign investment was prohibited in some sectors, including banking, insurance, defense, communications, the mass media, marketing, and, except in particular circumstances, agriculture and fishing.

The law distinguished between national companies (whose capital must be over 80 per cent Argentine owned), mixed companies (with Argentine ownership 51 per cent or more but not more than 80 per cent), and foreign companies (with Argentine ownership at less than 51 per cent).

Repatriation of foreign capital would be allowed after an initial period of at least five years, provided the continuity of the local firm was assured. Not more than 20 per cent of the capital could be repatriated in any one year.

Remittance of profits abroad was made subject to an annual limit of 12½ per cent of capital eligible for repatriation, or a rate exceeding by 4 percentage points the interest rate on time deposits of 180 days in the foreign country in question, whichever was higher; such remittances could not be financed with domestic or foreign credit. The reinvestment of remittable profits required authorization.

Existing foreign-owned companies, i.e., companies whose capital was at least 20 per cent foreign owned, had to choose whether or not to abide by the terms of the new law. If they chose to abide by the old Foreign Investment Law (Law No. 19151 of July 30, 1971), a special transfer tax was imposed on remittances of profits; this tax ranged from 20 per cent on remittances of 6 per cent or less of the invested capital to 40 per cent on those of over 15 per cent of the capital.

In the event of a critical balance of payments situation the repatriation of capital and remittance of profits could be postponed by the Central Bank.

The Law came into force on December 6, the date of its publication in the Official Gazette.

November 7. Law No. 20558 established the Corporación de Empresas Nacionales.

November 11. Law No. 20545, the Law for the Protection of Argentine Production, was adopted. It gave the Government additional powers to protect national production and labor by means of increases in customs duties; to promote industrial exports; to control imports and exports; to establish official minimum prices for imports and fixed or minimum index prices for exports; and to control reimbursement and drawback facilities for exports. The law came into force on December 22.

November 14. The Chamber of Deputies approved Law No. 20560, the Industrial Promotion Law. It came into force on December 13. The Law provided for certain facilities and benefits for the creation, expansion, or modernization of industries; such facilities and benefits could only be granted to firms whose capital was at least 80 per cent Argentine owned.

November 20. Law No. 20551, the Mining Promotion Law, was promulgated.

December 17. The declaración jurada henceforth was accepted automatically for the import of goods in short supply on international markets. (Resolution No. 775/73 of the Ministry of Economy).

December 21. Imports of specified chemicals became exempt from the mandatory minimum payments terms of 180 days after shipment (Telephone Communication No. 2920). On December 28 this exemption was extended to additional goods by Telephone Communication No. 2922.

Australia1

Exchange Rate System

The par value is 1.09578 grams of fine gold per Australian Dollar, corresponding to $A 0.810994 = SDR 1 or $A 1 = US$1.4875. From time to time the Reserve Bank of Australia sets official limits within which banks must effect spot transactions with the public in U.S. dollars, the intervention currency; on December 31, 1973 these limits were US$1.4900 and US$1.4850 per $A 1. Banks are free to determine their own spot rates for all other currencies, including sterling; rates quoted are based on closing rates in London and New York.

Forward exchange cover may be arranged through the authorized banks by residents for periods appropriate to the nature of the transaction in respect of most exchange risks arising out of trade transactions. Forward exchange cover for transactions in certain invisibles of a noncapital nature may also be arranged. The Reserve Bank provides forward cover to the trading banks in U.S. dollars and sterling. Banks act as principals in all foreign currency transactions, both spot and forward, and are free to determine their own forward rates for all currencies; they are required to restrict their uncovered positions and not to carry excessive balances abroad.

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

Exchange control policy is determined by the Government with the advice of the Department of the Treasury and of the Reserve Bank of Australia. The Reserve Bank administers the exchange control on behalf of the Australian Treasurer and delegates considerable discretionary powers to the trading banks authorized to handle foreign exchange transactions. Import and export licensing is administered by the Department of Customs and Excise, with some other departments being responsible for the administration of controls on certain imports and exports.

Prescription of Currency

Where imports are invoiced in Australian dollars, payments may be made in Australian currency through the account of an overseas bank with a bank in Australia, or in any foreign currency;2 if imports are invoiced in foreign currency, payment must be made in foreign currency. Proceeds from exports may be received in Australian currency from an account of an overseas bank with a bank in Australia, or in any foreign currency.

Nonresident Accounts

All credits to the accounts of nonresidents are subject to approval, which is granted in the same circumstances and subject to the same conditions as if a transfer to the country of residence of the account holder were involved. Transfers are allowed freely, on application, between accounts of nonresidents. Under current policy, the balance on an account held by any nonresident may be withdrawn in convertible currency. There are no blocked accounts. Nonresidents may not borrow in Australia.

Imports and Import Payments

With the few exceptions mentioned below, goods may be imported freely without import licenses, and no restrictions are imposed on payments for imports. The latter normally must be made not later than six months after the arrival of the goods in Australia; consent to longer deferment is given only where it is established that longer periods are normal commercial practice. Import licenses are required for used, secondhand, or disposals machinery or equipment and parts therefor (earthmoving or excavating vehicles, machinery or equipment; tractors, road rollers, or material-handling equipment); and disposals, used, or secondhand four-wheel drive vehicles (excluding public-service type passenger vehicles). Ships are classified as prohibited imports, and new or secondhand ships may only be imported with the written consent of the Minister for Transport. In addition, import controls are maintained on certain goods, irrespective of origin, mainly for reasons of health, morals, or security, or to maintain quality standards. In accordance with the relevant Resolutions of the UN Security Council, mandatory sanctions have been applied against Rhodesia.

Payments for Invisibles

All payments for invisibles are subject to exchange control, but, with the exception of remittances to Rhodesia (except in certain circumstances), they are not restricted. The control operates primarily to prevent unauthorized capital transfers; remittances to the New Hebrides are subject to a screening procedure to ensure that no tax minimization transactions are involved. Applications for outward transfers in connection with current invisibles are normally dealt with immediately by banks; no forms have to be filled out for amounts up to $A 2,000, and banks need not report these smaller transfers to the Reserve Bank. There is no limit on travel funds. Banks may approve up to $A 4,000 in any 12 months for any kind of travel in any country; additional amounts may be obtained on application, provided that the exchange control authorities are satisfied that the exchange is to be used for bona fide travel expenses and not for an authorized capital transfer. Similarly, no limits are placed on remittances for family maintenance and gifts, but beyond certain amounts, applications must be referred to the exchange control authorities; such applications are treated liberally.

Payment to overseas suppliers of services must be made no later than six months after the date when payment is contractually due; consent to longer deferment is given only where it is established that longer periods are normal commercial practice. Dividends and interest due to overseas residents must be paid within one month of the date on which they become payable. Foreign exchange is not normally provided to enable residents to take out personal life insurance with foreign insurers. Travelers who are not residents of Australia may take out any amount in foreign or domestic banknotes within six months of entry, provided that they brought the notes into Australia. Other travelers may take out up to $A 100 in Australian currency, without special authorization; of this amount, up to $A 4 may be in coins.

Exports and Export Proceeds

The export of all commodities, unless specifically exempted, requires an export license in terms of the Banking (Foreign Exchange) Regulations, to ensure that the full proceeds are received in a currency and within a period approved by the Reserve Bank; the approved period is within six months prior to or after the date of exportation, but where the value of the goods exceeds $A 10,000 the approved period for receipt prior to the date of exportation is one month, longer periods being allowed only where the prepayment is in accordance with normal commercial practice. To assist supervision, there is a further condition (in the case of export licenses covering goods exported by ship) that all shipping documents, bills of lading, etc., must be drawn to the order of and delivered to the Reserve Bank or to a trading bank acting as its agent. The Customs (Prohibited Exports) Regulations prohibit the export of specified goods either absolutely or subject to prescribed conditions. The controls have been established for a variety of purposes. Thus, export controls have been imposed on minerals in raw or semiprocessed form to ensure that export prices are at a reasonable level and that there is a balanced development of Australian mineral resources. Controls have also been utilized to ensure adequate supplies to meet domestic requirements (e.g., agricultural products, primarily stock foods and fertilizers, and some minerals and metals), to enable Australia to comply with obligations under international agreements, and to assist the orderly marketing of primary products. In accordance with UN Resolution No. 253 of 1968, Australia enforces trade sanctions against Rhodesia.

Proceeds from Invisibles

Proceeds from invisibles in foreign currencies do not have to be surrendered, but may be disposed of only with permission. Travelers may bring in any amount in foreign or domestic banknotes.

Capital

All transfers of capital from Australia require approval. Lending overseas by residents is normally not permitted other than in association with direct investments. Proposals for direct investment overseas are considered on a case-by-case basis. Transfers abroad for direct investment involving the export of a significant measure of Australian managerial or technical skills are readily approved. Approval is also readily given for all types of investment which promote Australian exports or protect existing Australian investments abroad. Approval is normally granted for the repatriation of capital by nonresidents, but no advance commitments are given. Foreign securities owned by Australian residents need not be surrendered; approval is given to residents to reinvest the sales proceeds from foreign securities for their own account in other foreign securities, but they are not normally permitted to trade among themselves in foreign securities except those issued off an Australian register. The export of securities and certain transactions in foreign securities are subject to approval.

Applications by resident individuals to invest abroad in amounts up to $A 10,000 in any 12-month period normally are readily approved; institutional investors and public companies can expect to receive permission to make investments abroad of up to $A 1 million in any 12-month period. Applications for investments in larger amounts are considered in special circumstances. Eligible investments include portfolio investments abroad in stocks and shares and investments in real estate; they do not include investments in loans or other fixed-interest securities. Investments in tax haven countries are subject to a screening procedure to ensure that no tax minimization transactions are involved.

Approval is required for residents to borrow Australian or foreign currency from any nonresident, or to incur a liability to a nonresident; the coverage of the controls over overseas borrowings includes not only formal contracts to borrow but also indirect forms of borrowings and transactions having a similar effect on capital inflow. In addition, residents are required to obtain approval to draw, issue, or negotiate any bill of exchange or promissory note, to enter into contracts (except for the purchase of goods) or to acknowledge debts so that actual or contingent rights to payments, any other valuable consideration, or services are created in favor of any nonresident, or to allot or transfer securities to, or register securities in the name of, any nonresident. Borrowings from overseas lenders of foreign or Australian currency in amounts exceeding $A 100,000 in any 12-month period which are repayable, or carry options to repay, in two years or less are not permitted (other than for trade transactions on normal trade credit terms). Persons receiving approval for foreign borrowings for periods greater than two years in excess of $A 100,000 in any 12-month period (other than for trade transactions on normal trade credit terms) are required to lodge with the Reserve Bank, through their own banks, interest free, a nonassignable deposit in local currency amounting to 33⅓ per cent of the amount drawn (drawings under loan agreements approved by the Reserve Bank prior to December 27,1972 are exempt, and for those under loan agreements approved since that date but prior to October 26, 1973 the rate of deposit is 25 per cent).

The borrowing restrictions, including the deposit requirement, also are applicable to acceptance of deposits from overseas residents by a wide range of financial intermediaries. The borrowing embargo also applies to subscriptions by nonresidents to new issues of fixed-interest securities having a maturity of two years or less (“short-term securities”), and to purchases by nonresidents of existing securities having two years or less to run to maturity. The deposit requirement also applies to subscriptions to new issues of securities having a maturity of more than two years. These restrictions apply to deposits and fixed-interest securities where the funds tendered by, or on behalf of, an overseas resident were remitted to Australia for this purpose on and after February 2, 1973. Deposits are held for the period of the borrowing and are refundable proportionately as loans are repaid. For the time being, Australian banks are required to sight specific Reserve Bank approval for all inward capital remittances of $ A 50,000 or more. Increases in indebtedness through intercompany accounts which could have the effect of circumventing the borrowing controls are prohibited.

Inward equity investment requires exchange control approval. The Government’s general policy on such investment is flexible and there are, for example, no general mandatory levels of Australian equity in new ventures. However, the Government has a firm policy objective of securing the highest possible levels of ownership and control of Australian resources and industries and ensuring that foreign capital inflows are associated with productive investment which adds to Australia’s real resources. The policy is being applied in a pragmatic way with all cases being considered on their merits.

There are some special areas in foreign investments to which the Government has given particular attention. These include the important energy minerals where the policy objective is full Australian ownership. Real estate is another; in this field the Government has discouraged foreign interests from making significant investments, particularly for subdivisions for resale for residential purposes and for development in central city areas.

In the fringe banking area, the Government has indicated its view that, generally, there would be little benefit in allowing additional institutions to be established by foreign interests. The Government has also made clear its general objective of preventing increases in foreign ownership and control of existing financial institutions. Furthermore, the Government has said it regards insurance as a “key” industry, and has stated its view that it does not generally favor the establishment of new life and general insurance companies, particularly the establishment of new foreign-controlled companies. The long-standing controls over inward investment in the fields of banking, civil aviation, and radio and television are being continued.

Measures introduced on September 26, 1972 provide for the prevention of foreign take-overs of Australian businesses judged by the Government to be contrary to the national interest. The Companies (Foreign Take-Overs) Act, 1972-73 gives legal backing to these measures insofar as they relate to foreign take-overs of companies through the acquisition of shares. Under the legislation, the acquisition by a foreign person or associated persons of 15 per cent of the voting capital (or 40 per cent by foreign persons in the aggregate) is regarded, prima facie, as a foreign take-over. However, in order to take action in respect of a proposal, the Treasurer must be satisfied that the acquisition of shares in question would lead to the transfer of effective control to foreign interests and that the exercise of such control would be contrary to the national interest. The Act does not apply where overseas interests already exercise effective control of the company being taken over or where the foreign acquisition of shares would not result in effective foreign control. Except in special circumstances, the Act is not applied to the take-overs of companies whose assets do not exceed $A 1 million. The screening and examination of foreign take-over proposals is undertaken by a committee made up of officials from appropriate government departments. The committee’s reports are submitted to the Government for decision.

The Government’s screening of take-over proposals has gone beyond the Companies (Foreign Take-Overs) Act itself. This Act deals with take-overs arising through the acquisition of shares. Under broader policy measures the Government has also screened take-overs of Australian businesses through the acquisition of the assets of the business.

There are no restrictions on domestic bank credit to overseas-owned or overseas-controlled companies in Australia.

Gold

Residents must surrender to the Reserve Bank all gold coming into their possession in Australia with the exception of gold coins the gold content value of which does not exceed $A 50 and gold lawfully acquired for use in a profession or trade; gold producers in Papua New Guinea are exempt from this requirement. Newly mined gold acquired by the Reserve Bank is made available at its official buying price of $A 28.38 a fine ounce to an association of gold producers for sale at free market prices to local industrial users or overseas purchasers. Subject to certain conditions, domestic gold producers are eligible for subsidy under the Gold-Mining Industry Assistance Act. Imports of gold are not restricted but imported gold becomes subject to delivery to the Reserve Bank. Exports of gold require the approval of the Reserve Bank. Gold jewelry is not subject to acquisition by the Reserve Bank and imports of such items are unrestricted. Exports of gold jewelry exceeding $A 250 in value require an export license. Travelers require an export license if taking out of Australia certain specified goods, including gold jewelry, in excess of a total value of $A 10,000 or when the gold content value of any one article exceeds $A 1,000.

Changes during 1973

January 1. Export quotas were imposed on tin. They were discontinued on October 1.

January 11. The special restrictions on transfers to specified bodies in Viet-Nam were removed.

January 18. The special restrictions on imports from Rhodesia were intensified.

January 30. The Reserve Bank raised from 1 per cent to 2 per cent per annum its basic forward discount in offering forward cover for banks’ U.S. dollar commitments to exporters. This discount was raised to 4 per cent on June 29 and continued at that level during the remainder of the year.

January 31. It was announced that export controls would be imposed on all minerals, whether in their raw state or partly processed, including those not covered previously. These controls came into effect on February 23.

February 1. The trade agreement with the United Kingdom was terminated. On the same date, the first step toward the dismantling of the tariff preferences granted to the United Kingdom was taken by the abolition of a 7½ per cent duty on by-law imports from nonpreferential countries.

February 2. The coverage of the controls over overseas borrowings was extended to include not only formal contracts to borrow but also indirect forms of borrowings and transactions having a similar effect on capital inflow. (1) Deferment of payments due to overseas residents in respect of imports, services, dividends, and interest was restricted. Payment to overseas suppliers for goods and services must normally be made not later than six months after the arrival of the goods in Australia, or, in the case of services, after the date when payment was contractually due (consent to longer deferment would be given where it was established that longer periods were normal commercial practice); dividends and interest due to overseas residents must be paid within one month of the date on which they became payable. (2) Acceptance of prepayment for exports exceeding $A 10,000 a transaction for longer than one month before the date of shipment would no longer be approved unless the Reserve Bank was satisfied that such prepayment was in accordance with normal commercial practice. (3) Increases in indebtedness through intercompany accounts3 which could have the effect of circumventing the borrowing controls were prohibited and a surveillance procedure was established over intercompany accounts. (4) The existing borrowing restrictions, including the deposit requirement, would now be applied also to deposits by overseas residents with such parties as finance companies, pastoral companies, short-term money market dealers, merchant banks, acceptance houses, building societies, brokers, solicitors, and nominee companies. (5) The borrowing embargo would also apply to subscriptions by nonresidents to new issues of fixed-interest securities having a maturity of two years or less (short-term securities), and to purchases by nonresidents of existing securities having two years or less to run to maturity. Short-term securities for these purposes were defined to include treasury notes, commercial bills, transferable certificates of deposit, and other marketable securities issued by banks, brokers, etc. The variable deposit requirement would apply to subscriptions to new issues of fixed-interest securities having a maturity of more than two years. (The restrictions under (4) and (5) would apply only where the funds tendered by or on behalf of an overseas resident were remitted to Australia for this purpose on and after February 2, 1973.)

February 12. Dealings in foreign exchange by Australian banks were suspended following the closure of major foreign exchange markets overseas.

February 14. Following the announcement that the U.S. dollar was being devalued, Australia maintained the par value of its currency in terms of gold. The effective parity relationship for the U.S. dollar, previously $A 1 = US$1.2750, became $A 1 = US$1.4167. New official limits for banks’ spot dealings in telegraphic transfers were set at US$1.4191 buying, and US$1.4143 selling, per $A 1. The suspension of foreign exchange dealings was relaxed to allow banks to deal with the Reserve Bank in spot U.S. dollars only. Remaining restrictions were withdrawn on February 15.

March 2. On the closure of foreign exchange markets abroad, the Reserve Bank’s foreign exchange dealings with Australian banks were restricted to U.S. dollars, both spot and forward.

March 20. The Reserve Bank resumed dealing with Australian banks in sterling, both spot and forward, as well as in U.S. dollars. The past practice of quoting to the banks daily rates for Reserve Bank dealings in Canadian dollars was not resumed. Banks could continue to meet their clients’ requirements in this, as in other currencies, through normal market channels.

March 20. Inward investment in real estate was restricted. For the time being, exchange control approval would not normally be given for the purchase of real estate by overseas interests, except for acquisitions purely incidental to other purposes, such as the establishment or expansion of a factory or investment by an individual in a block of land for his own use while employed in Australia or on retirement. In addition, the Government requested overseas interests not to enter into significant commitments to buy real estate for the time being.

April 2. Gold producers in Papua New Guinea were exempted from the requirement of surrendering newly mined gold to the Reserve Bank of Australia.

May 8. The special restrictions on exports to the People’s Republic of China, Cuba, North Korea, the U.S.S.R., North Viet-Nam, and certain other Eastern European countries were terminated, except in respect of the supply of warlike materials and atomic energy materials.

July 3. The Government announced its intention to liberalize the system of tariff preferences for imports from developing countries. The new system would cover all manufactured and semimanufactured products, including processed primary products; initially, the margin of preference would be 10 per cent ad valorem below the general tariff rates, and this margin would be increased until the products were competitive on the Australian market.

July 18. Effective immediately, the Government announced an across-the-board reduction of 25 per cent in import duties, except for a small number of revenue items and antidumping duties. The 15 per cent preferential margin for goods of New Zealand origin covered by the Australia-New Zealand Free Trade Agreement was maintained. The tariff reductions were officially estimated to have the same impact on prices of dutiable imports as a revaluation of approximately 6 per cent.

August 15. The minimum amount of inward capital remittance for which banks are required to sight Reserve Bank approval of the underlying transaction before converting into Australian currency was reduced from $A 250,000 to $A 50,000.

August 21. It was announced in the budget that income tax exemptions for gold mining profits and for 20 per cent of the profits from mining other prescribed minerals would be abolished. Dividends paid out of those profits and certain dividends paid out of petroleum mining profits would also cease to be exempt. Subsequently, it was decided to retain the exemptions for mining profits, pending further study, but the exemptions for dividends were withdrawn.

September 9. The par value was changed from 1.04360 grams to 1.09578 grams of fine gold per Australian dollar, corresponding to $A 0.810994 = SDR 1. The effective parity relationship for the U.S. dollar, previously $A 1 = US$1.4167, became $A 1 = US$1.4875. The market rate for the U.S. dollar was set at the latter level, with the official limits for banks’ spot dealings at US$1.4900 and US$1.4850, respectively, per $A 1.

September 9. The Reserve Bank changed its official buying price for newly mined gold from $A 29.80 to $A 28.38 a fine ounce.

September 10. It was announced that meat was being excluded from the export incentive schemes.

October 1. A special tax on meat exports was introduced.

October 10. Legislation was introduced to pave the way for the establishment of a separate Papua New Guinea banking system. The effect would be to withdraw the application to Papua New Guinea, at a date to be agreed with the Papua New Guinea Government, of the Reserve Bank Act, the Banking Act, and the Commonwealth Banks Act. This legislation was enacted on October 26. By virtue of declarations by the Treasurer, the Reserve Bank Act and the Banking Act ceased to apply to Papua New Guinea on November 1, 1973 and the Commonwealth Banks Act on April 22, 1974.

October 25. The Treasurer announced that the Taxation Office had begun screening exchange control applications for all transactions between Australia and the New Hebrides. Approvals were not being given to transactions between companies and persons in Australia and the New Hebrides unless the Reserve Bank sighted evidence that the Commissioner of Taxation did not object to the proposed transaction. Furthermore, all exchange control applications to make portfolio investments abroad in tax havens were now being screened.

October 26. The variable deposit requirement applicable to borrowings from abroad was increased from 25 per cent to 33⅓ per cent. Drawings under loan agreements already approved by the Reserve Bank were not affected.

October 29. The Government announced that it did not wish to see foreign ownership in the mining industry go beyond the existing level. In the field of energy resources, in particular, full Australian ownership in development projects involving uranium, oil, natural gas, and black coal was seen as a desirable objective, although a lower level of Australian participation was acceptable in exploration for these minerals; for other minerals a more flexible approach would be taken.

November 1. The Bank of Papua New Guinea was established as the central bank of Papua New Guinea. All transactions between Australia and Papua New Guinea were exempted from exchange control in either direction. (It was subsequently proposed that exchange control would be introduced on transactions by Australian residents with residents of Papua New Guinea when Australian currency would cease to be legal tender in Papua New Guinea.) Australian currency would, for the time being, continue to be the currency of Papua New Guinea, which would issue its own currency as soon as practicable but not before December 1974.

December 4. Exports of petroleum products, including fuel supplies for foreign transport, were made subject to restrictions.

December 11. Legislation was introduced to provide the basis for examination and, as necessary, regulation of the activities of certain nonbank financial institutions. The Treasurer indicated that the Reserve Bank was administering exchange control on the basis of the Government’s policy that it did not generally favor the establishment of new foreign nonbank financial institutions and of the general objective of preventing increases in foreign ownership and control of existing institutions.

December 11. Section 26 AAA of the Income Tax Assessment Act received royal assent. It provided that any profits received from the purchase and sale of assets within 12 months would be taxed as income.

December 11. Legislation was introduced to place beyond doubt the arrangements announced by the Treasurer on October 25 for taxation screening of exchange control applications involving tax havens. This legislation came into effect on December 17.

December 13. The Treasurer announced that legislation would be introduced early in 1974 to give legislative effect to the Government’s policy that it did not generally favor the establishment in Australia of new insurance companies by foreign interests. (The legislation would be nondiscriminatory, as it would give the Treasurer equal power to refuse permission for the establishment of new insurance companies by local interests.)

December 18. The Government announced an export incentives scheme, to operate for five years from July 1974.

December 31. The Companies (Foreign Take-Overs) Act of November 2, 1972 expired. It was extended until December 31, 1974.

Austria1

Exchange Rate System

The par value is 0.0359059 gram of fine gold per Austrian Schilling, which corresponds to S 24.75 = SDR 1. Austria has notified the Fund that the rate for the Austrian schilling is S 1 =SDR 0.0423597, corresponding to S 23.6073 = SDR 1, but no announced margins are maintained for any currency. In practice, and without having assumed any formal obligations in this respect, the authorities observe the margins of 2¼ per cent either side of cross-parities applicable under the European common margins arrangements. On December 31, 1973, the authorized banks’ buying and selling rates for the U.S. dollar were S 19.80 and S 19.90, respectively, per US$1. Forward premiums and discounts are, in principle, left to the interplay of market forces.

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 pass through Austrian banks authorized to implement the exchange control regulations.

The customs 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 competent ministry, viz., the Federal Ministry of Trade, Commerce, and Industry (Licensing Office) or the Federal Ministry of Agriculture and Forestry.

Prescription of Currency

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

Nonresident Accounts

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

Free Schilling Accounts may be freely credited with proceeds from the sale of gold coins or convertible currencies by a nonresident to the Austrian National Bank, or to an authorized bank, provided that the conversion serves to make a current payment to a resident, 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 or if the nonresident’s payment serves to finance direct investment in Austria, the purchase of Austrian securities in Austria, or the purchase of real estate in Austria. Balances may be freely converted into any foreign currency. Transfers between these accounts are free.

Blocked and Interim 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 Blocked and Interim Accounts is subject to an individual license. In most cases licenses are granted freely if the funds belong to residents of countries that are members of the IMF or the OECD. Balances in Blocked Accounts exceed by far those in Interim Accounts.

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

Imports and Import Payments

All commodities not included in the Annex 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 Annex require licenses. Most of these goods are free of quantitative restriction. For many goods licenses are granted by the customs, at the time of clearance, when they are imported from any country other than Rhodesia.2 Nearly all imports from GATT countries, their associated territories, and some other countries3 are liberalized. Some nonagricultural imports are admitted under an automatic licensing procedure when originating in Bulgaria, Czechoslovakia, Eastern Germany, Hungary, Poland, or Romania. Nonliberalized imports may be obtained under various procedures, namely, state trading, global quotas, bilateral quotas, discretionary licensing, and compensation (barter). State trading covers tobacco in any form, ethyl alcohol, and salt. Global quotas apply to specified imports from GATT countries, except Czechoslovakia and Japan. Discretionary individual licensing is applicable to all other private imports not covered by the procedures listed above. Licenses are usually granted if the imports concerned do not adversely affect domestic industries; in many cases, they are issued in accordance with quotas established in bilateral trade agreements.

Import licenses may not be granted for goods imported under compensation transactions, unless there is no other way of settling payments; at present, trade under such arrangements is negligible. Grains, milk and butter, and cattle, pigs, 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.

In principle, import licenses are issued only to importers who have received trade licenses. Licenses granted to new importers take into account the amount up to which the corresponding global quota has been utilized. Import licenses are not transferable and are valid for six months, but this period may be extended. Payments for imports from, and originating in, countries with which Austria makes settlements in convertible currencies do not require exchange licenses.

Payments for Invisibles

With few exceptions, residents are permitted to conclude transactions involving current invisibles with residents of countries that are members of the IMF or the OECD. Exceptions comprise certain transactions concerning transport, films, and insurance. As to transactions in current invisibles that involve payments to residents of other countries, general licenses cover the majority of these (e.g., freight, commissions, and the cost of assembly and repairs); for the remaining transactions, individual licenses are required. The licenses are granted after account is taken of certain considerations, such as the principle of reciprocity and hardship cases.

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 1,000 may be made freely and at any time. The remaining payments to “multilateral nonmember countries” for invisibles require special licenses.

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

Exports and Export Proceeds

Licenses for exports regulated under the Foreign Trade Law have to be obtained from the competent ministry. Goods exported under compensation arrangements are subject to licensing by the Federal Ministry of Trade, Commerce, and Industry. For most other exports, licenses are not required. Export licenses are issued with due consideration for the provisions of relevant bilateral trade agreements and the fulfillment of quotas established in accordance with such agreements, and for the needs of the Austrian economy.

Export claims exceeding the equivalent of S 26,000 must be declared. Export proceeds may either be surrendered or be deposited in accounts with authorized banks. Such deposits in convertible currencies may be used freely for authorized payments abroad.

Proceeds from Invisibles

Exchange receipts from invisibles, if not surrendered or deposited in an account with an authorized bank, have to be declared within eight days from the date of collection. They may either be surrendered or be deposited with an authorized bank and subsequently used in the same way as proceeds accruing from exports. Persons entering Austria may bring in Austrian or foreign banknotes and coins without limit.

Capital

Most inward capital transfers, most transactions that could lead to such inflows, and most borrowing from nonresidents are at present restricted. The acquisition by nonresidents of Austrian securities, shares or participations in Austrian companies or firms, and Austrian real estate is subject to individual approval by the National Bank.4 At present, direct investments by nonresidents normally are permitted only when related to manufacturing or to the importation and distribution of foreign goods.

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 normally are restricted. Approvals are granted particularly, but not exclusively, for (1) investment credits for producing enterprises and (2) import and export finance. The granting of permissions for commercial credits to finance imports of consumer goods, especially passenger automobiles, is restricted. Only loans from nonresident relatives to residents up to S 260,000 a borrower a year are at present licensed freely.

The short-term foreign assets and liabilities in convertible currencies of authorized banks are not subject to limitation, but any increase in their schilling liabilities to nonresidents over the level of August 13, 1971 is subject to the provisions of a gentlemen’s agreement with the National Bank providing for a supplementary or minimum reserve requirement that sterilizes 75 per cent of such increases.5 Furthermore, the domestic credit institutions are not to repatriate their liquid foreign currency balances or call in their foreign loans prior to maturity. A number of authorized banks are permitted to accept convertible currencies from abroad for onlending abroad at maturities of up to five years.

The Austrian National Bank permits the transfer abroad of (1) proceeds from the liquidation of various foreign investments in Austria (shares or participation 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 freely grant loans up to the equivalent of S 260,000 a resident lender each year to nonresident relatives.

Residents are allowed, for purposes of direct investment, to acquire participation rights in foreign companies, associations, and other enterprises, and to establish, acquire, or extend foreign agencies or individually owned firms; earnings accruing from such investment usually may be reinvested. Residents also are permitted to acquire real estate abroad (provided that it is intended for the personal use of the buyer within one year), to grant commercial or investment credits, to grant direct investment loans (provided that the resident can actually exert influence on the management of the nonresident enterprise), and, provided that the proceeds of the credit are not used within Austria, to grant credits secured by mortgages in Austria or abroad. Domestic insurance companies may conclude with nonresidents life insurance contracts in Austria.

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

Residents are allowed to purchase from nonresidents, without restriction, foreign securities issued in “multilateral member countries” and registered on stock exchanges6 and Austrian securities; for foreign securities and Austrian external bonds, the transactions must be carried out on a spot basis through authorized banks and, with certain exceptions (e.g., in the case of securities listed on the Vienna stock exchange), the securities purchased must be kept with such banks. Payments for these purchases to nonresidents may be made in convertible currencies. Residents may sell foreign securities and Austrian external bonds to nonresidents only on a spot basis against payment in convertible currencies and, for securities deposited in accordance with the afore-mentioned provision with Austrian authorized banks, only through such banks. The proceeds of the sale, as well as the foreign exchange obtained as a result of redemption of the foreign securities by the debtor, may be kept on account with an authorized bank.

Gold

Transactions in gold (excluding jewelry and medallions, which are considered jewelry) are governed by the Foreign Exchange Law. The Austrian 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 coins, 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 gold coins that are not legal tender on their own behalf or on behalf of their customers (including nonresidents); the prices are based on those for coins 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 coins that are not legal tender.

The Mint releases certain types of gold coins to authorized credit institutions for resale to the public. Residents may hold gold in any form, including bars, in Austria, and they may acquire in Austria any gold coins that are 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 coins, 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 among themselves gold in any form. Domestic sales of gold coins that are not legal tender are subject to value-added tax at the general rate of 16 per cent.

Where the Foreign Trade Law prescribes import licenses for gold imports (e.g., for gold sheets), the license is either issued by the Ministry of Trade, Commerce, and Industry, which usually grants any license applied for by industrial users, or by the customs office concerned, which issues licenses automatically for certain gold imports within its competence. 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; such licenses are issued after consideration of the merits of each case. 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 coins that are not legal tender up to a weight of 200 grams a person a trip, and allowing resident travelers to “multilateral member countries” to export such coins up to a value of S 1,000 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; commercial exports of a number of such articles, however, must be licensed by the Ministry of Trade, Commerce, and Industry.

Changes during 1973

January 1. The industrial free trade agreement of July 22, 1972 with the EEC came into force.

January 1. A new trade agreement with Czechoslovakia came into force. Restrictions on imports from that country were eased further and Austria undertook to continue its policy of liberalization.

January 1. A new trade agreement with Hungary came into force. Restrictions on imports from that country were eased further and Austria undertook to apply full GATT liberalization by the end of 1974.

January 1. Quantitative restrictions on goods of Japanese origin were eased further.

January 1. The validity of all existing unilateral tariff reductions and temporary exemptions from border tax (introduced under the temporary price containment program that began in 1969) was carried over into 1973.

January 1. The geographic coverage of the generalized system of tariff preferences was expanded.

January 1. A value-added tax was introduced with a general rate of 16 per cent. It replaced the general 5½ per cent turnover tax. The turnover tax rebates on exports were discontinued. The general rate of value-added tax was applicable also to domestic sales of gold coins that are not legal tender.

January 16. The gentlemen’s agreement of August 18,1971 between the National Bank and the credit institutions, which aimed at preventing domestic credit institutions from importing liquidity, was extended until May 31,1973. It called, inter alia, for interest-free deposits with the National Bank equal to 75 per cent of any increase over August 13, 1971 levels in banks’ schilling liabilities to nonresidents.7 Also, the credit institutions undertook not to sell foreign currency in order to increase their schilling liquidity, and not to repatriate their foreign assets prior to the maturity date. (The agreement was subsequently extended until the end of 1973, and in November 1973 it was again extended until June 30, 1974.)

January 16. The credit institutions agreed to extend until June 30, 1973 the gentlemen’s agreement under which they had since June 15, 1972 undertaken to either hold abroad or invest in National Bank certificates of deposit additional funds totaling S 1.5 billion. (On May 30,1973, this agreement was extended until the end of 1973, when it expired.)

February 13. Following the announcement that the U.S. dollar was being devalued, Austria changed its central rate from S 23.30 = US$1 to S 20.97 = US$1 and continued to avail itself of wider margins. In terms of SDRs the central rate remained unchanged at S 25.2971 = SDR 1. New upper and lower intervention points were set at S 21.44 and S 20.50 per US$1, respectively.

February 13. The upper and lower limits for the Italian lira were suspended.

February 15. The upper and lower limits for the Finnish markka, the Portuguese escudo, and the Swedish krona were suspended.

March 2. The foreign exchange market was closed. It reopened on March 19.

March 5. The upper and lower limits for the U.S. dollar were suspended, as were those for the Belgian franc, the Danish krone, the deutsche mark, the French franc, the Netherlands guilder, the Norwegian krone, and the Spanish peseta.

March 15. Austria notified the Fund that, with effect from March 19, it would not, for the time being, ensure that exchange rates would be kept within the margins hitherto observed for spot exchange transactions between the Austrian schilling and other currencies. It was subsequently announced that Austria would pursue a policy designed to keep its exchange rate broadly stable in terms of a weighted average of the stable currencies of those European industrial countries with which it maintained close trading ties.

March 17. It was announced that export industries would be granted tax relief and that improved export credit facilities were under consideration. (On March 30, the Oesterreichische Kontrollbank floated a S 250 million bond issue, the proceeds of which would be used for medium-term export financing.)

March 30. Austria communicated to the Fund a new rate for the schilling which the authorities proposed to treat in a manner analogous to the treatment given to central rates. No margins were announced, however. The new rate, S 1 = SDR 0.0404196 or S 24.7405 = SDR 1, became effective on March 29 when Austria, without assuming any formal obligation to do so, observed margins of up to 2¼ per cent either side of the cross-parities in respect of those currencies participating in the European common margins arrangement. This policy continued throughout the year.

May 23. Under the gentlemen’s agreement with the building societies, the provisions on lending for building purposes were tightened; new contracts with building societies could only be concluded by applicants who had lived in Austria for at least two years (previously, one year).

June 1. Upon the expiration of Foreign Exchange Announcement DE 3/72, the suspension of the liberalization of inward capital movements was extended until the end of 1973 by Foreign Exchange Announcement DE 5/73 of May 29; this announcement also made the gratuitous or unrequited acquisition by nonresidents of domestic real estate and all other assets listed in Announcement DE 3/72 subject to individual license during the same period.

June 1. The general license of December 1972, permitting credit institutions to sell a limited amount of domestic securities to nonresidents (based on the gentlemen’s agreement between the National Bank and the credit institutions of October 9, 1972 on the restriction of sales of domestic fixed-interest bearing securities), which had expired on May 31, was extended until September 30, 1973. The general license covered the sale of domestic securities to nonresidents up to the amount of purchases from nonresidents (including redemption and amortization) plus a global quota of S 500 million (subquotas were allocated to individual banks); the quota was valid from October 9, 1972 to September 30, 1973.

June 1. Loans from nonresident relatives up to S 260,000 a borrower a year again became exempt from restrictive licensing.

June 1. A trade and payments agreement with the People’s Republic of China came into effect that provided for settlements in convertible currencies. It replaced the agreement of November 2, 1972, under which settlements had taken place in schillings. Both countries granted each other’s exports most-favored-nation treatment.

June 21. The U.S.S.R. recognized the Austrian schilling as a freely convertible currency for international settlement purposes. As a result, contracts between residents of Austria and the U.S.S.R. could be invoiced in schillings.

June 28. A most-favored-nation treaty and a long-term trade and cooperation agreement were signed with Bulgaria.

June 29. The foreign exchange market was closed. It reopened on July 3.

July 1. Import procedures for liberalized commodities originating in specified countries were simplified. These goods could now be imported under customs licenses. The countries involved included Bulgaria, Czechoslovakia, Eastern Germany, Hungary, and Poland.

July 1. Upon the expiration of the bilateral payments agreement with Romania, settlements with that country were placed on a convertible currency basis.

July 1. Residents were granted a general license permitting them to incur monetary obligations to foreign persons resident in “bilateral countries” in respect of the purchase of commodities (except gold), provided that the country of purchase and origin was the same bilateral country to which payment would be made, and provided that the (unchanged) prescription of currency regulations were observed.

July 2. Austria notified the Fund that with effect from July 3 the rate for the Austrian schilling would be S 1 = SDR 0.0423597 or S 23.6073 = SDR 1. No margins were announced.

August 30. A long-term trade and payments agreement was signed with Eastern Germany. Payments would be put on a convertible currency basis with effect from January 1, 1974 and schilling invoicing would be permitted. Austria would apply full GATT liberalization of imports by January 1,1975.

September 18. Austria revoked its OECD reservations on (1) the conclusion of life insurance and other insurance contracts and the payment of life insurance premiums, (2) taxes on and tax deductability of life insurance and other insurance premiums, and (3) insurance relating to goods in international trade.

September 25. A new general license for the sale of domestic securities to nonresidents replaced, in slightly modified form, the corresponding general license in effect since June 1, 1973. The global quota was increased to S 641 million, to be valid until December 31, 1973.

November 29. Agreement was reached between the National Bank and the credit institutions that the principal measures contained in the stabilization program of November 1972 would be extended from December 31, 1973 until June 30, 1974, including the suspension of the liberalization of inward capital movements. The credit controls, however, would be made more flexible.

The gentlemen’s agreement calling for the banks to hold abroad or invest in Austrian National Bank certificates of deposit additional funds totaling S 1.5 billion would be terminated with effect from December 31, 1973, while the agreement calling for a supplementary minimum reserve deposit of 75 per cent against any increase in banks’ schilling liabilities to nonresidents and calling for banks to abstain from the conversion of foreign currency or the advance repatriation of foreign assets, was extended until June 30, 1974.

November 30. It was announced that, with effect from January 1, 1974, settlements with Eastern Germany were being placed on a convertible currency basis, with the exception of those in respect of contracts concluded before that date and expressed in clearing currency; the latter type of settlements would until December 31, 1975 be channeled through the clearing account in schillings at the Oesterreichische Kontrollbank.

December 14. The suspension of the liberalization of inward capital movements was extended from January 1, 1974 until June 30, 1974 by Foreign Exchange Announcement DE 8/73.

December 27. A new general license regarding the sale of domestic securities to nonresidents replaced the corresponding general license in effect since October 1, 1973. A new global quota of S 275 million was set for the first half of 1974.

Note.—The following change took place early in 1974:

January 1. Following the expiration of the payments agreement with Eastern Germany, settlements with all countries took place in convertible currencies. The exchange control regulations henceforth distinguished two groups of countries, “multilateral member countries” and “multilateral nonmember countries”; the exchange control concept of “bilateral countries” was eliminated.

Bahamas1

Exchange Rate System

The par value is 0.736662 gram of fine gold per Bahamian Dollar, which corresponds to B$ 1.20635 = SDR 1 or B$l = US$1, and the Bahamas avails itself of wider margins. The U.S. dollar circulates concurrently with the Bahamian dollar. The Bahamas Monetary Authority deals only in U.S. dollars and pounds sterling, and only with commercial banks. It buys U.S. dollars at par and charges a commission of ½ of 1 per cent when selling. It buys sterling at the London market mid-closing rate against the U.S. dollar and charges a commission of ½ of 1 per cent on this mid-rate when selling. For transactions in transfers and drafts with the public, banks are authorized to charge a commission of ½ of 1 per cent buying, and ¾ of 1 per cent selling, per U.S. dollar, and ½ of 1 per cent, buying or selling, per £ stg. 1; these charges are additional to the Monetary Authority’s charges. In addition, a stamp tax of ¼ of 1 per cent is imposed on outward transfers; remittances from Freeport and from bank accounts outside the Bahamas are exempt.

There is also a market in which “investment currency”2 may be negotiated between residents through the intermediary of an investment currency dealer at freely determined rates, usually attracting a premium over the official market rate. This premium was 14 per cent on December 31, 1973.

The Bahamas notified the Fund on November 28, 1973 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 Bahamas Monetary Authority, which in Grand Bahama and New Providence delegates to authorized dealers the authority to approve normal allocations of foreign exchange for certain current payments; the approval authority for import payments, travel exchange, and cash gifts is not delegated, except in the Family Islands. Import and export licenses are not required except for crawfish, arms and ammunition, and, in certain cases, industrial gold. The Department of Agriculture and Fisheries issues export licenses for crawfish and the Police Department issues import and export licenses for arms and ammunition. The administration of exchange and trade controls is not uniform throughout the Bahamas, there being some differences between practices in Grand Bahama, New Providence, and the Family Islands. Imports of industrial gold are licensed by the Monetary Authority.

Prescription of Currency

The Bahamas has ceased to be a Scheduled Territory in terms of the U.K. Exchange Control Act, 1947 but under current U.K. exchange control regulations continues to be regarded as a country of the Overseas Sterling Area. The Bahamas’ exchange controls extend to all territories outside the Bahamas. 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 but without work permits. With the prior approval of the Monetary Authority, authorized banks may also open External Accounts for nonresident companies that have direct investments in the Bahamas and for nonresident investors. External Accounts are normally funded entirely from foreign currency originating outside the Bahamas, but income on registered investment may also be credited to these accounts. 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 in certain resident-held assets or 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 Monetary Authority 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. An import surcharge (“emergency tax”) of 12½ per cent ad valorem is levied on most imports. Customs entries are subject to stamp tax at a rate of ¾ of 1 per cent.

Payments for Invisibles

There are no restrictions on current payments. Authorized dealers have been given authority to 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, interest on Bahamian assets, and insurance payments. Residents are entitled to a foreign currency travel allowance of the equivalent of B$ 1,000 a person a year for tourist travel and of B$5,000 a person a year for genuine business or professional travel.6 The amount of B$ 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 Monetary Authority, which approves all bona fide applications. Foreign exchange facilities obtained for travel may not be retained abroad for use on a journey or be used abroad for other purposes; any unused balance must be surrendered within one month of issue or, if the traveler is still abroad, within one month of his return to the Bahamas. Subject to adequate documentary evidence, an education allowance of up to B$6,000 a person an academic year is normally given upon application to authorized dealers. Applications for facilities in excess of this amount have to be referred to the Monetary Authority. Furthermore, an allowance for family support up to B$3,000 a year a remittor is granted. Temporary residents may remit all their wages and salaries which are in excess of their need in the Bahamas.

There are no restrictions on the export of coins expressed in any currency, but in principle the export by travelers of domestic banknotes is limited to B$70 and of foreign currency notes to the equivalent of B$ 1,000; in practice these limits are not enforced.

Exports and Export Proceeds

No export licenses are required except for crawfish 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 satisfactory to the Monetary Authority. The surrender requirements are seldom enforced.

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 domestic or foreign banknotes.

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 Monetary Authority is required in respect of any act whereby nonresidents acquire control of an incorporated company controlled by residents. Resident individuals and companies require the specific permission of the Monetary Authority to maintain bank accounts outside the Bahamas.7

The use of official exchange for outward direct investment is limited to B$ 150,000 or 50 per cent 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 continue thereafter. Investments in excess of B$l 50,000 must be financed by investment currency or by foreign currency borrowed on suitable terms, subject to individual approval by the Monetary Authority. Projects which do not meet the above criteria may be financed by foreign currency borrowing, 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 projects which are likely to have adverse effects on the balance of payments.

Inward investment by nonresidents in principle is unrestricted. However, the consent of the Monetary Authority 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. Where the investment takes the form of a purchase of real property, the nonresident must obtain permission. Such permission is normally granted, provided that a fair price is paid, and payment may be made either in Bahamian dollars from an External Account or in foreign currency.

In order to obtain “approved status” from the Monetary Authority, inward direct investment must be registered with the Registrar’s Office. For all investments with approved status, permission is automatically given 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 Monetary Authority to buy property outside the Bahamas; such purchases, if for personal use, can only be made 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 to preserve 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.

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.

Bahamian securities may be purchased and sold freely by all persons, irrespective of residence, through authorized agents.8 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 are not 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 nor 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 of foreign currency securities by Bahamian residents, wherever the switch takes place, require permission from the Monetary Authority, and all transactions must take place through authorized agents. All foreign securities purchased by residents of the Bahamas must be held to the order of an authorized agent. Securities of other Sterling Area countries are considered foreign currency securities, and sales proceeds of such securities held by residents, if registered at the Monetary Authority by December 31, 1972, are eligible for sale in the investment currency market; securities not properly registered may be offered for sale at the official rate of exchange.

Residents leaving the country with the intention of residing outside the Bahamas permanently are redesignated upon departure as nonresidents. Under normal rules a family (or an individual), 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 its (his) Bahamian dollar assets to the new country of residence, and may also take normal household and personal effects with them. Where 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 through the conversion of Bahamian dollars. Where 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 which is wholly owned by nonresidents of the Bahamas 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 nonresidents, approval of such local currency borrowing is determined on a basis pro rata to the nonresident interest in the equity of the company. Banks and other lenders resident in the Bahamas require permission before they make loans in domestic currency to any body corporate (other than a bank), which is resident in the Bahamas and is by any means controlled, whether directly or indirectly, by nonresidents. However, companies which 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.

Generally, authorized dealers may provide credit in Bahamian dollars to nonresidents for up to 180 days when it is by way of documentary bills in respect of current shipments of goods between the Bahamas and the rest of the world. They may also provide credit to nonresidents for up to nine months to finance the import into the Bahamas within that period of primary products where this has been traditional. Foreign currency deposited with authorized dealers may be on-lent to nonresidents for any purpose.

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 Monetary Authority, meet their current industrial requirements. Import licenses are freely issued by the Monetary Authority to industrial users. Authorized dealers are not required to obtain licenses for bullion or coins. Commercial imports of gold jewelry do not require a license. There is no import duty on gold bullion or gold coins; however, an import duty of 10 per cent is imposed on gold jewelry imports from Commonwealth countries (30 per cent for other countries), and a 7½ per cent stamp tax payable to the customs is levied on gold jewelry from any source. There is no restriction on the acquisition or retention by residents of gold coins. The Bahamas has issued gold coins in denominations of B$10, B$20, B$50, and BS100; these are legal tender but do not circulate.

Changes during 1973

February 15. Following the announcement that the U.S. dollar was being devalued, the par value was changed from 0.843828 gram to 0.736662 gram of fine gold per Bahamian dollar, corresponding to B$ 1.20635 = SDR 1. The effective parity relationship for the U.S. dollar was restored to the level that existed between February 1970 and December 1971, i.e., B$l = US$1. (The Bahamas at the time was a nonmetropolitan territory in respect of which the United Kingdom had accepted the Fund’s Articles of Agreement.)

February 15. The Monetary Authority reduced its commission on sales of U.S. dollars from ¾ of 1 per cent to ½ of 1 per cent.

March 28. The “emergency tax” on imports was increased from ½ per cent to 12½ per cent.

April 9. Temporary residents were allowed upon application to the Monetary Authority to repatriate local earnings in excess of their immediate local requirements, rather than having to accumulate their savings pending the expiration of their employment contract. They ceased to be eligible for exchange allocations other than business travel allowances.

April 16. The basic emigration allowance was increased from B$ 15,000 to B$25,000 for a family unit.

November 28. The Bahamas informed the Fund that it formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement.

December 17. An initial par value of 0.736662 gram of fine gold per Bahamian dollar, corresponding to B$ 1.20635 = SDR 1, was agreed by the Bahamas and the International Monetary Fund. The effective parity relationship for the U.S. dollar remained unchanged at B$l = US$1. The Bahamas availed itself of wider margins.

Bahrain

Exchange Rate System

The par value is 1.86621 grams of fine gold per Bahrain Dinar, corresponding to BD 0.476190 = SDR 1 or BD 0.394737 = US$1, and Bahrain avails itself of wider margins. The Bahrain Currency Board quotes daily rates for sterling based on London rates for the U.S. dollar against sterling. On December 31,1973, the Currency Board’s buying and selling rates for sterling were BD 0.912 and BD 0.922 per £ stg. 1, respectively. In their dealings with the public, commercial banks are required to observe the Currency Board’s rates, but they are authorized to charge up to BD 0.005 per £ stg. 1, buying and selling. The banks’ rates for other currencies are based on the Currency Board’s rates for sterling and the London market rates for the currencies concerned against sterling. On December 31, 1973, their buying and selling rates for the U.S. dollar were BD 0.3905 and BD 0.39925, respectively, per US$1. The Currency Board does not deal with the public.

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

Administration of Control

There is neither exchange control legislation nor an exchange control authority in Bahrain. Bahrain has ceased to be a Scheduled Territory in terms of the U.K. Exchange Control Act, 1947 but under current U.K. exchange control regulations continues to be regarded as a country of the Overseas Sterling Area. Payments of unreasonable amounts” to destinations outside the Sterling Area may be examined by the banks and/or the Currency Board on a discretionary basis. In practice, however, outward payments are not restricted. Import and export licenses are issued by the Bahrain Chamber of Commerce.

Prescription of Currency

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

Nonresident Accounts

No distinction is made between accounts held by residents and those held by nonresidents.

Imports and Import Payments

All imports from Israel and Rhodesia are prohibited, as are products manufactured by foreign companies that have been blacklisted by the Arab League. Imports of a few commodities are prohibited from all sources for reasons of health, morals, or security; imports of cultured pearls also are prohibited. Import licenses are required only for arms and ammunition, television cameras, alcoholic beverages, and used buses. Three commodities, namely, rice, sugar, and cement, can only be imported by the Bahrain Import-Export Company. Exchange for payments in respect of permitted imports may be obtained freely.

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 or Rhodesia. Travelers may bring in or take out of Bahrain any amount in domestic or foreign banknotes.

Exports and Export Proceeds

All exports to Israel and Rhodesia are prohibited and exports of certain refined petroleum products to the Netherlands, Portugal, South Africa, and the United States 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.

Capital

No exchange control requirements are imposed on capital receipts or payments by residents or nonresidents, but no payments may be made to or received from Israel or Rhodesia. Profits from foreign investments in Bahrain may be transferred abroad freely.

Gold

Residents may freely and without a license purchase, hold, and sell gold in any form, at home and 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 per cent customs duty but gold ingots are exempt.

Changes during 1973

February 12. Following the announcement that the U.S. dollar was being devalued, the gold parity of the Bahrain dinar was maintained at 1.86621 grams of fine gold. The effective parity relationship for the U.S. dollar was changed from BD 1 = US$2.28 to BD 1 = US$2.53.

March 20. Bahrain notified the Fund that it formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement.

March 31. An initial par value was established of 1.86621 grams of fine gold per Bahrain dinar, corresponding to BD 0.476190 = SDR 1 or BD 0.394737 = US$1. Bahrain availed itself of wider margins.

October 21. Exports of certain refined oil products to the United States were suspended. On October 31 such exports to the Netherlands and South Africa also were suspended, and on December 30 those to Portugal.

October 31. The Bahrain Import-Export Company was established with government participation. It was given a monopoly over the import of rice, sugar, and cement.

December 5. The Bahrain Monetary Agency was established. It would replace the Bahrain Currency Board and perform the functions of a central bank.

Bangladesh

Exchange Rate System

No par value for the Bangladesh currency, the Taka, has been established with the Fund. The official exchange rate is Tk 18.9677 = £ stg. 1, and the currency is floating with sterling. Exchange rates for currencies other than sterling, the Indian rupee, and other currencies directly linked to sterling, are based on the London market rates for the currencies concerned. On December 31, 1973, the spot buying and selling rates of the Bangladesh Bank (the central bank) vis-avis authorized dealers were Tk 18.7501 per £ stg. 1 and Tk 18.8501 per £ stg. 1, respectively. On December 31, 1973, the spot buying and selling rates (telegraphic transfers) of authorized dealers were Tk 18.7143 per £ stg. 1 and Tk 18.8857 per £ stg. 1, respectively. On the same date, the central bank’s spot buying and selling rates for the Indian rupee were Tk 100.00 and Tk 100.05, respectively, per Rs 100, and the corresponding rates of the commercial banks were Tk 99.95 and Tk 100.10 per Rs 100.

A buying rate of Tk 30 per £ stg. 1 is applicable to certain inward remittances made to their dependent relatives by Bangladesh nationals working abroad and not being paid out of Bangladesh resources. Forward transactions of the Bangladesh Bank are confined to purchases of sterling and U.S. dollars. Forward facilities at authorized banks are available for export proceeds in sterling and U.S. dollars.

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 three foreign and six domestic commercial banks have been appointed authorized dealers (authorized banks). The Chief Controller of Imports and Exports of the Ministry of Commerce and Foreign Trade is responsible for the issuance of import and export licenses. Certain trade transactions are conducted through state trading agencies, including the Trading Corporation of Bangladesh (TCB) and the Bangladesh Jute Export Corporation.

Prescription of Currency

Bangladesh has ceased to be a Scheduled Territory in terms of the U.K. Exchange Control Act, 1947 but under current U.K. exchange control regulations continues to be regarded as a country of the Overseas Sterling Area. Settlements with all countries are subject to exchange control. Settlements with countries with which Bangladesh has bilateral payments agreements1 normally must be effected through clearing accounts specified in the agreements. Settlements in respect of trade with Burma also are made through a special account. As regards other countries, settlements normally take place in sterling and other convertible currencies or through Nonresident Taka Accounts. Payments for imports must be made to the country of origin of the goods (1) in takas for credit to an account in Bangladesh held by a resident of the country concerned; (2) in pounds sterling for credit to an External Account held by a resident of that country in any country of the Sterling Area outside Bangladesh; (3) in the local currency of that country; or (4) in any other currency specified by the exchange control authorities. Export proceeds must be received in convertible foreign exchange,2 in takas from a Nonresident Taka Account, or, provided such funds were generated from the conversion of inward remittances made since December 17, 1971, from balances in the taka accounts of resident foreign companies being maintained with authorized dealers. All settlements with Pakistan, Rhodesia, 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 permanently residing.3

Specified debit and credit entries to nonresident accounts may be made by authorized dealers without prior approval of the Bangladesh Bank during the absence of the account holder from Bangladesh. Specified other debits and credits may be made freely irrespective of whether the account holder resides in Bangladesh. Certain other debits and credits may be made without the prior approval of the Bangladesh Bank but subject to reporting ex post.

All diplomatic missions operating in Bangladesh, their diplomatic officers, home-based members of the mission staffs, and international organizations functioning in Bangladesh and their employees are allowed to maintain a separate type of account, Special Convertible Taka Accounts. These accounts may be credited freely with receipts of inward remittances in convertible foreign exchange, and may be debited freely and at any time for remittances abroad in convertible currencies and for transfers to Nonconvertible Taka Accounts. Transfers between Special Convertible Taka Accounts are freely permitted. All other debits and credits require the prior approval of the Bangladesh Bank.

New nonresident accounts may be opened only with the prior approval of the Bangladesh Bank.

Imports and Import Payments

Imports are financed either from Bangladesh’s own resources or with foreign aid, loans, and barter arrangements. Imports financed from Bangladesh’s own resources are licensed within the framework of a semiannual import policy (import budget). Under the import policy for the “shipping” period, July-December 1973, items permissible for import were classified into three broad categories: (1) consumer goods and raw materials permitted to be imported by “commercial importers,” including public sector agencies; (2) raw materials and packing materials permitted to be imported by industrial consumers” recognized as such under an entitlement system; and (3) items permitted to be imported exclusively by the TCB or jointly by the TCB and private sector importers. The list of commodities that could be imported under this import policy comprised some 400 items; no provision was made for commercial imports of any other goods, whose importation, therefore, was de facto prohibited unless financed by foreign aid. Imports from Pakistan, Rhodesia, and South Africa are prohibited.

All imports require licenses. Single country licenses are issued for imports under bilateral trade or payments arrangements and for most aid imports. Other import licenses are valid world-wide, except for Pakistan, Rhodesia, and South Africa. Licenses issued to commercial importers are valid for a period of six months from the date of issuance. There is a registry of commercial importers, and items they are permitted to import are specified. Licenses are normally issued to commercial importers for importation of one item only, but where an importer is eligible to import more than one item, the total value of licenses could not exceed Tk 20,000 during the July-December 1973 “shipping” period; licenses issued under bilateral trade or payments arrangements were not counted toward this limit. Licenses are not transferable, and when they expire are not normally revalidated except where, owing to circumstances beyond the control of importers, the letter of credit requirement could not be met or shipping arrangements could not be made. Irrevocable letters of credit must be opened within three months from the date of issuance of licenses. Many imports are reserved for the TCB, including certain chemical and metal products, cement, sugar, certain cotton textiles, and woolen fabrics. In addition, the importation of a number of items is reserved exclusively to other public sector agencies; these include airplane parts, trucks, fire engines, bus and truck chassis, coal and coke, cinematographic films, certain cotton textiles, edible oil, fertilizers, insecticides, and wood and timber. There are limited facilities outside the import program for minor imports by specified end-users, such as hospitals and educational or technical institutions.

The licensing of imports of specified raw materials and packing materials by industrial consumers is governed by an entitlement system, based on the requirements for various industries during each “shipping” period as established by the Director-General of Industries. Firms in the industrial sectors are given an entitlement for importation of specified raw materials and packing materials, and licenses are issued on the basis of the entitlement. Separately, industrial consumers may be granted import licenses for parts and accessories of machinery. Goods imported against licenses issued to industrial consumers must be used in the industry concerned and must not be sold or transferred without prior approval.

Under a raw material replenishment scheme aimed at encouraging industrial exports, industries engaged in export business, or with export potential, may receive licenses in excess of their normal entitlement for the importation of their raw material requirements, on the basis of their export performance. Licenses issued under the scheme have to be claimed within six months of the realization of the export proceeds and are not transferable.

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

Payments for Invisibles

Payments for invisibles connected with authorized trade transactions generally are not restricted. Payments for most other invisibles require prior approval and are restricted. Little foreign exchange is provided for tourist travel. Applications for foreign exchange for business travel and medical treatment abroad are considered on an individual basis; as a rule, the amount granted is £ stg. 75 for two weeks of business travel, and about £ stg. 400 for medical treatment. Foreign nationals working in Bangladesh must obtain approval before making remittances abroad for family maintenance purposes; such approval is usually granted for 50 per cent of wages or salaries, subject to a maximum of £ stg. 150 a month (net of tax) if the terms of employment have been approved by the Government.

Nonresident travelers may take out foreign currency and travelers 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 150 into convertible foreign currencies. Resident travelers may take out foreign currency and travelers checks up to the amount of any travel allocation they have been granted. Bangladesh nationals may take out Tk 20 in domestic currency; otherwise, the export of Bangladesh currency notes and coins is prohibited.

Exports and Export Proceeds

Exports to Pakistan, Rhodesia, and South Africa are prohibited. The Bangladesh Jute Export Corporation has a monopoly over the export of raw jute. The proceeds from exports of jute goods and tea must be received within six months of shipment, those from exports of perishable goods to India within two months of shipment, and those from other exports within four months of shipment. Exporters of 79 items receive a cash subsidy equivalent to 30 per cent of the net f.o.b. value. In addition, certain export industries are granted incentives through a Raw Materials Replenishment Scheme.

Proceeds from Invisibles

All proceeds from invisibles must be surrendered. Remittances in convertible currencies made to their dependent relatives by Bangladesh nationals working abroad and not receiving payment out of Bangladesh resources are accorded a premium resulting in an effective buying rate of Tk 30 per £ stg. 1.

The import of Bangladesh currency notes and coins is prohibited. Foreign currency travelers 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.

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, which generally is given. 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 abroad in respect of business conducted in Bangladesh or services rendered, within one month of the date of acquisition.

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 persons resident in Bangladesh or outside Bangladesh, and to all foreign securities held by persons resident in Bangladesh. Approval is given if securities are returned to Bangladesh within a specified period or, if they are sold, if the proceeds are repatriated to Bangladesh.

Authorized dealers may obtain short-term loans and overdrafts from overseas branches and correspondents for a period not exceeding seven days at a time, provided that they are obtained only in the currency of the country or monetary area in which the overseas bank branch or correspondent is situated.

Borrowing by nonresident-owned or nonresident-controlled enterprises from commercial banks in Bangladesh, as well as from abroad, requires approval, and loans in local currency against overseas guarantees or collateral outside Bangladesh by authorized dealers 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 long-term 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.

Under the Industrial Investment Policy promulgated on January 8, 1973, joint ventures with foreign investors are permitted only with the participation of the Government, and the foreign share of the equity cannot exceed 49 per cent. Foreign investors are expected to provide the entire amount of the foreign exchange component of the project concerned. If this component exceeds 49 per cent of the equity, the excess foreign exchange has to be provided by the foreign investor through loans, on terms and conditions to be mutually negotiated. Foreign participation in the private sector (defined as private enterprises with fixed assets not exceeding Tk 2.5 million, although expansion of assets up to Tk 3.5 million through reinvestment of profits is allowed), however, is restricted to the provision of licenses and patents only, without equity participation. All foreign investments require approval by the Investment Board.

Under this policy, dividends on foreign capital can be remitted net of tax. No provisions are made for a tax holiday. Also remittable are 50 per cent of the net salary of foreign nationals, up to a maximum of £150 a month a person, and savings from earnings, retirement benefits, and personal assets on termination of services or retirement. Repatriation of foreign capital, including capital gains and profits reinvested within the first ten years from the commencement of production, may take place over a period of ten years. Government guarantees against nationalization are provided for a period of ten years, and in the event of nationalization after ten years, compensation is to be paid on a fair and equitable basis.

Gold

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

Changes during 1973

January 1. The import policy for the first half of 1973 came into effect. The public sector was allocated 70 per cent of total imports. The ban on luxury imports was continued. The amount of licenses available to individual commercial importers was increased from a maximum of Tk 20,000 to Tk 35,000. Import licenses for raw materials and spare parts were to be issued to pharmaceutical industries at 200 per cent of their entitlement and to all other industries at 100 per cent of their entitlement. Export incentives were to be granted by the issue of additional licenses to export industries according to their performance. Repeat licenses would be issued to importers of such essential items as milk and other food items and medicines.

January 1. A special clearing arrangement for travel expenditures was added to the existing payments agreement with India.

January 8. An Industrial Investment Policy containing regulations governing inward direct investment was announced.

February 12. A bilateral trade and payments agreement with Eastern Germany was signed; it came into effect immediately.

February 20. Following the announcement that the U.S. dollar was being devalued, the effective parity relationship for sterling was maintained unchanged at Tk 18.9677 = £ stg. 1 and the taka continued to float with sterling.

February 26. Authorized dealers were given general authority to credit nonresident accounts with the proceeds of inward remittances under the Premium Scheme (inclusive of the amounts of premiums) and to debit these accounts for local disbursements.

May 8. All outstanding import licenses against which letters of credit had not been established had to be revalidated.

May 26. The importation of certain cotton textiles, which hitherto was reserved for the Trade Corporation of Bangladesh, was again permitted also for the private sector.

July 1. The premium payments scheme for certain personal inward remittances was extended for another year. The conversion rate was maintained unchanged at Tk 30 per £ stg. 1.

July 5. A “two-tier agreement” including a “balanced trade and payments agreement” was signed with India. It came into effect on September 28, 1973, when the trade and payments agreement of March 28, 1972 expired. Trade between the two countries in listed commodities was placed on a balanced basis for a period of three years; such trade was to be settled through special accounts at two designated banks. Other trade with India would henceforth be settled in sterling or other convertible currencies. Operating instructions were issued on July 16, to cover operations from September 28 on.

July 30. A broad outline of the import policy for the second half of 1973 was announced. The public sector was allocated 82 per cent of total imports. The ban on luxury imports was continued, but the import of a number of essential consumer goods (e.g., cloth and yarn, drugs and medicines, sugar, edible oil, oilseeds, coconut oil, coal, cement, and books and periodicals) was permitted on a priority basis. Essential industries were to receive licenses for imports of raw materials and spare parts at the ratio of 100 per cent of their semiannual entitlement. The Raw Materials Replenishment Scheme for export industries was to be continued. The minimum value of licenses to be issued to commercial importers was increased to Tk 10,000. Some items were transferred from the TCB’s list of monopoly imports to the list of private sector imports, and several other items were shifted in the opposite direction.

November 3. An export subsidy scheme was announced. Under the scheme exporters of 79 items would receive a cash subsidy amounting to 30 per cent of the net f.o.b. value of exports after shipment of the goods and within 30 days of the surrender of the foreign exchange proceeds. The scheme was made retroactive to July 27, and would be in force until June 30, 1974.

December 31. The import policy for the first half of 1974 was announced.

Barbados

Exchange Rate System

The par value is 0.444335 gram of fine gold per Barbados Dollar, corresponding to BDS 2 = SDR 1, but no exchange transactions take place at the par value. The Central Bank of Barbados maintains a fixed relationship for the Barbados dollar with sterling at the rate of BDS 4.80 = £ stg. 1. Consequently, all exchange transactions other than those in sterling or currencies linked to sterling take place at fluctuating rates.

The Central Bank is authorized to levy a commission charge of up to 1 per cent on inward and outward transfers of sterling. On December 31, 1973, the commission charges in transactions with authorized banks were 516 of 1 per cent on inward transfers and ⅜ of 1 per cent on outward transfers. The authorized banks apply the same commission charges in dealings in sterling with their customers, although they may levy an additional charge on mail transfers and drafts. The Central Bank maintains fixed buying and selling rates at ⅛ of 1 per cent either side of parity for the Guyana dollar and the Trinidad and Tobago dollar, while for the Jamaica dollar the Central Bank’s buying and selling rates are determined on the basis of the prevailing sterling/U.S. dollar rate. The authorized banks apply commission charges for these currencies of ¼ of 1 per cent, buying and selling. Exchange rates for convertible non-Sterling Area currencies are based on the daily buying and selling rates in the London market. On December 31, 1973, the authorized banks’ buying rates for the U.S. dollar were BDS 202.8 for banknotes and BDS 204.5 for checks, respectively, per US$100; their selling rate was BDS 209.5 per US$100.

Under an arrangement with the central banks of Guyana, Jamaica, and Trinidad and Tobago, the Central Bank of Barbados purchases notes and coins issued by the monetary authorities of those countries and repatriates the currency in return for reciprocity of treatment with respect to collections of Barbados dollars. The currencies of Guyana and Trinidad and Tobago are purchased at the parity rates of BDS 0.9211 per Guyana dollar and BDS 1.00 per Trinidad and Tobago dollar; the Jamaica dollar is purchased at the middle rate determined on the basis of the prevailing sterling/U.S. dollar rate.

Administration of Control

Exchange control applies to all countries outside the Sterling Area.1 It is administered by the Central Bank of Barbados, to which the Minister of Finance and Planning has delegated the performance of his ordinary functions as the Exchange Control Authority. 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. The exchange control system provides that foreign exchange should normally be surrendered to an authorized dealer. Trade controls are administered by the Ministry of Trade, Industry, and Commerce.

Prescription of Currency

Barbados has ceased to be a Scheduled Territory in terms of the U.K. Exchange Control Act, 1947 but under current U.K. exchange control regulations continues to be regarded as a country of the Overseas Sterling Area. Settlements with residents of other parts of the Sterling Area2 may be made in any Sterling Area currency. Authorized payments to residents of countries outside the Sterling Area other than Rhodesia may be made in any non-Sterling Area currency or by crediting an External Account in Barbados dollars. Receipts from residents of countries outside the Sterling Area other than Rhodesia may be received to the debit of an External Account or in any foreign currency.

Nonresident Accounts

Residents of other Sterling Area countries may maintain accounts in Barbados dollars in Barbados and no distinction is made between these accounts and accounts maintained in Barbados dollars by residents of Barbados.

With the permission of the Exchange Control Authority, authorized banks may maintain Foreign Currency Accounts and External Accounts in the names of residents of non-Sterling Area countries. Residents of the Sterling Area may also hold Foreign Currency Accounts. Permission to open Foreign Currency Accounts, which are maintained in non-Sterling Area currencies, 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, subject to the conditions of approval at the time the account was opened. Other credits and debits require individual approval.

External Accounts may be opener, with exchange control approval, for nonresidents of the Sterling Area and are maintained in Barbados dollars. They may be credited with proceeds from the sale of foreign currencies or gold and with transfers from other External Accounts. Other credits require individual approval. They may be debited for payments to residents of the Sterling Area, for transfers to other External Accounts, and, in some cases, for the purchase of non-Sterling Area currencies. Other debits require individual approval.

The Exchange Control Act, 1967 empowers the Exchange Control Authority to require certain payments in favor of residents of countries outside the Sterling Area which are ineligible for transfer to be credited to Blocked Accounts. Amounts standing to the credit of Blocked Accounts may not be withdrawn without approval, other than for the purchase of approved securities. However, in view of the United Kingdom’s decision in 1967 to dispense with Blocked Accounts, these provisions of the Act have not been invoked.

Imports and Import Payments

All imports from Rhodesia and South Africa are prohibited and imports originating in the People’s Republic of China, the CMEA countries, North Korea, Japan, and Portugal require individual licenses. Imports from Japan are kept under review in order to prevent a widening of the trade imbalance with that country and to protect certain local industries. Certain imports are prohibited or are subject to discretionary licensing irrespective of origin. These include passenger automobiles, buses, cement, coffee, tea, cocoa, and goods which compete with domestic products, such as coconut oil, live poultry, sugar, beverages, and certain items of clothing. Special licensing arrangements apply to goods originating in other countries of the Caribbean Free Trade Association (Carifta) or in other countries of the Caribbean Common Market; Barbados is a member of both. Imports affected by these requirements include pork, milk, eggs, certain fruits, vegetables, wheat flour, millfeed, and nuts, all of which are licensed to conform with the terms of the protocol laying down the agricultural marketing arrangements for the Caribbean Free Trade Agreement. Individual licenses are required for imports of commodities subject to international commodity agreements, including wheat, rice (which is imported only from Guyana in terms of the Barbados-Guyana Rice Agreement), and commodities subject to the provisions of the Oil and Fats Agreement between the Governments of Barbados, Guyana, Grenada, St. Lucia, St. Vincent, Trinidad and Tobago, and Dominica. All imports not referred to previously are on open general license.

Payments for authorized imports are permitted upon application and submission of documentary evidence (relevant invoices or customs warrants) to authorized dealers.

Payments for Invisibles

Payments for invisibles originating in countries outside the Sterling Area require the approval of the authorities. Except for transactions involving residents of Rhodesia, the following applies. 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. These include foreign travel, for which up to BDS 1,000 a person may be allocated for each travel year, expenses of education abroad (BDS 2,500 a person a year after the first year), and subscriptions to newspapers, magazines, etc. With the exception of tourism, 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 seems to be involved. Applications in respect of tourism in excess of BDS 1,000 a person are considered on their merits.

Residents of Barbados and other Sterling Area countries may take out unlimited amounts in travelers checks denominated in Barbados dollars, East Caribbean dollars, or other Sterling Area currencies for encashment only in Sterling Area countries. Residents traveling to destinations outside the Sterling Area may take out notes and coins up to the value of BDS 100 in the currencies of Sterling Area countries and, with exchange control approval, up to BDS 1,000 in the currencies of non-Sterling Area countries. Residents of non-Sterling Area countries may take out any notes and coins which they brought into Barbados.

Exports and Export Proceeds

Exports to Rhodesia and South Africa are prohibited and licenses are required for the export of goods to the People’s Republic of China, the CMEA countries, North Korea, Tibet, and North Viet-Nam. Specific licenses are required for the export of certain goods to any country; these goods include rice, sugar, cement, petroleum products, and turtle shells. Certain goods, including rum, molasses, and confectionery, require licenses when exported to non-Sterling Area countries, and licenses are also required for the export of specified goods to any country that is not a member of Carifta. These goods include coconuts and coconut oil, lard, and margarine. All other goods may be exported without license. Exports are supervised by the Exchange Control Authority to ensure that proceeds in foreign currencies are surrendered within six months from the date of shipment.

Proceeds from Invisibles

Proceeds from invisibles received in foreign currencies must be sold to an authorized dealer. Travelers to Barbados may bring in freely notes and coins denominated in Barbados dollars, East Caribbean dollars, other Sterling Area currencies, or non-Sterling Area currencies. Resident travelers are required to sell their holdings of foreign currencies to an authorized dealer upon return to Barbados.

Capital

All capital transfers to countries outside the Sterling Area require exchange control approval.

Direct investments in non-Sterling Area countries by residents of Barbados require exchange control approval. The purchase by residents of Barbados of non-Sterling Area securities and of real estate for private purposes outside the Sterling Area also requires exchange control approval. Certificates of title to non-Sterling Area securities held by residents of Barbados 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 to residents of non-Sterling Area countries require exchange control approval, which is granted subject to the payment of estate and succession duties. Dowries in the form of settlements, and cash gifts up to BDS 500 a year may be transferred, with exchange control approval, to residents of countries outside the Sterling Area.

Direct investment in Barbados by residents of countries outside the Sterling Area 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 that the amount to be remitted is accurate, to the discharge of any liabilities related to the investment, and to the registration of the original investment with the Exchange Control Authority.

The issuance and transfer to residents of countries outside the Sterling Area of securities registered in Barbados require exchange control approval, which is freely given on condition that an adequate amount of non-Sterling Area 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 non-Sterling Area currency sources. Residents of countries outside the Sterling Area may acquire in Barbados real estate for private purposes with funds from non-Sterling Area currency sources or a combination of local and non-Sterling Area currency sources. Proceeds from the realization of such investments equivalent to the amount of non-Sterling Area currency brought in may be repatriated freely. Capital sums realized in excess of this amount may be repatriated freely on the basis of a rate of return on the original foreign investment, calculated at the following rates: for the last five years at 8 per cent per annum; for the five years immediately preceding the last five years at 5 per cent; and for any period preceding the last ten years at 4 per cent. Amounts in excess of the sum so derived are restricted to the remittance of BDS 24,000 a year.

Authorized banks may freely borrow outside Barbados or accept deposits from persons resident outside Barbados.

Gold

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 and exports of gold by residents are permitted for industrial purposes and are exempted from customs duties, charges, and other taxes. Licenses to import gold are issued by the Ministry of Trade, Industry, and Commerce; no license is required to export gold. Official institutions in Barbados do not purchase gold.

Changes during 1973

January 1. The Minister of Finance delegated by order the performance of his ordinary functions as the Exchange Control Authority to the Central Bank of Barbados.

January 16. The buying and selling rates for the Jamaica dollar quoted by the East Caribbean Currency Authority henceforth were based on the prevailing sterling/U.S. dollar rate; previously, fixed rates were quoted.

February 13. Following the announcement that the U.S. dollar was being devalued, the fixed relationship between the East Caribbean dollar and sterling was maintained at ECS4.80 = £ stg. 1 and the East Caribbean dollar continued to float with sterling.

June 1. Import duties on many commodities were increased.

August 1. Barbados became one of the four initial members of the Caribbean Community and Common Market.

August 1. The common external tariff of the Caribbean Common Market was brought into force.

September 4. The Miscellaneous Controls (General Open Import Licenses) Regulations, 1973 added buses, coffee, tea, cocoa, cement, and certain other items to the list of commodities subject to individual import license irrespective of origin. Milk, wheat flour, and millfeed were added to the list of commodities requiring an individual license when imported from Guyana, Jamaica, or Trinidad and Tobago.

November 22. The Miscellaneous Controls (Export Restrictions) Regulations of November 1973 made the export of cane sugar, cement, and petroleum products subject to specific license.

December 3. The Barbados dollar replaced the East Caribbean dollar as the Barbados currency unit. The par value remained unchanged at 0.444335 gram of fine gold per Barbados dollar, the fixed relationship for sterling was maintained at BDS 4.80 = £ stg. 1, and the Barbados dollar continued to float with sterling.

Belgium-Luxembourg

Exchange Rate System

The par values are 0.0177734 gram of fine gold per Belgian Franc and per Luxembourg Franc. Belgium and Luxembourg have established central rates of BF/Lux F 48.6572 = SDR 1, and avail themselves of wider margins. There are two spot exchange markets—the official (réglementéor regulated) and the free; these markets are separated and foreign currency acquired in one may not be sold in the other. Most current transactions are settled in the official market and most capital transactions in the free market.

In the official exchange market, only authorized banks may carry out exchange transactions permitted in that market.1 Belgium-Luxembourg maintains a maximum margin of 2¼ per cent for exchange rates in the official market between the Belgian franc/Luxembourg franc and the Danish Krone, the deutsche mark, the French franc,2 the Norwegian krone, and the Swedish krona, while a maximum margin of 1½ per cent on either side of the cross-parity of BF 100 = f. 6.8953 or f. 1 = BF 14.5026 is maintained for the Netherlands guilder. No announced margins are maintained for any other currency. On December 31, 1973 the buying and selling rates for the U.S. dollar in the official market were BF 41.22 and BF 41.42, respectively, per US$1. Most exchange transactions are settled through the official market. For all inward and outward payments in excess of BF 10 million through that market, supporting documents must be submitted to the Belgo-Luxembourg Exchange Institute (Institut Belgo-Lux-embourgeois du Change or IBLC).

In the free exchange market, all currencies (including domestic and foreign banknotes) may be bought and sold at freely fluctuating rates. On December 31, 1973 the free market rates between banks for the U.S. dollar were BF 41.17 buying, and BF 41.30 selling, per US$1.

Depending on the category of payments and receipts, either one exchange market or the other must be used; in a few cases, however, there is freedom of choice as to the exchange market in which conversion is to be effected.

In the official market, authorized banks in Belgium-Luxembourg may deal with other authorized banks and with nonresidents in any of the convertible currencies; however, there are special regulations for the zaïre. Nonbank residents may not acquire or surrender convertible currencies in the official spot market until a foreign payment is due. Nonbank residents may make forward purchases and sales of convertible currencies in the official market through authorized banks, provided that the currencies thus acquired are used for the authorized settlement of obligations within five working days from delivery; exchange not used within that period must be resold in the official market. Profits resulting from forward contracts not covering authorized inward or outward payments through the official market must be given up to the Treasury. Any resident or nonresident, banks included, may deal in any currency in the free market. Exchange rates in the forward market are normally left to the interplay of market forces.

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 Belgian-Luxembourg Economic Union—BLEU); the two countries constitute a single exchange control territory in relation to other countries.

Administration of Control

The ultimate responsibility for the administration of exchange control in the Belgian-Luxembourg Economic Union is exercised by the Belgo-Luxembourg Exchange Institute. Exchange control powers for most payments and transfers are delegated to authorized banks. The BLEU Convention of May 23, 1935, revised with effect from August 1, 1965 by a Protocol of January 29, 1963, conferred on the Belgo-Luxembourg Administrative Commission the authority to license trade transactions; this Commission 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.

Prescription of Currency

The prescription of currency requirements operate mainly to ensure that settlements with foreign countries are made, according to their nature, through the appropriate exchange market or, where payments in Belgian or Luxembourg francs are involved, through the appropriate category of nonresident account.

Foreign countries are divided into two groups: the bilateral countries3 and the convertible area (all other countries).

All inward and outward transactions are classified in four groups, which may be summarized as follows: List A covers merchandise, transport expenses, industrial expenses (e.g., costs of processing), and other commercial expenses, including insurance; List B covers settlements of travel firms, salaries, pensions, fees, subscriptions, taxes, and public administration payments; List C covers (1) administration expenses, (2) income on securities, loans, etc., rents, and operating profits, and (3) 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 investments, dealings in gold, transfers by emigrants of Belgian or Luxembourg nationality, transfers by immigrants, inheritances, forward covering of merchandise, private travel expenses (except when settled through travel agencies), and all transactions not in any of the other three lists.

The permissible methods of settlement for foreign payments are summarized in the accompanying table. In dealing with countries in the convertible area, transactions contained in Lists A and B must be settled through the official market (or, if made in Belgian and Luxembourg francs, through Convertible Accounts) and those contained in List D through the free market (or through Financial Accounts). As regards transactions in List C, outward payments for some of these (administration expenses and investment earnings) are channeled through the official market (or Convertible Accounts),4 while outward payments for all others and all inward payments can be transferred through either the official or the free market (or through either Convertible or Financial Accounts). Transactions that may or must be settled through the free market may also be effected in domestic or foreign banknotes.

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.

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 these accounts may be opened freely in the name of any nonresident.6 They are not related to any country or monetary area. They may be used freely for settlements with residents which 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-Luxembourg. Balances on Convertible Accounts may be transferred freely to other Convertible Accounts or be converted into any currency in the official market. Advances on Convertible Accounts other than mail-credit advances are subject to authorization by the IBLC. Convertible Accounts may be held only in the form of sight accounts (demand deposits) and balances may not bear interest except for amounts originating from documentary credits established by banks resident in specified countries. Furthermore, banks levy a negative interest charge (“commission”) on accruals to such balances over the level in a reference period.7 Reserve requirements are applicable to the level of balances in Convertible Accounts and to any increases or decreases therein, in either case calculated on a specified reference period.8

Summary of Permissible Methods of Settlement for Foreign Payments
Transaction ListCountry GroupForeign CurrencyExchange MarketNonresident Account In Francs
Outward Payments
A, B, C(1), C(2)ConvertibleConvertibleOfficialConvertible
C(3)ConvertibleAnyOfficial or freeConvertible or Financial
DConvertibleAnyFreeFinancial
A, B, C, DBilateralBilateral5
Inward Payments
A, BConvertibleConvertibleOfficialConvertible
CConvertibleConvertible OtherOfficial or free Free
Convertible or Financial
DConvertibleAnyFreeFinancial
A, BBilateralConvertibleOfficialBilateral or Convertible5
CBilateralConvertible OtherOfficial or free FreeBilateral or Convertible5
DBilateralAnyFreeBilateral5

2. Financial Accounts. These accounts may be opened only for residents in convertible area countries,9 and they are not related to any country or monetary area. They may be used freely for settlements which either must or may be made through the free market and for retransfer abroad through the free market, and they may be credited freely with proceeds from the sale by a nonresident of gold or any currency in the free market. Domestic banknotes and proceeds from the sale in the free market of foreign banknotes, when deposited with authorized banks by foreign travelers in Belgium-Luxembourg or by persons residing abroad, may be credited freely to Financial Accounts. Transfers between Financial Accounts are free. Balances on these accounts may be used to purchase gold or any currency negotiated on the free market.

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

Imports and Import Payments

All imports of Rhodesian origin are prohibited. Individual licenses are required for (1) all imports from Albania, Bulgaria, the People’s Republic of China, Czechoslovakia, Eastern Germany, Hong Kong, Hungary, Japan, North Korea, Outer Mongolia, Poland, Romania, the U.S.S.R., and North Viet-Nam,10 and (2) a number of imports from all other countries except Luxembourg.11 The commodities for which individual licenses are required include many textile products, certain agricultural products and foodstuffs, and coal and kerosene. All other commodities, which constitute about 85 per cent of total imports, are free of license and quantitative restriction; only a simple form completed by the importer giving notification of the payment (payment declaration) is required, which must be presented to an authorized bank. Many commodities subject to individual licensing are also admitted without quantitative restriction.

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

No exchange control documentation is required for imports not exceeding BF 10,000 in value. The authorized bank is required to make certain that payment is made by one of the methods laid down in the regulations (see section on Prescription of Currency, above) and that foreign exchange is not acquired until the import payment is due. If these requirements are not fulfilled, the authorized bank submits a request to the central exchange control authority for special permission. Prior examination of supporting documents by the IBLC is required for payments exceeding BF 10 million, and exchange control approval is required for payments for imports more than three months before or after the date of customs clearance. Payments for transit transactions must be made within three months from the date of any advance payment collected from the foreign buyer.

Payments for Invisibles

Payments to convertible area countries for transactions included in Lists A, B, and subcategories (1) and (2) of List C must be made through the official exchange market or by crediting Belgian or Luxembourg francs to a Convertible Account.12 Supporting documents must be presented to an authorized bank; for payments exceeding BF 10 million and in other exceptional cases, prior examination of the supporting documents by the IBLC is required. Payments to convertible area countries for items in subcategory (3) of List C may be made through either 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 banknotes); payments for items in List D must be made through the free market (alternatively, by crediting Belgian or Luxembourg francs to a Financial Account, or in foreign or domestic banknotes). Payments to bilateral countries (see footnote 3) must be made by crediting Belgian or Luxembourg francs to a Bilateral Account related to the country concerned; payments to Zaïre, however, may also be made in zaïres through a convertible account in Zaïre. Foreign and domestic banknotes may be exported freely.

Exports and Export Proceeds

The export of all goods to Rhodesia is prohibited in accordance with UN Security Council Resolution No. 253(68) of May 29, 1968. Individual licenses are required for specified exports to all countries except Luxembourg.13 All other exports are free of license; only a simple form completed by the exporter giving notification of the export is required.

No exchange control documentation is required for exports not exceeding BF 10,000 in value. The authorized bank is required to make sure that export proceeds are received in accordance with the regulations (see section on Prescription of Currency, above). Special authorization is required to collect export proceeds more than six months after the date of exportation. Export proceeds in convertible currencies must, within eight days of receipt, be surrendered to an authorized bank, or, alternatively, they may be deposited in a Controlled Resident Account in Foreign Currency with an authorized bank if they are to be used later for current payments authorized to be made in these currencies. Advance collection of export proceeds exceeding BF 5 million in value requires prior authorization of the IBLC; in addition, payments for exports to bilateral countries may not be received more than three months before the date foreseen for exportation; proceeds from transit transactions must be collected within three months from the date of payment to the foreign supplier. Prior examination of supporting documents by the IBLC is required for receipts exceeding BF 10 million.

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, within eight days of receipt, be surrendered (i.e., sold in the official exchange market), or, alternatively, be credited to a Controlled Resident Account in Foreign Currency with an authorized bank if they are to be used later for current payments authorized to be made in these currencies. Prior examination of supporting documents by the IBLC is required for receipts exceeding BF 10 million through the official market. Receipts in convertible currencies from transactions included in List C may be retained or sold in the official or the free market. Receipts from other transactions (List D) and receipts in all other currencies may be retained or sold in the free market. Proceeds from transactions included in Lists C and D may also be collected in domestic or foreign banknotes. Foreign and domestic banknotes may be imported freely.

Capital

All capital transactions with convertible area countries may be carried out freely through the free market, by settlement in Belgian or Luxembourg francs through the Financial Account of a nonresident, or in domestic or foreign banknotes. Direct investments by enterprises and some capital transfers by individuals, including gifts, family maintenance payments, remittances by emigrants of Belgian or Luxembourg nationality, and inheritances, but not transactions of a financial character, 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-Luxembourg. In that case, capital brought in through the official market (under special license, and as an exception to the standard prescription of currency set out above) may be repatriated through that market.

Also eligible for outward transfer through the official market are the amortization and redemption proceeds of bonds denominated in Belgian or Luxembourg francs, quoted on a stock exchange in the BLEU, and owned by residents of convertible area countries, provided that such securities had been held at least six 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. The prior approval of the Minister of Finance is required for issues of securities on the Belgian capital market by nonresidents. Public bids by foreign companies or individuals for the purchase or exchange of shares issued by Belgian companies require the prior approval of the Ministry of Finance. Outward payments for capital transactions with bilateral countries must be made only in Belgian or Luxembourg francs through Bilateral Accounts, or in the case of Zaïre, in zaïires; inward payments for capital transactions with bilateral countries may be made in Belgian or Luxembourg francs through Bilateral Accounts, in any currency through the free market, or in the case of Zaïre, in zaïires.

The external position of authorized banks is subject to control. Banks in Belgium and Luxembourg have been requested not to allow their net external debtor spot positions (in foreign currency relating to the official market plus, vis-á-vis nonresidents, in Belgian francs and Luxembourg francs in Convertible Accounts) to increase beyond specified levels. Banks have also been instructed that their overall foreign currency position relating to the official market (spot and forward combined) should normally be close to balance and should not register a substantial creditor or debtor position. Furthermore, since May 11, 1971, banks have been prohibited from opening time or prior notice Convertible Accounts for nonresidents and (with minor exceptions) from paying interest on demand deposits in Convertible Accounts.14

Gold

Residents may freely purchase, hold, and sell gold in the form of 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 with convertible area countries (other than payments for semiprocessed gold imported by professional users) may only be made through the free market, through Financial Accounts in Belgian or Luxembourg francs, or in domestic or foreign banknotes. No customs duties or other charges are levied on imports or exports of gold, except imports for industrial or handicraft purposes. Licenses are required for imports of semiprocessed gold; these are issued to professional users, who have to make payment through the official market. Transactions in monetary gold, i.e., coins and bars, are exempt from value-added tax in Belgium.

Changes during 1973

January 1. The import regime applicable to EEC member countries became applicable to Denmark, Ireland, and the United Kingdom, except for goods covered by common market organizations of the EEC, for which this occurred on February 1.

January 1. Luxembourg enacted two new laws. One required mutual funds and investment companies in Luxembourg to register with the Bank Control Commissioner and made them subject to his surveillance in much the same way as banks. The other law established the legal basis for operating trust companies; these also would be subject to surveillance by the Bank Control Commissioner.

January 2. An agreement came into force between the Luxembourg Bank Control Commissioner and the Luxembourg banks, under which banks established in Luxembourg became subject to a reserve requirement similar to that in effect in Belgium, against nonresidents’ holdings of convertible Luxembourg and Belgian francs. Furthermore, banks in Luxembourg were requested to confine their credits to Belgian enterprises within normal limits.

February 13. Following the announcement that the U.S. dollar was being devalued, Belgium and Luxembourg maintained their central rates in terms of gold and SDRs. The effective parity relationship for the U.S. dollar, previously BF/Lux F 44.8159 = US$1, became BF/Lux F 40.3344 = US$1, corresponding to BF/Lux F 48.6572 = SDR 1. The new intervention limits for the U.S. dollar were set at BF 39.4265 buying, and BF 41.2420 selling, per US$1.

February 19. Revised regulations were issued concerning the opening and functioning of Special Foreign Accounts (in Belgian or Luxembourg francs) and Foreign Accounts in Foreign Currencies for international organizations, foreign diplomatic representations, foreign diplomats, and foreign nationals employed by diplomatic representations and international organizations, accredited or located in the BLEU. The former accounts were allowed to bear interest. The regulations ruling Assimilated Resident Accounts also were revised.

February 26. The provisions of the gentlemen’s agreement of November 4, 1972 between the National Bank and the financial institutions in Belgium were modified with effect from March 1 and extended until May 31,1973. The marginal reserve requirement against the growth in their net liabilities on Convertible Accounts in Belgian francs over the level in the base period (August 31-November 1, 1972) was to increase gradually from 70 per cent to 100 per cent by April 20, 1973, while the average reserve requirement against such liabilities in the same base period was to increase from the equivalent of 17.5 per cent to 25 per cent by April 20, 1973. In addition, a marginal reserve requirement of 100 per cent was also gradually applied, with effect from March 12, against any increase in the net spot foreign currency debtor position in the official market over the level in a base period (February 1-10,1973). The Luxembourg Bank Control Commissioner subsequently applied similar controls over the net spot foreign currency debtor positions of Luxembourg banks in the official market (see March 21, below).

March 1. The IBLC instructed banks in Belgium and Luxembourg to purchase foreign currency from nonresidents in the official market only provided that the nonresident concerned was credited on a special “Transitory Convertible Account,” opened with the bank making the purchase. Such accounts could be debited only for payments in favor of residents, subject to the existing rules for permitted payments to the debit of Convertible Accounts; they could not be reconverted into foreign currencies.

The IBLC also instructed authorized banks in Belgium and Luxembourg to take the necessary steps with regard to holders of Convertible Accounts to avoid any unjustified accumulation of holdings in these accounts and, where appropriate, to require from the holders either immediate utilization of any excess balances or permission to reconvert them into foreign currency. Alternatively, authorized banks were instructed to obtain satisfactory explanations for the holding of such balances and to submit the documentation to the IBLC, which reserved the right either to freeze any amounts for which no satisfactory explanation could be provided or to deduct any resulting exchange profit.

March 16. “Transitory Convertible Accounts” were abolished, and balances therein could be transferred to Convertible Accounts in Francs. The instructions of March 9, 1972 and August 24,1972 regarding banks’ external positions were maintained, as was the instruction of March 1, 1973 that credits to Convertible Accounts should only be made for purposes of official market payments in favor of residents.

March 19. Belgium and Luxembourg henceforth maintained a maximum margin of 2¼ per cent for exchange rates in transactions in the official market between their own currencies and the Danish krone, the deutsche mark, the French franc, the Norwegian krone, and the Swedish krona; margins of up to 1½ per cent either side of the cross-parity continued to be observed for the Netherlands guilder. No announced margins would be maintained for other currencies.

March 21. The agreement between the Luxembourg Bank Control Commissioner and the Luxembourg banks on reserve requirements against net Convertible Account liabilities was extended to cover the banks’ net spot foreign currency debtor position in the official market.

March 26. At the request of the Belgian monetary authorities, banks established in Belgium agreed, with effect from April 1, to charge a negative interest rate in the form of a special commission of 0.25 per cent per week, calculated on a daily basis and charged monthly, on all holdings of Belgian francs in Convertible Accounts in excess of the daily average of holdings in the account concerned during the last quarter of 1972. As a result of an agreement concluded between the Luxembourg Bank Control Commissioner and resident banks, the charge was also applied by Luxembourg banks on Convertible Accounts in Belgian and Luxembourg francs.

April. It was announced that the three Benelux countries would restrict imports of Japanese products in the field of “entertainment” electronics. The restrictions were lifted after the signing of an agreement between Benelux and Japan on December 18.

May 28. The gentlemen’s agreement between the National Bank and the financial institutions in Belgium was extended until September 30, 1973. On May 31, the agreement between the Luxembourg Bank Control Commission and Luxembourg banks also was extended until September 30.

July 24. Residents could no longer resort freely to credit from authorized banks in foreign currencies on the official market for the execution of payments in favor of nonresidents. Such advances from banks in Belgium and Luxembourg became subject to individual authorization by the IBLC. As an exception, banks did not need specific authorization to grant advances to transit traders for the period between the payment to the foreign seller and the payment from the foreign buyer. (The freedom suspended on July 24 was restored on January 28, 1974.)

September 3. In agreement with the monetary authorities, Belgian banks suspended, with retroactive effect from August 1, 1973, the negative interest charge on excess nonresident holdings of Belgian francs in Convertible Accounts. The charge was not suspended in Luxembourg.

September 18. The IBLC issued new instructions to commercial banks in Belgium and Luxembourg tightening the controls over the external position of authorized banks by the introduction of a uniform ceiling on their net external liabilities related to the official exchange market. A limit was established on the net debtor position of each bank, calculated daily as the sum of the net spot debtor position in foreign currency relating to the official market and the net spot liabilities in Belgian francs or Luxembourg francs in Convertible Accounts; for most banks this limit was set at BF 20 million, but for the major banks it was fixed at higher amounts in keeping with their size and turnover. As under the previous ceilings, temporary excesses of up to 10 per cent would be tolerated so as not to disturb the normal operation of current transactions. The existing IBLC instruction to Belgian and Luxembourg banks not to incur any substantial overall position in foreign currencies (creditor or debtor position, spot plus forward) was maintained. The instructions of March 9, April 5, and August 24, 1972 were revoked. (The instruction of September 18 remained in force when on January 25, 1974 the IBLC imposed a ceiling on the net foreign asset position of banks.)

September 19. Belgian banks reimposed the negative interest charge on nonresident holdings of Belgian francs in Convertible Accounts. The negative rate of interest was again set at 0.25 per cent a week, but it was charged on balances exceeding the daily average of the holder’s balance during July and August 1973. As before, it was calculated on a daily basis. Luxembourg banks maintained this charge at the request of the Bank Control Commissioner. (On January 1, 1974 they reduced it to zero.)

September 28. The gentlemen’s agreement between the National Bank and the financial institutions was extended until January 31, 1974, with certain modifications which were expected to increase from about BF 24 billion to some BF 30-35 billion the amount of liquidity frozen in the form of noninterest-bearing deposits with the National Bank. The reserve requirements against resident-held sight and time liabilities were raised in four stages and reserve requirements were for the first time applied also to increases in bank credit granted over the levels in specified reference periods. With respect to nonresidents’ holdings of Belgian francs, however, there was no change, the reserve requirement remaining at 25 per cent of net liabilities in Convertible Accounts during the reference period, plus or minus 100 per cent of any increase or decrease since the reference period. The reserve requirement applicable to the banks’ debtor position in foreign currencies on the official market also remained unchanged, any increase above the reference period being frozen at the rate of 100 per cent.

(The agreement was extended, with eased provisions, from February 1, 1974 until March 31, 1974. Among the principal changes was the elimination, with effect from February 1, of the reserve requirements relating to Convertible Accounts, both with respect to their level and any increases or decreases therein.)

The existing agreement in Luxembourg with respect to Convertible Accounts and foreign currency liability positions was extended on October 19. (With effect from February 21, 1974 the Luxembourg Bank Control Commissioner reduced to zero the rate of reserve requirements on Convertible Accounts.)

October 24. Exports of petroleum products from Belgium to all countries except Luxembourg were made subject to licensing.

November 28. The IBLC further reduced, as it had previously done on September 18, the limit imposed on the net debtor positions of Belgian and Luxembourg banks on Convertible Accounts and in foreign currency on the official market. (This limit was subsequently increased on February 6, 1974.)

December 24. The Australian dollar and the South African rand were admitted to the official exchange market. They were not officially quoted.

December 26. In agreement with the monetary authorities, the Belgian banks decided to suspend, with effect from January 1, 1974, the negative interest charge on holdings in Convertible Accounts exceeding the reference ceiling.

December 27. The National Bank of Belgium announced that the yen would be officially quoted with effect from January 2, 1974.

Bolivia

Exchange Rate System

The par value is 0.0409256 gram of fine gold per Bolivian Peso, corresponding to $b 21.7143 = SDR 1. A central rate has been established of $b 20 = US$1, corresponding to $b 24.127 = SDR 1. The U.S. dollar is the intervention currency and Bolivia avails itself of wider margins.

For operational purposes, the exchange market is divided into two sectors: the public sector and the private sector. The Central Bank of Bolivia operates in the public sector, buying foreign exchange from the Government, the official enterprises, including the Bolivian Mining Corporation (Comibol), and private export firms, and selling foreign exchange to the Banco del Estado, the commercial banks and exchange houses, and the Government and its official agencies. The commercial banks and exchange houses purchase exchange accruing to the private sector on account of capital and invisibles, and they cover all foreign exchange requirements of the private sector. The exchange rate of the Central Bank on December 31,1973 was $b 20.00 buying, and $b 20.02 selling, per US$1. All sales of foreign exchange are subject to a 1.6 per cent exchange tax, a 2 per mill stamp tax, and a 2 per mill banking commission. Accordingly, the effective selling rate of the commercial banks and exchange houses on the same date was $b 20.40 per US$1.

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

Prescription of Currency

Certain settlements with Hungary and Poland are channeled through special accounts.1 Otherwise, 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, and Uruguay, may be made through accounts maintained with each other by the central banks.

Imports and Import Payments

All imports by public sector agencies require the prior authorization of the Ministry of Industry and Commerce; they are not permitted to import commodities also available in Bolivia. Private imports of certain commodities also require such prior authorization; these goods include live cattle, various foodstuffs, raw cotton, and petroleum and petroleum products. The import of cigarettes, cement, and certain other locally produced goods is prohibited. All other goods may be imported freely. Exchange to pay for imports may be purchased freely from commercial banks. Most foreign credits, including officially guaranteed suppliers’ credits, are subject to authorization by the National Economic and Planning Council.

Most private sector imports are subject to a customs surcharge of 1 per cent ad valorem.

Payments for Invisibles

Payments for invisibles may be made freely. Residents of Bolivian or foreign nationality must pay a travel tax when leaving the country. The tax is $b 150 for air travel to neighboring countries, $b 60 for overland travel to such countries, $b 300 for air travel to other Latin American countries, and $b 400 for air travel to countries outside Latin America.

Exports and Export Proceeds

Exports are not normally subject to licensing, although certain exports may be prohibited or restricted from time to time owing to domestic supply factors. All proceeds from exports of the public and private sectors must be sold to the Central Bank within 15 days of receipt, with the exception of reasonable amounts deducted for foreign exchange expenditures undertaken to effect the export. The marketing of minerals is a state monopoly; in practice, Comibol and the medium-sized mines export their own production and Comibol and the Mining Bank most of that of the small mines of the private sector. The small mines may export the rest of their production themselves or through traders.

Proceeds from Invisibles

Exchange derived from invisibles may be retained or sold in the exchange market.

Capital

Outward capital transfers by residents or nonresidents are free of control and may be made freely; inward capital transfers also 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 National Economic and Planning Council.

Foreign investments in Bolivia, except those involving petroleum and mining, are governed by the provisions of the Investment Law of December 16, 1971. The law is administered by the National Investment Institute. Investments in petroleum and mining are governed by the General Hydrocarbons Law and the Mining Code.

Gold

By virtue of Supreme Decree No. 07771 of August 2, 1966, imports and exports of gold and domestic trading in gold are subject to regulation by the Central Bank. The Decree also designated the Central Bank to purchase, for its use or for export in the form of gold bars, the total national production of gold. Supreme Decree No. 8635 of January 29, 1969 further regulated the purchase and sale of gold, silver, and platinum by the Central Bank and the Mining Bank. The Central Bank purchases a limited amount of gold at US$42.22 an ounce from the foreign-owned company and the Mining Bank, which buys from the smaller producers on behalf of the Central Bank. The Central Bank also purchases gold at the free market price, but only as a marketing agency for the mining sector, and not for its own account. Comibol exports all the gold it produces at the free market price. The foreign-owned company and the Mining Bank are also allowed to export gold at the free market price. The Mining Bank is authorized to sell a specified quantity of gold annually to domestic jewelers and dentists and is obliged to sell the remainder to the Central Bank. Residents may freely purchase, hold, and sell gold in any form other than bars in Bolivia.

Changes during 1973

February 13. Following the announcement that the U.S. dollar was being devalued, a central rate of $b 20 = US$1 was established. The effective parity relationship for the U.S. dollar remained unchanged. Bolivia continued to avail itself of wider margins.

February 21. Restrictions were placed on the export of natural rubber.

July 31. A reciprocal credit agreement was signed with Paraguay.

August 16. Exports of meat, poultry, sugar, rice, corn, and vegetables were suspended.

October 3. A reciprocal credit agreement was signed with Uruguay.

November 30. The importation of certain agricultural tractors was prohibited.

December 1. A new customs tariff came into effect.

Botswana

Exchange and Trade System

Botswana’s currency is the South African Rand. The par value of the rand is 1.04550 grams of fine gold per rand, which corresponds to R 1 = SDR 1.17648. However, no exchange transactions take place at the par value. The South African Reserve Bank quotes a middle exchange rate for the U.S. dollar of US$1.4900 per R 1. Exchange rates are based on the South African Reserve Bank’s rates for the U.S. dollar against rand (US$1.4937 buying and US$1.4862 selling per R 1) and the London market rates for the currencies concerned against the U.S. dollar.

Botswana has ceased to be a Scheduled Territory in terms of the U.K. Exchange Control Act, 1947 but under current U.K. exchange control regulations continues to be regarded as a country of the Overseas Sterling Area. Botswana also forms part of the Rand Monetary Area, which is a single exchange control territory comprising Botswana, Lesotho, South Africa, and Swaziland. For purposes of exchange control over transactions in securities or gold, residents of a member country of the latter area are not regarded as residents of another member country. The Ministry of Finance and Development Planning controls all external currency transactions.

No restrictions are applied to payments within the Rand Monetary Area, and in principle these are uncontrolled and unrecorded. In relation to countries outside the Rand Monetary Area, Botswana applies exchange controls that are generally similar to those of South Africa, although Botswana’s treatment of certain capital transfers may be more liberal. Payments to nonresidents for current transactions, while subject to control, are not restricted, but applications for outward transfers of capital are considered on their merits. The rulings on applications for inward and outward capital transfers may depend on whether the applicant is a temporarily resident foreign national, a nonresident, or a resident. Authority to approve some types of current payments is delegated to commercial banks up to established limits; this is true, for example, of the basic exchange allowance for tourist travel (the equivalent of R 2,000 in a calendar year for an adult and R 800 for a child) and a smaller annual allocation for travel to neighboring countries. There are no bilateral payments arrangements.

Botswana is a member of a customs union with Lesotho, South Africa, and Swaziland, and there are no import restrictions on goods originating in any country of the customs union. Imports from South Africa do not require licenses and include an unknown quantity of goods originating outside the customs union. Insofar as Botswana imports goods direct from countries outside the customs union, such imports are usually licensed in conformity with South Africa’s import regulations. Import licenses are valid for all countries and entitle the holder to buy the foreign exchange required to make the import payment. Certain exports are subject to licensing, mainly for revenue and similar reasons. Furthermore, goods of domestic origin may move freely between Botswana and Rhodesia by virtue of a customs agreement of 1956, provided that they are not intended for re-export; imports of Rhodesian beer, tobacco, and cigarettes are not permitted, however.

Changes during 1973

February 14. Following the announcement that the U.S. dollar was being devalued, the par value of the South African rand was maintained in terms of gold. The effective parity relationship for the U.S. dollar, previously R 0.782891 = US$1, became R 0.704603 = US$1. The South African Reserve Bank announced a middle rate for the U.S. dollar of R 1 = US$1.4193, and its fixed rates for the U.S. dollar were changed to US$1.4229 buying and US$1.4157 selling, per R 1.

June 5. The South African Reserve Bank henceforth quoted a middle exchange rate for the U.S. dollar of US$1.4900 per R 1. New official buying and selling rates were set at US$1.4937 and US$1.4862, respectively, per R 1.

Brazil

Exchange System

On July 14,1948, a par value for the Brazilian Cruzeiro was established by Brazil with the Fund. However, exchange transactions no longer take place at rates based on that par value. Brazil follows a flexible exchange rate policy.

Exchange transactions are carried out by the Central Bank, the Bank of Brazil, the authorized banks, and the exchange houses. The Central Bank operates in foreign exchange in Rio de Janeiro and São Paulo, and the Bank of Brazil undertakes exchange transactions in the name of the Central Bank in other parts of the country. The exchange houses deal only in banknotes and travelers checks in a “manual market.” Uniformity between the rates quoted by the monetary authorities and the effective rates of the authorized banks is ensured by the practice of the monetary authorities of standing ready to purchase exchange from the banks and to sell it to the banks on an adequate basis, for approved transactions; such purchases and sales are made at the official rate. On December 31, 1973, the buying and selling rates quoted by the monetary authorities to the public were Cr$6.180 and Cr$6.220 per US$1, respectively; those quoted by the authorized banks for transactions other than in banknotes or travelers checks were the same (see Table of Exchange Rates, below). 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 currencies concerned in New York and Europe. With specified exceptions, foreign exchange transactions are subject to brokerage fees, calculated on a sliding scale, which for the rates listed above result in effective rates within 1 per cent on either side of the rates of the monetary authorities.

On the buying side, other effective rates result from the following arrangements: (1) special regulations apply to coffee exports (see section on Exports and Export Proceeds, below); (2) a 10 per cent contribution (“contribution quota” or quota de contribuição) is levied on proceeds from exports of cocoa beans and products; (3) a contribution quota of US$500 per ton f.o.b. is applied to proceeds from exports of chilled, fresh, and frozen beef;1 and (4) a contribution quota of US$250 per ton f.o.b. is applied to proceeds from exports of processed beef.2

On the selling side, a different effective rate arises from the provision of the Foreign Investment Law (see section on Payments for Invisibles, below), which specifies that the sum of profits and dividends effectively remitted to persons and companies resident abroad is subject to a supplementary income tax when the average of actual remittances in any three-year period is in excess of 12 per cent a year of registered capita! and reinvestment.

The Bank of Brazil, acting on its own behalf or on behalf of the Central Bank, carries out a considerable proportion of all exchange transactions. The following arrangements assure the Bank of Brazil of a large portion of the country’s foreign exchange receipts: (1) Petrobrás surrenders to the Bank its entire foreign exchange proceeds from certain exports of petroleum. (2) Proceeds from exports of iron ore by the Vale do Rio Doce Company also are surrendered to the Bank of Brazil. (3) All public sector agencies carry out their exchange operations through the Bank of Brazil. (4) Furthermore, exporters in regions not served by other banks sell their exchange proceeds to the Bank.

The Bank of Brazil sells foreign exchange for the requirements of the Government at the exchange rate prevailing on the date the transaction is made. Like the other commercial banks the Bank of Brazil also sells foreign exchange for payments in respect of a large number of imports, including crude oil and petroleum products, wheat, newsprint, fertilizers, and the requirements of the Vale do Rio Doce Company. The Central Bank handles all exchange transactions in bilateral currencies and exchange transactions related to imports under U.S. aid (by transferring exchange to authorized banks or vice versa).

The authorized banks are required to surrender to the Central Bank or to the Bank of Brazil (operating for the account of the Central Bank), at the close of each business day, any foreign exchange in excess of a net position of US$25,000 for each branch. The Central Bank and the Bank of Brazil, operating for the account of the Central Bank, supply foreign exchange to authorized banks in amounts not exceeding those needed to eliminate an oversold position of up to US$500,000 and limited to 90 per cent of the exchange sold the previous day by the bank concerned to its customers; included in this limit is their “manual market” position (banknotes and travelers checks). The banks are permitted to sell foreign exchange to each other, provided that they are situated in the same trading center; transfers between branches of the same bank in different trading centers are also allowed, subject to certain conditions. In addition, since March 1971, exchange transactions have been permitted between banks in Rio de Janeiro and banks in São Paulo; such transactions may be carried out either by cable on a spot basis or on a forward basis and must be executed within 2 working days for spot transactions or not later than after 180 days for forward transactions. Since April 1972 authorized banks have also been permitted to engage in arbitrage among themselves when operating in the same trading center or between establishments in Rio de Janeiro and São Paulo. The “manual market” is conducted mainly by exchange houses, which are not permitted to maintain a sold position and are not entitled to obtain exchange cover from the monetary authorities.

Administration of Control

The National Monetary Council, chaired by the Minister of Finance, is responsible for the formulation of overall foreign exchange policy. In accordance with the guidelines established by the Council, and under the supervision of the Director in charge of Foreign Exchange Operations of the Central Bank, exchange control is operated by the Central Bank’s Exchange Operations Department (GECAM) and Department for the Control and Registration of Foreign Capital (FIRCE); the latter processes the registration of foreign capital for the purpose of its repatriation and of the remittance of income therefrom; it also exercises approval authority over the terms of foreign financing of imports for periods in excess of 360 days. Certain borrowing abroad requires the prior approval of the interministerial Foreign Loans Commission (CEMPEX).

The National Council of Foreign Trade (CONCEX), chaired by the Minister of Industry and Commerce and established within his Ministry, 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 Bank of Brazil (CACEX) implements the Council’s decisions within Brazil. The Foreign Trade Department issues export and import certificates (guias de exportação and guias de importação), and verifies price quotations, weights, measures, classifications, and types in import operations. CACEX also is in charge of approving import financing with terms of up to 360 days.

Coffee exports are regulated by the Brazilian Coffee Institute (IBC), which is an autonomous body responsible to the Minister of Industry and Commerce and operates within the general guidelines of the National Monetary Council.

The Customs Policy Council (CPA), established within the Ministry of Finance, is responsible for formulating guidelines for tariff policy, subject to the legal powers of the National Monetary Council and the National Council of Foreign Trade. The CPA also decides on changes in customs duties under the provisions of existing legislation.

Prescription of Currency

Prescription of currency is in principle related to the country of origin of imports or the country of final destination of exports, unless otherwise specifically prescribed or authorized. Settlements with payments agreement countries are made in clearing dollars through the relevant agreement account. These accounts are maintained with Bulgaria, Eastern Germany, Greece, Hungary, Israel, Poland, Romania, and Yugoslavia. Settlements with other countries with which Brazil has no payments agreements or arrangements are made in U.S. dollars or other convertible currencies. Reciprocal credit agreements providing for settlements through accounts denominated in U.S. dollars are in force with Argentina, Bolivia, Chile, Colombia, Ecuador, Mexico, and Peru. Proceeds from exports to Latin American member countries of the Inter-American Development Bank, other than Argentina, Mexico, and Venezuela, may be received in the currency of the importing country.

Imports and Import Payments

Special arrangements described below apply to imports of petroleum and petroleum products. The import of recreational boats of a value over US$3,500 and of commodities originating in or shipped from Cuba and Rhodesia is prohibited. All other imports may be grouped into the following two broad categories: (1) imports that are free of any requirement to secure prior administrative documentation, e.g., samples without commercial value, certain educational material, parts and accessories (valued up to the equivalent of US$5,000) for machinery, instruments, ships, and aircraft; and (2) imports that require an import certificate. The bulk of imports falls into the second category. The import certificate is issued subject to the presentation of data on the foreign price of the commodity and other relevant information CACEX may require. Import certificates are issued on an f.o.b. basis; as a rule, they are issued freely and without undue delay and are valid for 180 days. For a number of specified imports in the second category, the import certificate may be obtained after the disembarkation of the commodity in Brazil, e.g., live plants, fish, various minerals, and paper. For certain other imports in the second category the prior approval of CACEX is required; these include goods imported by public bodies, imports for which tariff concessions are being sought, goods to be brought in with foreign financing with terms between 180 and 360 days, certain imports without exchange cover, goods for use in fairs and trade exhibitions, and used instruments, machinery, and equipment. Most commodities subject to an import certificate are exempt from this requirement when the value of the import transaction does not exceed US$2,000.

As a general rule, imports may be cleared through customs before an exchange contract is closed. However, the maximum period for which payments for imports may be delayed is 180 days from the date of shipment; this period may be extended to 360 days at the discretion of CACEX for imports of raw materials, spare parts for direct use by the importer, and capital goods which are not produced domestically. Financing arrangements for imports in which credit terms exceed 360 days in amounts over US$500,000 require the prior approval of the Central Bank. Any bona fide interest involved in the above credit arrangements is approved freely. Spot contracts may be closed if the contract is intended to settle drafts, at sight or on maturity, and the appropriate shipping documents are presented. Spot exchange contracts must be settled within 2 working days. Forward contracts, for up to 180 days, may be closed when a letter of credit is being opened, or to pay for goods already shipped. Letters of credit must be opened within 5 working days from the date of the exchange contract. Commercial banks ordinarily require a guarantee deposit for their own protection for forward exchange contracts; the amount of the deposit varies with the credit standing of the customer. When the contracts are liquidated, guarantee deposits may be used for payment of the foreign exchange concerned. In certain cases, interest at about 0.5 per cent a month is charged on the portion of the forward contract not covered by a deposit. Advance payments in amounts up to US$300 for imports of books may be made without prior authorization.

Special procedures are applicable to certain imports of petroleum and petroleum products and of wheat. For petroleum and specified petroleum by-products, Petrobrás concludes a “global foreign exchange contract” with the Bank of Brazil once every four months for its estimated requirements. The contract is concluded at the official market rate prevailing 10 days prior to the closing of the contract. At the same time, the Bank of Brazil concludes a foreign exchange contract with the Central Bank, to cover its position, for an amount equivalent to the value of the “global contract” at the exchange rate at which the Central Bank sells foreign exchange to commercial banks; the rate applicable is again the one prevailing 10 days prior to the conclusion of the “global contract.” Individual exchange contracts for petroleum shipments made during the life of the “global contract” are then closed at the exchange rate on which the latter is based. Payment by Petrobrás against such contracts is made in the following manner: 30 per cent of the value of an individual contract is deposited 15 days from the date of shipment, and the remaining 70 per cent 110 days after shipment. The liquidation of each individual contract 110 days after shipment is accompanied by the liquidation, up to an equivalent value, of the exchange contract signed by the Bank of Brazil with the Central Bank; the liquidation of this latter exchange contract also takes place at the exchange rate at which the contract was originally signed. For some commodities, the application of import duties may be affected by the existence of similares nacionais or the establishment of a minimum import price (pauta de valor mínimo) or of a reference price. Certain imports are subject to customs surcharges.

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, by virtue of an internal Central Bank measure of September 19, 1965, on remittances of all royalties and technical assistance fees (see below). Authorized banks may sell foreign exchange up to the equivalent of US$300 a month for personal remittances abroad. The sale of foreign exchange for travel abroad is subject to special regulations as described below. Payments for other current invisibles require the approval of GECAM, which authorizes remittances freely, subject to the presentation of supporting documents as evidence that a bona fide current transaction is involved.

Sales of foreign exchange to meet personal expenses connected with travel abroad are permitted up to US$1,000 a person a trip, without the prior approval of the Central Bank, on the following terms: (1) in banknotes up to US$100, and (2) in payment orders or travelers checks for the remainder. Applications for purchases of travel exchange in excess of US$1,000 must be submitted to the Central Bank, which considers each case on its merits; amounts in excess of US$1,000, when authorized, may be taken up in the form of payment orders only. Foreign residents in transit in Brazil are permitted to purchase foreign currency up to the equivalent of the amount they sold during the period of their stay in Brazil; however, purchases in excess of 30 per cent of the amount previously sold require the approval of the Central Bank. Each purchase transaction is registered and the records of these operations, which must contain the names of clients, are submitted daily to the Central Bank.

Remittances abroad of foreign capital, income from foreign 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 (Law No. 4131, as amended by Law No. 4390). 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 the furnishing of proof that the document has been approved by the National Institute of Industrial Property. Remittances are normally authorized in the currency of registration. 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.

A progressive supplementary income tax is levied on remittances to persons and companies resident abroad of earnings on foreign capital if their average over a three-year period exceeds 12 per cent of the registered capital and reinvestments. Dependent on prior proof of exports of manufactured goods, firms may obtain reduction or restitution of the income tax levied on remittances of royalties, technical assistance fees, and interest on loans registered with FIRCE (Decree-Law No. 491 of March 5, 1969). For foreign capital that produces goods or services for luxury consumption, remittances of profits are limited to 8 per cent per annum of the registered capital. Remittances of royalties by a branch or subsidiary established in Brazil to its head office abroad are not permitted when 50 per cent 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 per cent to 5 per cent, of gross receipts from the sale or manufacture of given products for which such payments are incurred abroad. The percentages are the same as those established in Brazil’s taxation laws for determining the maximum permissible deductions for such expenses.

Travelers may take out domestic and foreign banknotes freely.

Exports and Export Proceeds

Exports are free of licensing requirements but require an export certificate issued by CACEX to ensure compliance with the requirements of exchange and trade regulations. Some exports are free of controls, but exports of many commodities require prior approval of CACEX, while exports of specified commodities are prohibited, including certain primary products and raw materials required for domestic consumption. Exports requiring approval include those effected through bilateral accounts or payable in inconvertible currencies, exports without exchange cover, exports on consignment, re-exports, commodities for which minimum export prices are fixed by CACEX, and exports requiring prior authorization by government agencies. Exports of certain commodities, including beef, are subject to an annual quota. Exports of coffee are subject to authorization by the IBC.

The IBC does not grant the authorization to export coffee unless the sale contract is based on a price per pound that is at least equal to the minimum registration price (in U.S. dollars a pound, f.o.b.) fixed from time to time by the IBC. The minimum registration price varies with the quality of the coffee and the port of shipment. Exporters of green coffee are required to surrender, without compensation, a portion of their proceeds in the form of a contribution quota. The cruzeiro proceeds from the contribution quota are transferred to the Coffee Defense Fund. The contribution quota is set from time to time by the IBC and is fixed in terms of foreign currency; on December 31, 1973 it was US$31.45 a bag. The contribution quota is adjusted whenever the exchange rate is changed in order to ensure that exporters’ returns in cruzeiros, at the minimum registration price, remain unchanged.

Exporters may convert exchange proceeds, after deduction of the contribution quota, at the prevailing official market rate of exchange. Thus, the effective exchange rate for exports of coffee depends on (1) the amount of the contribution quota, (2) the actual price received (f.o.b. Brazil, in U.S. dollars a pound), and (3) the official market rate of exchange. On December 31, 1973 minimum registration prices, depending on the grade of coffee and the port of shipment, were US$0.63, US$0.62, US$0.59, and US$0.575 a pound. The corresponding cruzeiro payments a bag, after deduction of the contribution quota, were Cr$319.57, Cr$311.41, Cr$286.94, and Cr$274.70. Thus the exchange rates for proceeds from coffee exports on sales at the minimum registration price were Cr$3.843, Cr$3.805, Cr$3.684, and Cr$3.619, per US$1. The effective exchange rate for coffee exports is higher to the extent that sales are made in excess of the minimum registration price.

A special regime of individual quotas is applied for exports of soluble coffee to all markets. Proceeds of exports of spray-dried soluble coffee in excess of individual quotas are subject to a contribution quota. On December 31, 1973 the minimum registration price for spray-dried soluble coffee was US$1.26 a pound and the contribution quota was US$0.10 a pound. Thus the exchange rate for proceeds from exports of soluble coffee in excess of individual quotas on sales at the minimum registration price was Cr$5.690 per US$1; the minimum registration price for freeze-dried soluble coffee was US$1.91 a pound, and exports were exempt from individual quotas.

The proceeds from all other exports are also sold at freely negotiated exchange rates, within the limits of the official market, but exporters of cocoa beans and cocoa products are required to surrender without compensation 10 per cent of their exchange proceeds. The cruzeiro equivalent of these deductions is used to finance a program of price support and plantation improvement for cocoa. Furthermore, a contribution quota of US$500 per ton f.o.b. is levied on exports of fresh, chilled, or frozen beef, and of US$250 per ton f.o.b. on exports of processed beef.3

A large number of fiscal incentives apply to exports, principally of manufactured commodities. These incentives include exemptions from indirect and income taxes, customs duties, and certain fees and charges, as well as credits related to the amount of exemption from tax liability. Various lines of credit for exporters, some at preferential rates of interest, are provided by the Bank of Brazil and the commercial banks. These financing facilities include both export financing and the financing of production and warehousing for export, particularly for manufactures. In addition, assistance is provided to exporters in the field of export credit insurance and by way of guarantees.

Proceeds from Invisibles

Exchange proceeds from current invisibles are sold through the Bank of Brazil or the authorized banks at the prevailing market rate. Travelers checks and foreign banknotes are sold in the “manual market.” Travelers may bring in domestic and foreign currency notes freely.

Capital

Capital inflows in the form of financial loans under Central Bank Resolution No. 63 (as amended) or under the provision of the Foreign Investment Law (Law No. 4131) are subject to ceilings and require the prior approval of the Central Bank. The prior approval of CEMPEX is also required for borrowing by the public sector, when the foreign funds originate with official financial institutions abroad for borrowing by the private sector, and when the transaction is to be guaranteed by the National Treasury or, on its behalf, by any official credit institution. Moreover, import financing with credit terms exceeding 360 days in amounts over US$500,000 requires the prior approval of the Central Bank. Furthermore, certain borrowing abroad is subject to deposit requirements (see below). 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. 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 which have entered the country without an initial corresponding expenditure of foreign exchange and which are to be used to produce goods or to render services, 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 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 that does not participate directly in capital risk is considered to be a loan. Any loan obtained to purchase capital goods abroad, whether conceded by the manufacturer himself or by a third party, is considered to be financing (mostly suppliers’ credit). Loans are considered to be cash loans when monetary or financial resources are brought into Brazil.

For financial imports and for investments made in the form of goods, registration is made 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 country of the lender, that the amortization schedule is not disproportionately heavy in the early stages of repayment, and, in the case of import financing loans, that the prices of the imported goods correspond to the prices of comparable goods in the country of origin. If the terms of financing are approved, CACEX examines the applications for some foreign borrowing in the light of the price and essentiality of the proposed import and of the availability of similares nacionais.

The registration of direct investment is subject to the following rules: The capital that enters or has entered Brazil is registered in foreign currency. Reinvestments are defined as profits of companies established in Brazil and accrued to persons or companies resident or domiciled abroad; such profits must have been reinvested in the same companies that produced them or in another sector of the Brazilian economy. The registration of reinvested profits is made simultaneously in Brazilian currency and in the currency of the country to which the profits could have been remitted. The conversion is calculated at the average exchange rate prevailing between the date on which the profits were earned, or appeared on the balance sheet in the case of a company, and the date of their reinvestment.

Special regulations govern borrowing abroad. Under Central Bank Resolution No. 63, as amended, private commercial and investment banks and the National Bank for Economic Development may be authorized to take up foreign currency credits abroad for relending to the domestic private sector for purposes of financing working capital. The certificate of registration of the loan for the purposes of the Foreign Investment Law is furnished by FIRCE upon approval of the loan by the Central Bank. 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 assures 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 exchange cover for them. Loans under Resolution No. 63 as well as those under Law No. 4131 must have a minimum term of six months but no maximum term is set.

Under a program for the management of external debt, the National Monetary Council has since December 1971 imposed quantitative limits on the amount of financial loans under Resolution No. 63 and Law No. 4131 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 path approved by the National Monetary Council. At the end of 1973, the Central Bank’s minimum acceptable maturity stood at ten years. However, provided that the full amount of the foreign exchange remains committed to Brazil for the minimum specified maturity, loans may be made to the final borrower in Brazil 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.

New foreign currency loans in the form of financial credits under Resolution No. 63 and Law No. 4131 are subject to a deposit requirement of 40 per cent of the cruzeiro equivalent of the foreign exchange proceeds of loans.4 The deposit is held at the Central Bank, which bears the exchange risk on the deposit. The deposit earns no interest, and is returned to the borrower proportionately with each amortization under the loan agreement. Loans registered prior to August 31, 1973 and renegotiated by borrowers 30 days prior to their original maturity are exempt from the deposit requirement. Renewed loans could be contracted with the original lender or with new lenders and must be consistent with the conditions for loans laid down by the Central Bank. Also exempt are loans from international agencies or foreign governments and suppliers’ credits on imports of commodities originating in industrial countries.

Banks are not permitted to pay interest on demand deposits, whether held by residents or nonresidents.

Outward capital transfers not mentioned above require authorization by GECAM, which considers applications on their merits. Approved exchange transactions involving outward transfers of private capital are effected through an authorized bank or the Bank of Brazil at the prevailing official market rate.

Gold

Residents may freely purchase, hold, and sell gold coins in Brazil. Gold mining is ruled by Law No. 4425 of November 2, 1964. Residents other than the monetary authorities and licensed industrial users are not permitted to purchase, hold, or sell gold (other than alloys for dental use) abroad unless special permission is obtained from the Central Bank. SUMOC Instruction No. 27 of December 1948 stipulated that producers of gold must sell 20 per cent of their output to the National Treasury, through the Bank of Brazil, at the official market price, i.e., then at US$35 an ounce; the other 80 per cent would remain at the free disposal of the person concerned. However, this provision was in force until December 1962 only, and the monetary authorities do not deal in gold. The domestic negotiation of newly mined gold, which takes place at free market prices, is subject to a mining tax of 1 per cent. The mining tax may be offset against the other tax liabilities if and when gold is manufactured. The import of gold is subject to the issuance of an import certificate by CACEX; imports of native gold and of gold in the form of powder are free of customs duty. Exports of gold coins and gold bars are prohibited and the export of gold in any other form (except jewelry constituting the personal effects of a traveler) requires an export certificate.

Table of Exchange Rates (as at December 31, 1973)5
(cruzeiros per U.S. dollar)
BuyingSelling
3.619-3.843 (Calculated on the Basis of Official Market Rate, Contribution Quota, and Minimum Registration Price)6
Exports of green coffee effected at a price equal to the minimum registration price, for payment at sight.
5.562 (Official Market Rate less 10% Contribution Quota) Exports of cocoa beans and cocoa products.
5.690 (Calculated on the Basis of Official Market Rate, Contribution Quota, and Minimum Registration Price)
Exports of spray-dried soluble coffee in excess of individual quotas.
6.180 (“Manual Market” Rate)6.220 (“Manual Market”Rate)
Foreign banknotes and travelers checks.Foreign banknotes and travelers checks.
6.180 (Official Market Rate)6.220 (Official Market Rate)
All other export proceeds7 except those from beef exports. Other receipts.Imports. Invisibles.8 Capital.

Changes during 1973

January 12. Central Bank Resolution No. 240 imposed a contribution quota of US$200 per ton f.o.b. on the foreign exchange proceeds from exports of fresh, chilled, frozen, or processed beef.

January 13. Exports of meat were suspended and meat export quotas were reduced by 40 per cent. The suspension of meat exports was terminated on January 18.

February 2. IBC Resolution 684 suspended, with effect from February 5, registrations of exports of soluble coffee, in any form, for shipments up to March 31. Minimum prices for exports of soluble coffee for the period April 1-June 30 were fixed as follows: US$1.08 a pound for spray-dried soluble coffee, and US$1.20 a pound for freeze-dried soluble coffee. Remittances abroad of agents’ commissions were limited to 5 per cent of the gross sale price. A regime of individual export quotas for soluble coffee for all markets was established for sales whose shipments were expected to take place between April 1 and June 30. A contribution quota on exports of soluble coffee in any form was introduced; it was set at the equivalent of 15 per cent of the minimum registration prices fixed by the IBC and would apply to exports in excess of the individual quotas.

February 8. CPA Resolution No. 1587 exempted from customs duties imports of complementary components, without “national similars,” intended for the manufacture of certain tractors.

February 12. Central Bank Resolution No. 247 made the following products subject to a system of prior export licensing through CACEX: soybeans in grain and soybean meal and cakes; corn in grain and corn meal; cotton meal and cakes; wheat meal; babassu meal and cakes; and fish meal.

February 14. Following the announcement that the U.S. dollar was being devalued, the cruzeiro was appreciated in terms of the U.S. dollar. The buying and selling rates were changed from Cr$6.180 and Cr$6.215 per US$1 to Cr$5.995 and Cr$6.030 per US$1, respectively. In terms of SDRs the adjustment of the buying rate was from Cr$6.70971 to Cr$7.23206 per SDR 1.

February 16. IBC Resolution No. 685 increased by US$0.02 a pound the minimum basic registration prices for exports of green coffee on transactions to be registered from February 19 onward for shipments up to and including April 30. The contribution quota on exports of green coffee was increased from US$26.64 to US$27.46 a bag. The price guarantee system for coffee exports was canceled. Individual coffee export quotas were established for April.

February 20. Central Bank Resolution No. 248 made exports of soybeans and soybean cakes and meal subject to a system of mandatory domestic sales. Exports could be made only after the prior sale of these products to CACEX in the ratio of one ton for each three tons exported.

February 26. Decree No. 71866 regulated the customs warehouse system and established rules for the tax treatment applicable to operations under Decree-Law No. 1248 of November 29, 1972.

March 15. IBC Resolution No. 687 increased the basic minimum registration prices for coffee established by Resolution No. 685 by US$0.03 a pound to US$0.60, US$0.59, US$0.56, and US$0,545 a pound depending on the grade of coffee and port of shipment, for the period from March 16 to June 30. Minimum export prices for soluble coffee shipments during July were set at US$1.11 a pound for spray-dried and US$1.70 a pound for freeze-dried. Contribution quotas for green coffee or its equivalent roasted/ground coffee were established at US$28.50 a bag for shipments made during May and at US$30.00 a bag for shipments made during June. The contribution quota for spray-dried soluble coffee was maintained at 15 per cent of the minimum registration price, but that for freeze-dried was abolished. Individual export quotas were maintained for green and roasted/ground coffees and spray-dried soluble coffee; quotas for exports of freeze-dried soluble coffee were abolished.

March 15. Central Bank Resolution No. 249 fixed at Cr$20 million the minimum capital of commercial exporting firms established under Decree-Law No. 1248 of November 29, 1972.

March 15. Central Bank Resolutions Nos. 250 and 251 authorized the release of specified percentages of commercial banks’ required reserves to assist the banks in the financing of national commercial export firms.

March 15. Central Bank Resolution No. 252 established a special rediscount line for authorized banks to be used in support of credit operations arising from the deposit of manufactured export products in warehouses established under Decree-Law No. 1248 of November 29, 1972.

March 15. Central Bank Resolution No. 253 exempted from the tax on financial operations certain export credit operations, including advances on exchange contracts, financing operations transacted by CACEX with reserves of the Export Financing Fund (FINEX), and operations under Central Bank Resolutions Nos. 71 and 252.

March 19. GECAM Communication No. 220 provided that, with effect from April 1, all payments between Brazil and Iceland would be settled in convertible currencies. Previously, settlements took place through special accounts under a reciprocal credit agreement between the central banks.

March 26. GECAM Communication No. 221 provided that foreign exporters making shipments to Brazil and requiring insurance on exports should be requested to place the insurance in Brazil with a Brazilian insurance company or a foreign company duly authorized to operate in Brazil. Premiums must be paid in Brazil even when the foreign exporter was designated as the insured.

March 30. CPA Resolution No. 1623 exempted imports of steel and steel products up to specified quotas from customs duties.

April 5. IBC Resolution No. 689 opened registration for soluble coffee to be shipped in August.

April 23. IBC Resolution No. 690 maintained the minimum registration prices for exports of green coffee established by Resolution No. 687. Contribution quotas were established at US$29.00 a bag for shipments during May and at US$30.50 a bag for shipments during June and July. The registration of “sales declarations” for green coffee to be shipped in April was suspended with effect from April 24.

April 24. The buying and selling rates of the monetary authorities were changed from Cr$5.995 and Cr$6.030 per US$1 to Cr$6.060 and Cr$6.100 per US$1, respectively.

May 2. GECAM Communication No. 223 permitted bookshops importing books in small quantities to remit abroad for advance payments amounts up to US$300 without prior authorization.

May 4. Industrial Development Council Resolution No. 29 provided that tax and financial incentives established under Decree-Law No. 1137 would be available for industrial projects which had not been specifically designated as being of interest to the industrial development of Brazil, but which could be so considered for exportation, provided that the products concerned were essentially destined for the external market.

May 16. Brazil gave notice of termination of the agreement with the United States of April 1971 providing for the sale of a fixed quantity of green coffee free of contribution quota to U.S. producers of soluble coffee. Brazilian shipments under the agreement had been suspended since September 1972.

May 16. IBC Resolution No. 727 established minimum registration prices for soluble coffee exports as follows: for shipments up to June 30 US$ 1.08 a pound for spray-dried and US$1.20 a pound for freeze-dried; for shipments during July and August US$1.11 a pound for spray-dried and US$1.70 a pound for freeze-dried; and for shipments during September US$1.14 a pound for spray-dried and US$1.75 a pound for freeze-dried.

May 16. IBC Resolution No. 728 suspended, with effect from May 17, the registration of “sales declarations” for green coffee to be shipped during May.

May 16. IBC Resolution No. 729 suspended until further notice the registration of new coffee exporting firms.

May 28. IBC Resolution No. 730 increased the minimum registration prices for exports of green or ground/roasted coffee during August by US$0.02 a pound to US$0.62, US$0.61, US$0.58, and US$0.565 a pound, depending on the grade of coffee and the port of shipment. The contribution quota remained unchanged at US$30.50 a bag for shipments during August. The registration of “sales declarations” for green coffee to be shipped during June was suspended with effect from May 29.

June 4. Exports of pig iron were suspended by CACEX Communication No. 416.

June 12. GECAM Communication No. 224 stipulated that for the payment of interest on foreign currency loans under Law No. 4131 authorized banks and investment banks could transfer to the foreign creditor the value in foreign currency corresponding to the difference between the interest payable by the Central Bank and the interest authorized by FIRCE.

June 12. Central Bank Resolution No. 259 suspended the deposit requirement introduced on October 19,1972 of 25 per cent of the cruzeiro equivalent resulting from the negotiation of foreign currencies stemming from external loans.

June 13. The minimum maturity for new external borrowing by the private sector was increased from six years to eight years, and the minimum grace period was set at six months.

June 14. CIA Resolution No. 1713 exempted from customs duty, for one year, imports of unprocessed hides and skins.

June 19. IBC Resolution No. 731 increased the basic minimum registration prices for exports of green coffee during September by US$0.01 to US$0.63, US$0.62, US$0.59, and US$0,575 a pound, depending on the grade of coffee and the port of shipment. Minimum registration prices for exports of soluble coffee during October were increased by US$0.04 to US$1.18 a pound for spray-dried and US$1.79 a pound for freeze-dried. Contribution quotas on exports of green and soluble coffee (except freeze-dried) remained unchanged. The maximum remittance abroad for agents’ commissions on exports of soluble coffee during October was reduced to 3 per cent of the gross sales price.

June 20. CONCEX Resolution No. 85 empowered CACEX to authorize export quotas for 1973 and 1974 for all types of hides and skins.

July 6. IBC Resolution No. 734 increased the contribution quota on exports of green coffee from US$30.50 a bag to US$30.74 a bag.

July 9. The buying and selling rates of the monetary authorities were changed from Cr$6.060 and Cr$6.100 per US$1 to Cr$6.090 and Cr$6.130 per US$1, respectively.

July 17. CACEX Communication No. 422 established the Register of Exporters. All companies and other entities carrying out export operations were required to be registered.

July 19. The minimum maturity for external borrowing by the private sector was increased to 10 years; the minimum grace period was retained at six months.

July 19. Central Bank Resolution No. 261 provided that concessions regarding the withholding tax on remittances of interest abroad, under the terms of Decree-Law No. 1215, applied only to foreign currency loans with a minimum amortization period of 12 years. The previous limit was 10 years.

July 19. Central Bank Resolution No. 262 prohibited any further licensing of exports of beef in 1973. Authorizations already given remained valid. Overall beef export quotas of 80 per cent of exports from Central Brazil and 90 per cent of exports from Rio Grande del Sul, actually made in 1973, would be set for 1974; individual quotas would be based on supplies to the domestic market during the period between harvests.

July 23. CACEX Communication No. 426 suspended exports of soy oil.

August 7. CONCEX Resolution No. 86 prohibited, with some exceptions, exports of rough and semiprocessed timber. Exports of all types of timber would in future be conditional upon the submission by exporters of their own reafforestation projects, or of a contract for participation in other forestry projects.

August 8. CACEX Communication No. 432 suspended exports of paper pulp and printing paper.

August 9. CACEX Communication No. 433 made exports of soybeans contracted after that date subject to the prior authorization of CACEX.

August 14. CPA Resolution No. 1785 exempted imports of corn from customs duty for six months.

August 17. IBC Resolution No. 738 opened registration of “sales declarations” for green coffee for shipment up to November 30.

August 18. CACEX Communication No. 437 suspended exports of cotton from the Center-South region.

August 27. CACEX Communication No. 439 suspended exports of tomato paste and extract until December 31.

August 27. CPA Resolution No. 1789 exempted imports of aluminum from customs duty for six months.

August 31. Central Bank Resolution No. 265 reintroduced the compulsory deposit of part of the cruzeiro proceeds of newly contracted foreign currency loans. The deposit rate was set at 40 per cent. The new regulation rescinded the provision that in the event of the suspension of the deposit requirement the funds held by the Central Bank would be released within 180 days of the National Monetary Council’s decision to that effect.

August 31. Central Bank Circular No. 218 authorized the renewal of maturing foreign currency loans under Law No. 4131 and Central Bank Resolution No. 63, without compulsory deposits, where such loans were renegotiated by borrowers 30 days prior to their original maturity. Such renewals could be contracted with the original lender or with new lenders. The financial conditions of the new loans must be compatible with those in force in the market of origin and the terms of the loan should be adjusted to the requirements laid down by the Central Bank of Brazil.

September 5. IBC Resolution No. 740 suspended with effect from September 6 the registration of exports of green coffee for shipment during September.

September 14. IBC Resolution No. 741 established a contribution quota of US$0.05 a pound on exports of spray-dried soluble coffee on sales in excess of individual quotas, registered from September 17. Additional quotas for exports of soluble coffee were established for shipments from October 1 to December 31.

September 19. The buying and selling rates of the monetary authorities were changed from Cr$6.090 and Cr$6.130 per US$1 to Cr$6.120 and Cr$6.160 per US$1, respectively.

September 19. IBC Resolution No. 742 increased the contribution quota on exports of green coffee from US$30.74 to US$30.98 a bag.

September 28. The minimum amounts up to which imports subject to guia de importação were exempt from this requirement were increased, subject to certain conditions, from US$3,000 to US$5,000 for machinery, parts, etc., and from US$1,000 to US$2,000 for most other goods. (CACEX Communication No. 446.)

October 3. IBC Resolution No. 743 increased the minimum registration prices for shipments of spray-dried and freeze-dried soluble coffee during October, November, and December to US$1.26 and US$1.91 a pound, respectively. For shipments during January and February 1974 the minimum registration prices were increased to US$1.28 and US$1.94 a pound, respectively.

October 4. CACEX Communication No. 447 prohibited exports of soybeans and soy oil until further notice.

October 9. Exports of semiprocessed rice were suspended.

October 12. IBC Resolution No. 744 suspended with immediate effect the registration of “sales declarations” for green coffee for shipment during October.

October 16. CPA Resolution No. 1854 reduced customs duties on imports of certain types of fertilizers.

October 18. Decree-Law No. 1287 extended to mining enterprises the incentives granted to manufacturing concerns under the terms of Decree-Law No. 1137.

October 19. CPA Resolution No. 1887 extended the exemption from customs duty for imports of fresh, chilled, and frozen beef until December 31, 1974.

November 1. IBC Resolution No. 747 permitted the registration of “sales declarations” for green coffee exports, with immediate effect, for shipment during January, February, and March 1974. It also permitted such registration for soluble coffee (spray-dried and freeze-dried) for shipment during March 1974.

November 7. CPA Resolutions Nos. 1900 and 1901 exempted imports of oils derived from cotton, corn, soybeans, groundnuts, and sunflower seeds from customs duty until March 31, 1974.

November 7. CACEX Communication No. 450 limited exports of raw groundnuts between December 1973 and November 1974 to the amount shipped between December 1972 and November 1973. The authorization of exports of groundnut oil would be dependent upon prior proof of imports of an equivalent amount of soy oil to sunflower-seed oil.

November 19. Central Bank Resolution No. 271 established export quotas for beef for the years 1974, 1975, and 1976 at 80,000 tons a year. The contribution quota on beef exports was increased from US$200 to US$500 a ton f.o.b. for frozen, chilled, or fresh beef and from US$200 to US$250 a ton f.o.b. for processed beef.

November 23. New share participations by foreign companies and individuals domiciled abroad, and by Brazilian firms controlled by companies and individuals domiciled abroad, in insurance companies or brokerage firms established in Brazil, were limited to one third of authorized capital. Increased share participation by foreign interests in such companies was prohibited when foreign participation already exceeded one third of authorized capital.

November 27. IBC Resolution No. 748 increased from US$0.05 to US$0.10 a pound the contribution quota on exports of spray-dried soluble coffee on sales in excess of individual quotas registered from November 28 through December 31.

December 7. CACEX Communication No. 456 imposed quotas on exports of raw cotton from all producing regions.

December 11. Decree-Law No. 1291 extended until the end of the fiscal year 1976 the provisions of Decree-Law No. 1158 that permit companies to deduct from their income chargeable to income tax, the portion of income which corresponds to the export of specified nationally manufactured products.

December 13. CACEX Communication No. 459 made exports of specified fertilizers subject to prior licensing.

December 13. IBC Resolution No. 811 set a new value of US$31.45 a bag for the contribution quota on exports of green coffee, until further notice, for exchange contracts closed from December 14 onward.

December 14. The buying and selling rates of the monetary authorities were changed from Cr$6.120 and Cr$6.160 per US$1 to Cr$6.180 and Cr$6.220, respectively, per US$1.

December 14. IBC Resolution No. 811 increased the contribution quota on exports of green coffee from US$30.98 a bag to US$31.45 a bag.

December 17. Central Bank Resolution No. 272 permitted exchange transactions relating to future transactions on terminal markets abroad. They were not permitted for coffee or sugar. GECAM Communication No. 229 regulated such transactions.

December 19. A three-year nonpreferential trade agreement was signed with the EEC. It came into effect on January 1, 1974.

December 24. The IBC announced a new program for exports of coffee under which (1) Brazilian export shipments during the first half of 1974 would be sharply curtailed, compared with the same period of 1973; (2) the IBC would no longer negotiate sales of coffee with foreign buyers; (3) minimum registration prices for green coffee would be raised over the period January-June 1974, in monthly steps, to US$0.625-US$0.680 a pound, depending on the grade of coffee and the port of shipment; and (4) contribution quotas on exports of green coffee would be reduced to US$21.50 a bag in January 1974 and would then be raised, in monthly steps, to US$28.50 a bag in June 1974.

December 24. IBC Resolution No. 812 increased the minimum registration prices for exports of green coffee, in amounts ranging from US$0.035 to US$0.05 a pound for shipments between January 1974 and June 1974. The minimum registration prices for shipments in June 1974 were established at US$0.68, US$0.67, US$0.64, and US$0.625 a pound, depending on the grade of coffee and the port of shipment. Contribution quotas on exports of green coffee during the first six months of 1974 were established at US$21.50, US$22.35, US$23.35, US$24.85, US$26.55, and US$28.50 a bag for shipments in January, February, March, April, May, and June, respectively. Minimum registration prices for exports of spray-dried soluble coffee were fixed at US$1.33, US$1.34, and US$1.35 a pound for shipments during April, May, and June 1974, respectively. The minimum registration price for exports of freeze-dried soluble coffee shipped from April 1974 to June 30, 1974 was fixed at US$2.00 a bag. The contribution quota on exports of spray-dried soluble coffee was reduced to US$0.05 a pound for shipments from January 1, 1974 to June 30, 1974.

Burma

Exchange Rate System

The par value is 0.186621 gram of fine gold per Burmese Kyat, corresponding to K 4.7619 = SDR 1. The central rate is K 4.8138 per US$1, corresponding to K 5.80717 = SDR 1, and Burma avails itself of wider margins. On December 31, 1973 the buying and selling rates for the U.S. dollar of the Union of Burma Bank, the sole authorized dealer in foreign exchange, were K 4.8138 and K 4.9100, respectively, per U.S. dollar, and the Bank’s buying and selling rates for sterling were K 13.9372 and K 14.2159, respectively, per £ stg. 1. The buying rate for sterling was subject to a commission of 15 per cent.1

Administration of Control

Exchange control is administered by the Exchange Control Board in accordance with instructions from the Ministry of Planning and Finance, through the Exchange Control Department of the Union of Burma Bank. A Foreign Exchange Control Committee headed by the Minister of Planning and Finance is in charge of the allocation of foreign exchange to the public sector. Exports are handled by the Myanma Export-Import Corporation (MEIC or Trade Corporation No. 22). The MEIC also imports goods for the use of the private sector, whose requirements are determined by the Central Trade Council. Government agencies and departments make imports of goods for their own use, including imports under loan and aid agreements, in the name of the MEIC. Most payments for imports are made in accordance with an annual foreign exchange budget drawn up by the Ministry of Planning and Finance.

Prescription of Currency

Certain settlements with Bangladesh are channeled through a nonresident bank account at the Union of Burma Bank. 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.

Imports and Import Payments

An import program is drawn up annually as part of the foreign exchange budget. All imports are made by, or in the name of, the MEIC. All imports from Rhodesia and South Africa are prohibited. Also prohibited are imports of a few commodities from any source—principally opium and similar narcotics, monkeys, playing cards, and gold and silver bullion. Imports of consumer goods are severely restricted. Most imports are purchased on an f.o.b. basis, and shipments are made on vessels owned or chartered by the Burma Five Star Line whenever possible. All payments for imports are made through the Union of Burma Bank.

Payments for Invisibles

All payments for invisibles are subject to licensing. In general, payments for items connected with foreign trade are allowed automatically, and payments for most other purposes 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 by foreign municipal workers or 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. Remittances of income resulting from investment other than that guaranteed under the Investment Act have been suspended. The remittance of pension payments to retired government employees who served the Government as Burmese nationals but took up foreign citizenship before departure from Burma is not permitted. Most personal money order remittances to neighboring countries through post offices are not permitted.

Foreign exchange allocations for tourist travel by residents have been suspended. However, residents granted an official permit to go abroad for any other purpose may take out freely the equivalent of K 50 in the currency of the country of destination (except India) or, if that currency is not available, in sterling notes or U.S. dollar notes. At present, Burmese nationals are not allowed to travel abroad except on official missions or for employment abroad. On leaving, nonresident travelers who have stayed in the country for less than six months may take out any foreign currency they still hold and may also reconvert the amount of foreign currency which they had converted into kyats. The export of Burmese currency is prohibited.

Exports and Export Proceeds

All exports are effected by the MEIC. There is a list of prohibited exports which comprises iron and steel, brass, copper, and aluminum and scraps thereof, foreign manufactures, and commodities of domestic origin the conservation of which is desired for domestic requirements. All exports to Rhodesia and South Africa are prohibited. Export proceeds must be obtained in a manner satisfactory to the exchange control authorities; the exchange must be surrendered to the Union of Burma Bank within six months from the date of shipment. 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 Line or on vessels nominated by it.

Proceeds from Invisibles

Exchange receipts from invisibles must be surrendered. 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.

Capital

Foreign investments in Burma are governed by the provisions of the Union of Burma Bank Investment Act, 1959 and the Investment Rules of February 25, 1960 issued under authority of the Act. Investment proposals are to be considered by an Investment Committee to ascertain whether the proposed enterprise will utilize domestic raw materials, increase domestic employment, conserve foreign exchange, and generally conform to the economic plans of the Government. No private investments have been made under the Act; since February 15, 1963, when the Government announced a new policy of nationalization, permission has not been granted for any foreign private investment in Burma.

The investment law provides for the transfer abroad of profits after taxes and for the withdrawal of imported capital at any time after five years from the time of entry, in annual quotas not exceeding 25 per cent of its original value. In principle, proceeds from the liquidation or sale of an enterprise may also be transferred abroad. All such transfers may, subject to prior approval, be made at the official rate of exchange prevailing at the time of the transaction. However, transfers of capital proceeds from the voluntary liquidation of foreign companies were suspended in July 1963.

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

Gold

Residents may hold and negotiate gold jewelry, gold coins, 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 of Burma. Jewelry for personal wear may be brought into Burma subject to customs declaration at the port of arrival. The export of personal jewelry is permitted under license, subject to the condition that the jewelry will be repatriated. No conditions are attached, however, to the taking out of personal jewelry that was declared to the customs when it was brought into Burma.

Changes during 1973

February 13. Following the announcement that the U.S. dollar was being devalued, Burma maintained the gold value of the kyat; the central rate, previously K 5.3487 = US$1, became K 4.8138 = US$1. Burma continued to avail itself of wider margins.

March 5. The Union of Burma Bank increased from 10 per cent to 15 per cent the commission levied since October 31, 1972 on purchases of sterling. The Bank introduced a commission of 10 per cent on purchases of U.S. dollars; this commission was discontinued on March 22.

November 17. A Foreign Exchange Control Committee headed by the Minister of Planning and Finance was instituted to supervise the use of foreign exchange by the public sector.

December 6. It was announced that compensation would be paid in respect of Burmese and foreign-owned private business enterprises nationalized since 1963. (Compensation had already been paid for nationalized banks.)

Burundi

Exchange Rate System

The par value is 0.00935443 gram of fine gold per Burundi Franc, corresponding to FBu 95 = SDR 1 or FBu 78.7501 = US$1, and Burundi avails itself of wider margins. The exchange rates quoted by the Bank of the Republic of Burundi (the central bank) for the U.S. dollar, the intervention currency, are fixed at FBu 78.35 buying, and FBu 79.15 selling, per US$1. The Bank quotes buying and selling rates for the Belgian franc based on the fixed rates for the U.S. dollar and the official market rates for U.S. dollars in Brussels; the Bank also quotes buying and selling rates for other specified currencies1 which are based either on its quoted rates for the Belgian franc and the official market rates for the currencies concerned in Brussels, or, for the Kenya shilling, the Rwanda franc, the Tanzania shilling, and the Zaïre, on their parities.

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; they may agree rates freely with their customers for Uganda shillings. Buying rates lower than FBu 78.35 per U.S. dollar apply to proceeds from coffee exports shipped via Kigoma, when the time between shipment and delivery of the foreign exchange exceeds three calendar months.

Administration of Control

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

Prescription of Currency

Outgoing payments may be made in any currency; receipts must be obtained in one of the currencies 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 central bank, by (1) physical persons of foreign nationality who are temporarily established in Burundi and are not considered as residents, such as diplomats, 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 central bank 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 banknotes). All other debits and credits require the prior approval of the central bank. These accounts cannot 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 central bank 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 that is received from abroad. They may be debited freely for (1) conversion into Burundi francs required to pay any expenses in Burundi and (2) payments abroad for travel and representation or for the purchase price of foreign goods. These accounts cannot bear interest and must not be overdrawn; the related bank charges and commissions may be settled in Burundi francs.

Imports and Import Payments

All imports from Portugal, Rhodesia, and South Africa are prohibited. All imports except trade samples and merchandise not intended for sale and valued up to FBu 20,000 require licenses; these are issued freely, except for certain used clothing. Applications for licenses must be submitted to the Bank of the Republic of Burundi on a form entitled Import License and Payment Authorization. The approval of such an application constitutes an authorization also to obtain foreign exchange. With certain exceptions, applications for amounts under FBu 100,000 are approved by the authorized banks. Import licenses must be presented to the customs officials when the goods are cleared through customs. The license is valid for a period of seven months starting at the end of the month following that of validation; in special cases, extensions may be granted by the central bank. The number and date of expiration of the license must be entered on the customs clearance form, the Consumption Declaration, a copy of which is then sent to the central bank by the customs office.

Advance deposits calculated on the c.i.f. value are required for certain luxury goods from private sector importers. The deposit on such commodities is 100 per cent; it is not required, however, when the goods are imported in small amounts, i.e., when the amount of the license is less than FBu 10,000. The deposit must be made at the time the import license is validated; it is released when the import payment is made. In principle, foreign exchange is made available at the time of shipment of the goods. For certain prime necessities, however, documentary credits may be opened for which exchange is supplied immediately. For goods under global licenses, foreign exchange is not made available until after customs clearance. All imports are subject to a statistical tax of 3 per cent 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 brokers or insurers established in Burundi. Transfers of earnings of foreign nationals are freely permitted upon proof of payment of taxes, up to 60 per cent of net annual income, depending on the amount of such income; this regime applies to earnings under a labor contract, to income earned in a profession, and to profits earned by any enterprise operated by an individual or a partnership. Private joint-stock companies may freely transfer 50 per cent of net declared profits after taxes to their foreign nonresident stockholders or to stockholders who are resident foreign nationals; however, approved enterprises may obtain a guarantee of full transferability of net declared profits. Persons leaving Burundi permanently are authorized to transfer abroad their holdings of Burundi francs that consist of unremitted savings or of the proceeds of the sale of their personal effects. Transfer of income from rental properties to nonresident owners of foreign nationality is permitted up to 50 per cent of net rental income (after payment of taxes and deduction of 20 per cent for maintenance expenses); resident owners of foreign nationality may remit the same proportion of such income. Residents of Burundi nationality may purchase needed amounts of exchange for foreign travel. All travelers may take out up to FBu 2,000 in Burundi banknotes. In addition, residents may freely purchase foreign travel tickets up to reasonable amounts against payment in Burundi francs.

Exports and Export Proceeds

All exports to Portugal, Rhodesia, and South Africa are prohibited. All exports valued at over FBu 3,000 are subject to a prior declaration entitled Declaration of Collection of Foreign Exchange. The Declaration must be presented for certification by the central bank through an authorized bank, with the exception of those for cotton, which may be certified by authorized banks; for coffee exports, the central bank’s visa is dependent on the prior advice of the Coffee Committee. Declarations are valid for six months, but extensions may be granted by the central bank. Payments must be collected not later than 45 days after the goods have left the country when they are sold to neighboring countries, and not later than 90 days for goods shipped to other destinations. All exchange proceeds from exports must be surrendered to an authorized bank within 8 days from their collection. However, unfavorable exchange rates are applied when surrender of export proceeds of coffee occurs more than three months after shipment. Virtually all exports, including coffee, are subject to export taxes and a statistical tax. Exports of manufactured goods may receive a refund of 3 per cent of the f.o.b. value, 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 banknotes and up to FBu 2,000 in Burundi banknotes.

Capital

The Investment Code of August 25,1967 provides for fiscal and other benefits for domestic and foreign private investors. New investment that fulfills 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 5 years, for other merchandise needed for the manufacturing operation or for the upkeep of the original investment. Taxes on profits and real estate may be likewise reduced or suspended. Enterprises which are granted priority status may obtain protection against foreign competition, priority in the allocation of government contracts, and a guarantee from the central bank for the free transfer of profits and dividends as well as the repatriation of the invested capital. In addition to these privileges, companies undertaking investments that are considered to be of prime importance to Burundi’s economic development may be granted, under a separate convention, a guarantee that direct taxes on their activities will not be increased for a period of up to 15 years. An Investment Commission under the Minister of Planning is charged with examining requests for priority status and granting the necessary authorization.

Capital transfers by residents require individual authorization, which is rarely given, except in the case of foreign capital on which a repatriation guarantee has been granted. The guarantee is given to foreign exchange imported in any of the currencies quoted by the central bank by resident enterprises for working capital purposes and is valid for one year from the date on which the exchange is surrendered to the central bank through an authorized bank. The guarantee provides for the transfer of the original amount surrendered at the official rate ruling on the day of transfer.

Gold

Dealings in gold coins must be carried out through the central bank. All other private dealing in gold is prohibited. The central bank purchases unrefined gold from domestic producers at FBu 135 a gram. After refining abroad, this gold is included in the official monetary reserves. Imports and exports of gold may be made only by the central bank, with the exception that private firms may be licensed to import gold for dental use.

Changes during 1973

January 9. The central bank’s purchasing price for unrefined gold was increased from FBu 100 to FBu 135 a gram.

February 20. Following the announcement that the U.S. dollar was being devalued, Burundi decided to maintain the par value of its currency unchanged in terms of gold. The effective parity relationship for the U.S. dollar, previously FBu 87.50 = US$1, became FBu 78.7501 = US$1.

March 20. The Bank of the Republic quoted the zaïre on the basis of its parity.

August 8. New regulations were issued for exports of the 1973/74 coffee crop (Central Bank Communication No. 66 Rt. C/EXP.). Authorized banks would maintain control of shipments until the foreign exchange settlement took place; shipping documents, therefore, had to be made out to the order of the bank concerned. Each contract normally had to provide for the opening of an irrevocable documentary credit. The exchange rates applicable to the foreign exchange proceeds were as follows: If delivery of foreign currency took place within three months of shipment to Kigoma, the spot buying rate on the date of surrender (at that time FBu 78.35 per US$1); if surrender took place between three and four calendar months after shipment, the spot buying rate minus a discount of 0.6 per cent (i.e., for U.S. dollars, FBu 77.88 per US$1); if surrender took place after four to five months, the discount applied would be 1.5 per cent (i.e., the rate for U.S. dollars would be FBu 77.17 per US$1); and for surrender more than five months after shipment, the discount would be 1.5 per cent plus a discount of 1 per cent per month or part of a month.

October 15. The Bank of the Republic quoted the Kenya shilling on the basis of its parity.

Cameroon

Exchange System

No par value for the currency of Cameroon has been established with the Fund. The unit of currency is the CFA Franc,1 which is officially maintained at the rate of CFAF 1 = 0.02 French franc. Exchange transactions in French francs, the intervention currency, between the Banque des Etats de PAfrique Centrale (BEAC) and commercial banks take place at the rate of CFAF 1 = F 0.02, free of commission.

Exchange transactions relating to foreign countries, i.e., countries other than France (and its Overseas Departments and Territories except the French Territory of the Afars and the Issas), Monaco, and the Operations Account countries of the French Franc Area, take place in a dual exchange market, at rates based on the fixed rate for the French franc and the Paris exchange rate for the foreign currency concerned in either the official exchange market or the financial franc market. Settlements eligible for the official exchange market are payments and receipts in respect of imports, exports, and most other current transactions, as well as all current payments by or in favor of domestic and foreign public authorities and public bodies. All other settlements with foreign countries, as well as transactions in banknotes of foreign countries and banknotes issued by the BEAC, take place through the financial franc market at freely fluctuating rates. The principal current payments and receipts channeled through the financial franc market are those relating to travel expenses, capital earnings, and workers’ remittances. Exchange rates for certain European currencies in the official market are based on par values and central rates; the effective parity relationship for the U.S. dollar in this market is not confined within any announced margins.

With the exception of those relating to gold, Cameroon’s exchange control measures do not apply to (1) France (as defined above) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (the Central African Republic, Chad, the People’s Republic of the Congo, Dahomey, Gabon, Ivory Coast, Mali, Niger, Senegal, Togo, and Upper Volta). Hence, all payments to these countries may be made freely. All other countries, except Cameroon itself, are considered foreign countries, and in principle, financial relations only with foreign countries are subject to exchange control. All financial transfers to countries of the French Franc Area must be declared to the authorities for statistical purposes.

Administration of Control

Exchange control is administered by the Sub-Directorate of Financial Operations in the Directorate of Economic Controls, Ministry of Finance, which also surpervises borrowing and lending abroad, the issuing, advertising, or offering for sale of foreign securities in Cameroon, and inward and outward direct investment. All exchange transactions relating to foreign countries must be effected through authorized intermediaries, i.e., the Postal Administration and authorized banks. Import and export licenses are issued by the Ministry of Industrial and Commercial Development.

Prescription of Currency

Cameroon is an Operations Account country of the French Franc Area, since the BEAC maintains an Operations Account with the French Treasury; settlements with France (as defined above), Monaco, and the other Operations Account countries of the French Franc Area 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 or Financial Accounts in Francs. All settlements between Cameroon and Portugal, Rhodesia, and South Africa are prohibited.

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. BEAC banknotes may be credited to Financial Accounts in Francs when mailed direct to the BEAC agency in Yaoundé by the foreign correspondents of authorized banks.

Imports and Import Payments

Imports from Portugal, Rhodesia, and South Africa are prohibited. The import from all sources of certain “controlled” goods requires a special authorization (autorisation spéciale d’importation); when these goods are imported from countries other than France or the Operations Account countries of the French Franc Area and are valued at CFAF 25,000 or more, they require in addition an import license. The import of rice, flour, and sugar is subject to special procedures. Other imports from France and the Operations Account countries in the French Franc Area do not require a license. All other imports are subject to licensing, but licenses are issued freely.

All import transactions relating to foreign countries must be domiciled with an authorized bank when their value exceeds CFAF 50,000. Import licenses entitle 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 other Operations Account countries in the French Franc Area 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 other Operations Account countries of the French Franc Area 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 to foreign countries, there is an allocation of the equivalent of CFAF 15,000 a day, subject to a maximum of CFAF 450,000 a trip.

The transfer of rent from real property owned in Cameroon by foreign nationals is limited in principle to 50 per cent of the income declared for taxation purposes. 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. The transfer of 20 per cent or 50 per cent 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 to foreign countries of insurance premiums are not permitted if the same type of insurance is available in Cameroon. Resident and nonresident travelers going to foreign countries may take out up to a maximum of CFAF 20,000 in BEAC banknotes. Travelers to other countries may take out any amount in BEAC banknotes.

Nonresident travelers may take out foreign banknotes and coins 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 Portugal, Rhodesia, and South Africa are prohibited. Export transactions relating to foreign countries must be domiciled with an authorized bank when valued at CFAF 50,000 or more. Exports to countries in the French Franc Area are free of license. Proceeds from exports to foreign countries must be collected within 90 days of the date of arrival at their destination and proceeds received in currencies other than those of France or an Operations Account country must be surrendered within a month after collection.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and other Operations Account countries in the French Franc Area 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 banknotes and coins 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 banknotes and coins (except gold coins) of countries outside the French Franc Area.

Capital

Capital movements between Cameroon and France (as defined above), Monaco, and other Operations Account countries in the French Franc Area 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 foreign countries may transfer abroad their full savings, provided that they have met their tax obligations.

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 Cameroon; these controls relate to the transactions themselves, not to payments or receipts. With the exception of those over the sale or introduction of foreign securities in Cameroon, the control measures do not apply to relations with France (as defined above), Monaco, and those other countries whose bank of issue is linked with the French Treasury by an Operations Account. The provisions of Decree No. 67/DF/365, which introduced these special controls, have been suspended insofar as they are contrary to Decree No. 68/DF/460, on which the present exchange controls are based. All foreign securities, foreign exchange, and titles embodying claims on nonresidents must be deposited with an authorized intermediary, 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 ex post to the Minister of Finance, unless the operation involves the relinquishing of a participation that had previously been approved as constituting the making of 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 the postponement of the projects submitted to him. The full or partial liquidation of direct investments in Cameroon requires only reporting ex post to the Minister of Finance, unless the operation involves the relinquishing of a participation that had previously been approved as constituting the making of 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 per cent 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 an ex post report, 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 previously been authorized.

Borrowing abroad by physical or juridical persons, whether public or private persons, 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 ex post: (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; (3) loans contracted by registered banks and credit institutions; and (4) loans other than those mentioned above, when the total amount outstanding of these loans does not exceed CFAF 50 million for any one borrower, their duration does not exceed two years, and the rate of interest does not exceed 6 per cent a year.

Lending abroad by physical and juridical persons, whether public or private persons, 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 are subject only to a report ex post: (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 contracted by registered banks and credit institutions.

An Investment Code promulgated in 1960 and revised in April 1964 establishes four categories of fiscal and other benefits which may be granted to both foreign and domestic firms undertaking approved new industrial or agricultural projects in Cameroon. The scope and duration of the benefits vary depending on the size of the investment, the degree to which it helps implement the economic and social development plan, and its importance to national economic growth. Category A permits mainly duty-free entry of capital goods and raw materials required for manufacturing and processing. Under Category B, firms may be entitled to the benefits of Category A and also to exemption for 5 years from the tax on industrial and commercial profits and from various other taxes and fees. Under Category C, large companies may conclude an “establishment agreement” with the Government, under which special conditions for the operations of the company are agreed and the nature and extent of tax concessions are determined. Normally, an “establishment agreement” is valid for 25 years and defines also the legal, economic, and financial guarantees granted to the company, including the assurance of stable conditions for financial transfers and marketing of goods. Category D grants to firms making investments of particular significance to the national economy the benefits of Category C, as well as a guarantee of stability of taxation for up to 25 years.

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. 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 1973

February 13. Following the announcement that the U.S. dollar was being devalued, the exchange rate of CFAF 1 = F 0.02 was maintained; the effective parity relationship for the U.S. dollar, previously CFAF 255.785 = US$1, became CFAF 230.207 = US$1.

March 19. With the entry into effect of new margins arrangements between the French franc and certain other European currencies, and the maintenance of the exchange rate of CFAF 1 = F 0.02, the CFA franc began to appreciate in terms of the U.S. dollar.

April 2. The Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC) was replaced by the Banque des Etats de l’Afrique Centrale (BEAC).

July. The exchange control regulations applicable to foreign countries became applicable also to the Malagasy Republic and Mauritania.

September 5. For statistical purposes only, all financial transfers to countries of the French Franc Area had to be declared to the authorities.

December 13. Circular No. 21 raised the floor value for the domiciliation of imports from countries outside the French Franc Area from CFAF 25,000 to CFAF 50,000. It also provided new regulations concerning the collection and surrender of export proceeds.

Canada

Exchange Rate System

The par value is 0.822021 gram of fine gold per Canadian Dollar. Since May 31,1970, however, the authorities have not maintained the exchange rate of the Canadian dollar within prescribed margins, and therefore all transactions, for the time being, take place at a fluctuating exchange rate. The closing free market rate for the U.S. dollar on December 31, 1973 was Can$0.9906 per US$1. Canada has no exchange restrictions on foreign payments other than certain restrictions on payments to Rhodesia.

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. In implementation of UN Security Council Resolution No. 253(68) of May 29,1968, payments and transfers to Rhodesia are restricted.

Imports and Import Payments

Payments and transfers abroad may be made freely. Import licenses are required only for certain drugs, for a few agricultural items, including certain cereals, for certain textile products, for natural gas, and for material and equipment for the production or use of atomic energy. For some of the agricultural items, such as certain dairy products, licenses are generally not being issued. Commercial imports of certain commodities from any source are generally prohibited; these include oleomargarine, used automobiles, secondhand aircraft, certain periodicals, and goods of Rhodesian origin.

Exports and Export Proceeds

The surrender of the proceeds from exports is not required, and exchange receipts are freely disposable. For supply reasons, the export of a few commodities to all destinations is under export control, as is the export to the United States of crude petroleum, certain petroleum products, and natural gas. For security reasons, the export of certain specified commodities to all destinations except the United States is under export control. All exports to Albania, Bulgaria, the People’s Republic of China, Czechoslovakia, Eastern Germany and East Berlin, Hungary, North Korea, Mongolia, Poland, Rhodesia, Romania, North Viet-Nam, and the U.S.S.R. are subject to control, although certain goods of Canadian origin may be exported to these destinations, with the exception of Rhodesia, under the authority of a general export permit. The export of all goods to Rhodesia is prohibited, except medical supplies, news material, educational equipment and materials for use in educational institutions, and books, magazines, and periodicals.

Payments for and Proceeds from Invisibles

No requirements are imposed on exchange payments for, or exchange receipts from, invisibles. However, travelers may not take out any Canadian silver coins minted in or prior to 1968.

Capital

No exchange control requirements are imposed on capital receipts or payments by residents or nonresidents. Certain nonmandatory guidelines were issued in 1966 and 1968, mainly to prevent Canada from being used as a “pass-through” channel for outflows of U.S. capital to countries other than the United States, but also to prevent an excessive inflow of long-term capital, particularly from the United States. They apply to (1) all Canadian investors, with respect to the acquisition of “offshore” securities issued by U.S. companies and their foreign subsidiaries for sale outside the United States; (2) chartered banks and other financial institutions with respect to their foreign assets and liabilities; and (3) companies incorporated in Canada with respect to transfers of capital to overseas countries. The principal exemptions from these guidelines relate to export financing designed to facilitate Canadian exports, and to Canadian dollar term loans to, and Canadian dollar securities issued or guaranteed by, the central governments or central banks of developing countries.1 The Minister of Finance and the Bank of Canada have asked Canadian borrowers to carefully explore the potentialities of the Canadian market before offering securities for sale abroad.

Gold

Residents may freely purchase, hold, and sell gold in any form, at home or abroad. Under the Emergency Gold Mining Assistance Act of 1948, all mines receiving subsidies are required to sell their newly mined gold to the Royal Canadian Mint at US$42.22 a fine ounce. After refining, this gold is disposed of in the free market to established wholesale dealers by the Bank of Canada, acting as agent for the Government. Unsubsidized mines may sell their output on the free market. Exports of gold are subject to the following conditions: (1) exports to Albania, Bulgaria, the People’s Republic of China, Czechoslovakia, Eastern Germany and East Berlin, Hungary, North Korea, Mongolia, Poland, Rhodesia, Romania, North Viet-Nam, and the U.S.S.R. are included among those exports subject to control and require a license from the Department of Industry, Trade and Commerce; (2) gold of U.S. origin may only be re-exported from Canada when covered by a permit issued by the Minister of Industry, Trade and Commerce under the authority of the Export and Import Permits Act; and (3) owing to the general embargo on trade with Rhodesia, movements of gold to or from Rhodesia are prohibited. Commercial imports of articles containing minor quantities of gold, such as watches, are unrestricted and free of license.

Changes during 1973

January 24. A proposed Foreign Investment Review Act was introduced in Parliament. It obtained Royal Assent on December 12 but by the end of 1973 had not come into force. The Act provided that the acquisition of control over a Canadian business enterprise by noneligible persons, or the establishment by them in Canada of a new business unrelated to any business which they might already be carrying on in Canada, was subject to control by the Government. The review process for take-overs would be instituted within 180 days of Royal Assent. Screening of the establishment of new businesses would begin later. The Foreign Investment Review Agency had not been formally established by the end of the year.

January 31. The trade agreements with the United Kingdom, including the remaining provisions of the Ottawa Agreement of 1932, expired.

February 15. Exports of crude oil were made subject to quota restriction. Controls instituted by the National Energy Board took effect on March 1.

February 19. Temporary import duty reductions went into effect which averaged 5 percentage points on imports valued in 1972 at almost Can$1.3 billion. (The duty on beef and live cattle was restored on September 21.)

February 20. Following the announcement that the U.S. dollar was being devalued, the Canadian authorities stated that they would continue to allow basic market forces to determine the value of the Canadian dollar and that the Bank of Canada would continue to restrict its intervention to maintaining an orderly market.

April 5. Exports of Canadian silver coins minted in or prior to 1968 were placed under control.

May 11. Banks were asked to pay particular attention to the needs of small businesses and to applications for credit in the slower growth regions of the country, and to give priority to the creditworthy needs of their Canadian customers rather than respond to unusual requests from foreign corporations or foreign-owned subsidiaries in Canada for funds for use abroad or to replace funds that would normally be obtained abroad.

June 15. Exports of gasoline and heating oil were restricted.

June 16. The system of discretionary licensing of imports of motor gasoline was abolished.

June 29. Export controls were imposed on soybeans, linseed, rapeseed, cottonseed, and their oils and by-products. On July 9 these controls were extended to a series of other edible oils, animal fats, and livestock protein feeds.

July 16. Export controls on iron and steel scrap were tightened.

August 14. Export controls were imposed on live cattle and pigs, beef, and pork.

September 17. Export controls on soybeans and other oilseeds and their products were eased.

October 1. A tax was levied on exports of crude petroleum to the United States. Its amount was set by the National Energy Board. The levy was increased on December 1 and again on January 1, 1974.

October 8. Various controls were imposed to check the growth of exports of natural gas and crude petroleum to the United States. Exports of petroleum to the United States were further reduced on December 1, 1973.

October 15. Export controls were imposed on propane gas, butane gas, and heavy fuel oils.

October 18. The buying price of the Royal Canadian Mint for newly produced gold was increased from US$38 to US$42.22 an ounce.

October 20. The export controls over agricultural protein commodities imposed on June 29 and July 9, and those over live cattle, hogs, beef, and pork imposed on August 14, were removed.

November 2. The Canadian Commercial Corporation was authorized to purchase crude petroleum abroad.

December 2. Minimum export prices were imposed on natural gas.

December 20. Guidelines were issued governing take-overs of Canadian businesses in the interim period until the Foreign Investment Review Act would come into effect. The guidelines took effect immediately.

Central African Republic

Exchange System

No par value for the currency of the Central African Republic has been established with the Fund. The unit of currency is the CFA Franc,1 which is officially maintained at the rate of CFAF 1 = 0.02 French franc. Exchange transactions in French francs, the intervention currency, between the Banque des Etats de l’Afrique Centrale (BEAC) and commercial banks take place at the rate of CFAF 1 = F 0.02, free of commission.

Exchange transactions relating to foreign countries, i.e., countries cither than France (and its Overseas Departments and Territories except the French Territory of the Afars and the Issas), Monaco, and the Operations Account countries of the French Franc Area, take place in a dual market, at rates based on the fixed rate for the French franc and the Paris exchange rate for the foreign currency concerned in either the official exchai ige market or the financial franc market. Settlements eligible for the official exchange market are payments and receipts in respect of imports, exports, and most other current transactions, as well as all current payments by or in favor of domes tic and foreign public authorities and public bodies. All other settlements with foreign countries, as well as transactions in banknotes of foreign countries and banknotes issued by the BEAC, take place through the financial franc market at freely fluctuating rates. The principal current payments and receipts channeled through the financial franc market are those relating to travel expenses, capital earnings, and workers’ remittances. Exchange rates for certain European currencies in the official market are based on par values and central rates; the effective parity relationship for the U.S. dollar in this market is not confined within any announced margins.

An exchange tax of per cent (subject to a minimum of CFAF 500) is levied on most exchange transactions with, and payments to, countries other than France (as defined above), Monaco, and the Operations Account countries. In addition to payments to the countries mentioned, the following are exempt: (1) transactions of less than CFAF 12,500; (2) all operations relating to foreign exchange receipts; (3) foreign currency allowances for travel to countries other than France (as defined above), Monaco, or the Operations Account countries; (4) government expenditures in countries other than France (as defined a.bove), Monaco, or the Operations Account countries; (5) transactions of international organizations and embassies; and (6) transactions carried out with the member countries of the EEC.

With the exception of those relating to gold, the Central African Republic’s exchange control measures do not apply to (1) France (as defined above) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Cameroon, Chad, the People’s Republic of the Congo, Dahomey, Gabon, Ivory Coast, Mali, Niger, Senegal, Togo, and Upper Volta). Hence all payments to these countries may be made freely. All other countries, except the Central African Republic itself, are considered foreign countries, and in principal financial relations only with foreign countries are subject to exchange control.

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 this approval authority to the Director of the Budget. The Office of Foreign Financial Relations in the Ministry of Finance supervises borrowing and lending abroad, the issuing, advertising, or sale of foreign securities in the Central African Republic, and inward and outward direct investment. Exchange control is administered by the Minister of Finance, who has delegated some of his approval authority to the BEAC,2 to the authorized banks, and to the Postal Administration. All exchange transactions relating to foreign countries must be effected through authorized banks. Import and export licenses are issued by the Directorate of Foreign Trade in the Ministry of Commerce and Industry, except those for gold, which are granted by the Ministry of Mines and Geology.

Prescription of Currency

The Central African Republic is an Operations Account country of the French Franc Area, since the BEAC maintains an Operations Account with the French Treasury; settlements with France (as defined above), Monaco, and the other Operations Account countries of the French Franc Area 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 or Financial Accounts in Francs.3

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. The principal nonresident accounts are Foreign Accounts in Francs, related to the official exchange market, and Financial Accounts in Francs, related to the financial franc market. BEAC banknotes mailed direct to the BEAC agency in Bangui by the foreign correspondents of authorized banks may be credited freely to Financial Accounts in Francs.

Imports and Import Payments

All imports from Portugal, Rhodesia, and South Africa are suspended. The import from all countries of a few commodities also produced domestically is prohibited. The import of certain foodstuffs is not authorized unless local production of these commodities is inadequate. Imports of certain goods, when not originating in a member country of the Central African Customs and Economic Union (UDEAC), may be made only in given ratios to purchases of the local product. The import of firearms is prohibited irrespective of origin. All other imports from countries in the French Franc Area may be made freely and without an import license. All other imports from EEC countries also are free from quantitative restrictions. Imports from all countries outside the French Franc Area are subject to licensing within the framework of an annual import program of an indicative character.

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 other Operations Account countries in the French Franc Area 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. Resident tourists traveling to countries other than France (as defined above), Monaco, and the other Operations Account countries of the French Franc Area 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 banknotes. 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 is CFAF 15,000 a day, up to CFAF 150,000 a trip, for business travel to any other foreign country; of this allocation, an amount equivalent to CFAF 5,000 may be taken out in foreign banknotes. 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 going to foreign countries may take out up to a maximum of CFAF 10,000 in BEAC banknotes, French banknotes, and banknotes 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 banknotes.

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 banknotes into foreign currency.

Exports and Export Proceeds

All exports to Portugal, Rhodesia, and South Africa are suspended. All exports of cotton, coffee, corn, tobacco, peanuts, palm oil, meat, and diamonds require a license. All other exports to countries in the French Franc Area may be made freely. All exports to countries outside the French Franc Area require licenses, which are issued freely. The National Marketing Office for Agricultural Products has a monopoly over the export of agricultural products,.

Proceeds from exports to foreign countries must be collected and repatriated within one month from the due date; the latter generally must fall within 180 days of shipment. Export proceeds received in currencies other than those of France or another Operations Account country must be surrendered. All export transactions relating to foreign countries must be domiciled with an authorized bank.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and the other Operations Account countries in the French Franc Area 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 banknotes and coins 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 banknotes and coins (except gold coins) of countries outside the French Franc Area.

Capital

Capital movements between the Central African Republic and France (as defined above), Monaco, and the other Operations Account countries in the French Franc Area 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 within the Ministry of Finance.

Special controls (additional to any exchange control requirements that may be applicable) are maintained over borrowing and lending abroad, ove r 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 over the sale or introduction of foreign securities in the Central African Republic, the control measures do not apply to relations with France (as defined above), Monaco, and those other countries whose bank of issuie is linked with the French Treasury by an Operations Account.

Direct investments abroad4 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 the making of a direct investment abroad. Foreign direct investments in the Central African Republic5 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 the postponement of the projects submitted to him. 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 the making of 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 enterprise. Mere participation is not considered as direct investment, provided that it does not exceed 20 per cent in 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 Central African Republic 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 persons, whose normal residence or registered office is in the Central African Republic, or by branches or subsidiaries in the Central African Republic of juridical persons whose registered office is abroad, requires prior authorization by the Minister of Finance. The following are, however, exempt from this authorization: (1) loans 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 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 of these 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 CFAF 500,000 or less.

Lending abroad by physical or juridical persons, whose normal residence or registered office is in the Central African Republic, or by branches or subsidiaries in the Central African Republic of juridical persons whose registered office is abroad, requires prior authorization by the Minister of Finance. The following are, however, exempt from this authorization: (1) loans granted by registered banks and (2) other loans when the total amount outstanding of these 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, reduced duties and taxes on the import of specified equipment; in addition, certain enterprises receive exemption from direct taxes on specified income.

The law also provides for three categories of preferential treatment in accordance with which fiscal and other privileges may be accorded to firms investing in new enterprises or in the expansion of existing ones in most sectors of the economy, except the commercial sector. Preferential treatment A applies to enterprises whose activity and market are limited to the territory of the Central African Republic; it is granted for a period of up to 10 years. Preferential treatment B applies to enterprises whose activity and market include the territory of two or more states of the former Equatorial Customs Union. Preferential treatment C, which contains the most favorable provisions, is reserved for enterprises of prime importance to the country’s economic development; it provides for stabilization of their fiscal charges for up to 25 years.

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 has been given by the Commission, the proposed authorization is submitted to the Council of Ministers. Preferential treatments A and C are granted by decree issued by the Council of Ministers. Preferential treatment B is granted by an Act of the Board of Directors of the former Equatorial Customs Union upon the recommendation of the Council of Ministers.

Gold

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

Changes during 1973

February 13. Following the announcement that the U.S. dollar was being devalued, the exchange rate of CFAF 1 = F 0.02 was maintained; the effective parity relationship for the U.S. dollar, previously CFAF 255.785 = US$1, became CFAF 230.207 = US$1.

March 19. With the entry into effect of new margins arrangements between the French franc and certain other European currencies, and the maintenance of the exchange rate of CFAF 1 = F 0.02, the CFA franc began to appreciate in terms of the U.S. dollar.

April 2. The Banque Centrale des Etats de PAfrique Equatoriale et du Cameroun (BCEAEC) was replaced by the Banque des Etats de l’Afrique Centrale (BEAC).

July. The Malagasy Republic and Mauritania ceased to be Operations Account countries. Consequently, the exchange control regulations and transfer commissions applicable to French Franc Area countries ceased to be applicable to these two countries.

Chad

Exchange System

No par value for the currency of Chad has been established with the Fund. The unit of currency is the CFA Franc,1 which is officially maintained at the rate of CFAF 1 = 0.02 French franc. Exchange transactions in French francs, the intervention currency, between the Banque des Etats de l’Afrique Centrale (BEAC) and commercial banks take place at the rate of CFAF 1 = F 0.02, free of commission.

Exchange transactions relating to foreign countries, i.e., countries other than France (and its Overseas Departments and Territories except the French Territory of the Afars and the Issas), Monaco, and the Operations Account countries of the French Franc Area, take place in a dual exchange market, at rates based on the fixed rate for the French franc and the Paris exchange rate for the foreign currency concerned in either the official exchange market or the financial franc market. Settlements eligible for the official exchange market are payments and receipts in respect of imports, exports, and most other current transactions, as well as current payments by or in favor of domestic and foreign public authorities and public bodies. All other settlements with foreign countries, as well as transactions in banknotes of foreign countries and banknotes issued by the BEAC, take place through the financial franc market at freely fluctuating rates. The principal current payments and receipts channeled through the financial franc market are those relating to travel expenses, capital earnings, and workers’ remittances. Exchange rates for certain European currencies in the official market are based on par values and central rates; the effective parity relationship for the U.S. dollar in this market is not confined within any announced margins.

With the exception of those relating to gold, Chad’s exchange control measures do not apply to (1) France (as defined above) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Cameroon, the Central African Republic, the People’s Republic of the Congo, Dahomey, Gabon, Ivory Coast, Mali, Niger, Senegal, Togo, and Upper Volta). Hence, all payments to these countries may be made freely. All other countries, except Chad itself, are considered foreign countries, and in principle financial relations only with foreign countries are subject to exchange control.

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 also administered by the Minister of Finance, who has delegated his approval authority in part to the authorized banks. All exchange transactions relating to foreign countries must be effected through authorized banks. Import and export licenses are issued by the Foreign Trade Office in the Ministry of Commerce and Industry, except those for gold.

Prescription of Currency

Chad is an Operations Account country of the French Franc Area, since the BEAC maintains an Operations Account with the French Treasury; settlements with France (as defined above), Monaco, and the other Operations Account countries of the French Franc Area 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 the U.S.S.R. are made through special accounts established in accordance with a payments agreement. 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 or Financial Accounts in Francs.

Nonresident Accounts

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

Imports and Import Payments

Imports from all sources of wheat, wheat flour, and sugar require licenses. All other imports from countries in the French Franc Area and from EEC countries other than France may be made freely. All imports from non-EEC countries outside the French Franc Area are subject to licensing in accordance with an annual import program. This program and the amount of foreign exchange required to implement it are determined by the Minister of Commerce and Industry on the basis of proposals drawn up by the Committee on Imports and discussed by a joint French-Chadian Committee.

The import program contains global quotas for imports from non-EEC 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 EEC countries. Imports from Rhodesia and South Africa are prohibited.

Specified imports from neighboring countries not belonging to the French Franc Area (the Libyan Arab Republic, Nigeria, and the Sudan) up to a value of CFAF 3 million a year in each direction for a single importer may be made through compensation transactions.

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 only permitted for specified commodities and requires the prior approval of the Office of the Minister of Finance.

Payments for Invisibles

Payments for invisibles to France (as defined above), Monaco, and the other Operations Account countries in the French Franc Area 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. For tourist travel, residents traveling to countries other than France, Monaco, and the other Operations Account countries of the French Franc Area may obtain an exchange allocation of an amount equivalent to CFAF 175,000 a person a trip, for any number of trips a year; any foreign exchange remaining after return to Chad must be surrendered. For business travel to foreign countries, there is a special allocation of the equivalent of up to CFAF 400,000 a person a trip; the Office of the Minister of Finance may issue exceptional allocations in excess of CFAF 400,000. Tourist and business travel allocations may not be combined. Travelers going to foreign countries may take out up to a maximum of CFAF 10,000 in BEAC banknotes. Travelers to other countries may take out any amount in BEAC banknotes. A resident going abroad for less than 24 hours may not take out more than CFAF 5,000 in CFA banknotes.

Nonresident travelers may take out foreign banknotes and coins up to the amount declared by them on entry, or, if no declaration has been made, up to the equivalent of CFAF 100,000; they may reconvert into foreign currency BEAC banknotes up to CFAF 25,000 that have been obtained from the sale of foreign means of payments that were declared upon entry.

Exports and Export Proceeds

Exports to Rhodesia and South Africa are prohibited. All exports to non-EEC countries outside the French Franc Area require licenses. Specified exports to the Libyan Arab Republic, Nigeria, and the Sudan may be made through compensation transactions. Exports of cotton are the monopoly of Cotontchad.

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

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and other Operations Account countries in the French Franc Area 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 surrendered, within two months of the due date. Resident and nonresident travelers may bring in any amount of banknotes and coins 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 banknotes and coins (except gold coins) and other foreign means of payment.

Capital

Capital movements between Chad and France (as defined above), Monaco, and other Operations Account countries in the French Franc Area 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 over the sale or introduction of foreign securities in Chad, the control measures do not apply to relations with France (as defined above), Monaco, and those other countries whose bank of issue is linked with the French Treasury by an Operations Account.

Direct investments abroad2 require the prior approval of the Minister 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 Minister of Finance, unless the operation involves the relinquishing of a participation that had previously been approved as constituting the making of a direct investment abroad. Foreign direct investments in Chad3 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 the postponement of the projects submitted to him. The full or partial liquidation of direct investments in Chad must also be declared to the Minister of Finance, unless the operation involves the relinquishing of a participation that had previously been approved as constituting the making of a direct investment in Chad. 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 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 per cent 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 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 persons, whose normal residence or registered office is in Chad, or by branches or subsidiaries in Chad of juridical persons whose registered office is abroad, requires prior authorization by the Minister of 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; (3) loans contracted by registered banks; and (4) loans other than those mentioned above, when the total amount outstanding of these loans does not exceed ZFAF 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 Minister of Finance within 20 days of the operation, unless the total 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 persons, whose normal residence or registered office is in Chad, or by branches or subsidiaries in Chad of juridical persons whose registered office is abroad, requires prior authorization by the Minister of 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 these 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 declared to the Minister of Finance within 20 days of the operation, unless the amount of the loan is less than CFAF 500,000, provided, however, that the total outstanding amount of all loans granted abroad by the lender does not exceed CFAF 5 million. Commercial banks must maintain in Chad a specified minimum proportion of their assets.

Under the Investment Code of August 26, 1963, any enterprise established in Chad, whether domestic or foreign, is granted, under certain conditions, reduced duties and taxes on specified imports, as well as exemption from direct taxes on specified income. The Code also provides for three categories of preferential treatment, in accordance with which certain fiscal and other privileges may be accorded to firms investing in specified new industries or in the expansion of existing ones. Requests for preferential treatment must be submitted to the Minister of Commerce and Industry, 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 five gold coins of CFAF 1,000, 3,000, 5,000, 10,000, and 20,000 which are legal tender. Ordinance No. 3/PR/TP of February 10,1968 concerning nonmonetary gold (ratified by Law No. 23 of June 4, 1968), in conjunction with relevant exchange control regulations, governs the holding, sale, import, circulation, export, and processing of gold and diamonds. Residents who are not producers of gold may not hold unworked gold unless thay have obtained an authorization issued by the President acting on the advice of the Minister of Mines. Imports and exports of gold, whether unworked or refined, require prior authorization by the Office of the Minister of Finance and by the Directorate of Mines and Geology as well as the visa of the Foreign Trade Office in the Ministry of Commerce and Industry. 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 an approved Office for Purchases, Sales, Imports, and Exports (BAVIE), which is a private company. Unworked gold may be exported only to France. Both licensed and exempt imports of gold are subject to customs declaration.

Changes during 1973

February 13. Following the announcement that the U.S. dollar was being devalued, the exchange rate of CFAF 1 = F 0.02 was maintained; the effective parity relationship for the U.S. dollar, previously CFAF 255.785 = US$1, became CFAF 230.207 = US$1.

March 19. With the entry into effect of new margins arrangements between the French franc and certain other European currencies, and the maintenance of the exchange rate of CFAF 1 = F 0.02, the CFA franc began to appreciate in terms of the U.S. dollar.

April 2. The Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC) was replaced by the Banque des Etats de PAfrique Centrale (BEAC).

July. The exchange controls became applicable to the Malagasy Republic and Mauritania which ceased to be Operations Account countries.

Chile

Exchange Rate System

No par value for the Chilean Escudo (which was introduced on January 1, 1960) has been established with the Fund. The par value for the Chilean peso established with the Fund on October 5, 1953 is not applied to any transactions under the present exchange system.

There are two exchange markets: the official market (known as the banking market) and the brokers’ market. Only the Central Bank, the Banco del Estado, authorized commercial banks, and other persons or entities authorized by the Central Bank may operate in these markets; at present, brokers are not permitted to operate in either market. There are multiple exchange rates in both markets and outward transfers through both markets are controlled. The rates of exchange in both markets are set by the Central Bank and they are adjusted periodically. Through the banking market pass government transactions, all trade and trade-related transactions, all capital transactions, and most invisible transactions other than travel. There is a separate exchange rate in this market for the proceeds from copper exports. Only travel expenditures and a few residual transactions in invisibles are conducted through the brokers’ market. Transactions in the banking market are for both spot and forward delivery at the same exchange rate; forward exchange purchases are mandatory for imports of most commodities and export proceeds (other than those from copper, nitrate, and iron) may be sold forward. For both types of transaction, settlement in escudos is effected at the time the foreign exchange contract is negotiated. Transactions in the brokers’ market are for spot delivery only. There is some restriction on the availability of foreign exchange in that the Central Bank sells exchange to the commercial banks only for forward delivery (180 days from the date of settlement in escudos by the importer).

On December 31,1973 the main exchange rate in the banking market was E° 360 per US$1 and the rate for copper export proceeds was E° 130 per US$1. In the brokers’ market, the basic exchange rate was E° 750 per US$1; the application on the selling side of two exchange taxes totaling 53.15 per cent resulted in an effective selling exchange rate of about E° 1,150 per US$1. In both markets, commissions were permitted only on sales of exchange, and these could not exceed 410 of 1 per cent. Most transfers of profits and dividends are settled in the banking market, subject to an exchange tax of 18.5 per cent.

Administration of Control

The Foreign Trade Department and the Department of International Transactions of the Central Bank of Chile are in charge of the operation of the exchange control system. Some functions of the Foreign Trade Department have been delegated to local commissions in important cities, and the supervision of copper exports, all imports of the copper industry, and some imports of the nitrate and iodine industry has been delegated to the Copper Corporation (Codelco), which is supervised by the Central Bank and the Superintendency of Banks. Imports for the public sector are supervised by the interministerial Import Committee for the Public Sector, on which the Central Bank is also represented.

Prescription of Currency

Settlements with Argentina, Bolivia, Brazil, Colombia, Mexico, Paraguay, Peru, Uruguay, and Venezuela must be made through accounts maintained with each other by the Central Bank of Chile and the central bank of the country concerned, within the framework of the LAFTA multilateral clearing system. For imports, payment in U.S. dollars is permitted for goods of any origin and is mandatory for imports from the United States and imports from Latin American countries with which reciprocal credit agreements are in force; payment in sterling is permitted for imports of any origin other than the United States and countries with reciprocal credit agreements; payment in renminbi through the clearing account is mandatory for goods originating in the People’s Republic of China; Australian dollars, Austrian schillings, Belgian francs, Canadian dollars, Danish kroner, deutsche mark, Finnish markkaa, French francs, Italian lire, Japanese yen, Netherlands guilders, Norwegian kroner, Spanish pesetas, Swedish kronor, and Swiss francs may be used to pay for imports from the country issuing the currency concerned.

Export proceeds must be received in U.S. dollars when stemming from sales to Latin American countries with which reciprocal credit agreements are maintained, and renminbi must be received for exports to the People’s Republic of China. Proceeds from exports to other countries may be received in any of the following currencies: Australian dollars, Austrian schillings, Belgian francs, Canadian dollars, Danish kroner, deutsche mark, Finnish markkaa, French francs, Italian lire, Japanese yen, Netherlands guilders, Norwegian kroner, pounds sterling, Spanish pesetas, Swedish kronor, or Swiss francs, but the use of each of these currencies is mandatory for exports to the country issuing the currency concerned. All settlements with Poland and certain settlements with Bulgaria are made through special accounts established under bilateral payments agreements. Certain payments and transfers to South Africa are prohibited.

Imports and Import Payments

All imports from Rhodesia and imports of military equipment from South Africa are prohibited. There is a List of Permitted Imports; commodities not appearing on it are prohibited unless imported through a “free port” zone (see below) or unless they are on Chile’s National List negotiated with LAFTA or are imported from Andean Pact countries. A wide range of commodities may be considered as effectively prohibited for private importation since, although on the List of Permitted Imports, they are subject to an advance deposit requirement of 10,000 per cent unless they are imported by public sector agencies, originate in Andean Pact countries, are imported under a special regime, or are on the National List and originate in a LAFTA country; the Executive Committee of the Central Bank, however, may grant specific exemptions. Goods may be normally imported in any amount. The Central Bank, however, is empowered to reject import applications (registrations) and during most of 1973 this authority was used in lieu of an import licensing system.

Imports on deferred payment terms (cobertura diferida) require prior authorization of the credit terms by the Central Bank. Imports of goods not on the permitted list that are imported into “free port” zones such as Arica, Magallanes, Aysén, and Chiloé, may not be shipped to other parts of the country unless they are first processed or assembled in the “free port” zone. Certain commodities (including automobiles and most trucks) may only be imported into a “free port” zone for use in that zone. Importers may purchase forward exchange as soon as their import applications have been approved. Settlement in escudos is effected at the time the forward exchange contract is negotiated. Foreign exchange for payments of approved imports is sold by the Central Bank for delivery 180 days from the date of the escudo payment. Imports are subject to a registration tax of 3 per cent of the c.i.f. value.

Payments for Invisibles

All payments for invisibles are subject to exchange control. Most are settled in the banking market, while travel and certain residual invisible transactions are settled in the brokers’ market. Payments through this market may be effected up to established limits for a number of purposes: for tourist travel (in addition to fares; all limits are a person a journey, with a 30-day waiting period between trips, and subject to an annual limit of US$300 for all travel exchange taken up by any one person; all allocations are subject to a tax at a rate of 53.15 per cent) the equivalent of US$30 for travel to destinations within 500 kilometers of the Chilean border (defined to include all of Argentina except the cities of Buenos Aires, Bahía Blanca, and Comodoro Rivadavia), subject to a maximum of US$5 a day; the equivalent of US$105 for travel to other parts of Latin America (defined to include the Bahamas, Curacao, Jamaica, and Puerto Rico), with a maximum of US$15 a day; the equivalent of US$200 for travel to Canada and the United States, with a maximum of US$20 a day; the equivalent of US$300 to countries outside the Western Hemisphere, with a maximum of US$20 a day; for purchases of books and periodicals US$100 a person a year. At the end of 1973 the allocation for family remittances was suspended.

Banks may sell up to US$ 1,200 a person a year for payment of insurance premiums contracted prior to November 20, 1970 in foreign currency with national insurance companies or with foreign companies authorized to operate in Chile. Transfers of other insurance premiums require the approval of the Central Bank, which acts on the advice of the Superintendent of Insurance. Payments for medicines and pharmaceutical products may only be made provided that the product in question is not available in Chile. A number of transactions conducted in the banking market are also subject to established limits: student registration fees, US$50 a person a year; students abroad on scholarship, US$95 to US$400 a person a month; other students abroad, US$125 to US$175 a person a month. Transfers in excess of the limits and those in respect of transactions for which no basic allocation has been announced require the prior authorization of the Central Bank.

All purchases of exchange in the brokers’ market are subject to a tax of 53.15 per cent, except those for which the Central Bank has approved a transfer application (solicitud de giro), which are subject only to a 0.15 per cent basic exchange tax; the only documentation required for invisibles that are neither covered by the approval authority delegated to authorized commercial banks nor by a solicitud de giro is an application form (carta petición) addressed to the Central Bank through an authorized bank. Residents of Chilean nationality and residents of foreign nationality who have spent more than a year in Chile, when traveling to countries outside Latin America, are required to pay a travel tax of E° 3,550 a trip.

Exports and Export Proceeds

With minor exceptions for humanitarian reasons, exports to Rhodesia are prohibited. Exports of arms and related equipment to South Africa also are prohibited. Additionally, exports of some items are prohibited or are subject to quota irrespective of destination.

All exports must be registered with the Foreign Trade Department of the Central Bank and the sale proceeds of exports are subject to surrender requirements. Exporters, when submitting an export registration to the Central Bank, are required to furnish at the same time a power of attorney entrusting the Central Bank or any authorized commercial bank with the collection of export proceeds.1 Commercial banks are authorized to purchase on a spot or a forward basis foreign exchange proceeds from exporters. In the case of forward purchases, the forward period cannot be under 10 days nor over 180 days. Receipts from copper exports are sold direct to the Central Bank on a spot basis.

Most export proceeds subject to surrender requirements must be repatriated within 90 days from the date of shipment, and surrendered within 10 days thereafter, but for specified goods this period is extended to between 120 days and 480 days. Export proceeds sold on a spot basis must be transferred to the Central Bank.

By virtue of Law No. 16528 of 1966, many minor exports receive refunds of taxes and other charges included in their cost of production.

Proceeds from Invisibles

All foreign exchange proceeds from invisibles must be surrendered. Proceeds from productive services rendered by residents, from most insurance transactions by national insurance companies or by foreign insurance companies authorized to operate in Chile, and from certain commercial services (news agency fees, royalties, copyrights, etc.) must be sold in the banking market. Exchange received from communications agencies’ fees, nontrade-related transport services, tourism expenditure, foreign student remittances, and a few other invisible transactions must be sold in the brokers’ market.

Capital

Capital inflows are free, but most outflows are restricted. All capital transactions and remittances of dividends, profits, and interest are settled in the banking market. Chile has ratified the Andean Group’s Cartagena Agreement and in principle limits transfers of profits, dividends, and interest on foreign capital to 14 per cent per annum. All new foreign borrowing or refinancing of existing credits by commercial banks requires prior approval by the Central Bank. Foreign capital may enter Chile under one of three different arrangements depending on the purpose and type of the investment.

(1) Article 14 of Decree No. 1272 of September 7, 1961 stipulates that capital brought into the country in the form of foreign exchange (aporte de capital) may be sold freely through authorized banks when the investor (individual or corporation, national or foreign) has registered with the Central Bank. Such capital may only be repatriated with the prior approval of the Central Bank. The same is true for the transfer of interest and profits on such capital. Repatriation is only allowed in accordance with the amortization schedule established at the time of registration.

(2) According to Article 16 of the above Decree, the investor may enter into a loan agreement with a Chilean individual or corporation, or into an agreement with a national enterprise with a view to capital participation. The Central Bank guarantees access to the banking market, both for the servicing of loans and the re-export of capital, and for the remittance of interest and profits. The guarantee is given subject to certain conditions, one of which is a minimum investment period of three years. As an application and extension of Article 16, the Executive Committee of the Central Bank on November 3, 1963 took a decision to create an additional regime to further foreign investment in Chilean export industries. Under this regime, capital may be brought in for the promotion of exports of agricultural, industrial, and mining products and it may be repatriated, provided that the amount repatriated is financed from the increase in the volume of exports resulting from the investment. The regime is implemented through individual investment agreements in accordance with Article 16. Repatriation of the invested capital may start two years after entry and may amount to 12½ per cent annually of the invested capital. In addition, the remittance of interest or profits is permitted annually up to 7 per cent of the invested capital. The above privileges are granted only to firms that will not purchase foreign exchange in the banking market to acquire abroad any machinery, equipment, or capital goods on a cash payment basis.

In a further extension of the regime under Article 16, on June 2, 1966, the Central Bank announced that it would guarantee the foreign exchange for repatriation of, and earnings on, imported capital, provided that certain conditions were met. These were (a) the investment must be deemed to be of importance to the Chilean economy; (b) it must amount to at least US$100,000 or the equivalent in other currencies; (c) the capital must remain in the country for at least three years, and subsequent repatriation must not be more than 20 per cent a year, on a noncumulative basis; (d) the exchange must be sold in the banking market; and (e) the interest rate on credit to Chilean firms must not be higher than that in the domestic market.

(3) The most important law governing foreign investment is Decree-Law No. 258 of 1960, which establishes a regime both for foreign exchange transfers and long-term capital investment. A Foreign Investment Committee studies the proposal and the Ministry of Economy approves by decree the particular investment; the Committee establishes both guarantees regarding withdrawal of capital and remittances of interest and profits and may also give special guarantees regarding exemption from payment of certain import surcharges, customs duties, and taxes. Such privileges may be granted for a period of 10 years, with extension to 20 years in special cases. Remittances are effected in the same market (normally the banking market) through which the capital was brought in, and the investor has the right to use the exchange resulting from the export proceeds of his investment.

Decision No. 24 of the Cartagena Agreement is considered to override any contrary provisions of Decree-Law No. 258 and of Articles 14 and 16 of Decree No. 1272.

Gold

Chile has issued four gold coins, which are legal tender. Newly mined gold is purchased from the producers by Empresa Nacional de Minería (Enami), which, after refining, sells it to the Central Bank. The latter has this gold coined at the Mint. The Central Bank makes gold available to dental users at E° 2,605.75 a gram of fine gold (in the form of Chilean gold coins) and to industrial users at E° 3,195.73 a gram (in the form of mint blanks). The Central Bank has exclusive power to purchase, sell, negotiate, or transfer gold in any form for any purpose, except in the form of jewelry. All import and export of gold contained in minerals is subject to special authorization by the Central Bank. Gold bars are imported and exported only by the Central Bank. The import of gold coins and of gold dust, gold leaf, and gold wire for industrial use is subject to a 10,000 per cent advance deposit requirement; the import of gold coins is not normally permitted.

Changes during 1973

January 1. By virtue of Central Bank Circular No. 1799, certain remittances to students were shifted to the Area I brokers’ market rate.

January 4. Circular No. 1808 shifted export proceeds from mercury and salt to the buying rate of List G.

January 5. Circular No. 1809 shifted foreign exchange receipts of national shipping companies from List F to List G.

January 11. Circular No. 1810 tightened the supervision over the sale of foreign exchange for travel purposes but maintained the basic allocations.

January 11. Circular No. 1811 authorized banks until June 30, 1973 to sell exchange to prepay interest and amortization that would fall due on imports financed on deferred payment terms (cobertura diferida) whether under suppliers’ credits or other foreign credits.

January 12. Circular No. 1813 established that the Central Bank’s Foreign Trade Department, when processing an import application, could prescribe that payment abroad should be made on short-term, medium-term, or long-term credit. The importer, nevertheless, had to purchase the foreign exchange in accordance with existing rules.

January 12. Circular No. 1814 shifted a number of export items to the buying rate of List G.

January 31. Circular No. 1821 excluded holders of certain scholarships from the right to travel exchange allowances set by Circular No. 1770.

January 31. Circular No. 1822 provided that from February 5,1973 only the Central Bank could purchase spot foreign exchange proceeds from exports.

February 1. The travel tax was increased from E° 1,350 to E° 3,550 a trip.

February 2. Circular No. 1826 reduced the exchange allowances for study abroad.

February 5. Circular No. 1827 shifted exports of certain fruits to the buying rate of List G.

February 12. Circular No. 1828 shifted eight export items to the buying rate of List G.

February 14. Circular No. 1829 applied the 10,000 per cent import deposit requirement to imports from LAFTA countries of maté in small or medium-size containers.

February 21. Circular No. 1833 revised the regulations on permissible interest charges in connection with import transactions and the settlement of surcharges.

February 21. Circular No. 1835 provided that from April 1 all sales of foreign exchange by diplomatic and consular representations and by international organizations had to be made to the Central Bank.

February 22. Circular No. 1836 prescribed, with effect from March 1, invoicing in U.S. dollars for all transactions with Poland.

February 27. Circular No. 1830 gave instructions for transactions under a US$10 million line of credit granted by the Bank of Brazil.

February 27. Circular No. 1837 gave instructions for transactions under a US$100 million line of credit granted by the Central Bank of Argentina.

February 28. Circular No. 1839 required hotels and similar establishments to surrender within 30 days of receipt all foreign exchange accruing abroad from services performed in Chile.

February 28. Circular No. 1842 gave instructions for transactions under a US$20 million line of credit granted by the Banco Nacional de Comercio Exterior, Mexico.

March 1. Circular No. 1840 shifted seven export items to List G.

March 1. Circular No. 1843 gave instructions for transactions under a SKr 24.2 million credit granted by the Government of Sweden.

March 1. A bilateral payments agreement with the People’s Republic of China came into force. Circular No. 1844 specified that all transactions with that country had to be settled through the clearing account, except for Chilean exports of copper (blister and electrolytic) and imports of tin and soy seeds.

March 8. Circular No. 1847 shifted two export items to List G.

March 8. Circular No. 1848 ruled that for imports financed by foreign credits managed by the Central Bank, the rate and timing of the local currency deposit would be fixed by the Central Bank.

March 8. Circular No. 1849 changed the buying rate in the brokers’ market from E° 46 to E° 70 per US$1 and the Area III selling rate in the brokers’ market (applicable to travel exchange, family remittances, etc.) from E° 85 to E° 187 per US$1, or, with the 53.15 per cent tax, effectively from E° 130.70 to E° 280.39 per US$1.

March 27. Circular No. 1851 shifted certain spare parts to Lists C and D in the banking market and made them subject to the 10,000 per cent import deposit.

March 29. Circular No. 1853 ruled that import registrations were nontransferable.

April 2. Circular No. 1854 increased certain exchange allowances of Circular No. 1826 for study abroad.

April2. Circular No. 1855 changed the Area III selling rate in the brokers’ market from E° 187 to E° 196.35 per US$1, or effectively to E° 300.71 per US$1.

April 4. Circular No. 1856 provided that, with effect from June 1, travel exchange (other than banknotes and negotiable documents) would normally be granted only in the form of a nontransferable personal draft.

April 9. Circular No. 1858 shifted five export items to List G.

April 12. Circular No. 1862 specified the exchange rates for imports under Law No. 12008; cattle and other live animals qualified for List A (E° 20 per US$1) and many other essential items for List C (E° 40 per US$1).

April 13. Circular No. 1863 shifted one export item to List G.

May 2. Circular No. 1868 shifted four export items to List G.

May 2. Circular No. 1869 changed the Area III selling rate in the brokers’ market from E° 196.35 to E° 216 per US$1 (with tax, to E° 330.80 per US$1), with effect from May 3.

May 3. The Central Bank increased its sales price for gold from E° 786.64 a gram to E° 2,015.73 a gram.

May 11. Circular No. 1870 shifted exports of certain parts and components of precision instruments to List G.

May 11. With effect from May 14, Circular No. 1872 changed the buying rate in the brokers’ market from E° 70 to E° 125 per US$1 and the Area III selling rate from E° 216 to E° 350 per US$1 (with tax, to E° 536.03 per US$1). Selling rates for Areas I and II were unchanged at E° 36 and E° 46 per US$1, respectively.

May 14. Circular No. 1873 modified Circular No. 1661 governing transfers abroad by airline companies (the measure was revoked by Circular No. 1886 of May 31).

May 14. Circular No. 1874 changed the Area I selling rate in the brokers’ market from E° 36 to E° 80 per US$1 and the Area II selling rate from E° 46 to E° 130 per US$1.

May 17. Circular No. 1877 added the renminbi of the People’s Republic of China to the list of currencies in which imports and exports could be invoiced.

May 25. Circular No. 1878 shifted 11 export items to List G.

May 28. With effect from May 30, Circular No. 1880 set new exchange rates in the banking market as follows: (1) buying rates: List E, E° 45 per US$1; List G, E° 100 per US$1; proceeds from all other receipts passing through this market including certain exports, E° 65 per US$1; (2) selling rates: List A, E° 20 per US$1; List C, E° 65 per US$1; List D-l, E° 120 per US$1; List D-2, E° 240 per US$1; and sales of foreign exchange for imports and invisibles, when not listed in Circular No. 1727 but covered by Lists A, C, or D, E° 25 per US$1. The Circular also reclassified the lists of imports and invisibles for exchange rate purposes. The List H buying rate was eliminated. Previously, the buying rate for minerals other than iron (List E) was E° 20 per US$1.

May 28. Circular No. 1881 added several import items to List C of the banking market.

May 28. Circular No. 1882 shifted certain imports under Law No. 12008 to List D-l (E° 120 per US$1).

May 30. Circular No. 1884 modified the regulations of Circular No. 1661 applicable to airline companies’ sales expenditures. Chilean and foreign persons and firms having sufficient foreign exchange incomes, and nonresident Chileans, diplomatic representatives, etc., had to settle their tickets and freight with their own foreign exchange.

June 1. Circular No. 1885 shifted sales of foreign exchange by national shipping companies from List B to List E of the banking market, and operating expenditures of ships from List F to List E.

June 1. Circular No. 1887 shifted four export items to List G.

June 1. Circular No. 1888 shifted seven export items from List E to List F; they included iron ore, salt, coal, newsprint, cellulose, and wood.

June 8. Circular No. 1891 shifted ten export items, including manganese ore, to List G.

June 11. Circular No. 1892 set exchange rates of E° 20, E° 25, E° 65, E° 120, and E° 40 for specified imports under Law No. 12008.

June 13. Circular No. 1894 changed the selling rates in the brokers’ market to Area I, E° 80 per US$1; Area II, E° 156 per US$1; and Area III, E° 420 per US$1 (with tax, to E° 643.23 per US$1). At the same time, the buying rate for all transactions in the brokers’ market was changed to E° 156 per US$1.

June 18. Circular No. 1896 shifted imports of taxis to List D-l.

June 22. Circular No. 1898 shifted one export item to List G.

June 27. Circular No. 1901 gave instructions for transactions under credits totaling US$145 million granted by Bulgaria, Czechoslovakia, Eastern Germany, Hungary, Poland, and Romania.

July 2. The Central Bank raised its buying price for gold, as well as its selling price for registered dental users, to E° 2,605.75 a gram of fine gold, corresponding to E° 53,000, buying, for a 100-peso gold coin. The selling price for industrial users was increased to E° 3,195.73 a gram of fine gold, corresponding to E° 65,000, selling, for a mint blank (cospel).

July 5. Circular No. 1908 shifted three items from List D-2 to List C, when imported from LAFTA countries.

July 5. Circular No. 1909 shifted two export items to List G.

July 5. Circular No. 1911 modified Circular No. 1880 to add a new List D-3 for invisible payments in the banking market; it included travel expenses; rail, ship, and airline passages; family remittances; pensions; alimony; and similar items. The exchange rate applicable to this list was set at E° 775 per US$1. The exchange rate applicable to the conversion of foreign exchange by foreign airlines for expenditures in Chile was changed from List F to List G.

July 5. Circular No. 1912 suspended all foreign currency sales at the Area III brokers’ market rate. Thus, sales for private travel were terminated.

July 10. Circular No. 1914 shifted the foreign currency earnings of crews of the national merchant navy from List D-l to List C.

July 10. Circular No. 1915 revoked Circulars Nos. 1576 and 1580 and established new rules for foreign currency declarations and new minimum daily conversion limits for foreign tourists.

July 13. Circular No. 1916 shifted charter payments for coastal shipping from List D-l to List C and added payments for diplomatic and consular representations and four other invisible items to List D-3.

July 13. Circular No. 1917 added certain ships and shipping materials to List C.

July 18. Circular No. 1918 shifted reinsurance premiums to List C in the banking market, for the period May 29-Septem-ber 30, 1973.

July 19. Circular No. 1920 announced that nontransferable personal drafts would be required for travel to countries with reciprocal credit agreements from September 1; the extension of this requirement to other countries was under consideration.

July 19. Circular No. 1921 shifted 14 export items to List G. Circular No. 1922 added an invisible receipt item to List F.

July 24. Circular No. 1924 added certain fabrics to List D-l.

July 25. Circular No. 1925 shifted nine export items to List G. Circular No. 1926 added one import item to List C.

July 25. Circular No. 1927 gave the operating rules for the implementation of Circular No. 1911 in connection with the introduction in the banking market of List D-3. Forms and procedures for applications would be the same as under Circular No. 1693.

July 26. Circular No. 1928 reorganized the exchange system with effect from July 27. The banking and brokers’ markets were merged into a single exchange market and the number of basic exchange rates was reduced to seven, as follows: List A, E° 20 per US$1; List B, E° 25 per US$1; List C, E° 45 per US$1; List D, E° 65 per US$1; List E, E° 120 per US$1; List F, E° 240 per US$1; and List G, E° 775 per US$1. Copper exports were in List C. There were special exchange rate arrangements for imports under Law No. 12008.

Export proceeds had to be sold spot, with settlement in the Central Bank. Exchange sales for import payments generally had to be made for forward delivery.

July 26. Circular No. 1929 provided that diplomats, etc., and Chilean and foreign juridical persons receiving income in convertible currencies could establish demand and time deposits in foreign exchange in Chile.

July 30. Circular No. 1930 shifted one invisible receipt item from List D to List F and another from List D to List E. Both items related to international organizations.

July. The Supreme Court ruled that the import of Chilean banknotes by travelers could not be treated as a commodity liable to a 10,000 per cent prior import deposit.

August 2. With effect from August 3, Circular No. 1931 eliminated List A and shifted all transactions on it to List B; it also created a List C. The following exchange rates were set: List B, E° 25 per US$1; List C, E° 45 per US$1; List D, E° 75 per US$1; List E, E° 140 per US$1; List F, E° 300 per US$1; and List G, E° 890 per US$1. Copper exports were in List C. Separate exchange rates were set for imports under Law No. 12008. A new List B for imports was established. Export proceeds had to be sold spot to the Central Bank. Foreign exchange for imports valued at over US$1,000 would be sold on a futures basis only.

August 7. Circular No. 1935 tightened the supervision over handicraft exports.

August 8. Circular No. 1932 changed the declaration and conversion requirements for foreign tourists and revoked Circular No. 1915. These rules were changed again by Circular No. 1937 of August 17.

August 9. Circular No. 1933 shifted one invisible receipt item from List E to List F. Circular No. 1934 added one export item to List E.

August 13. Circular No. 1936 provided that banks could not open import letters of credit later than 30 days after registration. Their validity could not exceed 90 days.

August 16. Circular No. 1938 added two export items to List E.

August 20. Circular No. 1940 added certain completely-knocked-down trucks to List D, subject to a 10,000 per cent import deposit.

August 20. Circular No. 1941 suspended the opening of import letters of credit.

August 21. Circular No. 1948 canceled the requirement of an exemption form for import registrations relating to goods subject to the 10,000 per cent advance deposit.

August 22. Circular No. 1942 authorized banks until December 31 to sell exchange for prepayment of interest and amortization due on imports on deferred payment terms (cobertura diferida) financed with suppliers’ credits or other foreign credits.

August 22. Circular No. 1943 added three export items to List E. Circular No. 1944 added one import item to List E. Circular No. 1945 added one invisible receipt item to List D.

August 22. Circular No. 1946 modified Circular No. 1678 and provided a new list of foreign currencies in which export and import transactions must be invoiced.

August 22. Circular No. 1947 shifted one invisible receipt item from List C to List D.

August 28. Circular No. 1949 gave instructions, effective September 10, for the cancellation of import registrations.

September 1. With effect from September 3, new exchange rates were introduced as follows: List C, E° 46 per US$1; List D, E° 85 per US$1; List E, E° 160 per US$1; List F, E° 350 per US$1; and List G, E° 1,300 per US$1. Copper exports were in List C.

September 4. Circular No. 1954 added seven export items to List E.

September 5. Circular No. 1955 set new rules governing payments for imports of books.

September 5. Circular No. 1956 shifted two invisible receipt items from List C to List D.

September 15. Circular No. 1958 suspended all authorizations given to commercial banks and other entities to engage in foreign exchange operations. The acceptance of import registrations also was suspended.

September 15. Circular No. 1959 authorized specified banks to engage in exchange transactions for travel purposes, at the exchange rate set by Circular No. 1952. On September 19, Circulars Nos. 1960 and 1962 added five other banks. (Further banks were added later.)

September 19. Circular No. 1961 authorized specified banks to engage in exchange transactions to settle and close all export transactions authorized up to September 10, at the exchange rates set by Circular No. 1952. (Further banks were added later.)

September 22. Circular No. 1967 authorized specified banks to finalize import transactions approved prior to September 15 and in urgent cases to handle import registrations for essential goods, raw materials, foodstuffs, etc. (Further banks were added later.)

September 28. Circular No. 1971 authorized specified banks to purchase or sell foreign exchange in respect of specified current invisibles.

September 30. Circular No. 1972 introduced an exchange reform with effect from October 1. All commercial banks were authorized to engage in specified exchange transactions. A dual exchange market similar to the one existing until July 26, 1973 was re-established; a banking market, through which would pass all trade and trade-related transactions, capital movements, and most services, and a brokers’ market, where travel expenditures and a few other invisibles would be settled. In the banking market, a uniform exchange rate of E° 280 per US$1 was set, with the exception that proceeds from copper exports were converted at E°110 per US$1. In the brokers’ market a uniform exchange rate of E° 850 per US$1 was introduced; purchasers of exchange in this market had to pay a tax of 53.15 per cent, and the effective exchange rate for sales of exchange to travelers became E° 1,306.98 per US$1.

Purchases of exchange would generally be made on a spot basis and the export proceeds of the copper, nitrate, and iron mines would be settled in the Central Bank. Exchange sales would normally be made for forward delivery and the Central Bank would sell exchange for import payments for delivery 180 days from the date of the shipping documents. Settlement in escudos was to be made when the exchange contract was negotiated. The Circular specified the exchange operations which the banks were authorized to undertake and allowed them to charge a 4 per mill commission on their sales of exchange.

September 30. Circular No. 1973 extended the validity of import registrations that had expired after September 1.

September 30. Circular No. 1974 revoked the requirement of prior registration with the Central Bank of imports and exports of Chilean banknotes.

September 30. Circular No. 1975 revised the rules on foreign currency declarations and a minimum daily conversion of foreign exchange by tourists.

September 30. Circular No. 1976 provided that foreign exchange could again be sold for travel expenses, in the brokers’ market and within the existing quotas.

October 6. Circular No. 1980 stated that the Central Bank would sell foreign exchange for delivery at 180 days after settlement in escudos (rather than 180 days after the date of the bill of lading, as previously); commercial banks must sell this exchange at the same term. Commercial banks could purchase exchange forward from exporters (except the proceeds from copper, nitrate, and iron exports) at terms of at least 10 days and at most 180 days; they could sell this exchange at terms not exceeding 180 days.

October 6. Circular No. 1981 specified the exchange rates and export incentives to be applied to proceeds from exports authorized and /or shipped before October 1.

October 6. Circular No. 1982 revised the rules of Circular No. 1742 specifying the conditions under which banks could make available foreign exchange for imports.

October 10. Circular No. 1985 empowered banks to use the 130 per cent escudo deposits made under Circular No. 1742 to cover any import payments of the depositors, even if the foreign exchange was used for an import transaction different from the one against which the deposit was lodged.

October 10. Circular No. 1987 amended Circular No. 1454 with respect to family remittances.

October 18. Circular No. 1990 again authorized certain establishments to purchase and /or receive foreign exchange from tourists.

October 18. Circular No. 1991 modified Circular No. 1794 by shifting one invisible receipt item to the banking market.

October 24. Circular No. 1993 listed all payments and receipts in respect of invisibles according to the exchange rate applicable.

October 25. Circular No. 1995 modified Circular No. 1972 on the exchange rate for proceeds from exports of copper and copper by-products. The E° 110 per US$1 rate was maintained for the large and medium-size mines, but for the latter the circumstances were specified under which they could become eligible for a rate of E° 280 per US$1.

October 27. Circular No. 1996 modified the export regulations set in Circular No. 1741.

October 30. Circular No. 1998 authorized commercial banks to issue guarantee certificates expressed in foreign currencies to their foreign correspondents, and to grant guarantees to secure obligations in foreign exchange derived from imports on deferred payment terms (cobertura diferida).

October 31. Circular No. 1999 shifted payments and receipts in respect of international communications services to the brokers’ market.

October. The Superintendency of Banks revoked the 130 per cent escudo deposit requirement for import transactions.

November 2. Circular No. 2000, with effect from November 3, changed the rate of exchange in the banking market from E° 280 to E° 285 per US$1 and that in the brokers’ market from E° 850 to E° 800 per US$1.

November 3. Circular No. 2001 revoked Circular No. 1975 and eliminated the requirement that nonresident foreign tourists make a foreign exchange declaration and convert minimum daily amounts of foreign exchange.

November 8. Circular No. 2004 shifted family remittances to students without scholarships to the banking market until March 31, 1974.

November 15. Circular No. 2007 modified Circular No. 1884 concerning the regulations applicable to airlines. Persons having their own foreign exchange resources had to settle all tickets from those resources.

November 15. Circular No. 2008 replaced Circular No. 1995 on the exchange rate applicable to proceeds from exports of copper and copper by-products. For the time being, the rate for medium-size mines also was maintained at E° 110 per US$1.

November 15. Circular No. 2009 authorized banks to collect specified commissions on their purchases of foreign banknotes and travelers checks in the brokers’ market. On November 20, Circular No. 2010 authorized hotels and similar establishments to collect the same charges.

November 21. Circular No. 2011 set the procedures to be followed for the surrender of proceeds from the copper exports of the large copper companies and the Andean Mining Company. These proceeds had to be collected in convertible currencies, and normally by or through Codelco.

November 27. With effect from November 28, Circular No. 2013 changed the exchange rate in the banking market to E° 340 per US$1 and that in the brokers’ market to E° 780 per US$1. The special rate applicable to copper exports was changed to E° 130 per US$1. The effective rate for sales of travel exchange became E° 1,197.69 per US$1 (previously, E° 1,228.40 per US$1).

November 27. Circular No. 2014 authorized banks and hotels and similar establishments to charge on their purchases of foreign exchange in the brokers’ market a commission of 4 per mill and revoked Circulars Nos. 2009 and 2010.

December 10. Circular No. 2017 authorized banks to purchase spot the proceeds from iron and nitrate exports.

December 10. Circular No. 2018 eliminated one item from the invisible receipts listed in Circular No. 1993 and transferred to the banking market one invisible payments item in that Circular.

December 13. Circular No. 2021 modified Circular No. 1993 by shifting one invisible payments item to the banking market and adding one invisible receipt item to those eligible for that market.

December 27. Circular No. 2028 changed the rate of exchange in the banking market to E° 360 per US$1 and that in the brokers’ market to E° 750 per US$ 1. The rate for copper exports was left unchanged at E° 130 per US$1.

December 27. Circular No. 2030 authorized banks to sell spot exchange in the banking market to importers and exporters for the payment of premiums on insurance taken out with the State Insurance Institute.

Republic of China

Exchange Rate System

The par value is 0.0204628 gram of fine gold per New Taiwan Dollar. The Republic of China has established a central rate of NT$1 = SDR 0.0218144, corresponding to 0.0193858 gram of fine gold per new Taiwan dollar or NT$38 = US$1, and avails itself of wider margins. The official buying and selling rates for the U.S. dollar are NT$37.90 and NT$38.10, respectively. Buying and selling rates for certain other currencies are also officially posted, with daily quotations based on the buying and selling rates for the U.S. dollar in markets abroad.1 Currencies for which rates are not officially posted may be accepted by appointed banks, and the rates are calculated in accordance with the foreign market quotations.2 With certain exceptions, earners of foreign exchange must sell it to banks appointed by the Central Bank of China. There is no exchange market. The appointed banks clear their exchange transactions at the end of each day with the Central Bank. Forward cover facilities are limited to import and export transactions and to the officially posted currencies, with the exception of the U.S. dollar.

Administration of Control

The Executive Yuan is responsible for policies concerning foreign exchange and trade controls. Foreign exchange and trade matters are entrusted to the Ministries of Finance and Economic Affairs and the Central Bank of China. The Ministry of Finance has general jurisdiction over foreign exchange laws and regulations, and is in charge of government remittances. The Foreign Exchange Department of the Central Bank of China is responsible for the overall management of foreign exchange, for the determination of the official buying and selling rates of exchange, and for the supervision of the authorized banks (“appointed banks”), of which the Bank of Taiwan is the most important. The Central Bank also licenses private remittances and capital movements. The Board of Foreign Trade of the Ministry of Economic Affairs coordinates industrial and trade policies, including those relating to the import regime and export promotion, and is in charge of the issuance of import and export licenses. By delegation, the Application Receipt and Dispatch Center at the Board of Foreign Trade screens applications for import licenses and issues the licenses; for some goods, however, import applications and licenses are screened and issued by 15 appointed banks and their branches. Export applications are screened, and export permits issued, by 25 appointed banks. Most foreign exchange transactions are conducted through appointed banks.

Prescription of Currency

Export receipts must be obtained in Australian dollars, deutsche mark, Hong Kong dollars, pounds sterling, Singapore dollars, Swiss francs, or U.S. dollars.3 Currencies not officially posted may be accepted by appointed banks but must be converted into posted currencies in exchange markets abroad. The Central Bank supplies foreign exchange in the form of any of the posted currencies for making payments to residents of foreign countries.

Nonresident Accounts

The Republic of China’s exchange control regulations do not provide for a clear distinction between residents and nonresidents. As a consequence, persons who would be considered nonresident under many other exchange control systems are not granted treatment essentially different from that accorded to residents of the Republic of China in exchange control matters.

Accounts in new Taiwan dollars of persons who are residents of other countries are treated in the same way and are subject to the same regulations as other accounts in new Taiwan dollars. The exchange control regulations do not provide for blocked balances and blocked accounts held in the name of residents of foreign countries.

Residents may maintain accounts in U.S. dollars, pounds sterling, or Hong Kong dollars, as follows: Holders of foreign banknotes or travelers checks may have these credited to Foreign Currency Accounts, and recipients of remittances from abroad or of money orders or other negotiable instruments drawn on foreign banks may have the proceeds credited to Foreign Exchange Accounts. Balances in Foreign Currency Accounts may be withdrawn in the original currency or in new Taiwan dollars, after conversion at the official buying rate. Balances in Foreign Exchange Accounts may be withdrawn in new Taiwan dollars; they may also be remitted abroad freely, with the exception that foreign exchange that originated in the United States may not be remitted to Hong Kong. Foreign Exchange Accounts and Foreign Currency Accounts are subdivided into interest-bearing time deposits and passbook accounts (which do not bear interest).

Imports and Import Payments4

Most imports require individual licenses. For virtually all commodities subject to license, license applications are screened, and import licenses are issued, by the Application Receipt and Dispatch Center at the Board of Foreign Trade. Designated appointed banks have authority to screen import applications for certain daily necessities, to issue import licenses on behalf of the Central Bank, and to make the necessary foreign exchange available; these goods are automatically approved for an import license.

Importers of goods on the permissible list (see below) may contract on documents against payment (D/P), documents against acceptance (D/A), or usance letter of credit terms (provided that the credit term is less than one year); imports of machinery and equipment, however, must be made on a cash settlement basis when the value of the import is less than US$3 million and the terms of repayment are under five years. The holder of an import license is entitled to obtain the necessary foreign exchange from an appointed bank. Exchange settlement corresponding to 25 per cent of the f.o.b., c. & f., or c.i.f. value of imports must be made within 28 days of approval of the license for all imports not taking place on a deferred payment, consignment, D/P, or D/A basis, i.e., for all imports under sight letter of credit; the requirement is 15 per cent for usance letters of credit; 15 per cent for letters of credit financed by self-provided exchange; 20 per cent for letters of credit on an installment payment basis; and 10 per cent for letters of credit covering bulk imports specially approved by the Ministry of Economic Affairs. This advance settlement requirement, the so-called performance deposit, is a condition for the issuance of a letter of credit.

Imports from communist countries are prohibited in principle, although imports of bulk goods, industrial raw materials, and many consumer goods from any source other than mainland China are now being licensed. The authorities license and check imports from Hong Kong in order to induce importers to obtain certain imports direct from the country of production and to control effectively imports from mainland China; for similar reasons, certain commodities are not permitted to be imported from Hong Kong, Japan, Macao, Malaysia, and Singapore. Certain commodities financed with U.S. aid funds (including tied letter of credit funds) can be imported only from the United States. Applications for imports from Japan of machinery valued over US$200,000 for each individual order require the approval of the Board of Foreign Trade.

Imports are divided into three groups: (1) prohibited, (2) controlled, and (3) permissible. The prohibited imports comprise not only narcotics and some other goods excluded by most countries from importation but also a wide range of pharmaceuticals. The controlled list contains, in addition to such items as arms and ammunition, ships, and poisonous chemicals, a number of luxury goods and less essential items (such as certain Chinese luxury foods, cigarettes, cigars, liquor, certain medicines, tea, sugar and its substitutes, molasses, made-up clothing, consumer durables, antiques, certain jewelry, gold, and silver) and goods subject to domestic regulation and allocation. The first type of goods are licensed restrictively;5 goods of the second type are often imported by government agencies, which offer them for sale either by allocation or by auction. Liquor and cigarettes are imported by a government monopoly organization, which is also responsible for domestic distribution of these commodities. Goods on the permissible list are licensed liberally and can be imported by both end-users and traders. The importation of items on the controlled list is permitted only to factories and end-users. For certain goods, preference must be given to domestic over imported goods, provided that the price of the local product does not exceed that of the import by more than 5 per cent. On December 31, 1973, of 15,261 classified import items, 13 were prohibited, 461 were controlled, and 14,787 were permissible.

A general (covering) licensing procedure has been introduced in respect of a few items on the controlled list. Under this procedure, manufacturers and other direct end-users are granted authorization semiannually for the importation of listed items specified by value and by quantity. Exchange for such imports is obtainable automatically each time the importer presents the general approved license at an appointed bank. Furthermore, an automatic approval system is applied to certain items on the permissible list. Under this system, importers may obtain foreign exchange at any appointed bank by submitting import licenses which are automatically approved. On December 31, 1972, the system applied to 3,955 items, and on December 31, 1973 to 10,271 items.

Special regulations apply to 6 commodities normally imported in bulk shipments.6 They are subject to annual quotas and priority must be given to Chinese flag vessels for their importation.

According to the intended utilization, goods may be imported by one of the three main groups of importers: government trading agencies, qualified private traders, and end-users and manufacturers. The import of crude oil is confined to the Chinese Petroleum Corporation. The Central Trust of China is the main government trading agency. It handles imports for government and military organizations, public enterprises, and other customers. Another government trading agency is the Taiwan Supply Bureau, which is in charge of imports for the Taiwan Provincial Government, some local industries, and certain other customers.

Firms that wish to operate as authorized (“registered”) importers must obtain approval (“registration”) from the Board of Foreign Trade; the firms must be operating in accordance with certain laws and have a minimum capital of NT$500,000 and an “export record” equivalent to more than US$100,000 for the last year. Traders licensed to operate on a commission basis may act only as agents for foreign suppliers. They also must be registered by the Board of Foreign Trade.

End-users and manufacturers are permitted to import raw materials, machinery, and replacement equipment needed for their factories. In granting licenses to this category of importer, the licensing authorities take into account such criteria as production capacity and equipment. In processing applications for licenses to import capital equipment for the construction of new plants, the licensing authorities consider the feasibility of the project and its priority from the point of view of the economic needs of the country. When the capital goods concerned are available from domestic sources, import licenses usually are not issued. Imports to be used for processing or producing goods for export are licensed up to requirements (e.g., raw cotton, wool, and wood for the production of plywood).

According to the methods of financing, imports may be divided into two broad categories: (1) imports for which exchange is allocated directly out of official exchange reserves, and (2) imports which are made without recourse to official exchange reserves and which comprise (a) those made under the U.S. P.L. 480 program and (b) those paid for with self-provided exchange or exchange supplied by foreign investors, foreign lenders, or overseas Chinese. Imports obtained with self-provided exchange are those financed by importers out of their own foreign exchange obtained by them prior to their coming to the Republic of China or originating from exchange receipts exempt from the surrender requirement.

Payments for Invisibles

All payments for invisibles require approval from the Central Bank of China. Payments for invisibles directly related to trade are permitted freely when the basic trade transaction has been approved. The transfer of interest, profits, and earnings on authorized foreign investments in the Republic of China may be made without restriction. Residents may at any time (but not more often than four times a year) make outward transfers up to the equivalent of US$200 for any purpose other than import payments; applications for such personal remittances are approved automatically.

Foreign exchange for payments for certain other invisibles is allocated only up to established limits or on a percentage basis. Foreign technicians are allowed to remit to their dependents abroad up to 70 per cent of their monthly salary. Employees of the Government or of educational institutions may remit to their dependents in Hong Kong or Macao up to HK$150 a month. Membership fees of foreign institutions and certain payments for news services, books, and magazines (personal subscriptions for reference purposes) are also approved. Receipts from local subscriptions to, and sales of, imported newspapers and periodicals are remittable. Up to 70 per cent of the net amount of motion-picture film rental and of foreign entertainers’ earnings may be transferred abroad; the remainder is to be used for local expenses. The full amount of tuition and living expenses during the first academic year of students studying abroad may be remitted, and up to US$3,600 a year in the second to fifth academic years. Residents are granted an exchange allowance equivalent to US$1,000 a trip (US$500 for each accompanying dependent under the age of 12) for any approved type of travel; visas for tourist travel, however, are not normally granted to Chinese nationals. For business travel, an allowance equivalent to US$1,200 a month for up to three months is granted for living expenses. All travel allocations are net of fares and tickets. Applications for exchange to pay for certain other types of invisibles are approved on their merits.

Residents leaving the Republic of China may take with them no more than NT$ 1,000 in domestic banknotes and coins and the equivalent of US$400 in foreign currencies. Nonresident travelers who have stayed in the Republic less than six months may take with them any unspent portion of the foreign currency which they registered upon entry, and may in addition convert local currency into foreign currency upon submission of the foreign exchange memorandum evidencing their acquisition of local currency by sale of exchange.

Exports and Export Proceeds7

All exports require licenses, mainly in order to ensure the surrender of foreign exchange. Licenses may be issued only for exports to noncommunist countries. The re-exportation of imported goods is permitted after they have been processed. Exports of sugar, rice, and salt are handled by government trading agencies.

Quota limitations are maintained on the export of bananas, canned mushrooms, and asparagus. The export of other foodstuffs, fertilizers, paper and pulp, logs, PVC products, cement, steel, and scrap of iron and steel, is either prohibited or suspended. There are ceilings on the export of textiles to Canada, the United States, and the member countries of the EEC.

Manufacturers who use imported raw materials to produce goods for export are, after export of the processed goods, refunded various charges imposed on such raw materials. These charges include import duties, harbor dues, and commodity tax. Some preferential treatment is accorded to payers of income tax related to the production of goods for export, provided that the taxpayers submit satisfactory proof of such exports; complete exemption from the tax is not granted, however.

With minor exceptions, exporters are required to surrender exchange earnings accruing from exports immediately after their collection. Most exports to any permitted destination may be made on a consignment or collection basis, provided that payment is not deferred for more than 180 days from shipment. Subject to approval, bona fide gifts and commodity samples up to the value of US$200 may be sent abroad. When leaving the Republic of China, tourists are allowed to take out domestic products valued up to US$200 without providing evidence that they have surrendered foreign exchange.

Proceeds from Invisibles

Exchange surrender requirements applicable to proceeds from invisibles are generally similar to those applicable to export proceeds. Interest, earnings, and profits on investments made by Chinese investors outside the country, and originally approved by the Central Bank of China, must be surrendered to the banks, but earnings from private investments abroad that have not been financed by outward remittances may be retained. Private inward remittances may be retained by the recipients for deposit on a foreign exchange account, from which they may be transferred freely.

Travelers may bring in any amount of foreign currency and either hold or surrender it; the amount imported must be declared upon entry. The import of domestic banknotes expressed in new Taiwan dollars is limited to NT$1,000 for each traveler; a license from the Ministry of Finance is required for importing a larger amount.

Capital

Investments by nonresidents (including overseas Chinese) may be made in capital equipment or raw materials, or through the transfer of foreign currency to the Republic of China. In accordance with the Foreign Investment Law of July 14, 1954, as amended in 1959, and the 1971 Statute for Encouragement of Investment, new foreign investments approved by the authorities are guaranteed (1) unrestricted transfer of net annual profits or earned interest; (2) repatriation of capital, including reinvested earnings, 2 years after completion of the investment plan, at an annual rate not exceeding 15 per cent, calculated in relation to the invested funds; (3) the right to re-export invested capital in its original form; (4) favorable treatment in respect of rezoning and requisition of agricultural land for industrial use; (5) certain benefits with respect to business income tax and import duties; and (6) compensation for expropriation where the foreign investment constitutes less than 51 per cent, and immunity from expropriation for 20 years where the foreign investment constitutes at least 51 per cent, of the total investment. In addition, foreign investments are granted treatment at least as favorable as that accorded to new domestic investments. Laws for the encouragement of foreign investments provide for additional benefits in specific cases.

To obtain the benefits of the investment laws, investments by nonresidents must be made in enterprises conducive to the economic and social development of the country, such as mining, communications, and manufacturing for domestic needs. Preference is given to foreign investors who intend to produce goods for export or for replacing imports.

Nonresidents (including overseas Chinese) who intend to make investments in Taiwan stocks and wish to take advantage of privileges provided under the foreign investment laws, as described above, must obtain approval from the Ministry of Economic Affairs. Purchases and sales of stocks and bonds by nonresidents must be made through the intermediary of registered brokers, such as the Trust Department of the Bank of Taiwan and the Trust Department of the Central Trust of China.

Subject to approval, direct investments may be made outside the Republic of China in the form of technical know-how, semifinished products, locally manufactured equipment, and remittances of foreign exchange. Applications that receive sympathetic treatment include those which would assist in assuring a stable supply of raw materials for domestic industries. Portfolio investment abroad by residents who are private persons is not normally permitted.

Chinese nationals who wish to emigrate, and foreign persons who have settled in the Republic of China and wish to return to their native countries, are not accorded any transfer facilities in respect of proceeds from the liquidation of their assets in the Republic. Persons outside the Republic of China who acquired in the Republic assets or balances in new Taiwan dollars on account of dowries, inheritances, gifts, and so forth, are not normally granted the right of transferring them from the Republic.

Certain inflows of short-term capital are restricted. These include foreign currency loans for working capital purposes and certain forms of import credit. Domestic banks are permitted to hold short-term deposits with their foreign correspondents but they are not normally permitted to acquire foreign treasury bills, certificates of deposit, or other types of foreign securities.

Gold

Producers of gold must sell their output to ornamental gold processors (registered goldsmiths, silversmiths, and jewelers), through open tenders conducted by the Central Trust of China; gold delivered to the Central Trust for refining must have a fineness of 0.945, any necessary reduction being undertaken by the Taiwan Metal Mining Corporation. Any newly produced gold that remains unsold at auction must be kept in the custody of institutions specifically designated by the Government; at present, only the Central Trust is so designated. Ornamental gold processors are not permitted to sell gold of a fineness in excess of 0.945.

Other residents may hold gold in any form and of any fineness, but its use as collateral for loans is prohibited. Travelers may bring in any amount of gold, which must be declared upon entry if its weight exceeds 5 shih liang, i.e., 156.25 grams; other imports of gold are not permitted. Residents may freely take out gold in the form of jewelry, provided that its weight does not exceed 2 shih liang, i.e., 62.5 grams. Otherwise, exports of gold and gold jewelry by travelers are not normally permitted.

Changes during 1973

January 1. A number of luxury goods and less essential items were shifted from the prohibited import list to the controlled list. They included certain Chinese luxury foods, cigarettes, cigars, liquor, certain jewelry, certain medicines, tea, sugar, and molasses.

January 1. The tenth edition of the classification of import and export commodities came into effect. It covered 15,261 import items. Of these, 14 items were prohibited, 2,864 were controlled, and 12,383 were permissible. These numbers took into account the shifts from the prohibited to the controlled list that are indicated in the first entry for January 1, above.

January 15. The Central Bank ceased to approve new borrowing abroad in the form of short-term foreign currency loans for working capital purposes.

January 15. Foreign exchange settlement arrangements with banks were changed to provide for the simultaneous payment of domestic currency upon the surrender of export proceeds and other foreign exchange earnings to the Central Bank. Previously, the Central Bank provided domestic currency up to 15 days in advance of the surrender.

January 22. For letters of credit opened by appointed banks under foreign currency loans for imports, importers were required to settle in advance not less than 10 per cent of the total amount of the letter of credit.

January 23. Exports of wheat flour were suspended for one year, and exports of steel were suspended indefinitely.

January 24. It was announced that the Central Bank would extend US$400 million in foreign exchange loans for the import of daily necessities and of industrial raw materials and capital equipment. Of this amount, one half would be loaned by various banks at 7½ per cent per annum for the importation of machinery. The remaining US$200 million would be loaned through banks to traders and manufacturers for imports of necessities and raw materials, also at 7½ per cent per annum. In addition, to curb rising prices of certain imported products, direct financing would be available at 5½ per cent per annum through the Board of Foreign Trade.

February 1. Foreign banks in China were permitted to accept local currency demand deposits, but not time or savings deposits. Each bank’s local currency deposits could not exceed 12½ per cent of capital, and there was an overall ceiling on the deposits of all foreign banks combined.

February 16. Following the announcement that the U.S. dollar was being devalued, the Republic of China established a central rate of NT$1 = SDR 0.0218144, corresponding to NT$45.8413 = SDR 1 or NT$38 = US$1, and continued to avail itself of wider margins. The official buying and selling rates for the U.S. dollar, previously NT$40.00 and NT$40.10, were set at NT$37.90 and NTS38.10, respectively, per US$1.

February 17. The conversion rate for Japanese banknotes was changed from Y 8.5 = NT$1 to Y 7.5 = NT$1.

February 25. Import duties were reduced by up to 50 per cent on ten import items, including barley, corn, soybeans, molasses, wheat bran, and steel scrap. On August 24, these reductions were extended for six months.

March 7. The value of bona fide gifts and commodity samples which may be sent abroad, subject to approval, was increased from US$100 to US$200. Tourists leaving the Republic of China were allowed to take out domestic products valued at up to US$200, compared with US$100 previously, without providing evidence that they had surrendered foreign exchange.

March 15. The Board of Foreign Trade began to make foreign currency loans available to importers through the Central Bank. The total amount was initially set at US$200 million. From July 1, unlimited foreign currency loans were made available for imports of wheat, soybeans, corn, and iron and steel.

March 16. Over 2,000 items were shifted from the list of controlled imports to the permissible list, and 1 item from the prohibited list to the controlled list. As a result, 13 import items were prohibited, 461 were controlled, and 14,787 were permissible. Most of the shifted items henceforth could be imported from all sources except mainland China.

March 16. The requirement was withdrawn that in certain manufacturing industries a stipulated minimum ratio of the value of manufactured products must be met by the use of domestic resources. However, the use of local materials continued to be required for certain domestic industries.

April 1. Approval was no longer given for the renewal of maturing short-term foreign currency loans for working capital. Refinancing of such loans was to be obtained in domestic currency through local banks.

April 1. Advance settlement requirements for imports were increased; for sight letters of credit the increase was from 20 per cent to 25 per cent of the value.

April 1. Export financing loans by banks to manufacturers, other than loans for exports of machinery, were provided only up to 80 per cent of the amounts previously made available.

April 1. The acceptance by domestic importers and manufacturers from foreign suppliers or banks abroad of short-term financing and/or usance letters of credit of less than one year was suspended. After meeting the advance settlement requirement, domestic importers and manufacturers could apply to appointed banks for loans in domestic currency for settlement of the balance. The rate of interest on these loans was fixed at 7½ per cent per annum.

April 1. Imports of machinery and equipment had to be made on a cash settlement basis when the amount involved was less than US$3 million and the terms of repayment were less than five years. After advance settlement of 20 per cent of the foreign exchange amount, importers and manufacturers could obtain domestic bank financing at 7½ per cent a year for the remaining 80 per cent of the import value.

May 3. The limitations imposed on April 1 on imports on a documents against acceptance (D/A) basis or a documents against payments (D/P) basis were removed.

July 1. Consular invoices ceased to be required for imports.

July 4. Certain limitations on permitted countries of origin for imports of bulk goods and industrial raw materials were lifted. Henceforth, these could be imported from any source other than mainland China, while previously restricted sources of origin included Hong Kong, Japan, Macao, Malaysia, and Singapore.

July 17. The remittance facility for individuals was increased from US$100 to US$200 per transfer.

July 17. The exchange allowances for study abroad were increased. Those for approved travel abroad were increased from US$600 to US$1,000 a person a trip (from US$300 to US$500 for children). The living expenses allowance for business travel was increased from US$1,000 to US$1,200 a month.

August 10. The Central Bank made available domestic finance up to a total of NT$1 billion to facilitate the financing of imports by small and medium-size enterprises of basic consumer goods and industrial raw materials. Such enterprises were, in addition, urged to avail themselves of foreign currency loans available at the Central Bank at preferential interest rates of 5½–7½ per cent.

August 22. Tariff reductions of about 50 per cent were announced for imports of nine industrial raw material products.

September 27. Exports of certain foodstuffs and fertilizers were prohibited.

October 9. Export controls were imposed on additional commodities. These included chemicals, foodstuffs, and paper products.

October 23. The country of origin requirement for 824 categories of consumer goods imports was removed. These goods could now be imported from any country except mainland China, while previously the restricted sources of origin included Hong Kong, Japan, Macao, Malaysia, and Singapore.

December 7. Import duties on 36 categories of foodstuffs and other basic consumer goods were reduced by 25-50 per cent, for a period of one year.

December 22. The country of origin requirement for another 404 categories of consumer goods imports was removed. These goods could now be imported from any country except mainland China.

Colombia1

Exchange Rate System

On December 17,1948, a par value for the Colombian Peso was established by Colombia with the Fund. However, exchange transactions no longer take place at rates based on that par value. All exchange transactions are effected through the Bank of the Republic (the central bank) or the authorized banks in the official market—the exchange certificate market, in which the rate fluctuates. On January 1, 1974 the average selling rate in the certificate market was Col$24.89 per US$1. The peso equivalent of the Government’s exchange receipts from the export tax on coffee is credited to the Treasury’s Special Exchange Account at the central bank’s accounting rate of Col$23.70 per US$1; the Government purchases exchange for all public debt payments and other expenditures included in the national budget at the same exchange rate. There are also certain other effective exchange rates, some of which result from a system of tax credit certificates granted on export proceeds. The different exchange rates and the types of transaction to which they apply are set out in the Table of Exchange Rates, below. On January 1, 1974, the fluctuating buying rate for proceeds from coffee exports (after taking into account a 20 per cent exchange tax) was Col$19.91 per US$1, and that for most other exports about Col$28.62 per US$1. In principle, all imports are paid for at the certificate market rate, and all payments and receipts in respect of current invisibles and capital also take place at that rate; different effective rates, however, arise from the application of advance payments deposits for purchases of exchange for certain import payments and for many other purposes. A fixed rate of Col$20.00 per US$1 applies to certain petroleum transactions.

The Bank of the Republic stands ready to sell to the public, against payment in pesos at the certificate market selling rate ruling on the date of issue, exchange warrants (títulos canjeables por certificados de cambio or títulos de divisas). These warrants, which are expressed in U.S. dollars, are negotiable, and may also be exchanged, provided that the holder presents an exchange license, for exchange certificates (for the same amount of foreign currency and free of charge); such exchange must take place between 45 and 180 days after the date of issue. Within the period mentioned, warrants may also be sold to the Bank of the Republic for pesos, at the certificate market buying rate ruling on the date of repurchase and subject to a commission of 1 per mill. Warrants bear interest at 7 per cent per annum. Warrants held for more than 180 days but less than two years may be resold to the Bank at the certificate market rate ruling 180 days after issue. They become null and void two years after issue. Foreign payments made with certificate exchange that has been acquired against warrants are exempt from the 100 per cent advance payments deposit that must otherwise be lodged for many types of outward transfers. Between 45 and 180 days after issue, warrants may also be used to purchase exchange for travel purposes.

Administration of Control

All imports and exports require prior registration at the 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 current transactions, when made through credit institutions, do not require prior exchange licenses. The Monetary Board periodically draws up a foreign exchange budget. It also establishes 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. Overall import and export policy is determined by the Foreign Trade Council. The Institute of Foreign Trade, through its Import Board, controls imports that are subject to prior licensing. The National Council for Economic and Social Policy issues directives concerning direct investment in Colombia to the Exchange Office and the National Planning Department, which evaluates new projects. The Exchange Office of the Bank of the Republic 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 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

Payments and receipts related to international transactions are normally effected in U.S. dollars. Settlements with Bulgaria, Eastern Germany, Hungary, Poland, Romania, Spain, and Yugoslavia for commercial transactions must be made through clearing accounts in accordance with the provisions of the relevant bilateral payments agreement.

Payments between Colombia and Argentina, Bolivia, Brazil, Chile, the Dominican Republic, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela are made through accounts maintained within the framework of the LAFTA multilateral clearing system.

Nonresident Accounts

Credit establishments are authorized to receive short-term deposits in foreign currency from physical or juridical persons not resident in Colombia, and 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

There is no prohibited import list. Imports are classified as follows: goods whose import is subject to prior licensing by the Institute of Foreign Trade; and goods that may be imported freely without license although subject to registration. In this last category, there are a global free list applicable to all countries, a National Free List applicable to LAFTA countries only, and a free list applicable to Andean Common Market countries only. Liberalized imports on the global free list at the beginning of 1974 corresponded to about 42 per cent of 1973 reimbursable imports.2 All import registrations by public sector agencies are screened by the Institute of Foreign Trade to determine whether local substitutes are available. Import licenses for certain items are not normally issued; these include arms and habit-forming drugs, certain foodstuffs, certain textiles and garments, jewelry, and a number of other consumer goods.

Prior registration of the import transaction at the Institute of Foreign Trade is required for all imports other than those with an f.o.b. value of less than US$20 (or US$40 for books and pharmaceuticals). The charge for import registration is Col$ 100.00 (in some cases Col$5.00) plus a consular invoice tax of 1 per cent. Advance import deposits (consignaciones) in Colombian currency of at least 35 per cent of the registered amount must be made with an authorized bank before import registration is permitted; the deposit may be used at any time to make import payments.3

The following imports are the main exemptions from prior deposits: nonreimbursable imports (see footnote 2); imports brought into Colombia under special import-export arrangements (Vallejo Plan); all foodstuffs and agricultural inputs; all imports for the military and the police; all imports from Andean Group countries; imports by official entities when financed with foreign credits having a maturity of at least five years; imports from Spain (when financed under the bilateral payments agreement); goods imported by the National Federation of Coffee Growers for its own use; goods exempt by virtue of an international agreement; goods of prime necessity imported by the Institute of Agricultural Marketing (Idema); most imports by universities and other nonprofit-making educational institutions; and books, newspapers, and magazines. The advance import deposit is calculated on the f.o.b. value of the goods, at the average selling rate for exchange certificates for the previous month, as determined by the Ministry of Finance (the “Ministry of Finance exchange rate”). The importer is issued a nonnegotiable noninterest-bearing title (título de divisas) denominated in foreign currency and corresponding to the advance import deposit; during its six-month validity the title may be used to purchase exchange for import payments, free of the 100 per cent advance payments deposit, and at the expiration of this period the title, if unutilized, will be repurchased by the central bank at the original exchange rate. Under these arrangements, the importer is free to put up a deposit in excess of the prescribed minimum of 35 per cent of the registration amount.

A prior exchange license issued by the Exchange Office is required for payments for imports. At least 20 days prior to filing an application for an exchange license, the importer must provide an advance payments deposit (depósito provisional) in pesos equivalent to 100 per cent of the exchange requested, calculated at the Ministry of Finance exchange rate (see above). Exemptions include import payments by the government departments, municipalities, and official agencies, and payments for imports financed with foreign credits extended to the Bank of the Republic, goods for general consumption imported by the Institute of Agricultural Marketing, payments for the crude oil acquired by the national petroleum company (Empresa Colombiana de Petróleos—Ecopetrol) for refining in Colombia, imports financed by U.S. AID credits, import payments made not later than 30 days after customs clearance (including import payments made in advance of shipment), and payments for imports from Spain when settled under the bilateral payments agreement with that country and financed by the Bank of the Republic, and import payments made with titles corresponding to advance import deposits.

Import duties are calculated at the Ministry of Finance exchange rate. In addition to customs duties, there is an ad valorem tax on imports equal to 3 per cent of the c.i.f. value. Of the amounts collected, 50 per cent goes to the Export Promotion Fund, while the remaining 50 per cent goes to the National Coffee Fund. Exempt from this tax are imports by public entities, goods of LAFTA origin, and imports under the Vallejo Plan.

Importers of goods financed by the U.S. AID are required to ship at least 50 per cent of the total volume of shipments on Colombian flag ships.

Payments for Invisibles

Payments for invisibles are made at the exchange certificate rate. In principle, all payments for invisibles are subject to exchange licenses, which are granted according to officially established priorities determined by the Monetary Board; however, the Bank of the Republic may make payments abroad on behalf of credit institutions without prior exchange license, and commercial banks in cities where Exchange Offices are located may sell exchange directly for the purpose of foreign travel and may also transfer without prior approval the monthly allowances of students studying abroad with government support. No advance payments deposit is required for invisibles. Payments for travel abroad are limited to US$40 a person a day, not to exceed US$1,400 a year; this limit may be raised to US$70 a day and US$6,300 a year when the travel may be especially beneficial to the country; transfers to professionals and technicians undertaking courses abroad are generally restricted to US$450 a month for up to J2 months, while for other students the ceilings vary from VS$200 to US$300 a month, depending on the cost of living in the country concerned. The Exchange Office, however, is empowered to grant larger allocations. Foreign tourists who have stayed in Colombia for a period not exceeding three months may, on leaving the country, purchase foreign currency not exceeding US$60 on presentation of their boarding pass.

Colombian nationals and resident foreigners are required to pay a travel tax of Col$500 whenever they leave the country.

Exports and Export Proceeds

Certain exports are prohibited. No export licenses are required. Prior application for registration, however, is required for all exports except crude oil, samples, and Colombian products in noncommercial quantities. If the application meets all legal requirements, approval is stamped on the application form, i.e., registration is granted. When registering an export transaction, the exporter must provide either a personal guarantee in pesos (but without depositing any funds) corresponding to the full export value or a bank guarantee (usually for 30 per cent of the same value), to ensure that the proceeds will be surrendered to the Bank of the Republic. The periods for surrendering export proceeds are as follows: (1) for coffee exports, within 20 days from the date of registration of the export; (2) for banana exports, 50 per cent of the value must be surrendered within 30 days following the registration of the export, and the remaining 50 per cent within 60 days after the registration; and (3) for other exports, generally within 90 days from the same date.

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 incurred by the exporter concerned. All exchange proceeds from exports, except those from the export of crude oil not produced by Ecopetrol, must be surrendered to the Bank of the Republic.

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 (CATs) in an amount corresponding to a specified percentage of the total earnings surrendered, converted at the Ministry of Finance exchange rate. This ratio is 1 per cent for timber, hides and skins, platinum, emeralds, dairy products, and live animals; 13 per cent for many agricultural products; and 15 per cent for all other commodities (including bananas and gold; the 15 per cent is calculated on value added if the exports are manufactured goods). These certificates, which are freely negotiable and are quoted on the stock exchange, are accepted at par by tax offices three or six months after issuance for the payment of income tax, customs duties, and sales taxes. At the end of 1973 certificates just issued were quoted at a discount of about 18 per cent.

The surrender of foreign currency earned by exports is carried out by exchanging the foreign currency for exchange certificates that are negotiable in the bankers’ market. The certificates have a validity of 5 to 10 days, after which they must be surrendered to the central bank at 90 per cent of the lowest certificate rate quoted by the Bank in the preceding week.

The surrender price for exports other than coffee varies with fluctuations in prices in the world market. Coffee exports are subject to the following additional regulations: (1) A minimum surrender price (reintegro) is fixed after deduction for freight and insurance, at US$104.50 per 70-kilogram bag. (2) Exporters pay a tax in foreign exchange at the rate of 20 per cent ad valorem. Of this tax, 4 percentage points are paid to the National Coffee Fund while the remainder provides revenue for the Treasury’s Special Exchange Account, of which the net product forms a contribution to the national budget. The Special Exchange Account is credited at the Bank of the Republic’s accounting rate of Col$23.70 per US$1. (3) Exporters must either surrender in the form of untreated coffee to the National Federation of Coffee Growers and without payment the equivalent of 35 per cent of the volume of excelso coffee that they wish to export (retención) or pay the Federation the peso equivalent. (4) Exports of coffee are subject to an additional tax of 6 per cent ad valorem (pasilla, tax); the tax must be paid, either in kind or in pesos, to the Federation. (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 arroba of 12.5 kilograms. (6) Whenever the domestic support price, net of taxes and freight, exceeds a level corresponding to a spot New York price of US$0.57 a pound, the excess (net of taxes and levies) is shared among producer, Coffee Fund, and local producers’ committees at a ratio of 35:30:35; in that event, the retención is to be increased and the proceeds of the increase are paid to the Coffee Fund and the producers’ committees.

Anticipated export proceeds from coffee may be provisionally surrendered in advance of actual surrender (when prefinanced by foreign buyers) provided that the latter takes place within 60 days of the provisional surrender, at a provisional exchange rate of Col$20.50 per US$1.4 The peso payment to the coffee exporter at the time of actual surrender is based on the certificate market rate on the day of advance surrender.

Proceeds from Invisibles

All exchange receipts from invisibles must be surrendered; they are converted at the certificate market buying rate.

Capital

All inward and outward capital transfers are effected at the certificate market rate.

All foreign investment in Colombia, all new foreign loans, direct lines of foreign credit obtained by nonbank residents,5 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 of the Bank of the Republic.6 Capital imports also require prior approval by the National Planning Department in accordance with directives issued by the National Council for Economic and Social Policy; capital for the petroleum industry or for other mineral exploration in addition requires approval by the Ministry of Mines and Petroleum. Capital registration entitles the investor to export profits and to repatriate capital at the certificate market rate on certain conditions specified in Resolution No. 17 of July 19,1972 by the National Council for Economic and Social Policy. The transfer of profits is limited to 14 per cent of the net capital value in any one year (beginning with profits earned in 1968), except for profits resulting from investments of outstanding importance or involving special risks in view of the circumstances prevailing in the international money market. If in any year the earnings remitted are less than 14 per cent, the balance may be remitted in subsequent years, provided that the additional remittances do not exceed 3 per cent a year. New investments may be granted exemptions from import duty and from advance deposit and import license requirements. Capital invested in the petroleum industry is subject to special rules and to contractual provisions.

Foreign loans contracted by private Colombian individuals or firms are generally subject to a minimum maturity of four years and to an interest rate ceiling of 1½ per cent over the monthly average of the six-month London interbank rate. Such loans normally are permitted only when needed as working capital for manufacturing enterprises or for direct investment in industrial or agricultural activity.

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 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 not only the interest, profits, commissions, and royalties but also the proceeds of the sale or liquidation of the principal investment at the prevailing certificate market rate. Exports of capital by residents are restricted and such exports by private individuals are not normally permitted.

Gold

Physical and juridical persons may trade in Colombia in gold coins for collection purposes only. With this exception, only the Bank of the Republic is entitled to purchase, sell, hold, import, or export gold. The Bank of the Republic purchases the gold produced in the country at US$38 an ounce7 and is empowered to pay up to 50 per cent in foreign currency on presentation by foreign capital mining companies of exchange licenses entitling them to make payments abroad for services, dividends, capital repayments, taxes, etc. The remaining 50 per cent and all payments to the small producers are paid in pesos at the certificate market exchange rate. On selling their gold to the Bank of the Republic, the producers receive tax credit certificates equivalent to 15 per cent of the value of the gold sold. The certificates held by the small producers are bought by the Bank of the Republic in Colombian pesos at their market value. The Bank of the Republic, which exports gold at world market prices, at the same time pays the producer a bonus or premium consisting of the difference between the average quotation in the international market during the previous week and the official price of gold.

The Bank of the Republic makes domestic sales of gold for industrial use either direct or through the Colombian Mining Association at a price equivalent to the average quotation in the free external gold markets during the previous month; this price is translated into pesos at the prevailing selling rate of exchange certificates on the date of sale. Imports and exports of gold are a monopoly of the Bank of the Republic; imports of nonmonetary gold are not normally undertaken.

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 must obtain a license from the Superintendency in order to carry on their operations.

The Bank of the Republic from time to time strikes commemorative gold coins which are legal tender. Residents and nonresidents may freely buy such coins, but export licenses are not normally granted.

Changes during 1973

During the year, the selling rate in the certificate exchange market was gradually depreciated from Col$22.83 per U.S. dollar to Col$24.89 per U.S. dollar. Import restrictions were relaxed significantly and the system of advance import deposits was reorganized. Changes in the system of tax credit certificates for exports resulted in an increased number of effective exchange rates. The restrictions on borrowing abroad were eased.

January 1. By virtue of Decree No. 1841 of September 30, 1972 the tax credit certificate rate for exports of emeralds was lowered from 15 per cent to 12 per cent.

January 1. The suspension of most private borrowing abroad (which had been in effect in November and December 1972) was terminated. Private external loans converted after January 1, 1973 had to conform to the following conditions: (1) The amortization period must not be less than 48 months. (2) The interest rate must not exceed that set by the Monetary Board. (3) Such loans were permitted only if it was shown to the satisfaction of the Exchange Office that they were needed as working capital for manufacturing enterprises or for direct investments in industrial or agricultural activities that were in conformity with the legal purpose of the borrowing enterprise. The extension or refinancing of older loans had to conform to the regulations covering new loans. (Monetary Board Resolution No. 69 of 1972.)

January 1. The exchange applications for payments for imports effected before June 30,1971 had to be accompanied by a deposit corresponding to 150 per cent of the exchange value. Two thirds could be used as payment for the foreign exchange, while the remainder would be repaid after 90 days. As from February 1, 1973 the deposit requirement would increase to 200 per cent, of which one half could be used to pay for the exchange, and the other half would be repaid after 90 days. The exchange applications in question would be exempt from the provisional 95 per cent deposit requirement. (Monetary Board Resolution No. 75 of 1972.)

January 15. By virtue of Resolution No. 1 of October 3, 1972 of the Royalty Commission, all remittances abroad relating to film distribution contracts required the prior approval of the Royalty Commission.

January 17. The exchange rate for the actual surrender of export proceeds from commodities other than coffee, where advance surrender had taken place, was changed from the certificate market rate on the day of actual surrender to the certificate market rate on the day of advance surrender. (Monetary Board Resolution No. 2.)

January 24. Exports of rice were suspended.

January 31. The coffee retention quota was raised from the equivalent of 30 per cent to 31.64 per cent of coffee exports. (Decree No. 152.)

January 31. The minimum surrender price per 70-kilogram bag of coffee was raised from US$91.20 to US$102. (Monetary Board Resolution No. 3.)

February 13. Following the announcement that the U.S. dollar was being devalued, the certificate rate of exchange was maintained unchanged.

February 14. The maximum term for import credits granted by domestic credit institutions was increased from 180 days to 15 months for imports under the Vallejo Plan. (Monetary Board Resolution No. 4.)

February 20. Incomex Resolution No. 005 transferred some 200 tariff items to the free import list. The transferred items represented about Col$100 million on an annual basis and consisted mainly of machinery and industrial inputs. The coverage of the free list thus was increased to about 43 per cent of reimbursable imports in 1972.

February 21. General Circular No. 10 of the Exchange Office clarified that, contrary to General Circular No. 25 of July 5, 1972, direct suppliers’ credit was not subject to the registration and maximum maturity requirements applicable to direct lines of credit.

Table of Exchange Rates (as at January 1, 1974)
(pesos per U.S. dollar)
BuyingSelling
19.91 (Certificate Market Rate less 20% Exchange Tax, Fluctuating Rate)
Coffee exports.8
20.00 (Fixed Rate)

Purchases of crude oil from foreign-owned companies in Colombia for domestic refining.13
23.70 (Accounting Rate of Bank of the Republic) Conversion of Government’s receipts from exchange tax on coffee exports.23.70 (Accounting Rate of Bank of the Republic) Government’s purchases of exchange for servicing of public debt, diplomatic expenses, official travel, etc.
24.89 (Certificate Market Rate, Fluctuating Rate) Net proceeds from exports of crude oil and petroleum derivatives.9 Exports from free ports. All receipts from invisibles and capital transfers.24.89 (Certificate Manket Rate, Fluctuating Rate) All imports. All other transactions.14
25.14 (Certificate Market Rate plus Tax Credit Certificates for 1% of Export Value Converted at Average Certificate Market Rate of Previous Month, Fluctuating Rate)
Exports of timber, hides and skins, platinum, emeralds, dairy products, and live animals.10
28.13 (Certificate Market Rate plus Tax Credit Certificates for 13% of Export Value Converted at Average Certificate Market Rate of Previous Month, Fluctuating Rate)
Specified agricultural exports.10

28.62 (Certificate Market Rate plus Tax Credit Certificates for 15% of Export Value Converted at Average Certificate Market Rate of Previous Month, Fluctuating Rate)
All other exports.10,11,12

February 28. Monetary Board Resolution No. 9 reduced to 10 per cent all advance deposit rates in excess of 10 per cent, with effect from March 6, 1973.

March 7. Monetary Board Resolution No. 10 increased the minimum surrender price for coffee exports to US$108 a bag.

March 8. Decree No. 356 increased the coffee retention quota to the equivalent of 37.16 per cent of coffee exports.

March 21. Monetary Board Resolution No. 13 exempted all public sector agencies from the special advance import deposits (for imports effected before June 30, 1971) that had been imposed under Resolution No. 75 of 1972 (see January 1, above).

March 21. Monetary Board Resolution No. 14 set a new, uniform interest rate ceiling of 10 per cent on private external loans, on special direct lines of credit for the financing of imports of capital goods and intermediate goods needed for the manufacture of durable consumer goods, and on direct lines of credit for export financing. (The previous maximum interest rates for these types of external credit covered by Monetary Board Resolution No. 61 of 1972 had been 8-8.5 per cent, depending on maturity.) The interest rate ceiling on direct lines of credit granted by foreign banks for other import financing was increased from 6.5 per cent to 8.5 per cent.

March 21. Law No. 8 ratified Colombia’s signature of the Andean Subregional Agreement of May 26, 1969 (Cartagena Agreement).

March 29. Law No. 5 reduced the tax credit certificate rate for agricultural exports from 15 per cent to 13 per cent (see also August 9, below).

March 29. Decree No. 498 lowered the coffee retention quota to the equivalent of 35 per cent of coffee, exports.

April 5. The Government announced that meat exports in 1973 would be reduced by 50 per cent.

May 11. Monetary Board Resolution No. 21 revoked Resolutions Nos. 70 and 75 of 1972 and introduced an additional type of advance import deposit (consignación). In order to obtain exchange licenses for import payments, the importer had to lodge a local currency deposit with the central bank equivalent to 10 per cent of the total value of the import registration, converted at the Ministry of Finance rate, before registration. The central bank would credit the amount to a special account in the name of the importer, and in exchange for the deposit issue him a certificate denominated in foreign currency (calculated at the exchange rate in effect on the day of import registration). Such certificates could be used at any time by the importer for partial payment of the import, including advance payments, downpayments, or payments after customs clearance; for these payments, the advance payment deposit of 95 per cent of the value was not required.

The importer could resell the certificates to the central bank, at the exchange rate prevailing on the day of resale, if Incomex had accepted the registration, or at the exchange rate used to calculate the deposit, if Incomex had rejected the registration.

Exempt from the new deposit requirement were all nonreimbursable imports, as well as such reimbursable imports of foodstuffs and raw materials for agriculture as might be determined by the Executive Council for External Commerce. Imports under the Vallejo Plan, however, were subject to the new deposits. Whereas the old import deposit (depósito previo) could not be released until customs clearance, the new deposit (consignación) could be used at any time to make import payments.

May 11. Monetary Board Resolution No. 22 established that with effect from May 14, 1973 the Bank of the Republic and authorized credit institutions would no longer convert the foreign exchange proceeds from private external loans into pesos unless they had been approved by the Exchange Office prior to May 11. The Exchange Office was authorized to grant exchange licenses for the full or partial advance repayment of external private loans registered under the systems in force prior to Monetary Board Resolution No. 69 of 1972.

May 14. Incomex Resolution No. 015 exempted certain fertilizers and certain foodstuffs from the 10 per cent advance import deposit when imported by Idema.

May 14. Incomex Resolution No. 016 required certificates issued by Incomex for exports of specified agricultural commodities.

May 16. Monetary Board Resolution No. 24 established that the 10 per cent advance import deposit (Resolution No. 21) was to be considered as a minimum, and that the importer had the option of making a larger deposit.

May 18. Incomex Resolution No. 018 transferred several food items from the prohibited import list to the prior approval list.

May 18. Incomex Resolution No. 019 exempted numerous food and fertilizer items from the 10 per cent advance import deposit requirement.

May 18. Incomex Resolution No. 020 transferred some 420 tariff items from the prior approval list to the free import list.

May 30. Monetary Board Resolution No. 26 changed the exchange rate for advance surrender of export proceeds from the Ministry of Finance rate on the date of advance surrender to the certificate market rate on that day. Thus the rate for advance surrender was made equal to the rate for final surrender.

June 13. Monetary Board Resolution No. 29 increased the travel allowance from US$30 a person a day, subject to a limit of US$1,050 a person a year, to US$40 a person a day with a limit of US$1,400 a person a year. The advance deposit requirement of 50 per cent for purchases of travel exchange was abolished.

June 14. Incomex Resolution No. 025 transferred a large number of tariff items from the list of prohibited imports to the prior approval list.

June 14. Decree No. 1121 terminated the advance import deposit requirements in force prior to those of Monetary Board Resolution No. 21. At the same time, Monetary Board Resolution No. 30 incorporated the suspended rates of advance deposit into the new advance import deposit system of Resolution No. 21.

The new minimum advance import deposit rates were as follows: (1) for imports which had been exempted from the old advance import deposit requirement, 10 per cent of the total value of the import registration; (2) for imports previously subject to a 1 per cent deposit requirement, 11 per cent; (3) imports which had been subject to an advance deposit of 5 per cent were subject to a rate of 16 per cent; and (4) imports which had been subject to the highest rate, 10 per cent, were subject to a rate of 21 per cent.

July 4. Monetary Board Resolution No. 31 established an interest rate ceiling of 10.5 per cent for (1) external loans obtained by banks and financial corporations (previously 8–8.5 per cent, depending on maturity); (2) direct external lines of credit for import financing (previously 8.5 per cent) as well as special direct lines of credits (previously 10 per cent); and (3) private external loans (previously 10 per cent). The ceiling under (3) would also apply to those private external loans registered prior to Monetary Board Resolution No. 22 of May 11, 1973 under original contracts calling for periodic interest rate adjustments.

July 6. Monetary Board Resolution No. 34 exempted books and all imports under the Vallejo Plan from advance import deposits. Exchange licenses for payments for imports of machinery and equipment by public work contractors refinanced by the Fondo Vial Nacional were exempted from the 95 per cent advance payment deposit.

July 10. Incomex Resolution No. 029 introduced restrictions on exports of iron, steel, and their by-products.

July 25. Monetary Board Resolution No. 38 changed the interest rate ceiling established by Resolution No. 31 of July 4 from a flat 10.5 per cent per annum to 1.5 percentage points above the six-month London interbank rate.

August 1. Monetary Board Resolution No. 41 exempted imports of equipment for the military forces and the police from advance import deposits. Also exempted were imports in connection with the international fair to be held in Bogotá in July 1974.

August 9. Decree No. 1561 provided that, in accordance with Law No. 5/73, Article 21, the Bank of the Republic would withhold 2 percentage points from the tax credit certificates issued for specified agricultural products. The resulting rate of tax credit certificate was 13 per cent.

August 10. Incomex Resolution No. 883 required the prior approval of the Natural Resource Development Institute (Inderena) for imports and exports of live animals.

August 14. Exports of long-fiber cotton were suspended.

August 14. Monetary Board Resolution No. 42 abolished the system of advance surrender of export proceeds for minor exports, i.e., all exports other than coffee.

August 14. Monetary Board Resolution No. 43 increased the advance payment deposit from 95 per cent to 100 per cent of the amount of the exchange license. The advance payment deposit ceased to be required for (1) import payments in advance of shipment; (2) import payments made within 15 calendar days of customs clearance; and (3) goods imported with financing from a special credit facility in the central bank for machinery and equipment for manufacturing industries.

August 14. Incomex Resolution No. 034 exempted specified chemicals, fertilizers, and tractors from advance import deposits.

August 14. Incomex Resolution No. 037 eliminated the prohibited import list transferring all items on this list to the prior licensing list. The Resolution also contained a reissue of the import free list.

August 14. Incomex Resolution No. 038 exempted 138 tariff items from advance import deposits.

August 29. With effect from September 3, Monetary Board Resolution No. 46 increased the minimum advance import deposit rates from 10, 11, 16, and 21 per cent to 19, 20, 25, and 30 per cent.

August 29. Monetary Board Resolution No. 47 amended the regulations applying to private external loans for the purpose of financing the construction of new factories and other projects of economic and social interest (as regulated in Article 131 of Decree No. 444 of 1967). Prior to contracting a loan to be used in whole or in part for imports, the debtor was required to obtain from Incomex an import registration and import license (or global import license) specifying that the import transaction was nonreimbursable. The Exchange Office could not register such loans if they were contracted to pay for imports covered by licenses for reimbursable imports that had been issued before August 29. Loans of these types (i.e., in conformity with Article 131 of Decree No. 444 of 1967) intended in part for the payment of technical services abroad could only be registered by the Exchange Office when that Office had previously authorized both the service contract and the payment.

The interest ceiling for credits dealt with in this Resolution was the same as that for other external credit operations. Suppliers’ credits could not be registered under the Resolution.

September 4. Exports of sugar were suspended.

September 4. Incomex Resolution No. 039 exempted aircraft from advance import deposits.

September 5. Monetary Board Resolution No. 49 increased by Col$ 1,000 million the central bank’s rediscount facility for Proexpo.

September 15. Decree No. 1897 approved the regulations governing multinational firms and foreign capital set out in Decision No. 46 of the Andean Common Market.

September 15. Decree No. 1898 put into effect Decision No. 47 of the Andean Common Market relating to the minimum percentage of state participation in mixed enterprises.

September 15. Decree No. 1899 put into effect Decision No. 48 of the Andean Common Market relating to investments realized by the Andean Development Corporation in member countries.

September 15. Decree No. 1900 put into effect the regulations dealing with foreign capital, licenses, patents, and royalties set out in Decisions Nos. 24, 37, and 37A of the Andean Common Market.

September 18. Monetary Board Resolution No. 52 reduced the minimum surrender price for coffee exports to US$104.50 a bag.

September 29. Decree No. 1996 modified the valuation basis for the tax credit certificates granted on specified exports of manufactured products (under the Vallejo Plan) from total export value to value added, with effect from January 1, 1974. The same Decree empowered Idema to act as sole exporter of any agricultural product.

September 29. Decree No. 1997 increased the validity of tax credit certificates from three or six months to eleven months, with effect from October 1, 1973. The Decree was declared unconstitutional by the Supreme Court.

September 29. Decree No. 1998 reduced the rates of tax credit certificates on exports of timber, hides and skins, platinum, emeralds, dairy products, and live animals to 1 per cent, with effect from January 1, 1974.

October 3. Monetary Board Resolution No. 56 changed the exchange rate for the advance surrender of proceeds from coffee exports from Col$19 per US$1 to Col$20.5 per US$1.

October 3. Monetary Board Resolution No. 59 authorized the Exchange Office to issue exchange licenses for the advance repayment of the principal on direct loans to individuals registered before the issuance of Monetary Board Resolution No. 22 of May 11, 1973.

October 3. The advance import deposit rates were increased to a uniform minimum rate of 35 per cent, to be calculated at the Ministry of Finance exchange rate. Exempt from import deposit requirements were all nonreimbursable imports and all food items, agricultural inputs, books, imports under the Vallejo Plan, imports for the military and the police, imports by official entities obtained with foreign credit of at least five years, and goods for the international fair in July 1974; these exemptions were additional to those in Monetary Board Resolution No. 43. (Monetary Board Resolution No. 60.)

October 31. The exemption from advance import deposit requirements was extended to all imports from countries of the Andean Common Market. The exemption from the 100 per cent advance payments deposit was extended to all goods for which payments were made within 30 days from customs clearance. (Monetary Board Resolution No. 65.)

November 20. Incomex Resolution No. 056 established a list of permitted exports, a list of prohibited exports (including live cattle, sheep, and pigs, mutton and pork, poultry, bacon, milk, eggs, certain types of grains, animal and vegetable oils, refined sugar, cacao, hides and skins, timber, specified iron and steel products, zinc, tin, and lead), and a list of exports requiring prior approval (including sugarcane, raw sugar, specified milling products, sulphur, specified chemicals, plastic tubes, and paper products).

December 5. Monetary Board Resolution No. 72 modified the advance import deposit system introduced by Resolution No. 21. The minimum deposit rate was maintained at 35 per cent, but the deposit would now be calculated at the certificate market rate, and the titles issued to importers could henceforth also be used, up to 50 per cent of the amount of foreign exchange taken up, to make payments for imports other than those to which the registration and the certificate were related. The deposits had to be lodged with commercial banks, which were to transfer them to the central bank within a day. The titles were nonnegotiable and noninterest-bearing and their validity was limited to six months; any unused titles could at the end of their validity be resold to the central bank at the original rate of exchange. Payments made with titles remained exempt from the advance payments deposit.

December 5. Monetary Board Resolution No. 72 added imports from Spain financed under the bilateral payments agreement with that country to the exemptions from advance payments deposits and advance import deposits listed in Monetary Board Resolutions Nos. 43 and 60.

December 17. Monetary Board Resolution No. 75 created a line of credit of US$30 million to finance imports from Eastern European countries with which bilateral trade agreements were in force.

December 17. Monetary Board Resolution No. 76 changed the accounting exchange rate of the central bank from Col$22.00 per US$1 to Col$23.70 per US$1, to be applicable for the first time to the balance sheet for December 1973.

December 20. Applications for nonreimbursable imports by foreign mining and petroleum companies required prior approval by the Ministry of Mines and Petroleum.

Note.—The following change took place early in 1974:

January 1. By virtue of Decree No. 1998 of September 29, 1973 the rates of tax credit certificates on exports of timber, hides and skins, platinum, emeralds, dairy products, and live animals were reduced to 1 per cent. By Decree No. 1996 of the same date, the valuation basis for exports under the Vallejo Plan was changed from total export value to value added.

People’s Republic of the Congo

Exchange Rate System

No par value for the currency of the People’s Republic of the Congo has been established with the Fund. The unit of currency is the CFA Franc,1 which is officially maintained at the rate of CFAF 1 = 0.02 French franc. Exchange transactions in French francs, the intervention currency, between the Banque des Etats de l’Afrique Centrale (BEAC) and commercial banks take place at the rate of CFAF 1 = F 0.02.

Exchange transactions relating to foreign countries other than France (and its Overseas Departments and Territories except the French Territory of the Afars and the Issas), Monaco, and the Operations Account countries of the French Franc Area, take place in a dual exchange market, at rates based on the fixed rate for the French franc and the Paris exchange rate for the foreign currency concerned in either the official exchange market or the financial franc market. Settlements eligible for the official exchange market are payments and receipts in respect of imports, exports, and most other current transactions, as well as all current payments by or in favor of domestic and foreign public authorities and public bodies. All other settlements with foreign countries, as well as transactions in banknotes of foreign countries and banknotes issued by the BEAC, take place through the financial franc market at freely fluctuating rates. The principal current payments and receipts channeled through the financial franc market are those relating to travel expenses, capital earnings, and workers’ remittances. Exchange rates for certain European currencies in the official market are based on par values and central rates; the effective parity relationship for the U.S. dollar in this market is not confined within any announced margins.

Payments to the following countries, although subject to declaration, are unrestricted: (1) France (as defined above) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Cameroon, the Central African Republic, Chad, Dahomey, Gabon, Ivory Coast, Mali, Niger, Senegal, Togo, and Upper Volta). Settlements and investment transactions with all foreign countries, however, are subject to control. Foreign countries are defined as all countries outside the People’s Republic of the Congo.

Payments to France (as defined above), Monaco, and the Operations Account countries (as well as the purchase of their banknotes and travelers checks) are subject to a commission of 1 per cent, subject to a minimum of CFAF 100; exempt are payments of the State, the Postal Administration, and the BEAC, the salaries of Congolese diplomats abroad, the expenditures of official missions abroad, and the scholarships of persons studying or training abroad. Most payments to other foreign countries and credits to Foreign Accounts in Francs are subject to a commission of 1 per cent or, for foreign exchange purchased by Diamond Purchase Offices, 0.50 per cent; this commission also is subject to a minimum of CFAF 100.

Administration of Control

The Office of External Financial Relations in the Ministry of Finance and the Budget supervises borrowing and lending abroad, the issuing, advertising, or offering for sale of foreign securities in Congo, and inward and outward direct investment. Exchange control is administered by the Minister of Finance and the Budget, who has delegated his approval authority to the Office of External Financial Relations and the authorized banks. All exchange transactions must be effected through authorized banks or the Postal Administration. Import and export licenses are issued by the Foreign Trade Office in the Ministry of Economic Affairs, except those for gold, which are granted by the Office of External Financial Relations.

Prescription of Currency

The People’s Republic of the Congo is an Operations Account country of the French Franc Area, since the BEAC maintains an Operations Account with the French Treasury; settlements with France (as defined above), Monaco, and the other Operations Account countries of the French Franc Area 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 the People’s Republic of China are made through special accounts established under a bilateral payments agreement.2 Settlements with all other countries are usually made in any of the currencies of those countries or in French francs through Foreign or Financial Accounts in Francs. All payments to Portugal require the prior approval of the Ministry of Finance and the Budget. All settlements between Congo and Rhodesia are prohibited.

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. The crediting of BEAC banknotes to Financial Accounts in Francs is permitted when they have been mailed direct to the BEAC agency in Brazzaville by the foreign correspondents of authorized banks.

Imports and Import Payments

Imports of virtually all commodities from countries in the French Franc Area and from EEC countries other than France may be made freely. All imports of Portuguese or Rhodesian origin are prohibited. Imports from all non-EEC countries outside the French Franc Area are subject to licensing in accordance with an annual import program; the program also includes indicative quotas for a few commodities from EEC countries other than France. This program is determined by a joint French-Congolese Committee. The import program does not include petroleum imports, for which a joint quota is set for the countries of the Central African Customs and Economic Union (UDEACX Also outside the program are imports for the Goverment under foreign aid and bilateral payments agreements and imports made by the Office National du Commerce (Ofnacom). The quotas for non-EEC countries may be used to import goods originating in any country outside the French Franc Area. Licenses for liberalized commodities originating in EEC countries other than France are issued automatically.

Imports from non-UDEAC countries of certain goods are not permitted unless the importer also buys a certain quantity of the local product (jumelage).

Ofnacom has a monopoly over certain imports, including hardware, rice, and salted fish from all sources, certain cotton piece goods from Japan, and certain other textiles from the People’s Republic of China.

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 require the visa of the Foreign Trade Bureau and that of the Office of External Financial Relations. The approved 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 other Operations Account countries in the French Franc Area are permitted freely provided they have been declared and are made through an authorized intermediary; those to other foreign 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. Resident tourists traveling to foreign countries other than France (as defined above), Monaco, Operations Account countries of the French Franc Area, 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 ten) for any number of trips a year; any foreign exchange remaining after return to Congo in excess of CFAF 5,000 must be surrendered.

For business travel to such foreign countries, 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 of foreign exchange for business travel 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 Zairian banknotes. The transfer of the entire net salary of a foreigner working in Congo is permitted upon presentation of the appropriate pay voucher, provided that the transfer takes place within three months of the pay period. Residents traveling to France (as defined above), Monaco, or an Operations Account country may take out CFAF 25,000 in BEAC banknotes. Resident and nonresident travelers going to foreign countries other than France (as defined above), Monaco, Operations Account countries, or Zaïre may freely take out up to a maximum of CFAF 10,000 in BEAC banknotes, French banknotes, and banknotes issued by any other institute of issue maintaining an Operations Account with the French Treasury.

Exports and Export Proceeds

Exports to Rhodesia are prohibited. 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, or ONCPA) or other state enterprises having an export monopoly. All other exports require individual licenses.

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 banknotes and coins 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 banknotes and coins (except gold coins).

Capital

All capital movements between Congo and Rhodesia are prohibited. Movements of funds between Congo and France (as defined above), Monaco, and other Operations Account countries in the French Franc Area are free, although subject to declaration; most investment operations and borrowing and lending between Congo and these countries are subject to authorization. Capital transfers to all other countries require exchange control approval and are restricted, but capital receipts from such countries generally are permitted freely. All foreign securities, foreign currency, and titles embodying claims on foreign countries or nonresidents that are held in Congo by residents or nonresidents must be deposited with authorized banks in Congo.

Special controls (additional to any exchange control requirements that may be applicable) are maintained over borrowing and lending abroad, over inward and outward direct investment, and over the issuing, advertising, and offering for sale of foreign securities in Congo; these controls relate to the transactions themselves, not to payments or receipts.

Direct investments abroad3 require the prior approval of the Minister of Finance and the Budget; the full or partial liquidation of such investments also requires the prior approval of the Minister. Foreign direct investments in the Congo4 require the prior approval by the Minister of Finance, unless they involve the creation of a mixed economy enterprise. The full or partial liquidation of direct investments in 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 Congo, 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.

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

Borrowing by residents from nonresidents requires prior authorization by the Minister of Finance and the Budget. The following are, however, exempt from this authorization: (1) loans constituting a direct investment in Congo for which prior approval has been obtained as indicated above; (2) loans contracted by registered banks; and (3) loans other than those mentioned above, when the total amount outstanding of these loans does not exceed CFAF 10 million for any one borrower. The contracting of loans that are free of authorization, and each repayment thereon, must be reported to the Office of External Financial Relations within 20 days of the operation.

Lending by residents to nonresidents is subject to exchange control. In addition, lending to nonresidents requires prior authorization by the Minister of Finance and the Budget. The following are, however, exempt from this authorization: (1) loans granted by registered banks; (2) other loans when the total amount outstanding of these loans does not exceed CFAF 5 million for any one lender; and (3) loans whose interest rate does not exceed 5 per cent 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 Office of External Financial Relations within 20 days of the operation.5

Under the Investment Code of April 26, 1973 (Ordinance No. 11/73), 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 in Congo gold in the form of coins, art objects, or jewelry, but they require the prior authorization of the Minister of Finance and the Budget to hold gold in any other form or to import or export gold in any form from or to any other country. 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. The agency Sogarem has a monopoly over the export of newly mined gold.

Changes during 1973

January 3. Order No. 0003 established the commissions for 1973 on transfers to countries not linked to the French Treasury by an Operations Account at 1 per cent (except for transfers of diplomatic officials’ salaries, students’ scholarships, and payments for the account of the Congolese Treasury) and 0.50 per cent (for foreign currency purchased by Diamond Purchase Offices to the debit of their Foreign Accounts in Francs).

February 13. Following the announcement that the U.S. dollar was being devalued, the exchange rate of CFAF 1 = F 0.02 was maintained; the effective parity relationship for the U.S. dollar, previously CFAF 255.785 = US$1, became CFAF 230.207 = US$1.

February 28. Order No. 0866 introduced certain additional exemptions from the 1 per cent transfer commission. They included exemptions for all transfers of the Postal Administration and the BEAC.

March 8. The regulations concerning the import and export of domestic and foreign means of payment were modified by Order No. 1095.

March 19. With the entry into effect of new margins arrangements between the French franc and certain other European currencies, and the maintenance of the exchange rate of CFAF 1 = F 0.02, the CFA franc began to appreciate in terms of the U.S. dollar.

April 2. The Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC) was replaced by the Banque des Etats de l’Afrique Centrale (BEAC).

April 26. Ordinance No. 11/73 introduced a new Investment Code. Law No. 39/61, as modified by Law No. 45/62, was revoked.

July. The Malagasy Republic and Mauritania ceased to be Operations Account countries. Consequently, the exchange control regulations and transfer commissions applicable to the French Franc Area countries ceased to be applicable to these two countries.

August 25. The People’s Republic of the Congo ceased to invoke Article XXXV of the GATT in respect of Japan.

Costa Rica

Exchange Rate System

The par value agreed with the International Monetary Fund on February 1, 1965 is 0.134139 gram of fine gold per Costa Rican Colón. No transactions take place at the par value.1 There is a dual exchange market. The Central Bank buys and sells exchange in the official market at fixed rates of Ȼ 6.62 and Ȼ 6.68, respectively, per US$1. The official market rates apply to export proceeds from bananas produced by foreign-owned companies, coffee, sugar, and certain other traditional products; listed imports classified as essential;2 receipts from and payments for specified invisibles; most capital receipts and debt service payments of the public sector; and registered private capital inflows and their service payments. Official transactions with CACM countries, when settled through the Cámara de Compensación Centroamericana (a clearinghouse established by the central banks of Central America to foster the process of economic integration of their countries) are effected at a uniform buying and selling rate of Ȼ 6.625 per US$1; transactions with these countries that are not eligible for the official market and are settled in non-CACM currencies may be effected at the free market rate.

Two mixing rates of Ȼ 7.5825 and Ȼ 7.58 per US$1 apply to nontraditional exports to the CACM and to the rest of the world, respectively; 50 per cent of such exports is sold in the official market and 50 per cent in the free market. A mixing rate of Ȼ 7.3688 per US$1 is applicable to proceeds from bananas exported by independent local growers; 39 per cent of their proceeds are sold in the free market and 61 per cent in the official market (certain additional mixing rates for exports are listed below in the section on Exports and Export Proceeds). All other sales and purchases of foreign exchange may be made freely in the free market in which the exchange rates also are fixed; on December 31, 1973, the buying and selling rates for the U.S. dollar in this market were Ȼ 8.54 and Ȼ 8.60, respectively.

Further mixing rates may arise from the following arrangements: (1) coffee exporters incurring promotional expenditures abroad may sell up to 5 per cent of their export proceeds in the free market; (2) re-export industries may sell in the free market 50 per cent of the value added which is incorporated in their exports; and (3) transfers at the official rate of interest and dividends on registered capital may be limited to a certain percentage of the registered amount, while amounts in excess of that percentage can be transferred through the free market.

The Central Bank stands ready in principle to buy U.S. dollars forward at 90 days, in the official market only, at Ȼ 6.50415 per US$1; however, no transactions have taken place for some time, as a result primarily of the existence of the dual exchange market.

Costa Rica formally accepted the obligations of Artiele VIII, Sections 2, 3, and 4, of the Fund Agreement, as from February 1, 1965.

Administration of Control

The exchange controls are operated by the Central Bank of Costa Rica. Purchases and sales of official market exchange are made through the Central Bank or through commercial banks acting as its agents. The free exchange market is conducted by commercial banks, acting as agents of the Central Bank, and licensed exchange houses. Commercial banks deal in this market only as agents of the Central Bank, for its account and at its risk. Other residents do not require a license from the Central Bank to effect transactions in the free market.

Prescription of Currency

In practice, nearly all exchange transactions in Costa Rica are expressed in U.S. dollars. Payments to Poland may be made through special U.S. dollar accounts established under a payments agreement with that country. Payments to El Salvador, Guatemala, Honduras, and Nicaragua in respect of trade and trade-related invisibles, if eligible for the official rate, may be made in Costa Rican colones through the Cámara de Compensación Centroamericana; the documents must be expressed in colones and require approval by the Central Bank. The central banks of these four countries may also convert Costa Rican notes and coins, up to the equivalent of US$10,000 a month for Nicaragua and up to the equivalent of US$5,000 a month for each of the other countries. Payments to Mexico in respect of trade and invisibles may also be made in Costa Rican colones through the clearinghouse, in accordance with the Agreement on Clearing and Reciprocal Credits between the Bank of Mexico and the member banks of the clearinghouse; the documents must be expressed in colones and require the prior approval of the Central Bank. There are no special arrangements with Mexico for the conversion of Costa Rican notes and coins.

Imports and Import Payments

There is no import licensing and all import payments may be made freely. However, certain imports from CACM countries require prior authorization, and imports made on a barter basis require a barter license (licencia de trueque) issued by the Ministry of Industry and Commerce. Imports from South Africa are prohibited in principle.

Exchange at the official rate is granted for the c.i.f. value of specified essential imports, regardless of origin; for all imports registered at the Central Bank for the purchase of official exchange before October 23,1972 (including goods of Central American origin); for goods imported prior to June 19,1971; for commitments undertaken prior to June 19,1971 with bona fide financial institutions abroad; and for payments of letters of credit issued prior to June 19, 1971 for goods not shipped by that date. Capital goods are eligible for official exchange only if certain external financing requirements are met. All other imports pass through the free market. However, some goods that are otherwise payable at the free market rate are eligible for the official rate when imported from CACM countries or Panama.

To be eligible for foreign exchange from the official market, imports must be registered with the Central Bank within 60 days of arrival at a national port. This registration serves as an application for official exchange. In principle, the Central Bank grants authorization to purchase foreign exchange at the time of registration; delays may occur, however, except in respect of imports from CACM countries.

In addition to any applicable customs duty, there are levied on imports (1) a stamp tax of 3 per cent of the customs duty on commodities not covered by the common external tariff of the CACM; (2) a sales tax of 5 per cent ad valorem, from which certain essential items are exempt; and (3) a selective consumption tax with a range of 10-50 per cent ad valorem on imports from outside the CACM and at lower rates on CACM imports. There also exists a small consular tax on certain imports. Furthermore, most imports originating outside the CACM are subject to an import surcharge of 30 per cent of the applicable import duty.

Payments for Invisibles

Payments for invisibles may be made freely through the free market. Exchange at the official rate is only granted for freight and insurance on imports effected at the official rate; for dividends and interest on registered foreign capital; indispensable payments of the Central Government; normal expenses in foreign currency on export transactions settled through the official market; student remittances; royalties; and insurance and reinsurance premiums, provided a commitment is given that any receipts from indemnities will be sold in the official market. Allocations of exchange at the official rate for interest and dividends are, in principle, made on the basis of 10 per cent of the registered capital, while the balance may be settled through the free market; in practice, allocations are granted on the merits of the case. Taxes of 15 per cent and 10 per cent, respectively, are levied on remittances abroad of dividends and interest; interest on certain borrowing abroad (e.g., from government banks) is exempt.

Residents traveling abroad by air must pay a travel tax of 5 per cent of the value of the tickets plus Ȼ 20 a trip; government officials, diplomats, minors, and students are exempt.

Exports and Export Proceeds

The Central Bank supervises exports to ensure that exchange proceeds are surrendered as prescribed. Surrender must take place in the official exchange market, with the following exceptions: the exchange proceeds may be sold in the free market up to 50 per cent for nontraditional exports; up to 39 per cent for bananas produced by independent local growers; up to 5 per cent for coffee, if the coffee exporter incurs promotional expenditures abroad; up to 50 per cent of value added for exports of re-export industries; and up to 50 per cent of value added for exports outside the CACM of products incorporating inputs financed at the official rate. Some of these mixing rates are applicable only to exports to countries outside Central America. Furthermore, nontraditional exports are entitled to tax credit certificates (CATs) corresponding to 15 per cent of the f.o.b. value.

Licenses from the Central Bank are necessary for the exportation of merchandise. 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 scraps of nonferrous base metals (from the Ministry of Industry and Commerce); sugar (from the Ministry of Industry and Commerce, so that shipments under the sugar quotas may be controlled); lumber and root of ipecacuanha (from the Institute for Lands and Colonization); beans, rice, potatoes, onions, cotton, meat, and purebred and other cattle (from the National Council of Production); airplanes (from the Civil Aviation Board); Indian art objects made of gold, stone, or clay (from the National Museum); tobacco (from the Tobacco Defense Board); certain livestock and animals and plants of forest origin (from the Ministry of Agriculture and Livestock); and coffee (from the Coffee Office); in addition, when there is a lien on the 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 in principle.

The exchange proceeds of all exports must be surrendered within 60 days of exportation or, if the goods were sold on credit, upon expiry of the term of the credit. Foreign-owned banana companies that have contracts with the Government must surrender their net export proceeds, which are calculated by deducting from their gross export proceeds (1) profits obtained during the year from their transactions in Costa Rica; (2) the allowance for depreciation on their investment in Costa Rica that is acceptable to the U.S. Internal Revenue Service; (3) the export tax on bananas payable in foreign currency; and (4) the cost of imports made during the year that were necessary for their normal business in Costa Rica. There are export taxes on bananas, sugar, and coffee.

Proceeds from Invisibles

Exchange receipts from invisibles must be surrendered at the official rate within 60 days of accrual, with the exception of the following, which may be retained or sold in the free market: diplomatic and similar salaries and expenses; tourist expenditure; family remittances and other personal remittances; settlements on insurance claims, provided that the premium was paid through the free market; and commissions received by agents of foreign firms.

Capital

Inward and outward transfers of capital may be made freely through the free market by residents and nonresidents. The Charter of the Central Bank provides that foreign capital entering through the official market may be registered with the Central Bank in order to be ensured access to that market for the transfer of interest, profits, and amortization. Private capital outflows may be effected through the official market only if so registered. Incoming capital may be sold freely in the free market if it is foreign capital that did not elect registration and surrender at the official rate or if it is national capital returning from abroad. The only outward transfers of capital permitted to be made at the official rate are repayments on certain private and public debts and certain amortization on registered foreign capital. Registration is mandatory only for public sector borrowing abroad and for government-guaranteed borrowing abroad.

Gold

The Central Bank may purchase, sell, or hold gold coins or bars as part of the nation’s monetary reserves in accordance with regulations established by its own Board. Private physical and juridical persons may negotiate freely, at home or abroad, domestically produced gold (except national archaeological treasures), provided there is no infraction of international agreements. They may also hold gold in any form in Costa Rica. The Central Bank does not supply gold to artistic or professional users.

Changes during 1973

During the year, on a number of occasions, payments for selected imports from the CACM countries and Panama were shifted back from the free market to the official market. Also, there were several additions to the List of Essential Import Goods; these involved basic commodities such as industrial raw materials, irrespective of origin.

January 26. It was decided to transfer foreign exchange from the free market to the official market in February 1973 in order to speed up payment authorizations for imports eligible for the official rate. Such transfers were made on February 15, March 6, June 5, July 24, August 4, November 21, and December 7.

February 16. Following the announcement that the U.S. dollar was being devalued, the buying and selling rates for the U.S. dollar were maintained unchanged in both exchange markets.

March 3. Legislative Decree No. 5188 was published, which changed the gold parity of the colón from 0.123549 gram of fine gold to 0.111194 gram of fine gold. It came into effect on October 16. The new par value had not been agreed with the International Monetary Fund.

March 14. Import duties became payable on the basis of the exchange rate applicable to the import transaction. Previously, all import duties were based on the official rate.

March 20. In accordance with Article 10 of Law No. 5122 of November 16, 1972, which established the Costa Rican Development Corporation (Codesa), the Central Bank increased the selling rate in the official market to Ȼ 6.68 per US$1 (previously Ȼ 6.65 per US$1) and reduced the buying rate in the free market to ¿ 8.54 per US$1 (previously Ȼ 8.57 per US$1). The resulting exchange differential of Ȼ 0.03 per US$1 was earmarked to cover Codesa’s financial needs.

April 12. Those industrial firms exporting outside the CACM that had previously been required to surrender their export proceeds in the official market in exchange for the privilege of importing their raw material inputs at the official rate, were permitted to sell 50 per cent of the exchange proceeds in the free market.

April 14. Decree No. 2932-MEIC of April 5, 1973 was published, implementing the Export Promotion Law (Law No. 5162 of December 22,1972). The Decree provided for the granting of tax credit certificates (CATs). The value of such certificates would be equivalent to 15 per cent of the amount in colones obtained by surrender to the Central Bank of the exchange proceeds from nontraditional exports.

April 26. Fifty per cent of the proceeds from nontraditional exports of agricultural, livestock, and fishing products (except those in the List of Essential Imports) could henceforth be sold in the free market, but only when the goods were sold outside Central America. The remaining 50 per cent had to be surrendered at the official rate.

April 26. Re-export industries (“drawback industries”) were permitted to sell in the free market 50 per cent of the value added that was included in their export proceeds.

May 24. The Charter of the Central Bank was amended by the modification of Articles 93, 96, and 102, and the elimination of Article 94. The new Article 102 provided that private physical or juridical persons could sell domestically produced gold (except national archaeological treasures) at home or abroad, provided there was no infraction of international agreements. Sales abroad would be subject to such conditions as the Central Bank might establish. (Law No. 5199 of May 17,1973.) Previously, only the Central Bank was permitted to buy or sell gold and to import or export gold.

May 25. A free trade agreement with Honduras was signed. It came into effect on June 7.

May 31. Official exchange was provided to liquidate arrears on imports that had entered the country before June 19,1971.

June 1. Importers entitled to official exchange who had made import payments through the free market before this date were entitled to receive the domestic currency equivalent of the difference between the two exchange rates.

June 11. Decree No. 2926 prohibited finance companies from engaging in certain foreign trade operations that were henceforth reserved for commercial banks.

June 21. An agreement between the central banks of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua was approved that regulated, through the intermediary of the Cámara de Compensación Centroamericana, transactions in banknotes and other documents of countries maintaining exchange restrictions.

June 28. The release of up to US$15 million of official exchange was authorized for the settlement, in chronological order, of arrears on imports made after June 19, 1971.

July 2. The Central Bank established regulations governing the granting by commercial banks of an “aval” or guarantee of payment to persons or firms abroad. These regulations were published in the Official Gazette on September 12.

July 19. Thirty-nine per cent of the exchange proceeds from banana exports effected by local independent companies became eligible for sale in the free market; the remainder had to be surrendered in the official market. The arrangement was not applicable to foreign-owned banana producers.

August 23. The Central Bank tightened the conditions on which official exchange could be made available for imports of capital goods. This action was based on changes made on the same date in Article 64 of the Regulations for the Application of the Exchange System. The new text provided that the Central Bank could make exchange for capital goods available at the official rate when the imports were financed by international credit institutions, etc., or when the importer had obtained external financing for at least five years. In the latter case, the downpayment could not exceed 20 per cent, and the remainder had to be settled in five annual or ten semiannual proportional installments, beginning one year after the downpayment.

August 30. Exchange up to US$500 a month was granted at the official rate for expenses of persons engaged in a profession and taking postgraduate courses abroad.

Cyprus

Exchange Rate System

The par value is 2.13281 grams of fine gold per Cyprus Pound, which corresponds to £C 0.416667 = SDR 1 or £C 0.345395 = US$1. No exchange transactions take place at the par value. The Central Bank quotes daily buying and selling rates for deutsche mark, Greek drachmas, pounds sterling, and U.S. dollars. The rate for the U.S. dollar on December 29, 1973 was US$2.7740 buying, and US$2.7710 selling, per £C 1, and that for sterling was £ stg. 1.2000 buying, and £ stg. 1.1950 selling, per £C 1. The Central Bank quotes indicative rates for a number of other currencies as well. Furthermore, the Central Bank offers authorized dealers facilities for forward purchases and sales of U.S. dollars and pounds sterling for periods of up to six months, in cover of trade transactions only.

Administration of Control

Exchange controls are administered by the Central Bank of Cyprus and trade controls by the Ministry of Commerce and Industry. Certain authority to approve applications for the allocation of foreign exchange within the scope of instructions issued by the Central Bank has been delegated to the authorized dealers. Authority to introduce, adapt, and supervise controls on exports of potatoes has been delegated to the Cyprus Potato Marketing Board, while exports of cereals are licensed by the Cyprus Grain Commission.

Prescription of Currency

Cyprus has ceased to be a Scheduled Territory in terms of the U.K. Exchange Control Act, 1947 but under current U.K. exchange control regulations continues to be regarded as a country of the Overseas Sterling Area. Settlements with clearing countries1 must be made through the appropriate clearing account denominated either in pounds sterling or in U.S. dollars. Payments to countries other than the clearing countries (except Rhodesia) may be made by crediting Cyprus pounds to an External Account, or in any foreign currency other than Rhodesian currency; the proceeds of exports to such countries may be received in Cyprus pounds from an External Account or in any foreign currency except Rhodesian currency. Settlements with Rhodesia are subject to special regulations; payments for exports to Rhodesia must be received in any foreign currency other than Rhodesian currency.

Nonresident Accounts

Residents of countries outside Cyprus other than Rhodesia may maintain with authorized banks nonresident accounts in Cyprus pounds, designated External Accounts. These may be credited with authorized payments from residents of Cyprus, with transfers from other External Accounts, and with the proceeds from sales by nonresidents of any foreign currency2 other than Rhodesian currency. External Accounts may be debited for payments to residents and nonresidents, for transfers to other External Accounts, and for purchases of any foreign currency other than Rhodesian currency.

Rhodesian Accounts are held by residents of Rhodesia and are subject to separate rules.

Blocked Accounts are maintained in the name of a nonresident for certain funds of a capital nature which, under the existing exchange control regulations, may not be transferred outside Cyprus. Blocked funds may either be held as deposits or invested in government securities or government-guaranteed securities. Income earned on blocked funds so invested may be remitted to the nonresident beneficiary or credited to an External Account without prior reference to the Central Bank. Funds can be released from Blocked Accounts in the following circumstances: On application by the authorized bank concerned acting on behalf of the nonresident account holder, the Central Bank may authorize the release of blocked funds for (1) reasonable educational expenses in Cyprus of the account holder’s children; (2) reasonable living expenses of the account holder while on a visit to Cyprus; and (3) donations to charitable institutions in Cyprus. In addition to any releases under (1), (2), and (3), amounts up to a level determined from time to time may become eligible for release. At present, the Central Bank is prepared to permit the release to each nonresident holder of blocked funds of up to £C 5,000 in any calendar year.

Imports and Import Payments

All imports from Rhodesia and South Africa are prohibited. Imports of virtually all commodities may be made freely from any other country except Albania, Bulgaria, the People’s Republic of China, Czechoslovakia, Eastern Germany, Hungary, North Korea, Poland, Romania, Tibet, the U.S.S.R., and North Viet-Nam. For protective reasons, certain goods (such as some agricultural and textile products, footwear, metal manufactures, and industrial machinery) may not be imported freely; for a few of these items, no licenses are granted, while for most of them licenses are granted liberally. Imports from Bulgaria, the People’s Republic of China, Czechoslovakia, Eastern Germany, Hungary, Poland, Romania, and the U.S.S.R. are licensed in accordance with the terms of bilateral trade and payments agreements. With respect to Albania, North Korea, Mongolia, Tibet, and North Viet-Nam, no formal trading arrangements exist but certain barter transactions take place from time to time.

Individual import licenses are not required for bona fide unsolicited gifts (which may not be sold) up to £C 10 in value, for returned goods, or for certain special import transactions.

Payments for all permitted imports may be made freely, but the authorized dealers’ authority to effect payment without reference to the Central Bank is for advance payments in respect of imports limited to the equivalent of £C 100.

Payments for Invisibles

Payments for invisibles to nonresidents require the approval of the exchange control authorities. Profits, dividends, and interest from approved foreign investments may be transferred abroad, after payment of any charges and taxes due. Insurance premiums due to foreign insurance companies are remittable after deduction of all expenses and contingencies in respect of any claims. Maintenance remittances are allowed on application accompanied by documentary evidence of hardship. For certain categories of payments, limits are imposed, only for the purpose of preventing illicit capital outflow. For study abroad, the lower limit is £C 700 a year, and the upper limit is £C 2,200 a year; the amount allowed depends on the cost of living in the country concerned—e.g., for study in countries in the Middle East (defined as Egypt, Greece, Israel, Lebanon, and Turkey), £C 700; in the United States and Canada, £C 2,200; in other countries, £C 1,400. Higher amounts for student allowances may be granted on presentation of documentary evidence. For tourist travel, the limit is £C 350 a person annually; for business travel £C 20 to £C 40 a day is granted in addition to the tourist allowance. The basic tourist allowance is not available for travel to Rhodesia. Resident travelers may take out Cyprus notes up to £C 10 and foreign currency notes up to the equivalent of £C 50, the latter as part of their annual basic travel allowance. Nonresident travelers may take out £C 10 in Cyprus notes and any amount of foreign currency notes that they brought into Cyprus.

Exports and Export Proceeds

Exports of potatoes are subject to control by the Cyprus Potato Marketing Board, and those of wheat and barley to control by the Cyprus Grain Commission. All exports are subject to licensing when the f.o.b. value exceeds £C 75 to ensure repatriation of the sales proceeds in an appropriate manner (see section on Prescription of Currency, above). Export proceeds in all currencies must be surrendered within one month of receipt.

Proceeds from Invisibles

Receipts from invisibles in all currencies must be sold to an authorized bank within one month of receipt. Persons entering Cyprus may bring in any amount in foreign currency notes and Cyprus currency notes.

Capital

Exchange control is exercised over all capital receipts or payments. Capital receipts must be offered for sale to an authorized dealer; payments of a capital nature to any destination require prior approval.

Foreign investments in Cyprus by nonresidents require the prior approval of the exchange control authorities. In considering applications, due regard is given to the purpose of the investment, the extent of possible foreign exchange savings, the number of persons to be employed, the extent of the foreign exchange liability which might arise from the investment, and possible competition with existing industries. Proceeds from the liquidation of approved foreign investments may be repatriated in full at any time, after payment of any charges and taxes due.

Foreign nationals who repatriate or take up residence outside Cyprus, and Cypriots who emigrate, may transfer abroad up to £C 10,000. Any excess amount is deposited in a Blocked Account.

Transactions in foreign securities owned by residents require prior permission from the authorities.

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 1973

January 1. The Central Bank began offering facilities for forward purchases and sales of U.S. dollars and pounds sterling for periods of up to six months.

February 16. Following the announcement that the U.S. dollar was being devalued, Cyprus maintained the par value of its currency in terms of gold. The effective parity relationship for the U.S. dollar, previously £C 0.383772, became £C 0.345395 = US$1. The Central Bank announced new buying and selling rates for the U.S. dollar of US$2.8360 and US$2.8390, respectively, per £C 1.

May 1. Releases of balances in Blocked Accounts were increased from £C 1,000 to £C 5,000 for each holder in each calendar year.

May 1. The amount that foreign nationals who repatriate or take up residence outside Cyprus could transfer abroad was increased from £C 5,000 to £C 10,000.

June 1. The agreement of association with the EEC came into effect.

July 9. The authorities ceased for the time being to ensure that the rates for the Cyprus pound would be confined within the margins hitherto observed. As a result, the currency appreciated in terms of the U.S. dollar. Reasonable stability would be maintained with regard to the value of the Cyprus pound in terms of the currencies of Cyprus’ major trading partners.

July 23. The Central Bank began to quote spot and forward rates for the deutsche mark, in addition to the rates already quoted for the U.S. dollar and the pound sterling.

September 19. A bilateral trade and payments agreement was concluded with the People’s Republic of China. It came into effect immediately.

October 15. The Central Bank began to quote the Greek drachma.

Dahomey

Exchange System

No par value for the currency of Dahomey has been established with the Fund. The unit of currency is the CFA Franc,1 which is officially maintained at the rate of CFAF 1 = 0.02 French franc. Exchange transactions in French francs, the intervention currency, between the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO) and commercial banks take place at the rate of CFAF 1 = F 0.02, free of commission.

Exchange transactions relating to foreign countries, i.e., countries other than France (and its Overseas Departments and Territories other than the French Territory of the Afars and the Issas), Monaco, and the Operations Account countries of the French Franc Area, take place in a dual exchange market at rates based on the fixed rate for the French franc and the Paris exchange rate for the foreign currency concerned in either the official exchange market or the financial franc market. Settlements eligible for the official exchange market are payments and receipts in respect of imports, exports, and most other current payments, as well as all current payments by or in favor of domestic and foreign public authorities and public bodies. All other settlements with foreign countries, as well as transactions in banknotes of foreign countries and banknotes issued by the BCEAO, take place through the financial franc market at freely fluctuating rates. The principal current payments and receipts channeled through the financial franc market are those relating to travel expenses, capital earnings, and workers’ remittances. Exchange rates for certain European currencies in the official market are based on par values and central rates; the effective parity relationship for the U.S. dollar in this market is not confined within any announced margins.

With the exception of those relating to gold, Dahomey’s exchange control measures do not apply to (1) France (as defined above) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Cameroon, the Central African Republic, Chad, the People’s Republic of the Congo, Gabon, Ivory Coast, Mali, Niger, Senegal, Togo, and Upper Volta). Hence, all payments to these countries may be made freely. All other countries, except Dahomey itself, are considered foreign countries, and in principle financial relations only with foreign countries are subject to exchange control. For purposes of certain capital controls, however, the countries specified in this paragraph are also considered foreign countries.

Administration of Control

Exchange control is administered by the Directorate-General of Economic Affairs in the Ministry of Economy and Finance, which also supervises borrowing abroad, the issuing, advertising, or offering for sale of foreign securities in Dahomey, inward direct investment, all investment in foreign countries, and the solicitation of funds in Dahomey for placement in foreign countries. The BCEAO is authorized to collect (either direct or through the intermediary of banks, financial institutions, the Postal Administration, and notaries public), any information necessary to compile the balance of payments statistics. All exchange transactions relating to foreign countries must be effected through authorized intermediaries. Import licenses are issued by the Directorate-General of Economic Affairs in the Ministry of Economy and Finance. Exports of diamonds and other precious or semiprecious materials require prior approval granted by a decree issued by the Council of Ministers. There are three special offices for the import and export of precious metals and precious mineral materials, but these are inoperative. Import certificates for liberalized commodities originating in OECD countries other than Japan are made out by the importer himself and approved by the Directorate-General of Economic Affairs.

Prescription of Currency

Dahomey is an Operations Account country of the French Franc Area, since the BCEAO maintains an Operations Account with the French Treasury; settlements with France (as defined above), Monaco, and the other Operations Account countries of the French Franc Area 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 or Financial Accounts in Francs. Certain settlements with the People’s Republic of China and Ghana, however, are made through special accounts.2 All settlements with Portugal, Rhodesia, and South Africa are prohibited.

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. The crediting to nonresident accounts of CFA banknotes, French banknotes, or banknotes issued by any other institute of issue that maintains an Operations Account with the French Treasury is not permitted, except for BCEAO banknotes mailed direct to the BCEAO agency in Cotonou by authorized banks’ foreign correspondents for credit to the accounts opened for the latter by authorized banks.

Imports and Import Payments

All imports originating in or shipped from Portugal, Rhodesia, or South Africa are prohibited. Certain imports, such as narcotics, are prohibited from all sources. The Société de Commercialisation et de Crédit Agricole du Dahomey (Socad) has a monopoly over the importation of sugar, rice, wheat, wheat flour, and condensed milk. Imports of all other goods originating in countries in the French Franc Area may be made freely without an import license. Imports of all other goods originating in EEC countries other than France may also be made freely; these goods require a license, which is issued automatically. Certain imports are liberalized when originating in OECD countries other than Japan and only require an import certificate made out by the importer himself. Imports of nonliberalized commodities originating in OECD countries, all imports originating in Japan, and all imports originating in non-OECD countries are subject to licensing; they are admitted in accordance with an annual import program, which is determined each year in a French-Dahomean Committee, in which both countries have equal status, as provided for by the Economic Cooperation Agreement with France. Under this program, a global quota is established for imports from all countries outside the French Franc Area except EEC countries. Certain French textiles processed in foreign countries are licensed separately.

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

Payments for Invisibles

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

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

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

Nonresident travelers may take out any unutilized foreign banknotes and coins 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 banknotes, French banknotes, and banknotes issued by Operations Account countries; the equivalent of CFAF 25,000 in foreign banknotes; and any amount in other foreign means of payment (travelers checks, etc.) established abroad in their names.

Exports and Export Proceeds

All exports to Portugal, Rhodesia, and South Africa are prohibited. Exports to all foreign countries must be domiciled with an authorized bank when valued at CFAF 500,000 or more. Exports to all countries are free of license, except those of gold and diamonds, but require an export application visaed by the Directorate-General of Economic Affairs. Export proceeds received in currencies other than those of France or another Operations Account country must normally be collected within 180 days of the arrival of the commodities at their destination and surrendered by sale on the official exchange market within two months of collection.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and other Operations Account countries in the French Franc Area 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 banknotes and coins 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 banknotes and coins (except gold coins) of countries outside the French Franc Area; resident travelers must within eight days of return surrender to an authorized bank any foreign banknotes and foreign currency travelers checks in excess of CFAF 5,000 they bring in.

Capital

Transfers of capital between Dahomey and Portugal, Rhodesia, and South Africa are prohibited. Capital movements between Dahomey and France (as defined above), Monaco, and other Operations Account countries in the French Franc Area 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 foreign direct investment and all outward investment in foreign countries, and over the issuing, advertising, or offering for sale of foreign securities in Dahomey; these controls relate to the transactions themselves, not to payments or receipts. With the exception of those over foreign securities, these control measures do not apply to France (as defined above), Monaco, the other member countries of the West African Monetary Union, and those other countries whose bank of issue is linked with the French Treasury by 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 all publicity aimed at placing funds abroad or at subscribing to real estate building operations abroad; these special controls do apply also to France (as defined above), Monaco, and the Operations Account countries.

All investments abroad by residents of Dahomey require prior authorization by the Minister of Economy and Finance.3 Foreign direct investments in Dahomey4 must be declared to the Minister of Economy and Finance before they are made. The Minister has a period of two months from receipt of the declaration during which he may request the postponement of the projects submitted to him. The full or partial liquidation of either type of investment also requires declaration. Both the making and the liquidation of investments, whether these are Dahomean investments abroad or foreign investments in Dahomey, must be reported to the Minister of Economy and Finance 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 per cent in the capital of a company whose shares are quoted on a stock exchange.

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

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 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 firms (approved by the Minister of Economy and Finance) to finance transit trade, or by any type of firm to finance imports or exports; (3) loans contracted by authorized banks; and (4) subject to certain conditions, loans other than those mentioned above, when the total amount outstanding of these loans, including the new borrowing, does not exceed CFAF 50 million for any one borrower. The repayment of loans not constituting a direct investment requires the special authorization of the Minister 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 Economy and Finance. The lending of CFA francs to nonresidents for periods of up to two years, however, is freely permitted, subject to ex post reporting to the Directorate-General of Economic Affairs and to the BCEAO.

The Investment Code (Ordinance No. 72-1 of January 8, 1972) 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 medium-sized investments and provides for exemption, during a period of up to 5 years, from import duties and taxes on materials necessary for the production of the proposed product, and from certain other taxation. Plan B, for larger projects, is granted for a maximum period of 8 years and provides, in addition to the benefits of Plan A, certain other tax privileges. Plan C is intended for enterprises undertaking to invest more than CFAF 500 million and is granted for a period of up to 15 years. In addition to the benefits of Plan B, Plan C guarantees stability of tax status, free choice of suppliers, and certain other advantages. Plan D provides certain benefits for Dahomean entrepreneurs investing at least CFAF 10 million. The method of application of the Investment Code is set out in Decree No. 72-7 of January 17, 1972.

Gold

Residents are free to hold, acquire, and dispose of gold in any form in Dahomey.5 Imports and exports of gold from or to any other country require prior authorization by the Minister of Economy and Finance, 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 1973

January 29. The commissions levied by the BCEAO on transfers to France and other countries of the French Franc Area, except those of the West African Monetary Union, were made identical with those on transfers to countries outside the French Franc Area. The unified commission was increased on July 2.

February 7. Ordinance No. 73-11 obliged all industrial and commercial enterprises installed in Dahomey to domicile their head office in Dahomey and to conduct their accounts in Dahomey.

February 13. Following the announcement that the U.S. dollar was being devalued, the exchange rate of CFAF 1 = F 0.02 was maintained; the effective parity relationship for the U.S. dollar, previously CFAF 255.785 = US$1, became CFAF 230.207 = US$1.

March 19. With the entry into effect of new margins arrangements between the French franc and certain other European currencies, and the maintenance of the exchange rate of CFAF 1 = F 0.02, the CFA franc began to appreciate in terms of the U.S. dollar.

April 13. Ordinance No. 73-31, which contained a Mining Law, was issued.

April 13. Ordinance No. 73-33, which contained a Petroleum Law, was issued.

July 1. Mauritania ceased to be a member of the BCEAO.

July 2. The commission levied by banks on transfers outside the West African Monetary Union was increased by Decree No. 73-209 of June 30, 1973. Part of the commission had to be passed on to the Treasury.

July. The exchange control regulations applicable to foreign countries became applicable also to the Malagasy Republic and Mauritania. The relative circulars (Nos. 169 and 170) were published on November 6.

September 27. Ordinance No. 73-67 regulated the import and export trade in diamonds and other precious and semiprecious materials.

Denmark1

Exchange Rate System

The par value is 0.118489 gram of fine gold per Danish Krone. A central rate has been established of DKr 6.28205 = US$1, corresponding to DKr 7.57831 = SDR 1, and Denmark avails itself of wider margins. Denmark maintains a maximum margin of 2.25 per cent for rates in spot exchange transactions in the official exchange market between the Danish krone and the Belgian franc, the deutsche mark, the French franc, the Luxembourg franc, the Netherlands guilder, the Norwegian krone, and the Swedish krona.2 No announced margins are maintained for any other currency. Market rates are quoted daily for the 16 currencies that are used most often.3 On December 31, 1973, the buying and selling rates for the U.S. dollar were DKr 6.2860 and DKr 6.2940, respectively, per US$1.

Authorized exchange dealers may engage in arbitrage both spot and forward for up to 12 months with one another and with their foreign correspondents in all currencies, including Danish kroner. Special rules apply, however, for the forward sale of foreign currencies against Danish kroner to foreign correspondents. Forward premiums and discounts are generally left to the interplay of market forces, but the central bank has from time to time sold U.S. dollars forward to authorized banks. Forward transactions with residents must cover contractual payments for goods and services or payments on authorized loans and credits, the payments covered being due not more than two years from the date of the forward contract.

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 Faroe Islands.

Administration of Control

Exchange control is administered by the National Bank of Denmark, which is the central exchange control authority. However, administrative powers for most payments and transfers are delegated to the authorized exchange dealers, i.e., banks and the stock exchange brokers who are members of the Copenhagen Stock Exchange. The exchange regulations generally do not apply to individual transactions and transfers of DKr 3,000 or less. Permission, when required, for foreign direct investments in Denmark has to be obtained from the Ministry of Commerce. Licenses for imports and exports, when required, are issued by the Ministry of Commerce, the Ministry of Agriculture, or the Ministry of Fisheries.

Prescription of Currency

Payments to or from foreign countries may be made in any foreign currency or in Danish kroner. Virtually all payments in favor of residents of Rhodesia, however, must be credited to a South Rhodesian Account.

Pursuant to UN Security Council Resolution No. 253 (1968), restrictions for security reasons are applied to virtually all payments and transfers to, or for the benefit of, Rhodesia, and to certain receipts from Rhodesia.

Nonresident Accounts

Nonresident krone accounts are convertible. The only exceptions are Emigrant Accounts and South Rhodesian Accounts.

Krone Accounts may be opened by authorized banks for foreign banks, insurance companies, and shipping companies, and for specified official institutions of the EEC. They may also be opened for other nonresidents, including persons who are or have been of Danish nationality, provided that the credit balance in any one account does not exceed DKr 75,000; any amounts in excess of DKr 75,000 must be transferred abroad within two days. Special accounts not subject to a maximum balance may be opened for nonresidents provided they are only credited with the liquidation proceeds or capital earnings from investments in Denmark and some other funds.

Emigrant Accounts are kept by authorized exchange dealers for holding capital, income from capital, pensions, and other funds owned by or accruing to Danish emigrants, to the extent that the amounts exceed the exchange allowance of DKr 40,000 available to each person at the time of departure. Certain payments to residents may be made freely from these accounts and the balances are in any case made convertible one year after departure.

South Rhodesian Accounts are kept for residents of Rhodesia; balances in these accounts are inconvertible.

Imports and Import Payments

Most commodities are liberalized and free of licensing from all sources. The only commodities that require a license when originating in or purchased from member countries of the EEC are a few agricultural products and unwrought and semimanufactured gold. A few items require a license when originating in Japan, the Republic of Korea, or any other non-state-trading, non-EEC country. A larger number of items require a license when originating in or purchased from Albania, Bulgaria, Czechoslovakia, Eastern Germany, Hungary, Poland, Romania, or the U.S.S.R. Special licensing provisions are in force for most items originating in or purchased from the People’s Republic of China, the Republic of China, North Korea, Mongolia, or North Viet-Nam. No licenses are granted for the importation of goods originating in or purchased in Rhodesia.

With these exceptions, imports are free of license, provided that for Japan, the Republic of Korea, and the state trading countries the country of origin and the country of purchase are identical.

The transfer of funds to, or for the benefit of, Rhodesia is prohibited. With this exception, payments for imports and the related shipping expenses may be made freely within five years from the end of the month in which the goods were cleared through customs, provided that repayments of debts are not made more than 30 days before the day stipulated as the latest in the contract (or before the latest customary date in the trade). However, commercial credits can be repaid at any time if any discount is obtained as a result, provided the payment is made to the supplier and conforms to normal commercial practice in the trade concerned. Prepayments linked to trade in goods and services that are in conformity with normal commercial practice for the particular line of business, may be granted to nonresidents up to one year prior to the expected date of import or the expected date of performance of the service; the permitted period is up to five years for capital goods (ships, aircraft, heavy machinery, and major installations) when purchased for an amount of DKr 1 million or more. All other advance payments for imports require prior approval by the National Bank.

Payments for Invisibles

The National Bank has delegated to authorized exchange dealers the authority to permit payments by residents, including foreign nationals temporarily working in Denmark, for most invisibles to be made freely, provided that payments of debts are not made more than 30 days before the day stipulated as the latest in the contract (or before the latest customary date in the trade); only in a few cases is approval from the National Bank required. Authorized banks are empowered to allow the transfer up to DKr 40,000 a person a year of foreign nationals’ wages and salaries earned in Denmark, provided that the person concerned has not resided in Denmark for more than three years and the transfer is made to the remittor’s own account abroad. Transfers of up to DKr 3,000 for any permitted purpose may be made without delivery of forms. Foreign exchange for travel is allocated freely and may be obtained for travel to any country, but not earlier than 30 days before the trip if the amount applied for exceeds the equivalent of DKr 3,000.

Payments of any kind to Rhodesia, except payments for pensions, for strictly humanitarian, medical, or educational purposes, or for the purchase of news material, are prohibited.

Travelers may take out freely DKr 3,000 in Danish banknotes and coins, and any amount in foreign banknotes or other means of payment. Nonresidents may in addition export any amount of Danish banknotes and coins derived from sales of foreign currency in Denmark or brought in by them when they entered Denmark.

Exports and Export Proceeds

Exports to Rhodesia are prohibited, with the exception of products intended for strictly medical purposes, educational material or other equipment for schools and the like, publications, and news material. The only commodities that require a license when exported to member countries of the EEC are gold and waste and scrap of iron and steel. With respect to other destinations, except for certain items subject to strategic controls, export licenses are required only for waste and scrap of certain metals, crude oil and some oil products, and monetary gold and gold coins.

Export proceeds must be transferred to Denmark without undue delay unless the National Bank permits otherwise. However, this obligation does not apply to amounts which are to be used within 30 days to settle or to offset the cost of certain commercial expenses. Foreign exchange receipts must be offered for sale to the National Bank or to an authorized exchange dealer without undue delay.

Proceeds from Invisibles

Foreign exchange derived from invisibles must be transferred to Denmark, unless the National Bank permits otherwise, and offered for sale to the Bank or to an authorized exchange dealer without undue delay, with exceptions similar to those that apply to export proceeds (see section on Exports and Export Proceeds, above).

Travelers may bring in any amount of Danish banknotes and coins, foreign banknotes, and other Danish or foreign means of payment.

Capital

Both inward and outward transfers of capital and all borrowing and lending between residents and nonresidents are subject to exchange control and may be restricted. Licensing practice vis-à-vis residents of member countries of the EEC is based on the rules of the EEC’s directives on capital movements, subject to certain transitional arrangements, and licensing practice in respect of residents of the rest of the world (except Rhodesia) as a rule is similar. Residents have an obligation to repatriate proceeds realized from the sale or liquidation of assets abroad.

Transfers abroad may be made by residents to pay interest on, or to redeem upon maturity, or to repurchase any Danish securities denominated exclusively in Danish kroner as well as the transferor’s own bonds irrespective of denomination (provided these bonds are quoted on an authorized stock exchange abroad), to lend amounts not exceeding DKr 200,000 in a calendar year to subsidiary companies, branches, and so forth, or to a member of the resident’s family, and to buy foreign securities that do not represent direct investments in foreign commercial or industrial enterprises, provided that the securities are acquired on the basis of a subscription right to shares or the like owned by the resident concerned or provided that the resident furnishes proof that he has repatriated a corresponding amount within the last 12 months from the sale of foreign securities to a nonresident.

No special permission is required for residents to make transfers abroad, within certain limits, in connection with direct investments in most industries (equity capital or loan capital) or with the private acquisition of real estate abroad. The limits are DKr 100,000 a year for each foreign enterprise for direct investments of equity capital, DKr 200,000 for direct investments of loan capital, and DKr 60,000 a person for private acquisition of real estate for noncommercial purposes. Direct investments abroad by residents are normally approved in accordance with Denmark’s obligations as a member of the EEC and the OECD. The private acquisition of real estate in excess of DKr 60,000 normally is approved in accordance with Denmark’s obligation as a member of the EEC. Loans and credits granted by exporters or banks and made in connection with the sale of goods or services are normally permitted for up to five years. Permission from the National Bank is required for most other transfers abroad of a capital nature by residents. Portfolio investment abroad is generally not allowed.

Danish emigrants are granted an exchange allowance of up to DKr 40,000 for each person at the time of departure. Funds exceeding these amounts must be credited to an Emigrant Account in the name of the owner and may be transferred abroad one year after departure, or earlier if the emigrant can show that he has taken up permanent residence abroad with the approval of the relevant foreign authorities.

Inward direct investment in the form of equity capital may be made without any special license if the investment concerns industry, trade in goods, handicrafts, the hotel business, travel agencies, or transportation, and if the investment does not increase total direct foreign investment in the enterprise concerned by more than DKr 100,000 in each calendar year. Inward direct investments with loan capital also are exempt from special license within certain limits. Other direct investment by nonresidents requires permission from the exchange control authorities, which is granted liberally in accordance with Denmark’s obligations as a member of the EEC and the OECD. The purchase by a nonresident of real property in Denmark usually requires a special license from the Ministry of Justice; permission is usually granted readily where real estate is to be used for industrial or similar enterprises.

Nonresidents may purchase or subscribe to bonds that are quoted on the Copenhagen Stock Exchange and are expressed solely in Danish kroner, when the funds have been obtained from the liquidation of investments in Denmark (other than Danish shares representing portfolio investments), or from specified types of income accruing in Denmark; within certain limits, foreign insurance companies may purchase such bonds without any corresponding restrictions on the origin of the funds. Moreover, the sale to nonresidents (including persons who are or have been Danish nationals) of Danish bonds expressed solely in Danish kroner and listed on the Copenhagen Stock Exchange is freely permitted within a periodically established quota, provided that sales are effected for the account of the National Bank of Denmark. Such bonds may be resold to residents and the proceeds of resale are transferable or may be reinvested, within a short period, by purchase of, or subscription to, Danish bonds. Nonresidents may freely purchase or subscribe to shares that are quoted on the Copenhagen Stock Exchange, provided the purchase does not represent a direct investment and is not being made with a view to subsequent direct investment in the company concerned; this liberalization does not apply to certificates of investment companies, etc., whose latest balance sheet shows more than 10 per cent of their assets placed in Danish bonds, debentures, and mortgage deeds.

Nonresidents may freely grant credits for up to five years to residents to finance purchases of commodities and services abroad and to finance the granting of credits for exports of commodities and services, provided the credit is in conformity with commercial practice in the trade concerned. They may, further, grant loans of up to DKr 5 million a borrower in a calendar year to enterprises in most industries, provided that the maturity is at least five years and that the entire proceeds are used only to finance expenditure made within six months prior to the date the loan is contracted or to be made within six months following that date, for the establishment, expansion, or equipment of the borrower’s own business and /or industrial premises and for the acquisition of plant, machinery, and transport equipment to be used for its own business and/or industrial activities. Finally, they may grant loans up to DKr 200,000 a borrower in a calendar year to members of the nonresident’s family.

Municipalities and public utility companies may as a rule issue debenture loans abroad without special permission of the National Bank, but their foreign borrowing is subject to control by the competent executive department of the Government.

Transfers of proceeds from the sale or liquidation of all types of investments and transfers of all other liquid funds in Denmark owned by nonresidents other than newly emigrated persons are permitted freely, irrespective of when and how the original investment was acquired. Interest and repayment of principal on authorized loans, credits, and deposits received from persons and firms who are nonresidents at the time of receipt may be paid freely, with the proviso that loans and credits obtained from a nonresident generally must not be amortized or repaid in full more than 30 days before the amortization payment or repayment is due, or before the customary date in the trade.

Inheritances and gifts to relatives may normally be transferred to any country without limitation. Individual payments above DKr 3,000 as gifts to persons other than relatives require approval from the National Bank. Such approval is normally given for bona fide gifts.

Imports and exports of securities are subject to regulations, the details of which are established by the National Bank. Bona fide imports of Danish securities payable only in Danish kroner are permitted. Exports of Danish and foreign securities owned by nonresidents are normally permitted also. Danish securities held in Denmark and belonging to nonresidents may, with the principal exception of securities denominated wholly or partly in foreign currencies, be sold freely to residents. Foreign securities held in Denmark and belonging to nonresidents may, with certain exceptions, be sold to residents only with the permission of the National Bank. Foreign securities held in Denmark may be negotiated freely between residents, provided that the exchange control regulations are not circumvented.

The net “commercial” foreign position of authorized foreign exchange dealers is subject to limitation. For any individual bank, this position must not be negative, except in accordance with the following. For all banks collectively, a quota has been set (DKr 250 million for 1974) up to which they may incur a negative net “commercial” foreign position, insofar as this results from the taking up of foreign currency loans and credits for purposes of on-lending in foreign currency to customers in order to finance Danish foreign trade. The largest exchange dealers have been allocated subquotas, and for the others there is a residual subquota of DKr 9 million. A positive net “commercial” foreign position is in principle allowed only as long as it does not exceed the higher of the following amounts—DKr 2 million or 15 per cent of the capital and reserves of the individual bank concerned. The National Bank has granted a number of exemptions from this rule. Bank advances to customers financed by foreign credit taken up under these quota arrangements are exempt from the credit ceiling to which the bank concerned is subject. Such advances to customers must be used only for purposes permitted by the exchange control regulations.

Gold

Residents may freely buy, hold, and sell gold coins in Denmark; they may also import gold coins from most non-state-trading countries. Otherwise, residents other than the monetary authorities and authorized industrial users are not allowed to acquire gold abroad. Imports and exports of gold normally require licenses issued by the Ministry of Commerce; such licenses are not normally granted except for imports and exports by or on behalf of the monetary authorities and industrial users, or exports to EEC countries of gold coins. Imports of gold in bars or coins, unless made by or on behalf of the monetary authorities, are subject to value-added tax at a rate of 15 per cent but not to customs duty. Domestic transactions also are taxed at a rate of 15 per cent.

Changes during 1973

January 1. Denmark became a member of the EEC.

January 1. Portfolio investment by nonresidents in Danish shares quoted on the Copenhagen Stock Exchange was liberalized. The only exception was that with respect to certificates issued by investment associations and investment companies, this liberalization did not apply to those whose latest balance sheet showed more than 10 per cent of their assets placed in Danish bonds, debentures, and mortgage deeds. Before the purchase or subscription was effected, the nonresident acquiror was required to submit a declaration to the National Bank to the effect that the purchase or subscription would not result in a direct investment in Denmark and that it was not being made with a view to subsequent direct investment in the company concerned. The sales proceeds of Danish shares acquired by nonresidents were transferable abroad and hence were in effect available also for the purchase of krone bonds by nonresidents.

Sales of krone bonds to nonresidents remained subject to existing arrangements, but the special agent commission on such sales was canceled; the quota for the first six months of 1973 was fixed at DKr 125 million.

January 1. The ceiling on residents’ purchases of real estate abroad for noncommercial purposes was raised from DKr 40,000 to DKr 60,000 a person. Furthermore, applications for higher amounts could generally be expected to be granted, but only for property situated in a member country of the EEC.

January 1. Licensing practice under the existing exchange control regulations would henceforth be based on the rules of the EEC’s directives on capital movements, subject to the transitional arrangements agreed with Denmark on inward and outward portfolio investment.

January 1. The rules governing the net “commercial” foreign position of authorized foreign exchange dealers were modified. Since December 1, 1971, these rules had provided that the position of each bank must at all times be at least zero and at most DKr 2 million, although a bank could at any given moment have a net “commercial” foreign position equal to 15 per cent of its share capital plus reserves. While the rule regarding the positive position remained unchanged, an individual bank’s position henceforth could be negative in accordance with the following rule. For all banks collectively, a quota was set (DKr 250 million for 1973) up to which they could incur a negative net “commercial” foreign position, insofar as this resulted from the taking up of foreign currency loans and credits for purposes of on-lending in foreign currency to customers in order to finance Danish foreign trade. The largest exchange dealers were allocated subquotas, and for the others there was a residual subquota of DKr 50 million.

January 1. The right of expatriate Danes to make payments from abroad into their krone accounts was limited. Also, the rules governing the maximum balance in krone accounts maintained by nonresidents other than foreign banks, shipping lines, and insurance companies were amended so that the credit balance in any one account could not exceed DKr 75,000 unless the amount concerned was held as of September 30, 1972 or stemmed from the subsequent liquidation of the account holder’s capital investments or similar assets in Denmark. Existing individual exemptions from the rules on maximum balances in convertible krone accounts remained in force until further notice but would be reviewed by the National Bank.

January 1. The temporary import surcharge was further reduced from 7 per cent to 4 per cent.

January 1. An internal consumption tax was imposed on coffee to cover the difference between the previous import duty on coffee and the new customs duty imposed under the common external tariff of the EEC.

February 1. A substantial overall liberalization of trade controls took place with the first commercial policy measures taken in compliance with EEC membership commitments. Licenses for imports from EEC countries henceforth were required only for a few agricultural products, ethyl alcohol, and gold (unwrought and semimanufactured, except gold leaf and gold foil). Licenses for exports to EEC countries were required only for waste and scrap of iron and steel and for monetary gold. The special arrangements agreed with the United Kingdom for Danish exports of bacon, poultry, and cheese lapsed and the levies on exports of pigs and pork to other EEC countries were terminated. The first tariff adjustments toward the elimination of import duties on intra-EEC trade and toward alignment on the common external tariff of the EEC took place.

February 12. The exchange market was closed. It reopened on February 15.

February 15. Following the announcement that the U.S. dollar was being devalued, Denmark maintained the value of the krone in terms of SDRs and the central rate, previously DKr 6.98 = US$1, became DKr 6.28205 = US$1. New upper and lower intervention rates for the U.S. dollar were set at DKr 6.4230 and DKr 6.1410, respectively.

February 20. The reinvestment in Danish bonds of the proceeds from the sale of Danish shares representing portfolio investment by nonresidents was prohibited unless such reinvestment took place within the framework of the bond quota for nonresidents.

March 2. The exchange market was closed. It reopened on March 19.

March 14. Capital Accounts held by residents of Rhodesia were redesignated South Rhodesian Accounts. The remaining Capital Accounts were redesignated Emigrant Accounts. Foreign Accounts, i.e., nonresident accounts with savings banks and small cooperative banks, were redesignated Krone Accounts, these banks now being given full authorized bank status. Convertible Krone Accounts of nonresidents other than foreign correspondents, shipowners, and insurance companies were subdivided into O Accounts and M Accounts, with balances in the latter subject to ceilings.

March 19. The official limits for the U.S. dollar were suspended. Denmark maintained a maximum margin of 2.25 per cent for rates in spot exchange transactions in its official market between the Danish krone and the Belgian franc, the deutsche mark, the French franc, the Luxembourg franc, the Netherlands guilder, and the Norwegian krone. On the same date, these arrangements were extended to include the Swedish krona. No announced margins were maintained for any other currency.

March 19. A complete revision of the foreign exchange regulations came into force. Administrative practices were modified. The principal new measures were the following:

(1) The foreign exchange regulations generally would not apply to individual transactions or transfers of DKr 3,000 or less. This provision replaced a large number of exemptions from the previous rules governing amounts of up to DKr 2,000.

(2) The provisions on direct investments were relaxed and the scope for the granting of licenses upon verification was widened. Henceforth no permit was required for either Danish direct investments abroad or foreign direct investments in Denmark in industry, trade in goods, or certain services, provided that such investments did not exceed DKr 100,000 a calendar year (previously DKr 40,000 a calendar year).

Subject to special rules, Danish direct investments abroad could be refinanced with loans taken up abroad with a maturity of at least five years. Subsidies granted by parent companies to branches henceforth were treated as direct investments.

(3) The purchase by nonresidents of Danish shares for portfolio investment was fully liberalized, provided the shares were quoted on a recognized security market. This liberalization henceforth also extended to Danish shares denominated in foreign currency and to shares and certificates issued by investment companies, provided their latest balance sheet showed that not more than 10 per cent of their assets consisted of Danish bonds, debentures, and mortgage deeds.

(4) The issue of shares and certificates abroad by residents was partially liberalized, in the sense that the securities could be purchased by nonresidents for portfolio investment in conformity with the provisions under 3, above.

(5) The rules governing the purchase by nonresidents of Danish bonds quoted on a recognized security market were eased. The purchase by nonresidents of bonds denominated wholly or partly in foreign currency was liberalized. The quota system for the sale to nonresidents of bonds denominated in Danish kroner was continued and expanded. Nonresidents henceforth could within one year of accrual invest certain monies in bonds outside the quota system (liquidation, proceeds of direct investments, inheritances, pensions, life and annuity insurance payments, and capital earnings from any of the foregoing).

(6) The provisions according to which nonresidents who are or have been Danish nationals enjoyed special privileges with respect to the purchase of Danish securities were repealed.

(7) The rules governing the taking up and granting of commercial credits, including prepayment and repayment, were relaxed so that fewer individual licenses were required.

(8) The procedures governing the purchase or construction by residents of real estate abroad for nonbusiness purposes, and the acquisition of long-term leases on such property, were relaxed slightly in line with the January 1, 1973 liberalization measure. Such purchases no longer required an individual permit, provided the investment of each individual did not exceed DKr 60,000 (previously DKr 40,000).

(9) Authorized exchange dealers could henceforth invest liquid funds in foreign currency certificates of deposit, subject to the rules already applicable to foreign treasury bills and bankers’ acceptances; amounts serving to cover forward exchange transactions now could be invested by banks for the full maturity of the forward contract.

(10) A list of current transactions was drawn up. All other transactions would be regarded as capital transactions.

April 1. The temporary import surcharge was abolished as scheduled.

May 10. Certain imports from Albania, Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and the U.S.S.R. were liberalized. Certain imports from the People’s Republic of China also were liberalized.

June 28. The quota for sales of krone bonds to nonresidents was fixed at DKr 75 million for the third quarter of 1973.

September 15. Further imports from Albania, Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and the U.S.S.R. were liberalized.

September 27. The quota for sales of krone bonds to nonresidents for the fourth quarter of 1973 was fixed at DKr 85 million.

October 31. Further imports from Albania, Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and the U.S.S.R. were liberalized.

October 31. Exports of certain oil products to non-EEC countries were made subject to individual license, with the understanding that normal commercial relations would be taken into consideration.

December 20. Agreement was reached between the Government and the National Bank to the effect that as soon as possible borrowing abroad by Danish firms should normally be confined to trade credit or credit to finance investments of a genuine commercial or industrial nature.

Note.—The following changes took place on January 1, 1974:

January 1. The rules governing the net “commercial” foreign position of authorized foreign exchange dealers were continued unchanged. All banks collectively could incur a negative net “commercial” foreign position up to DKr 250 million, subject to the rules introduced on January 1, 1973. The quota for 1974 was divided into subquotas for the 26 largest exchange dealers and a residual quota of DKr 9 million for the others.

January 1. The bilateral payments arrangement with Eastern Germany was discontinued and all payments between Denmark and Eastern Germany henceforth took place in convertible currencies. The special East German Krone Accounts were redesignated convertible Krone Accounts. At the same time a comprehensive and reciprocal liberalization of trade between Denmark and Eastern Germany came into effect.

January 1. Acting in concert with the central banks of the other EEC member countries, the National Bank eased the rules governing demand and time deposits on convertible Krone Accounts held by specified financial institutions of the EEC, as well as the rules concerning their investments in listed Danish krone bonds.

January 1. The taking up of financial loans abroad, which had been permitted for certain categories of business firms since 1968, was made subject to more stringent conditions. Henceforth, such loans could generally be raised abroad only provided the entire proceeds were used exclusively to finance expenditures made within six months prior to the date of the loan transaction, or to be made under contractual obligations within six months following that date, for the establishment, extension, or equipment of the borrower’s own business and/or industrial premises, and for the acquisition of plant, machinery, and transport equipment to be used for the borrower’s own business and/or industrial activities. Every borrower was required to declare in writing that his prospective financial loan would meet these conditions. The maximum permitted amount remained unchanged at DKr 5 million a borrower a year. Special rules were applicable to financial loans raised by affiliates from their parent companies or vice versa, or from other affiliates of the same parent company.

January 1. As the quota for the fourth quarter of 1973 for sales of krone bonds to nonresidents had not been taken up fully, the period within which that quota could be used was extended until further notice.

January 1. Denmark’s scheme of generalized tariff preferences was superseded by the EEC scheme.

Dominican Republic

Exchange Rate System

The par value is 0.736662 gram of fine gold per Dominican Peso, corresponding to RD$1.20635 = SDR 1 or RD$1 = US$1. The intervention currency is the U.S. dollar. Exchange transactions in U.S. dollars between the Central Bank of the Dominican Republic and other banks take place at RD$1 = US$1, plus a commission of 132 of 1 per cent. Exchange transactions by commercial banks with the public also take place at the rate of RD$1 = US$1, subject to banking commissions of ¼ of 1 per cent buying and ½ of 1 per cent selling. Different effective exchange rates may arise from the requirement of a fully prepaid letter of credit for certain imports. With the exception of payments for imports made with the importer’s own foreign exchange, all payments abroad must be made through banks, and all exchange received must be sold to banks. The commercial banks are required to transfer to the Central Bank all exchange purchased. There is a tolerated parallel exchange market.

On August 1, 1953, the Dominican Republic notified the Fund that it formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement.

Administration of Control

Exchange and trade control policy is made by the Monetary Board. Foreign exchange control is administered by the Central Bank. The Monetary Board establishes import quotas, which are administered and controlled by the Foreign Exchange Department of the Central Bank.

Prescription of Currency

Imports from the United States that are financed by the U.S. Agency for International Development must be effected under special letters of credit. Certain import commissions must be paid in local currency only. Settlements with Colombia and Venezuela may be effected through special accounts established under reciprocal credit agreements;1 payments for oil imports, however, may not be made through these accounts. Import payments in currencies other than the U.S. dollar must be made through a letter of credit. Otherwise no obligations are imposed on importers, exporters, or other residents in respect of the method to be followed or the currency to be used for payments to or from nonresidents.

Imports and Import Payments

Imports of some 80 categories of goods, including automobiles with an f.o.b. value in excess of RD$2,000, are prohibited. Imports of certain other commodities are restricted by quotas. All commodities are exempt from quota and prohibition when they are financed with the importer’s own foreign exchange; such imports are also exempt from prepayment of import taxes and surcharges. Licensing controls are maintained over a few commodities, however, for reasons of health or security. The import controls involve exchange allocations. All payments for imports require the approval of the Central Bank, except those made with the importer’s own exchange. Insurance on imports must be effected with companies authorized to operate in the Dominican Republic.

Commodities subject to quantitative restrictions can be imported and settled with official exchange only against a fully prepaid letter of credit. The same requirement applies to some other goods that are not subject to quantitative restrictions, including many types of smoked, dried, or canned fish, alcoholic beverages, Venetian blinds, some perfumes and cosmetics, electric ovens, freezers and refrigerators, record players, and certain construction materials. Some 20 other import items not subject to restrictions must be covered by regular letters of credit. The commercial banks transmit to the Central Bank each day a list of applications for all imports against letters of credit. After the Central Bank approves an application, the letter of credit may be opened by the commercial bank. For prepaid letters of credit the Central Bank debits the account of the commercial banks for the peso equivalent at the time of approval of the letter of credit. The peso equivalent of other letters of credit is forwarded to the Central Bank after they have been negotiated and exchange is requested by the commercial bank. In principle, exchange for import payments is made available within not more than five working days from the receipt of the application.

Most imports are subject to an internal consumption tax of 20 per cent ad valorem. Virtually all imports are also subject to customs surcharges (impuestos internos) ranging from 10 per cent to 200 per cent of the f.o.b. value; for most imports, however, they are 56.6 per cent. Imports of agricultural and industrial machinery and equipment and spare parts are subject to a single import tax (including customs duties) of 10 per cent.

Payments for Invisibles

All payments for invisibles require the prior approval of the Central Bank, which is given only after careful examination of the application and if the transaction is considered genuine. The allocation of foreign exchange for travel and for insurance premiums is suspended. Allowances for family remittances and medical expenses are rarely granted. Residents are not prevented, however, from purchasing exchange for travel purposes and personal remittances in the parallel market. Airline tickets are subject to a tax of 15 per cent when the price of the ticket is over RD$200 or from RD$5 to RD$25 when the price is RD$200 or less.

Nonresidents working in the Dominican Republic may remit abroad for any purpose up to 60 per cent of their salaries. For students pursuing approved courses, exchange requests for monthly maintenance allowances are approved up to US$200 for studies in Latin America, Puerto Rico, and Spain, and up to US$230 for studies in the United States (except Puerto Rico), Canada, and other European countries. Exchange is also sold for remittances to authorized students to meet expenses for tuition, books, and other fees.

Applications for exchange for contractual payments, such as interest and amortization payments on loans registered with the Central Bank, are approved in conformity with the terms of the contract. Transfers of profits and dividends are permitted only in respect of foreign investments that have been registered in the Central Bank and cannot exceed 18 per cent a year of the net value of the original and any additional investment, including reinvested profits. The Monetary Board, however, is empowered to authorize remittances in excess of 18 per cent when investments are deemed beneficial to the Dominican economy. Dividends remitted or credited to nonresidents are subject to a tax of 18 per cent.

In principle, exchange for payments for invisibles is made available within five days from receipt of the application.

Travelers are not permitted to take with them any domestic currency.

Exports and Export Proceeds

Export licenses are required for sugar, in connection with the operation of export quotas established under the International Sugar Agreement, and for coffee, cocoa, and tobacco. Within two working days of receiving payment, exporters of Dominican products must surrender through the commercial banks to the Central Bank foreign exchange equal to 100 per cent of the f.o.b. or c.i.f. value of their exports. For the purpose of exchange surrender, declared export prices must equal or exceed the minimum export prices published by the Central Bank. Exempt from the exchange surrender requirements are foreign mining companies, and firms operating in industrial free zones, which are only required to convert sufficient foreign exchange to cover local costs and taxes. All exports of sugar and sugar by-products are subject to prior authorization by the committee consisting of the Minister of Finance, the Governor of the Central Bank, and the Executive Director of the Sugar Institute. Exporters may not extend credit for more than 90 days from the date of embarkation without authorization by the Central Bank.

Proceeds from Invisibles

The foreign exchange proceeds from invisibles are subject to surrender requirements and must be surrendered to the Central Bank through the commercial banks. The import of Dominican banknotes and coins is prohibited.

Capital

There are no restrictions on the inward movement of capital by either residents or nonresidents. Inward capital remittances must be registered with the Central Bank and must be converted into pesos at that Bank. Registered foreign direct investments are eligible for remittances of profits and dividends. Registration is permitted for investments in agriculture, livestock, mining, manufacturing, tourism, transportation and communications, and finance companies. The Monetary Board may, however, permit the registration of other investments when deemed beneficial to the economic development of the country. Registration may cover the value of machinery and equipment, as well as intangible assets such as licenses and patents. Applications for approval of outward capital remittances must be submitted through the commercial banks to the Central Bank. Withdrawals of capital by foreigners leaving the Dominican Republic are authorized in reasonable amounts, sometimes with provision for the transfer to be effected in annual installments. Applications by residents to transfer capital abroad to make portfolio investments, purchase real estate, etc., are not normally approved.

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 1973

January 11. Monetary Board Resolution No. 2 approved the participation of the Dominican Republic in the LAFTA multilateral compensation system, retroactive to January 1, 1973.

February 16. Following the announcement that the U.S. dollar was being devalued, a central rate of RD$1 = US$1 was established. The effective parity relationship for the U.S. dollar remained unchanged.

February 20. Import payments in currencies other than the U.S. dollar henceforth could be made only on a letter of credit basis.

March 15. The Central Bank announced that all commercial arrears had been eliminated.

April 10. Imports requiring a fully prepaid letter of credit ceased to be subject to prepayment of 80 per cent of import duties and surcharges.

October 27. The par value was changed from 0.818513 gram to 0.736662 gram of fine gold per Dominican peso. The new par value corresponded to the central rate. The effective parity relationship for the U.S. dollar remained unchanged at RD$1 = US$1.

December 20. Monetary Board Resolution No. 10 extended the system of import controls until December 31, 1974.

Ecuador

Exchange Rate System

The par value is 0.0355468 gram of fine gold per Ecuadoran Sucre, corresponding to S/ 25.00 = SDR 1. A central rate of S/ 25.00 = US$1 has been established, corresponding to 0.0294665 gram of fine gold per sucre or S/ 30.1587 = SDR 1.

There are two exchange markets. In the official market the Central Bank maintains rates of S/ 24.80 buying, and S/ 24.95 selling, per U.S. dollar, which apply to export proceeds, import payments (except for printed matter and nonmonetary gold), certain invisible and capital transactions, and all transactions by the Government or public entities; however, the exchange transactions of the private petroleum companies must be conducted with the Central Bank, at S/ 25.00 = US$1, subject to an exchange tax of 1 per cent, buying and selling. All other transactions take place in a free market where the rate fluctuates according to supply and demand but in which the Central Bank intervenes in order to maintain the rate within the margins applicable to the official rate. Transactions eligible for the free market may alternatively be effected at the Central Bank, at its official market buying and selling rates.

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

Administration of Control

The Monetary Board has authority to shift transactions between the two exchange markets and has extensive powers with respect to import policy. The official exchange market is under the control and supervision of the Central Bank of Ecuador. The Central Bank also issues import and export licenses and registers foreign capital. Exports of coffee to “new markets,” however, require the prior authorization of the Institute of Foreign Trade and Integration. Imports which enter as part of a direct investment and imports by foreign enterprises which have contracts with the Government require prior authorization by the Institute of Foreign Trade and Integration and by the Finance Ministry, respectively. However, all applications for import licenses by industrial firms must be submitted to the Central Bank.

Prescription of Currency

Most settlements with Eastern Germany, Hungary, Poland, and Romania must take place through bilateral accounts. Payments between Ecuador and Bolivia, Brazil, Colombia, Mexico, and Peru must be made through accounts maintained with each other by the Central Bank of Ecuador and the other central banks concerned, within the framework of the LAFTA multilateral clearing system. 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 essential and semiessential goods, and List II, consisting of less essential and luxury goods. All goods not included in these two lists are prohibited. Prior import licenses are required for all permitted imports, with the exceptions specified below. Books, newspapers, periodicals, and printed or recorded music may be imported freely without a license or consular invoice; payments have to be made through the free market. Medicine and spare parts for machinery and automotive vehicles are free of license when valued at US$500 c.i.f. or less (US$500 f.o.b. or less for goods shipped by air). A few goods may be imported only from LAFTA countries, and some only from Paraguay; with these exceptions, import licenses are issued freely irrespective of the origin of the goods, provided that the appropriate import taxes have been paid, that the required prepayments of 80 per cent of import duties have been made, and that a certificate is submitted showing that the insurance has been arranged in Ecuador. The licenses automatically entitle the holders to obtain exchange at the official rate to cover the c. & f. value of the imports upon presentation of the shipping documents; advance payments for imports are permitted. Import licenses which do not entitle the importer to foreign exchange at the official rate (“no exchange licenses” or permisos de importación no reembolsables) may be issued for goods financed from the proceeds of certain international loans, provided that these have been registered at the Central Bank, but such licenses are not required to import the goods concerned.

The Monetary Board is authorized to shift items between Lists I and II and to prohibit the import of goods or lift import prohibitions when the economic situation of the country and the balance of payments situation so require.

Imports of crude petroleum receive a subsidy of S/ 7.07 per U.S. dollar invoiced on import documents and are exempt from all fiscal charges. The subsidy is received in the form of a tax credit certificate issued by the Central Bank on the basis of documentation approved by the Ministry of Natural Resources and Tourism that the import was effected, without relation to the import payment.

Most imports are subject to a tax of 4 per cent levied on commercial transactions. Furthermore, List I goods are subject to a tax of 1 per cent of the c.i.f. value and List II goods to a tax of 6 per cent of the c.i.f. value; the latter tax is reduced to 1 per cent for imports financed with foreign credit and for imports for which the Central Bank is not obliged to provide foreign exchange.

Payments for Invisibles

Exchange for payments in respect of certain current invisibles may be obtained from the Central Bank at the official rate. These invisibles are in principle limited to interest on foreign loans that have been registered at the Central Bank, dividends and profits on foreign investments registered at the Central Bank, payments by the Government and public entities, and the necessary expenses of Ecuadorans studying at universities abroad. Interest payments at the official rate may not exceed 7½ per cent a year and remittances of dividends and profits at the official rate may not exceed 14 per cent of the registered value of the investment. With respect to loans to petroleum companies only, interest, commission, and other financial charges on foreign loans may not exceed the equivalent of 2 per cent above the rates of interest of the creditor country; moreover, annual amortization may not exceed the sum of undistributed profits, depreciation of fixed assets and liquidated assets, and any variation in working capital. There are also limits on student allowances eligible for the official rate; these range from US$300 to US$450 a month, depending on the type of study and on the country involved.

All other payments for current invisibles, including travel expenditure, must be settled in the free market and are unrestricted. There are no limitations on the amounts of domestic and foreign banknotes that travelers may take out. Residents traveling abroad by air must pay a tax of S/ 600 for each exit visa. Airline tickets for foreign travel are taxed at 10 per cent, while tickets for travel by ship are subject to tax at the rate of 8 per cent for departure from Ecuador and 4 per cent for the return trip to Ecuador.

Exports and Export Proceeds

All exports require licenses to ensure, among other things, the full surrender of the exchange proceeds to the Central Bank; licenses are issued freely, subject to guarantee. No surrender is required for exports effected under licensed barter transactions. Reference prices are established for exports of bananas to help to ensure full surrender of the exchange proceeds. Reference prices are also established for exports of crude petroleum; these serve as the basis for the calculation of taxes, royalties, etc. Certain exports are subject to export taxes, payable at the time the export license is received. An export tax of 15 per cent is levied on coffee beans, cocoa beans, sugar, and crude petroleum. Certain exports exempted from the ad valorem export taxes receive a subsidy based on the f.o.b. value. The subsidy is received in the form of a tax credit certificate (certificado de abono tributario) on the basis of customs documentation. There are other export taxes in addition to those mentioned above.1

Proceeds from Invisibles

Receipts from specified invisibles have to be sold to the Central Bank at the official rate. All other receipts, including those from travelers, may be sold in the free market. There are no limitations on the amounts of domestic and foreign banknotes that travelers may bring in.

Capital

Capital may freely enter or leave the country through the free market. Outward transfers through the official market are restricted.

All foreign investments in Ecuador must be registered with the Central Bank in order to be entitled to foreign exchange at the official rate for remittances of interest, profits, dividends, and amortization; new investments require the prior authorization of the Institute of Foreign Trade and Integration. In the case of investment for which exchange was sold to cover local costs, the investor must document that the exchange was sold to the Central Bank. For foreign capital entering in the form of machinery and equipment, the investor must document that the merchandise has been cleared through customs and that it took the form of a “nonreimbursable” import. Additionally, the investor must present to the Central Bank the certification from the appropriate ministry (Finance, Natural Resources and Tourism, or Production) that the declared value conforms to the actual value of the machinery and equipment. The Exchange Department of the Central Bank must submit a recommendation to the General Management of the Central Bank within 30 days from receipt of the request for registration and all pertinent documentation. Thereafter, taking into account the interests of the Ecuadoran economy and priorities established in the country’s development plans, the General Management of the Central Bank must approve or deny the registration within an additional 30 days. In certain cases, where all documentation has been submitted, the Central Bank can provisionally register the investment for a period of up to 90 days.

Similarly, loans in foreign exchange granted to the Government or to official entities must be registered with the Exchange Department of the Central Bank; for private loans registration is required for statistical purposes. In the case of suppliers’ credits and similar credit for financing the importation of merchandise, no special registration procedure is required; all the pertinent information on terms of payment, etc., is contained in the import license, and that provides the basis for purchase of exchange for remittance of interest, charges, and scheduled amortization. Foreign nationals are prohibited from owning rural properties and from owning or operating mining industries within 30 miles of Ecuador’s coastline or borders.

Foreign exchange at the official rate may be obtained for the withdrawal of foreign investment from Ecuador five years after the date of registration, on the basis of a schedule agreed by the Central Bank. Profits accumulated in previous years may be repatriated also on the basis of a schedule agreed by the Central Bank for investments which have completed the registration procedure. For investments registered on a provisional basis, no profits may be repatriated through the official market. Profit remittances may not exceed the limit (14 per cent a year) specified in the Foreign Investment Code of the Andean Pact.

Residents who are private individuals are not granted official foreign exchange to purchase securities or real estate abroad. Commercial banks are authorized to maintain accounts with correspondent banks abroad in convertible currencies.

Gold

Residents other than the Central Bank may export gold only in the form of filigree work whose gold content represents not more than 25 per cent of its market value. Imports of monetary gold are reserved for the Central Bank; they are treated as List I imports, payable through the official market. Imports of nonmonetary gold in bars may be made by the Central Bank or by any other resident and are treated as List I imports, payable through the free market. Gold bars are exempt from import duty, while that on semiworked gold is 70 per cent ad valorem.

Changes during 1973

January 1. Industrial firms had to submit all applications for import licenses to the Central Bank, as well as all applications for exemptions or privileges under the Industrial Development Law. (Decree No. 1103 of September 27, 1972.)

January 1. The bilateral payments agreement with Bulgaria became inoperative. It was formally terminated on January 19.

January 9. Decree No. 13 of the Institute of Foreign Trade and Integration provided that coffee exports to any destination would be subject to minimum prices to be established later.

January 10. Monetary Board Resolution No. 651 stipulated that all new foreign investments must be registered with the Central Bank after authorization of the investment had been obtained from the Institute of Foreign Trade and Integration. Existing foreign investments had to be registered within 90 days.

January 16. Decree No. 04-J created the National Fisheries Corporation.

February 1. Monetary Board Resolution No. 654 of January 31 provided that import items included in List I be consolidated into new Categories A and B, with the former consisting of the old Categories A and B and the latter corresponding to the old Category C. The advance import deposit requirements were eliminated for the new Category A (previously 10 per cent or 20 per cent) and reduced from 30 per cent to 10 per cent for the new Category B. There were no changes with respect to List II.

February 6. Decree No. 111 created a Committee for External Credit.

February 14. Decree No. 146 provided that the certificados de abono tributario held by petroleum companies could be used to pay taxes, subject to a limit of 4.2 per cent a month of the total amounts individually held.

February 26. Following the announcement that the U.S. dollar was being devalued, Ecuador established a central rate of S/ 25.00 = US$1. The effective parity relationship for the U.S. dollar remained unchanged. No transactions were shifted from one exchange market to the other. The 1 per cent tax on sales and purchases of exchange in the free market was abolished. In the official market, Central Bank purchases and sales of exchange from and to petroleum companies took place at S/ 25.00 per US$1, plus or minus an exchange tax of 1 per cent, while the Central Bank set buying and selling rates of S/ 24.80 and S/ 24.95 per US$1 for all other official market transactions. In the free market, where the Central Bank would limit fluctuations to within 1 per cent either side of the central rate, the initial buying and selling rates were S/ 24.50 and S/ 24.60 per US$1. These measures were equivalent to a de facto unification of the dual exchange market. The Central Bank subsequently adopted an “open window” policy under which it stood ready to effect at official market buying and selling rates any transactions that formally were eligible for the free market.

February 26. Decree No. 185 imposed tariff levies of 1 per cent and 6 per cent on imports of goods on List I and List II, respectively.

February 26. Monetary Board Resolution No. 655 of February 22 abolished the advance import deposit requirements. The final deposit rates had been zero or 10 per cent on List I goods and 100 per cent to 130 per cent on List II goods.

March 12. Monetary Board Resolution No. 659 revoked Monetary Board Resolution No. 509 of February 2,1968 and thus permitted payments for imports on credit terms to be made prior to the due date.

March 18. Resolution No. 18 of the Ministry of Foreign Trade and Industry established minimum prices for coffee exports to traditional markets.

April 9. Decree No. 347 reduced import duties on 150 commodities, including wheat, medicines and medical equipment, certain agricultural machinery and parts, and various intermediate goods used in agriculture and industry.

April 13. Decree No. 421-A empowered the Central Bank to invest up to 10 per cent of the country’s international reserves in foreign treasury bills and similar money market instruments.

April 26. Decree No. 439 regulated the reference prices for petroleum exports.

May 2. Decree No. 479 established that the 6 per cent charge on List II imports consisted of a 1 per cent charge applicable to all imports, plus a 5 per cent tax on luxury imports. No exemption could be granted from the 1 per cent element, except for imports financed with foreign credits and imports for which the Central Bank was not obliged to supply foreign exchange.

May 15. Decree No. 528 established new reference prices for petroleum exports.

May 16. Monetary Board Resolution No. 666 limited to 180 days the maximum term of credit for the payment of imports on List II.

May 22. Supreme Decree No. 565 established rules for imports and exports of hydrocarbons. On the same date, implementing rules were issued by Monetary Board Resolution No. 667.

June 13. Monetary Board Resolution No. 673 extended for 90 days the deadline for registering foreign investments.

June 25. Decree No. 745 provided that tax credit certificates (CATs) and securities could only be sold on a national stock exchange.

July 1. The export tax on bananas was reduced from 8 per cent to 6 per cent until June 30, 1974, by Decree No. 283 of July 13.

August 22. Monetary Board Resolution No. 679 eliminated the ceiling on the foreign exchange holdings of commercial banks.

August 29. Monetary Board Resolution No. 682 provided that exporting firms contracting for future exports must notify the Central Bank within 8 days and register the relevant documents within 30 days of signing. The goods must be shipped no later than 90 days after the date of notification, except for nonperishable products or products not quoted in international commodity exchanges, for which the limit was 12 months.

October 4. Decree No. 859 exempted wheat imports from all import duties.

October 24. Monetary Board Resolution No. 686 extended for a further 90 days the deadline for registering foreign capital investments.

October 30. Exports of coffee to nontraditional markets ceased to be exempt from the 15 per cent export tax.

November 27. Decree No. 1315 reduced the mandatory prepayment of import duties from 100 per cent to 80 per cent; it also raised the amount of imports of medicines and spare parts for machinery and automotive vehicles that could be imported free of import license from US$100 to US$500 c.i.f. (US$500 f.o.b. for goods shipped by air).

December 20. Monetary Board Resolution No. 700 provided that for goods imported in compensation for exports of Gros Michel bananas to nontraditional markets, credit terms of up to 18 months could be accepted.

Egypt

Exchange Rate System

On September 18,1949, a par value for the Egyptian Pound was established by the Arab Republic of Egypt with the Fund. However, exchange transactions no longer take place at rates based on that par value. Most exchange transactions take place at rates based on the official rate of LE 1 = US$2.55555. The Central Bank of Egypt’s official buying and selling rates for the U.S. dollar on December 31, 1973 were LE 0.391305 and LE 0.393652, respectively. An exchange tax of 5 per cent is applied to most outward remittances of invisibles and capital at the official rate.

An exchange rate of US$1.70 buying, and US$1.65 selling, per LE 1, is applicable to transactions in specified convertible currencies1 in a parallel exchange market conducted through authorized commercial banks where the buying and selling rates are LE 0.5869 and LE 0.6065, per US$1.

Banks require prior exchange control approval to deal among themselves in foreign currencies or to engage in arbitrage transactions abroad; such approval is not required, however, for transactions effected through the parallel exchange market or for balances held in specified foreign currency accounts.

Administration of Control

Exchange control is supervised by a Supreme Committee for Foreign Exchange, which is set up by the Minister of Finance, Economy, and Foreign Trade. The exchange control laws, ministerial orders, decree-laws, instructions of the Minister of Finance, Economy, and Foreign Trade, and decisions of the Supreme Committee are carried out by a Director of Exchange Operations appointed by the Minister. A foreign exchange budget is established annually. Exchange control is implemented under the supervision and instructions of the Undersecretary for Finance, Economy, and Foreign Trade in Charge of Exchange Operations and the Foreign Exchange Budget and the Director of Exchange Operations. The technical work of exchange control is performed by the Exchange Control Administration attached to the afore-mentioned Undersecretary. Banks are authorized to execute foreign exchange transactions, within the framework of a general authorization, without need to obtain specific exchange control approval. The General Control Authority for Exports and Imports supervises imports and exports; it also issues import licenses. Most imports and exports are carried out by public sector companies.

Prescription of Currency

Payments for imports normally may be made only to the country of origin. Payments to residents of countries with which Egypt does not have bilateral payments agreements may be made in the currency of the payee’s country when that currency is available; in a convertible currency;1 in Egyptian pounds to the credit of the appropriate nonresident account; or in any other manner permitted by the Exchange Control Administration. Receipts other than those in respect of raw cotton exports may be accepted in the currency of the payor’s country, if it is a currency acceptable to the Central Bank; in any convertible currency; in Egyptian pounds to the debit of an appropriate nonresident account; or in any other manner permitted by the Exchange Control Administration. The proceeds from exports of raw cotton to convertible currency countries must be received in deutsche mark, French francs, Japanese yen, or Swiss francs, or, if the importer resides in the United Kingdom or the United States, in sterling or U.S. dollars, respectively.

Settlements with countries with which Egypt has payments agreements are made according to the terms of those agreements.2 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 must be paid in Egyptian pounds by debiting a Shipping Account No. 1. Balances on this type of account may be created by selling a convertible currency to an authorized bank in Egypt or by debiting a Free Nonresident Account.

Nonresident Accounts

In addition to the special accounts related to the bilateral payments agreements of Egypt or to the indemnity agreements concluded with certain countries, there are three main types of nonresident accounts in Egyptian pounds: Free Nonresident Accounts, Nonresident C Accounts, and Nonresident D Accounts.

Free Nonresident Accounts may be opened in the name of any nonresident, irrespective of his country of residence, and by international organizations with headquarters in Egypt. They may be credited with proceeds from the sale of any convertible currency that has been transferred from abroad; with transfers from other Free Nonresident Accounts; with interest on the accounts; and with the Egyptian pound equivalent of any transfer authorized in convertible currency. They may be debited for payments due to residents; for transfers to other Free Nonresident Accounts or Nonresident C or D Accounts; and for payments abroad in any convertible currency.

Nonresident C Accounts may also be opened in the name of any nonresident, irrespective of his country of residence. They may be credited with proceeds from the sale of any convertible currency that has been transferred from abroad; with transfers from Free Nonresident Accounts or other Nonresident C Accounts; and with any amounts authorized to be credited to these accounts by the Exchange Control Administration. They may be debited, subject to exchange control approval, for payments due to residents (except for exports, Suez Canal dues, and ships’ disbursements); for transfers to other Nonresident C Accounts; for transfers to Nonresident D Accounts; and for payments abroad in convertible currencies.

Nonresident D Accounts may be opened in the name of any resident of a payments agreement country (see footnote 2). The account must be designated by the name of the partner country concerned, and transfers from the account of one country to that of any other country may not be made without exchange control authorization. These accounts may be credited with the proceeds from the sale of any convertible currency that has been transferred from abroad; with transfers from a Free Nonresident Account and—provided that exchange control authorization is obtained—with transfers from a Nonresident C Account; with transfers from other Nonresident D Accounts of the same nationality; and with any sum authorized to be credited to the account. They may be debited for payments due to residents, except for exports, Suez Canal dues, and ships’ disbursements, and—provided that exchange control authorization is obtained—for transfers to other Nonresident D Accounts and for payments to the country in whose name the account is designated.

There are also blocked accounts, to which may be credited any payment to a nonresident not remittable under the exchange control regulations. Transfers between blocked accounts require prior approval. These accounts may be debited for amounts up to LE 1,000 a year for living expenses of the account holder or his family in Egypt. They may also be debited, subject to prior approval, for investments in Egyptian Government loans or in registered shares in nominative form of companies established in Egypt, and for subscriptions to increases in capital of Egyptian companies in which the account holder is already a shareholder. Income derived from such investments may be remitted to the nonresident beneficiary. Blocked accounts held by juridical persons may be debited for amounts not exceeding LE 1,000 a year for settlement of obligations due to the Egyptian authorities, payments to residents for services rendered, and expenses incurred in connection with the activities or residence of the holder’s employees or representatives in Egypt.

All accounts held by residents of Rhodesia also are blocked; no transactions on these accounts may take place without prior approval.

In addition, there are certain types of foreign currency accounts that may be held by nonresidents or persons who for certain exchange control purposes are treated as nonresidents. These foreign currency accounts are of four types, as indicated below.

External Accounts of Nonresident Aliens may be opened in the name of nonresident foreigners. They may be credited with convertible currencies transferred from abroad; foreign currency transferred from other accounts of the same type; and bank interest on balances in these accounts. They may be debited for amounts of foreign exchange sold to the Central Bank of Egypt at the official exchange rate to cover local payments; transfers to other accounts of the same type; and transfers abroad in any convertible currency for the benefit of nonresidents (or, if the account is held by a juridical person, for the benefit of residents who are employed by the holder of the account).

External Accounts of Resident Aliens may be opened in the name of foreign residents who for exchange control purposes are treated as nonresidents in respect of income they receive from abroad. They may be credited only with convertible currencies transferred from abroad and with bank interest on balances in these accounts. They may be debited only for amounts sold at the official exchange rate to the Central Bank of Egypt to cover local payments and for transfers abroad in any convertible currency for the benefit of the account holder, his parents, wife, or children.

External Accounts of Egyptian Citizens may be opened in the name of citizens who for exchange control purposes are treated as nonresidents in respect of income they receive abroad, such as emigrants and Egyptians working abroad for over five years. They may be credited with convertible currencies transferred from abroad and with bank interest on balances in these accounts. They may be debited for transfers abroad in any convertible currency for the benefit of the account holder, his parents, wife, or children; and for sales of foreign currency for Egyptian pounds to the bank at which the account is held, at the parallel market rate.

Foreign Currency Resident Accounts of Egyptian Citizens may be opened for Egyptians working abroad or performing services in Egypt for foreign persons or firms. They may be credited with convertible currencies transferred from abroad that represent their foreign currency income after deduction of the prescribed percentages that must be repatriated and surrendered at the official rate; bankers checks, travelers checks, and letters of credit denominated in convertible currency; foreign banknotes; and bank interest. They may be debited for transfers abroad in the name of the account holder while he is abroad; travel and living expenses abroad of the account holder, his parents, wife, or children; transfers abroad for the benefit of the account holder to cover personal expenses; and sales of foreign currency for Egyptian pounds to the bank at which the account is held, at the parallel market rate.

Imports and Import Payments

Imports of certain goods from any source, and all imports from Israel, Rhodesia, and South Africa, are prohibited. No exchange is allocated in practice for many goods that are considered nonessential or that are also produced locally. Certain commodities, mostly when imported by the private sector, are financed at the parallel market rate.

Most imports are made by publicly owned commercial companies affiliated with the Egyptian General Trade Organization. Some imports may also be made by certain industrial and other public sector establishments. Private sector imports are handled by a Foreign Trade Company.

A Supreme Council for the Planning of Foreign Trade is entrusted with establishing long-term policy for exports and imports, controlling the annual export and import plan, and supervising the execution of the foreign exchange budget. The ministries concerned are responsible for setting priorities regarding imports and their timing, within the framework of quarterly foreign exchange programs. Foreign Trade Committees in the various ministries consider import and export offers for the goods within their competence, in the light of specifications, prices, delivery dates, and means of payment. Approval by a foreign trade committee constitutes the necessary authorization for the implementation of import transactions.

For purposes of administration, the economy is divided into several sectors (agricultural, industrial, transportation, etc.). The annual foreign exchange budget provides for a specific quota for each sector, and the authorities in charge of the sector decide upon the goods to be imported within that quota. In drawing up this budget, an estimate is made first of the country’s export proceeds and its earnings from invisibles, as well as the expected availability of foreign loans and other credit facilities. Allowance is then made for the commitments falling due during the fiscal year in respect of foreign debt service and other obligations, as well as payments for invisibles. The remaining resources in convertible and bilateral currencies are allocated to the various sectors of the economy in accordance with the priorities given to the import requirements of each. An External Financing Committee has been established in accordance with Ministerial Decree No. 607 of 1971. It coordinates foreign exchange requirements and available resources by drawing up quarterly programs for the implementation of the annual foreign exchange budget.

By virtue of Order No. 478 of 1973, all goods may be imported without an import permit; imports are regulated by exchange allocations rather than by import licenses.

A development tax of 10 per cent of the c.i.f. value is payable on imports; the tax is 5 per cent for certain highly essential foodstuffs imported by the Ministry of Supply. A statistical tax of 1 per cent of the c.i.f. value is payable on all imports except wheat.

Payments for Invisibles

Banks are authorized to provide exchange for payments for certain invisibles in accordance with general authorizations and instructions and up to specific quotas. Private travel abroad normally requires an exit visa (except travel to the Libyan Arab Republic or the Syrian Arab Republic). Egyptian nationals who have deposited earnings from their work abroad, or from services performed for nonresidents, in specified foreign currency accounts, may use this foreign exchange freely for any travel expenses for themselves, their wives and children, or their parents. Other residents may purchase, through local banks and up to specified amounts, the foreign exchange required for travel expenses and certain other purposes, at the parallel market rate.

An exchange tax of 5 per cent is applied to all payments for invisibles at the official rate, except students’ remittances, government payments, and transfers of funds for pilgrimages.

Travelers may not export Egyptian pound banknotes. Egyptian nationals working abroad and returning to their place of work may take with them any remaining foreign exchange which they had brought in and declared; foreign travelers leaving Egypt may take out only the balance after deduction of the equivalent of £ stg. 5 for each night spent in Egypt. Residents may not take out foreign exchange in excess of the equivalent of £ stg. 30 without specific permission.

Exports and Export Proceeds

Apart from exports to Israel, Rhodesia, and South Africa, which are prohibited, and commodities required for the national economy, whose export may be restricted, exports may be made free of license. Exports of many products are organized and supervised by Foreign Trade Committees. Cotton, rice, and petroleum are exported by the public sector only. The proceeds in specified convertible currencies from exports other than raw cotton, cotton yarn and cotton textiles, rice, petroleum and petroleum products, onions, garlic, potatoes, cement, and re-exported foreign goods, may be retained for six months in domestic foreign currency accounts. Balances in these accounts may be used by the holder to make payments for certain imports or current invisibles or may be sold to banks at the parallel market rate.

Export proceeds must be repatriated within three months from the date of shipment of the goods. Proceeds from exports to payments agreement countries must be obtained in accordance with the provisions of the relevant agreement. Some exports to specified countries may be settled through indemnity accounts in Egyptian pounds.

Proceeds from Invisibles

The parallel market rate is applied to foreign exchange remitted by Egyptians abroad and sold to a bank, to foreign exchange remitted by citizens of Arab countries for purposes other than investment, and to foreign currency sold by tourists. This facility is applicable to specified convertible currencies only.

Physical persons who are considered nonresidents (including emigrants of Egyptian nationality, Egyptian nationals who have been resident abroad for at least five consecutive calendar years, and foreigners who reside in Egypt) are not obliged to transfer to Egypt any part of their foreign earnings. They may retain these earnings in foreign currency accounts. Egyptian nationals who are working abroad for a period of less than five calendar years or who perform services for nonresidents are obliged to repatriate fixed percentages of their foreign income and may retain the balance in foreign currency accounts. With these exceptions, all persons and legal entities in Egypt are obliged to offer to authorized banks at the rate of exchange quoted by the Central Bank, within one month from the date of their collection abroad, all proceeds in foreign currencies derived from invisibles. Suez Canal dues must be received in Egyptian pounds from a Shipping Account No. 1, which may be credited only with the proceeds from sales of convertible currencies or by transfers from a Free Nonresident Account. Certain travel in Egypt by non residents may be financed from Nonresident C Accounts, or, under indemnity agreements with specified countries, from Nonresident T Accounts.

Persons arriving in Egypt from abroad may not import Egyptian pound banknotes but are permitted to bring in, and to use locally, unlimited amounts in foreign exchange, subject to customs declaration. Foreign travelers must convert into Egyptian currency the equivalent of £ stg. 30 to obtain an entry visa.

Capital

Egyptian nationals who have deposited foreign earnings in specified foreign currency accounts in Egyptian banks may use this foreign exchange for any purpose, including transfer abroad. With this exception, outward capital transfers by residents are severely restricted. Egyptian emigrants are authorized to transfer funds and/or to take out jewelry and other valuables up to LE 200 a person or LE 500 a family; in addition, they may export freely personal effects and furniture up to LE 200 a person or LE 500 a family. Capital transfers abroad are subject to an exchange tax of 5 per cent.

Nonresidents may purchase freely securities on stock exchanges in Egypt against payment in foreign currencies acceptable to the Central Bank of Egypt or in Egyptian pounds by debiting an appropriate nonresident account. Certain categories of securities may be bought to the debit of blocked accounts (see section on Nonresident Accounts, above). Proceeds from sales of securities held under “nonresident dossier” are credited to blocked accounts. Transfers of securities between nonresidents require prior approval. Transfers abroad are permitted in respect of (1) securities drawn or matured in accordance with the original terms of issue; (2) the value of life or endowment policies on surrender or at maturity; (3) matured mortgages; and (4) accrued alimony under court orders up to LE 5,000.

An amount not exceeding LE 5,000 a family—irrespective of whether the sum is made up of capital or income—may be released from a family’s assets in Egypt to residents of foreign nationality who acquire nonresident status. Any amount above this limit is credited to a blocked account. Any payment of a capital nature not remittable under the exchange control regulations must be credited to a blocked account. The Foreign Investment Law of September 23, 1971 defines the treatment of new foreign investments. Requests for transfers of profits not covered by this law are considered on an individual basis.

Gold

The monetary authorities and authorized industrial users are allowed to hold or acquire gold in any form. Other residents may only hold and acquire gold coins and gold jewelry in Egypt. There is a free market for gold coins in Cairo. With the exception of monetary gold, imports and exports of gold in any form other than jewelry are restricted.

Changes during 1973

January 10. The incentive exchange rate was changed from LE 0.65 buying and LE 0.68 selling, per US$1, to LE 0.66 buying and LE 0.70 selling, per US$1.

February 26. Following the announcement that the U.S. dollar was being devalued, Egypt maintained its official exchange rate in terms of gold and in terms of U.S. dollars and changed the official rate to LE 1 = US$2.55555. Buying and selling rates for the U.S. dollar were set at US$2.55555 and US$2.54031, respectively, per LE 1, or LE 0.391305 buying, and LE 0.393652 selling, per US$1. Previously, the official exchange rate was LE 1 = US$2.30.

February 26. The incentive exchange rate was changed to LE 0.62 buying and LE 0.65 selling, per US$1.

February. The bilateral payments arrangement with Cuba was terminated.

September 1. Order No. 477 introduced a new parallel market arrangement for specified transactions when settled in specified convertible currencies. Transactions in the parallel market took place through the commercial banks at fixed rates resulting from the application of premiums (which could be changed by the Central Bank) to the official buying and selling rates; these premiums were 50 per cent (buying) and 55 per cent (selling) and were applied to the official rates of LE 0.391305 and LE 0.393652 per US$1, respectively. The resulting effective rate for the U.S. dollar was LE 0.6065 selling, and LE 0.5869 buying. The parallel market rates were applicable to all means of payment, including both banknotes and banking transfers. All export subsidies were discontinued for exports qualifying for the parallel market.

The following foreign exchange earnings were channeled through the parallel market: (1) savings and private remittances of Egyptians abroad; (2) receipts from foreign tourists (individual and group travel, but not airline or shipping fares earned by Egyptian transport companies); (3) funds transferred by citizens of Arab countries for purposes other than investment; (4) proceeds from exports of mostly nontraditional commodities (i.e., exports other than raw cotton, cotton yarn and textiles, rice, petroleum and petroleum products, onions, garlic, potatoes, cement, and re-exports of foreign goods); and (5) 50 per cent of convertible currency proceeds in excess of annual export targets for cotton yarn and cotton textiles. In addition, the Minister of Finance, Economy, and Foreign Trade was empowered to allocate to the parallel market foreign exchange received from transactions effected in the official market.

The following outward payments could be made through the parallel market: (1) all permitted payments, on the basis of the existing exchange control regulations, for current invisibles by private individuals and the rest of the private sector, including travel expenses; (2) payments for private sector imports of production requirements, machinery, instruments, and spare parts for industrial, agricultural, professional, and handicraft production; (3) payments for imports by the public and private sectors of the tourist industry of machinery, instruments, and spare parts; (4) payments for other current invisibles and production requirements, when financed from the payor’s own receipts from exports or tourism; and (5) payments for any other import transactions that might be approved by the Ministry of Finance, Economy, and Foreign Trade, such as luxury items needed in the tourist sector, or machinery, etc., needed by the private sector or the tourist sector and imported by a Foreign Trade Company to meet overall domestic requirements.

Recipients of foreign exchange eligible for the parallel market could retain such exchange for six months, provided it was deposited with an authorized commercial bank, but they could also sell it to a commercial bank at the parallel rate; at the end of this period any unutilized exchange had to be sold to the bank concerned at the parallel rate of exchange. Dealings in the parallel exchange market were exempt from authorization or exchange license. Applications for permission to import under the new arrangements had to be submitted to the Misr Company for Export and Import. The approved application then was to be presented to the commercial bank selling the foreign exchange; the latter, however, could adjust its sales of foreign exchange in light of the availability of foreign exchange in the parallel market. The imports concerned had to be effected by the Misr Company for Export and Import, but private individuals could make direct imports valued at up to LE 200.

September 1. Order No. 478 revised certain import regulations, including those for personal imports by Egyptian citizens returning from abroad and by foreign nationals residing in Egypt.

September 24. Foreign buyers of raw cotton were required to guarantee 40 per cent of the purchase price when placing orders. Guarantees in U.S. dollars and sterling were accepted only from U.S. and U.K. importers. Importers in other countries had to deposit French francs, deutsche mark, Japanese yen, or Swiss francs. Corresponding rules were issued for the invoicing and settlement of cotton exported to the convertible area.

November 1. The 1972 trade agreement with the EEC formally came into effect.

El Salvador

Exchange Rate System

The par value is 0.294665 gram of fine gold per Salvadoran Colón, corresponding to Ȼ 3.01587 = SDR 1 or Ȼ 2.50 = US$1. The rates of the Central Reserve Bank of El Salvador for transactions with the public are Ȼ 2.49 buying, and Ȼ 2.51 selling, per US$1. Exchange transactions by commercial banks with the public take place at or within these limits. A stamp tax of 110 of 1 per cent is applicable to all sales of exchange as well as drafts and other documents embodying a right to exchange; on amounts below Ȼ 100,000 the tax is levied at fixed amounts that may be slightly in excess of 110 of 1 per cent.

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 any directives issued by the Monetary Board, exchange control authority is exercised by the Central Reserve Bank through its Exchange Control Department. Authority to approve certain payments, including most import payments, is delegated to the commercial banks. Exchange licenses for imports must be obtained from the Exchange Control Department. The Central Reserve Bank is also empowered to license exports, but this power has not been exercised. Exports of a number of commodities require licenses issued by the Ministry of Economy or of Agriculture. Exports of coffee are supervised by the Salvadoran Coffee Company and require licenses issued by the Ministry of Finance.

Prescription of Currency

Payments to Costa Rica, Guatemala, Honduras, and Nicaragua in respect of trade and specified invisibles must be settled in the currencies of those countries or in Salvadoran colones through the Cámara de Compensación Centroamericana, a clearinghouse established by the central banks of Central America to foster the process of economic integration of their countries. Payments to Mexico are also settled through the clearinghouse. Otherwise, residents are free to make authorized payments in any currency they choose.

Nonresident Accounts

Accredited diplomatic missions and other foreign institutions or persons established in El Salvador may be authorized to hold nonresident accounts in U.S. dollars with authorized banks, provided that such accounts are credited with foreign exchange received from abroad. Banks also may freely open foreign currency accounts in the names of physical persons (whether of foreign or Salvadoran nationality) who reside abroad. All nonresident accounts may be utilized freely, but the commercial banks must make periodic reports to the Central Reserve Bank of the movements on such accounts. In addition, there are certain facilities for resident accounts in foreign currencies.

Imports and Import Payments

Imports from all countries must be registered with the Central Reserve Bank before orders are placed; orders for imports from countries outside Central America must be approved by the Exchange Control Department. Import licenses are required for 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.

Payments and transfers abroad do not require exchange licenses, provided that the terms of payment do not exceed a certain maximum (counted from the date of entry of the merchandise into a customs warehouse): (1) Imports of raw materials for industry, iron and steel products for the construction industry, various spare parts, greases, and lubricants, when the terms of payment do not exceed three years.1 (2) Imports of staple food products, medicinal products, and medical and surgical supplies, when the terms exceed one year.2 Imports of the following goods are not subject to maximum credit terms: machinery and equipment for agriculture and industry, semiprocessed goods for industrial production, surgical equipment, research and educational equipment, scientific and technical books, fertilizers, and insecticides. A prior import deposit in local currency, equivalent to 100 per cent of the c.i.f. value, is applied to specified nonessential food products, confectionery, alcoholic beverages, tobacco products, perfumes, cosmetics, watches, and jewelry. Small businesses are exempt from this requirement. With one exception noted below, all goods not mentioned previously in this paragraph may be imported only against payments before customs clearance, in which case no exchange control approval is required. Imports from countries outside the Central American Common Market that apply discriminatory restrictions against exports from El Salvador also must be paid for before customs clearance, with the exception of industrial raw materials; for the latter, the Central Reserve Bank approves credit terms of up to three years (medicines from Mexico may be paid for within 90 days).

The commercial banks are authorized to provide exchange for all import payments, provided that the permissible credit terms are not exceeded, and, up to US$100 for each order for noncommercial imports. When suppliers abroad request payment in advance for commodities valued at over US$500, a prior deposit of 10 per cent calculated on the value of the advance payment is required from the importer as a guarantee, but industrial and agricultural firms may be exempted. The deposit requirement is 100 per cent for goods valued at over US$500 that are subject to the 100 per cent prior import deposit; the latter may be used to finance the deposit on the advance payment. These regulations are also applicable to goods imported from other countries in the Central American Common Market. Guarantee deposits are refunded when the goods arrive in the country, provided that payment in full has been made to the exporter. Imports from Panama that are covered by the Free Trade Agreement with that country and imports made by small traders and industrial producers (up to US$500 for each order and up to US$30,000 a year for each importer) are exempt from the ruling exchange control regulations.

Imports originating outside the Central American Common Market are subject to an import surcharge of 30 per cent of the applicable import duty; the surcharge is not applied to certain industrial equipment and raw materials that are duty free by virtue of the Industrial Incentives Law.

Payments for Invisibles

The commercial banks are authorized to sell foreign exchange, without prior authorization from the Central Reserve Bank, for medical and hospital costs abroad, subscriptions to foreign literature, correspondence courses, and memberships in professional clubs and societies and, up to established limits, for travel, study, and family remittances. Payments for other current invisibles and amounts in excess of basic quotas require exchange licenses, which are granted freely for most items, although for certain payments only up to specified limits.

The basic exchange allocation for travel outside the Central American area (interpreted to mean the Central American Common Market) for tourism, business, or health reasons is, free from deposit requirements, the equivalent of US$2,100 a person a trip, on the basis of US$70 a person a day (US$1,050 for children under 16 on the basis of US$35 a day); for amounts in excess of US$2,100 a person a trip, up to an additional US$4,200 (for amounts in excess of US$1,050 up to an additional US$2,100 for children under 16), a 10 per cent guarantee deposit in local currency must be lodged with the Central Reserve Bank, which is released upon the traveler’s return.3 No exchange license is needed to make transfers of up to US$400 a month (up to US$200 a month for children), for up to 12 months, to each Salvadoran with permanent residence abroad; larger amounts may be authorized when the need therefor is shown. Students are allowed US$300 a month, for up to 12 months, in addition to an installation allowance, tuition, and other expenses.

For Salvadoran nationals traveling to Central American countries, the commercial banks have been delegated authority to provide exchange up to the equivalent of US$2,100 (US$1,050 for children under 16) in Costa Rican colones, Honduran lempiras, Nicaraguan córdobas, or Guatemalan quetzales, or a cashier’s check in Salvadoran colones (for payment through the Cámara de Compensación Centroamericana). Requests for larger amounts must be submitted to the Central Reserve Bank. International sea and air passages are subject to a travel tax of 10 per cent of the price of the ticket; official or diplomatic travel is exempt.

Insurance and reinsurance premiums may be paid in foreign exchange, provided that the insurance contract was registered with the Exchange Control Department at the time it took effect. Alternatively, insurance companies may receive premiums in colones and periodically obtain from the Exchange Control Department authorization to purchase the foreign currencies they are obliged to transfer abroad. Foreign currencies derived from insurance or reinsurance contracts must be surrendered to the Central Reserve Bank or to an authorized commercial bank.

Travelers may take out Ȼ 200 in domestic notes and coins. This limit is subject to modification, however, to facilitate border trade with other Central American countries. Nonresident travelers may upon departure reconvert Ȼ 200 into foreign currency.

Exports and Export Proceeds

Export licenses are not required except for a number of foodstuffs and other items of which the authorities wish to ensure an adequate local supply, but the proceeds of all exports must be received through a bank in El Salvador and the foreign exchange must be surrendered to the Central Reserve Bank or an authorized commercial bank. Export transactions must be declared to the Exchange Control Department within 15 days of shipment. The collection terms normally must not exceed 90 days, but longer credit terms may be authorized by the Exchange Control Department. With the exception of sales to “new markets,” exports of coffee 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. Travelers may bring in Ȼ 200 in domestic notes and coins. This limit is subject to modification, however, to facilitate border trade with other Central American countries.

Capital

All exchange receipts resulting from capital transactions must be surrendered. Payments abroad representing capital movements require exchange licenses; such licenses are not granted for resident-owned capital except for investments in Costa Rica, Guatemala, Honduras, and Nicaragua. The entry of capital in the form of foreign investment may 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 enterprises in the sphere of tourism; (2) the remittance of net profits of enterprises engaged in other activities up to a limit of 10 per cent a year of the registered capital (larger amounts may be authorized in special cases by the Ministry of Economy); (3) repatriation of the proceeds from the total or partial liquidation of the enterprise (after payment of taxes) in proportion to the participation of foreign capital in the total capital; (4) remittance of the sales proceeds of shares and other instruments representing investments or participations, including capital gains; and (5) with respect to loans, interest and amortization as determined at the time of registration. In the cases under (3) and (4) there is required, in addition to the approval of the Exchange Control Department, the prior approval of the Ministry of Economy. Foreign investments made in El Salvador prior to June 1, 1961 must also be registered by the Ministry of Economy or the Exchange Control Department in order to enjoy the same facilities.

The Exchange Control Department authorizes, without restriction, the remittance abroad of foreign currency for the payment of interest and amortization on short-term loans from abroad that have been approved by and registered with the Exchange Control Department; foreign loans with a maturity of up to one year must be authorized by the Central Reserve Bank, while foreign loans with a maturity of more than one year must be authorized by the Ministry of Economy. The Central Reserve Bank controls the short-term foreign liabilities of the commercial banks through a system of individual quotas.

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 countries of the Central American Common Market.

Gold

Residents may hold and acquire gold coins in El Salvador 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, 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 not normally granted except 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 a jewelers’ cooperative acting on behalf of its members and other users.

Changes during 1973

February 14. Following the announcement that the U.S. dollar was being devalued, the exchange rate for the U.S. dollar was maintained unchanged at Ȼ 2.50 = US$1.

February 15. The exchange control regulations concerning import payments were liberalized. Commercial banks were authorized to provide exchange for all import payments, without referring to the Central Reserve Bank, provided that the prescribed maximum credit terms were observed.

February 15. Basic exchange allocations for travel outside the Central American Common Market countries for tourism, business, or health reasons, free of the deposit requirement, were increased from US$600 a person a trip to US$2,100 a person a trip, on the basis of US$70 a person a day (US$1,050 for children under 16, on the basis of US$35 a day). Amounts in excess of these authorized amounts, subject to the deposit requirement, were increased to an additional US$4,200 (an additional US$2,100 for children under 16). The amounts of exchange that banks could provide for travel to Central American countries were increased and were made uniform at the equivalent of US$2,100 a person a trip (US$1,050 for children under 16). Allocations for family remittances and student expenses also were increased, and there were certain liberalization measures for such items as payments for correspondence courses and for membership fees. Commercial banks were henceforth authorized to sell foreign exchange corresponding to the basic travel quotas and for certain other current invisibles; previously, an exchange license from the Central Reserve Bank was required in all cases.

February 15. Additional facilities for the opening of nonresident accounts in foreign currencies, as well as resident accounts in foreign currencies, were created. Banks were also authorized to open accounts in foreign exchange for Salvadoran nationals residing abroad.

June 12. Decree No. 357 exempted imports of wheat and wheat flour from all customs duties and taxes.

August 1. Industrial raw materials were exempted from the 100 per cent import deposit required for imports from those countries outside the Central American Common Market that apply discriminatory restrictions against exports from El Salvador; payment for these imports would be authorized by the Central Reserve Bank, provided the terms of payment did not exceed three years.

August 1. The exemption from the exchange control regulations for imports made by small traders and industrial producers was increased from US$15,000 a year to US$30,000 a year for each importer.

August 1. Banks were authorized to sell foreign exchange up to the equivalent of US$80 a person to nonresident foreign and Salvadoran nationals on departure from the country.

August 23. Decree No. 407, which came into force on September 6, 1973, created a Monetary Board charged with the formulation of monetary, exchange, credit, and financial policies. Its specific duties included setting the exchange rate for the colón, determining the appropriate level and composition of the foreign exchange reserves, and establishing any measures to regulate international payments. The Decree amended the charter of the Central Reserve Bank accordingly.

September 21. Export controls were imposed on raw cotton and cotton yarn.

October 3. Exports of sugar were prohibited.

October 3. Export controls were imposed on molasses.

October 3. Exports of hides were prohibited.

October 18. The par value was changed from 0.327405 gram to 0.294665 gram of fine gold per Salvadoran colón, corresponding to Ȼ 3.01587 = SDR 1. The effective parity relationship for the U.S. dollar remained unchanged at Ȼ 2.50 = US$1.

Equatorial Guinea

Exchange Rate System

The currency of Equatorial Guinea is the Equatorial Guinean Peseta, which is issued by the Central Bank of the Republic of Equatorial Guinea and is defined as equivalent to 0.0126953 gram of fine gold. No par value has been established for the Equatorial Guinean peseta. The currency is at par with the Spanish peseta, which is Equatorial Guinea’s intervention currency. Rates for other currencies are based on those in the Madrid exchange market. There are no forward exchange facilities. Exchange taxes of 17.5 per cent, 25 per cent, and 35 per cent are levied on certain transfers abroad.

Administration of Control

The Central Bank is in charge of exchange control. Exchange transactions must be carried out through the Central Bank or authorized commercial banks abroad; the only authorized bank is the National Deposit and Development Bank. Import and export licenses are issued by the Directorate-General of Foreign Commerce in the Ministry of Commerce; import licenses also require the approval of the Central Bank.

Prescription of Currency

Settlements with Spain must be made through payments agreement accounts denominated in U.S. dollars. Settlements with other countries are made in convertible currencies.

Imports and Import Payments

All commercial imports require an import license. Licenses normally are issued within the framework of an annual import program. They do not entitle importers to the necessary foreign exchange until they have been approved by the Central Bank, after which the exchange is automatically made available. Licenses for imports from Spain usually have a validity of three months, and those for other countries a validity of six months.

Payments for Invisibles

All payments for current invisibles require the prior approval of the Central Bank, which for specified purposes and up to specified amounts has delegated its approval authority to the authorized commercial bank. Residents1 are granted foreign exchange up to the equivalent of EG Ptas 10,000 a person a calendar year for tourist travel abroad. The standard allocation for business travel is the equivalent of EG Ptas 2,000 a person a day, subject to a maximum of EG Ptas 50,000 a trip. For study abroad, foreign exchange is granted to cover tuition and living expenses; nonboarding students are allowed the equivalent of EG Ptas 5,000 a month for living expenses.

The transfer of wages and salaries by alien residents, and of professional earnings as well as dividends by all residents, is freely permitted up to 60 per cent of taxable earnings when the transfer is made to a country with which a payments agreement is in force, and up to 40 per cent for other countries, provided that annual earnings do not exceed EG Ptas 50,000. Larger transfers are permitted when annual earnings exceed EG Ptas 50,000. Transfers abroad of professional earnings by nonresidents are freely permitted, but any amounts in excess of 60 per cent of taxable earnings are subject to a transfer tax of 35 per cent on the amount transferred. There are special arrangements for the transfer of earnings of Nigerian workers employed in Equatorial Guinea. In addition, nonresidents as well as nationals residing temporarily abroad are permitted to withdraw up to EG Ptas 5,000 a month from their savings accounts for remittance abroad.

The transfer of net investment income, whether by residents or nonresidents, is subject to a tax of 35 per cent of the amount transferred. Subject to this requirement transfers are fully permitted. In the event of at least 50 per cent of such net investment income being reinvested in approved projects in Equatorial Guinea, the tax is 17.5 per cent of the amount remitted. Transfers abroad in respect of patents, trademarks, and royalties are permitted fully, subject to a tax of 25 per cent of the amount remitted.

Travelers may take out EG Ptas 3,000 a person in domestic banknotes.

Exports and Export Proceeds

All exports require an export license. Both specific and general export licenses are granted; the latter are available only to registered exporters. All export proceeds must be surrendered to the Central Bank or the authorized commercial bank.

Proceeds from Invisibles

All exchange receipts from invisibles must be surrendered to the Central Bank or the authorized commercial bank. Travelers may bring in any amount of foreign banknotes and coins but the import of domestic currency by travelers is prohibited.

Capital

All imports and exports of capital require approval. Capital receipts in foreign currency must be surrendered to the Central Bank or the authorized commercial bank. The transfer abroad of funds from the sale of fixed assets and financial assets by alien residents or by nonresidents is permitted as follows: 50 per cent of the total amount realized net of taxes may be remitted abroad immediately and the balance in 24 equal monthly installments. The sale of real estate, however, requires prior approval by the Government. Residents, as well as nonresidents living in Equatorial Guinea, are prohibited from engaging in borrowing or lending with nonresidents.

Gold

All purchases and sales of minted gold and gold bars are centralized in the Central Bank, which also has a monopoly over the import and export of minted gold and gold bars. Commemorative gold coins were issued in 1970 in denominations of EG Ptas 250, 500, 750, 1,000, and 5,000; these are legal tender. Except for these coins and jewelry, residents are not permitted to hold gold.

Changes during 1973

February 13. Following the announcement that the U.S. dollar was being devalued, the gold content of the Equatorial Guinean peseta was maintained unchanged and the currency remained at par with the Spanish peseta.

Ethiopia

Exchange Rate System

The par value is 0.355468 gram of fine gold per Ethiopian Dollar, corresponding to Eth$2.50 = SDR 1 or Eth$2.07237 = US$1, and Ethiopia avails itself of wider margins. The intervention currency is the U.S. dollar. The National Bank of Ethiopia (the central bank) does not deal with the public; its dealings in U.S. dollars with the authorized banks take place at the official rate of Eth$2.07 = US$1. Authorized banks in dealing with the public must observe this official rate for the U.S. dollar and prescribed commission charges of 0.75 per cent buying and 2.25 per cent selling; the resulting effective buying and selling rates are Eth$2.05448 and Eth$2.11658 per US$1.

Spot exchange rates for other currencies are based on the National Bank’s official rate for the U.S. dollar and the previous day’s closing rates against the U.S. dollar in European exchange markets; a charge equivalent to about ½ per cent, additional to the prescribed commissions, is payable for transactions in currencies other than the U.S. dollar. Authorized banks may freely undertake forward exchange transactions. Exporters may cover their exchange risk in Ethiopia or abroad.

Administration of Control

All transactions in foreign exchange must be carried out through authorized banks and 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. The Minister of Commerce, Industry, and Tourism has statutory authority to prohibit, restrict, or regulate imports and exports.

Prescription of Currency

Outgoing payments are normally made in convertible foreign exchange appropriate to the country of the recipient or in U.S. dollars. The net proceeds of exports must be received in a foreign currency that is freely convertible, or in any other foreign currency acceptable to the Exchange Controller.

Nonresident Accounts

Nonresidents may, subject to exchange control approval, open nonresident accounts either in Ethiopian dollars or in foreign currencies at authorized banks. Balances in foreign currency accounts may be freely transferred abroad. Transfers between nonresident accounts require prior approval, except those between foreign currency accounts.

Imports and Import Payments

All imports from Portugal and its overseas territories, Rhodesia, and South Africa are prohibited. No import licenses are required. However, payments abroad for imports require exchange licenses; these licenses are granted freely in the currency appropriate to the country of origin, or in any convertible currency that may be requested, but advance payment for imports is not normally permitted. Payment is normally authorized by letter of credit, mail transfer, telegraphic transfer, or cash against documents at sight or on an acceptance basis; however, goods which were previously subject to advance deposit requirements (about 100 items, mostly consumer goods) may not be financed on an acceptance basis.

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 nationals may remit up to 35 per cent of their salaries or annual taxable earned income, provided that they have resided in Ethiopia for less than six years; exceptions may be made, particularly with regard to the time limit, for foreign nationals who are in contractual service with the Ethiopian Government or with certain other public and private institutions, and who have an employment contract specifically entitling them to remit a stated percentage of their earnings, provided this aspect of the contract is approved by the National Bank. Ineligible persons may apply for exchange to meet expenses for maintenance of bona fide dependents, education of children, medical care, and premiums on insurance policies taken out before April 2, 1962; applications are considered on their merits. Subject to proper provision having been made for local taxation and for a reserve prescribed by the Commercial Code, foreign companies may remit dividends on their invested and reinvested capital in any currency.

Persons traveling abroad are allowed foreign exchange equivalent to Eth$75 a day for a maximum period of six weeks in any one calendar year if the journey is made for business purposes, and up to the equivalent of Eth$600 a year for persons 16 years of age or over and Eth$420 a year for those under 16 if the journey is made for pleasure. Travelers may take with them a maximum of Eth$100 in Ethiopian banknotes.

Exports and Export Proceeds

All exports to Portugal and its overseas territories, Rhodesia, and South Africa are prohibited. Exports of most cereals to any destination also are prohibited. All commodities require export licenses and some require in addition the approval of specified public bodies. When applying for a license, an exporter must specify the goods to be exported, the destination, and the value. The granting of the license 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 within six months and that export proceeds are received in an appropriate currency (see section on Prescription of Currency, above).

Proceeds from Invisibles

Foreign exchange receipts from invisibles must be surrendered. Persons may bring in a maximum of Eth$100 in Ethiopian banknotes. Foreign exchange need not be declared by travelers on entry, and its re-export is freely permitted.

Capital

Controls over capital movements are designed to restrict undesirable outflows, to preclude an unwarranted accumulation of external debt, and to keep the authorities informed of the country’s external debt position.

All receipts of capital in the form of foreign exchange must be surrendered. Exchange control permits are not required, but registration of capital inflows with the exchange control authorities establishes evidence of receipt, which is required for any later repatriation. There is no discrimination regarding the currencies in which foreign investments are accepted. Special concessions are made to approved new enterprises involving an investment of at least Eth$200,000 financed by domestic or foreign capital: these concessions include exemption from income taxes for a period of five years, admission of imports of machinery free of duty, and a guarantee of permission to foreign investors to remit abroad earned profits after taxation. Upon liquidation, transfer of the entire imported capital and reinvested profits is permitted in any currency, provided that the capital inflow has been registered; for large amounts, transfers may be phased over a reasonable period of time. Foreign physical or juridical persons require government permission to purchase land in Ethiopia; such permission is not normally withheld. Transfers of emigrants’ allowances, legacies, and savings of foreign employees upon retirement are permitted up to the equivalent of Eth$70,000 in foreign currency. Sums in excess of this amount are authorized up to a total of Eth$70,000 in any subsequent 12-month period. Repatriation of nonregistered capital is subject to the same limits.

Borrowing abroad requires exchange control approval and is restricted. Normally, evidence must be presented that all possibilities for domestic borrowing have been exhausted. External borrowing by the Central Government and public sector agencies requires parliamentary approval, as does private sector borrowing abroad when covered by a government guarantee. Authorized banks may freely place their funds abroad, except on fixed-term deposit. 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

Special commemorative gold coins which are legal tender, as provided in Legal Notice No. 318 of 1966 and Legal Notice No. 422 of 1972, are offered for sale in Ethiopia and abroad by the Commercial Bank of Ethiopia to residents and nonresidents and may be exported by travelers. The ownership of personal jewelry and articles of adornment of which gold or platinum forms a part also is permitted. Unless specifically authorized by the Minister of Mines, the possession or custody, in a quantity in excess of 50 ounces, of raw or refined gold or platinum or of gold or platinum in the form of nuggets, ores, or bullion constitutes an offense. Certain mined gold is sold by the Treasury to the National Bank at a price equivalent to Eth$87.50 (US$42.22) a fine ounce of purely refined gold. Imports and exports of gold in any form other than jewelry require exchange licenses issued by the National Bank on behalf of the Ministry of Mines. Such licenses are not normally granted except for imports and exports by or on behalf of the monetary authorities and industrial users; those for the import of gold for industrial purposes are issued to registered importers on satisfactory evidence that the gold is destined for direct use in industry.

Changes during 1973

February 15. Following the announcement that the U.S. dollar was being devalued, Ethiopia maintained its par value in terms of gold. The effective parity relationship for the U.S. dollar was changed from US$1 = Eth$2.30263 to US$1 = Eth$2.07237. The official rate applicable to U.S. dollar transactions between the National Bank and the commercial banks was changed from Eth$2.30 to Eth$2.07 per US$1. The rates of exchange commission set in Directive No. 6 of December 30, 1971 remained unchanged. Ethiopia continued to avail itself of wider margins.

February 22. The National Bank announced that a special buying rate of Eth$2.16 per U.S. dollar would be applied by commercial banks to U.S. dollar proceeds from coffee exports shipped in the period February 1-13, 1973.

April 11. Exports of most cereals were prohibited.

Fiji

Exchange Rate System1

Fiji has not yet established a par value for its currency, the Fiji Dollar, with the Fund. A fixed relationship between the Fiji dollar and the pound sterling, the intervention currency, is maintained at £ stg. 1 = F$ 1.88. As a result, all exchange transactions except those in sterling and currencies directly linked to sterling take place at fluctuating rates. For telegraphic transfers, the banks’ buying and selling rates for the U.S. dollar on December 31, 1973 were FS0.8022 and F$0.8195, respectively, per US$1.

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

Administration of Control

Exchange control is administered by the Central Monetary Authority, acting as agent of the Government. The Monetary Authority delegates to authorized dealers (only banks are authorized dealers in Fiji) the authority to approve normal import payments. Except with the specific permission of the Monetary Authority, residents of Fiji are required to offer for sale to an authorized dealer all foreign currencies they receive.2 The Ministry of Commerce, Industry, and Cooperatives is responsible for the issue of import licenses. Export licenses are issued by the Comptroller of Customs.

Prescription of Currency

Fiji has ceased to be a Scheduled Territory in terms of the U.K. Exchange Control Act, 1947 but under current U.K. exchange control regulations continues to be regarded as a country of the Overseas Sterling Area. Transactions with Sterling Area countries as well as non-Sterling Area 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. The prescribed manner of payment for exports to any destination outside Fiji is payment in Fiji currency from an External Account or in any foreign currency. All payments to Rhodesia are prohibited.

Nonresident Accounts

A nonresident3 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 Central Monetary Authority. These accounts may be credited freely with interest payable on the account, payments from other External Accounts, the proceeds of sale of foreign currency or foreign coin by the account holder, and 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; in addition, External Accounts may be credited with payments by residents for which either a general or 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 for travel purposes.

Imports and Import Payments

All imports from Rhodesia are prohibited, and imports originating in the People’s Republic of China and the CMEA countries4 require individual licenses. Imports of most goods are free under open general license when originating in countries other than those mentioned. However, import prohibitions are imposed on a few commodities from all sources, mainly for security, health, or moral reasons. Certain commodities can be imported only under specific licenses, including passenger automobiles, butter, matches, cement, and gold.

Payments for authorized imports are permitted upon application and submission of documentary evidence to authorized dealers. A specific exchange license is not required. Authorized banks may authorize payments for goods which have been imported either under a specific import license or open general license. Authorized banks may authorize advance payments for imports only if the goods have already left the port of shipment; in all other cases advance payment requires the permission of the Central Monetary Authority.

Payments for Invisibles

Payments for invisibles originating in any country (except Rhodesia) are permitted either under a delegated authority to banks or, where large amounts or nondelegated payments are involved, upon application to the Central Monetary Authority. Payments may be made freely for all bona fide current transactions. Residents of Fiji traveling to other countries are entitled to a foreign currency travel allowance for private or business travel up to the equivalent of F$600 a journey. In addition, each traveler may take with him F$50 in Fiji currency, and the equivalent of F$200 in other currencies. Any additional foreign currency required for travel purposes is granted on application to the Central Monetary Authority, provided the Authority is satisfied that the additional amount is required to meet genuine travel expenditures. Travelers may not take out more than F$50 in domestic currency notes and F$l in domestic coins.

Exports and Export Proceeds

Exporters are obliged to collect the proceeds of exports within six months of the date of exportation of the goods from Fiji, irrespective of the currency in which the payment is being made. All foreign currencies must be offered for sale to an authorized dealer. Exporters may not grant credit to a nonresident buyer in excess of six months without specific permission.

Exports to Rhodesia are prohibited. Specific licenses are required only for the export to countries outside the Sterling Area of lumber and a few other items, including pearl shell and turtle shell. 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 and for private consignment of goods with an f.o.b. value exceeding F$2,000; this permit is required for exchange control purposes.

Proceeds from Invisibles

Receipts from invisibles must be surrendered to authorized dealers, irrespective of the currency concerned. Travelers may bring in freely any amount in Fiji notes, other Sterling Area currencies, or non-Sterling Area currencies. Resident travelers are required to sell their holdings of Sterling Area and non-Sterling Area currencies to an authorized dealer within 30 days of return.

Capital

The inflow of capital is unrestricted. Foreign investment in Fiji normally is expected to be financed from a nonresident source. Such foreign investment may be given “approved status,” which guarantees the right to repatriate dividends and capital. All capital outflows are subject to prior approval. Capital transfers by residents to finance direct investments require the specific permission of the Central Monetary Authority and are normally permitted only where benefits will accrue to Fiji within a reasonably short term. Banks require the approval of the Central Monetary Authority before any loans are granted to a company or branch in Fiji (other than a bank) which is by any means controlled by persons resident outside Fiji or by individuals designated as nonresidents; however, banks do not require such approval to lend up to F$1,000—for any period and any purpose—to individual nonresident customers. Banks may not lend foreign currency to any resident of Fiji without the specific permission of the Central Monetary Authority, and residents require specific permission from the Central Monetary Authority before they may borrow foreign currency from anyone other than an authorized bank in Fiji or from any source outside Fiji. The transfer of inheritances and dowries which are due to nonresidents is permitted, as is the transfer of the sales proceeds of a house owned by a nonresident. Residents of Fiji are also allowed to make cash gifts equivalent to F$500 a donor a year to nonresidents; additional funds are permitted in compassionate cases. Emigrants may take out all their assets, whether their destination is inside or outside the Sterling Area.

Residents are not permitted to purchase foreign currency to acquire foreign currency securities without the prior approval of the Central Monetary Authority. The purchase of personal real property outside Fiji is not permitted. Portfolio investment in Fiji by nonresidents is permitted, provided that payment is made from a nonresident source; the proceeds of the sale or realization of such investment qualify for repatriation.

Gold

Residents may freely hold gold coins, but not gold bullion, in Fiji. The export of gold coins requires the specific permission of the Central Monetary Authority. Gold imports from all sources require a specific import license issued by the Ministry of Commerce, Industry, and Cooperatives; they are restricted to authorized gold dealers and are subject to a 25 per cent duty when of Commonwealth origin or 50 per cent when of other origin. Gold jewelry may be imported free of duty from all sources and does not require any license when valued at less than F$200.5

Authorized jewelry manufacturers are entitled to rebate to the extent of duty paid on gold imports if they prove that imported gold has been manufactured into jewelry in Fiji. Exports of gold jewelry do not require licenses and are free of export duty. All newly mined gold is sold in Australia at free market prices.

Changes during 1973

February 20. Following the announcement that the U.S. dollar was being devalued, the fixed relationship of £ stg. 1 = FS1.98 was maintained and the Fiji dollar continued to float with sterling.

April 5. The Central Monetary Authority of Fiji was established. In addition to exchange control and banking supervisory functions, it was given the sole right of issuing currency notes and coins.

May 1. The private travel allowance for travel outside Fiji was increased from F$500 to F$600 a person a trip. The allocation for business travel also was increased from F$500 to F$600 a person a trip.

May 1. The supervision over borrowing and lending between residents and nonresidents was tightened.

May 1. The amount of domestic banknotes that a traveler could take out was reduced from F$100 to F$50.

June 1. The Central Monetary Authority began to administer exchange control, acting as agent of the Government. All existing exchange control regulations were canceled and a new exchange control manual was issued.

July 1. The Central Monetary Authority of Fiji took over the assets and liabilities of the Currency Board of Fiji.

September 7. Imports of certain food items were exempted from customs duty.

September 10. Following the revaluation of the Australian and New Zealand currencies, the fixed relationship between the Fiji dollar and the pound sterling was changed from £ stg. 1 = FS1.98 to £ stg. 1 = F$1.88. The Fiji dollar continued to float with sterling.

Finland

Exchange Rate System

The par value is 0.211590 gram of fine gold per Finnish Markka. A central rate of Fmk 3.90 = US$1, corresponding to Fmk 4.19997 = SDR 1, has been established and Finland avails itself of wider margins. However, on June 4, 1973 the authorities ceased to observe the lower exchange rate margin. The Bank of Finland’s official buying and selling rates for the U.S. dollar, the intervention currency, on December 31, 1973 were Fmk 3.836 and Fmk 3.854 per US$1. The official rates for the U.S. dollar are applicable also to clearing dollars. Official fixed buying and selling rates are applied to the clearing ruble; these are based on the Gosbank’s rates for the U.S. dollar against the ruble. Market rates are quoted by the Bank of Finland for certain other currencies;1 these are based on market rates abroad.

The Bank of Finland in addition quotes daily forward rates for the U.S. dollar at which authorized banks may cover their contracts with resident customers relating to any type of transaction permitted by the exchange control regulations; otherwise, forward premiums and discounts are left to the interplay of market forces. Authorized banks may deal among themselves, with resident customers, and with nonresident banks in U.S. dollars and other convertible or externally convertible currencies. Forward transactions may be concluded freely for periods not exceeding 12 months and the Bank of Finland may in special cases grant cover to the authorized banks for up to 24 months.

Administration of Control

The Bank of Finland operates the exchange control system, delegating authority to the authorized exchange dealers (mainly commercial banks). Import and export licensing is administered by an office subordinate to the Ministry of Trade and Industry, the Licensing Office, which is headed by a Licensing Board composed of government officials, including a representative of the Bank of Finland.

Prescription of Currency

For prescription of currency purposes, countries are divided into two groups: the bilateral countries2 and the convertible currency countries (all others). Settlements with the bilateral countries must be made in the currency of the agreement (rubles for the U.S.S.R. and Romania, Finnish markkaa for the People’s Republic of China, and U.S. dollars in all other cases) or in Finnish markkaa through Restricted Accounts. Settlements with the convertible currency countries may be made in any convertible currency or through Convertible Accounts.

Nonresident Accounts

There are three categories of nonresident accounts: Convertible Accounts, Restricted Accounts, and Capital Accounts.

Convertible Accounts are held by nonresidents in Finnish markkaa or in convertible currencies. These accounts may be credited by an authorized bank with amounts transferred from other Convertible Accounts, Finnish currency received direct from a foreign bank or imported into Finland, amounts which the bank would be authorized to transfer abroad, amounts of convertible currency received by the bank, and interest accrued on funds held in the accounts. These accounts may be debited freely and balances may be transferred abroad freely to any country.

Restricted Accounts are held by residents of countries with which Finland has bilateral payments arrangements, are designated according to the holder’s country of residence, and may be held in Finnish markkaa or the appropriate bilateral agreement currency. They may be credited by an authorized bank with amounts with which the bank may credit a Convertible Account, amounts transferred from Restricted Accounts related to the same country, Finnish currency received from a bank in the country indicated on the account, amounts which the bank is authorized to receive to the credit of a Restricted Account related to the country indicated on the account, currency surrendered to the bank and restricted to the country indicated on the account, and interest accrued on funds held in the accounts. These accounts may be debited freely and balances may be transferred freely to the bilateral country concerned.

Capital Accounts comprise all other nonresident accounts. The assignment of a Capital Account to another nonresident and the transfer abroad of funds held in such an account may be effected only with the permission of the Bank of Finland. A monetary institution may credit a Capital Account with amounts which may be credited to Convertible or Restricted Accounts, amounts transferred from a Convertible or a Restricted Account, the purchase price of assets other than foreign securities bought from the holder by a resident, redemption payments and interest on matured bonds and debentures quoted on the Helsinki Stock Exchange, rent on property owned in Finland by the holder of the account, and interest accrued on funds held in the accounts.

Capital Accounts may be debited freely for noncommercial current expenses in Finland of and for account of the account holder, and funds in Capital Accounts may be used for capital payments for account of the account holder when the transaction does not require authorization or is authorized for transferable funds. The Bank of Finland automatically grants permission for transfers abroad of funds deposited in Capital Accounts to an account holder who has resided abroad during the last calendar year and who continues to do so.

Imports and Import Payments

All imports from Rhodesia are prohibited. Most goods may be imported free of license from the multilateral area or license-free area (i.e., nearly all countries with which Finland does not have bilateral payments agreements),3 provided that the goods are purchased from and originate in that area. Specified consumer durables, however, are temporarily subject to ad hoc import licensing, irrespective of origin. Certain other goods 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 11 value quotas for specified commodity groups; no industrial goods are restricted by global quotas. The total value of the global quotas for 1973 was less than 1 per cent of total 1973 imports. All remaining goods require an individual license when imported from the multilateral area and are set out in a negative list, the discretionary licensing list, which comprises only agricultural commodities, coal, coke, and petroleum products. The only commodities still subject to quantitative restriction for the multilateral area, in addition to the consumer durable goods mentioned above, are agricultural commodities, fuels, and gold and silver.

Import licenses are not required for most commodities originating in and shipped from the U.S.S.R., and for many commodities originating in and shipped from the other bilateral countries; all commodities liberalized for import from the bilateral area are among those already liberalized for import from the multilateral area. Other imports from the bilateral countries are admitted under licenses up to quotas provided for under the relevant trade agreement. All imports of commodities originating in countries classified neither in the multilateral area nor in the bilateral area require individual licenses. The State Granary is the main agency for the import of wheat, rye, barley, oats, and products of these grains for human consumption, but individual importers may also import these commodities under license. There is a state monopoly for imports of alcoholic beverages.

Exchange is granted by authorized banks for all permitted imports on presentation of an application form, the import license if required, 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 arrival of goods in the country; if the period of credit exceeds six months, the credit must be authorized by the Bank of Finland but is approved provided that it is considered normal in the traditions of the trade. Under a temporary scheme, however, payment for specified consumer goods must be made, or the markka equivalent of the purchase price deposited with the Bank of Finland, before the goods are released by the customs authorities.

Payments for Invisibles

With few exceptions (relating to transport and insurance), residents are permitted to conclude transactions involving current invisibles with nonresidents. Payments in respect of authorized invisibles are not restricted. The authorized banks have general permission to effect payments for most current invisibles, subject in some cases to a maximum allowance or other conditions; for amounts in excess of the standard allowances and for purposes for which no standard allowances have been set, exchange licenses are granted freely by the Bank of Finland. All contracts involving payments to nonresidents for which general permission has not been granted must be submitted to the Bank of Finland for approval. For minor payments, authorized banks may grant foreign exchange equivalent to Fmk 200 a calendar month for each remittor.

A Finnish resident going abroad (except for border travel) may purchase from commercial banks foreign exchange equivalent to Fmk 3,000 a trip. A Finnish traveler abroad may also withdraw foreign exchange on a bank account passbook or check issued by a Finnish monetary institution, provided that the utilized amount of his travel allocation does not exceed a total of Fmk 3,000. In addition, a resident traveler may use a credit card abroad for travel services and make the payment after return. Nonresident travelers may take out Fmk 3,000 a trip in Finnish notes and coins and any amount in foreign notes and coins declared upon entry. Resident travelers may take out foreign or domestic currency, or any combination of these, up to Fmk 3,000. For all types of travel, bona fide applications for additional amounts of foreign exchange are approved by the Bank of Finland.

Exports and Export Proceeds

All exports to Rhodesia are prohibited. Export licenses are required only for exports of scrap metal and, temporarily, of petroleum products. Exports of other goods require only an export control declaration, which is approved automatically by the Licensing Office except in a few specified cases. Certain exports to countries not in the multilateral area are restricted. Foreign exchange acquired through commodity exports need not be surrendered to the Bank of Finland or an authorized exchange dealer. Exporters are required to repatriate their foreign exchange proceeds within eight days of collection, which may then be held in a foreign currency account with an authorized bank in Finland or converted into domestic currency.

The acceptance of advance payments for exports of wood, wood products, and charcoal requires the permission of the Bank of Finland, which normally prescribes that part of any prepayments authorized should be deposited with the Bank on an interest-bearing account, balances in which are released pari passu with the realization of the export shipments.4

Proceeds from Invisibles

Foreign exchange receipts derived from current invisibles do not have to be surrendered but must be repatriated within eight days of collection. The exchange may be held in a foreign currency account in Finland. Any unutilized foreign banknotes and travelers checks must be repatriated, but these are exempt from the surrender requirement up to Fmk 3,000 for each resident holder. The import of Finnish and foreign means of payment is unrestricted.

Capital

Most outward transfers of nonresident capital are subject to approval by the Bank of Finland. Inheritances are transferred automatically up to Fmk 100,000 for each beneficiary, while authorization by the Bank of Finland is required for larger amounts. Persons who during the last calendar year have resided outside Finland and continue to do so may transfer abroad their assets in Finland in one lump sum, subject to the prior approval of the Bank of Finland, which generally is granted.

Nonresidents may purchase through an authorized bank, against convertible currencies or by debiting a Convertible Account, bonds, debentures, or shares quoted on the Helsinki Stock Exchange. When the securities so acquired by a nonresident are deposited in the custody of the authorized bank, the nonresident purchaser is permitted to sell the securities on the stock exchange through the authorized bank and to repatriate the proceeds of the sale in a convertible currency. The acquisition with funds classified as Capital Accounts of shares, bonds, and debentures quoted on the stock exchange is also permitted automatically, but proceeds from the sale of such securities may not be transferred abroad without the permission of the Bank of Finland. Any other transactions in, and the export of, securities involving nonresident interests require approval. If the securities were acquired with convertible foreign exchange or with markkaa from a Convertible Account, approval for their export can be obtained freely.

The regulations concerning inward direct investment are as follows: All incoming capital transactions must be approved by the Bank of Finland, which considers the foreign exchange aspect. The Bank grants permission liberally, unless the investment is judged to be exceptionally detrimental to the national interest or to be of a purely financial character. Repatriation of authorized direct investments is free. Foreign investments that involve a participation of more than 20 per cent in the share capital of an enterprise require the approval of the Council of State. This approval is usually granted liberally. Direct foreign investment in the forest and mining industries and in certain traditionally regulated activities is not normally permitted.

On demand of the Bank of Finland, residents must declare their foreign assets, including property owned abroad. Proceeds from the sale of securities and real property must be repatriated under the general rule of repatriation. Outward transfers of capital by residents require individual approval; investment by residents in foreign securities or real estate is rarely permitted. Authorized banks, however, are given permission to purchase specified foreign and Finnish securities issued abroad. For direct investment abroad, approval is granted on the merits of each case.

Finnish emigrants are granted an exchange allowance of up to Fmk 50,000 a person, in addition to the basic tourist travel allowance. There is an automatic exchange allowance of Fmk 1,000 a calendar month for each donor for gifts and contributions to nonresidents.

Foreign currency borrowing by Finnish residents, in the form of short-term or medium-term financial credits or by bond issues abroad, requires the specific approval of the Bank of Finland, which exercises surveillance over the terms and timing. Lending to nonresidents is normally restricted to export credits. No permission is needed for customary export credits. Medium-term and long-term borrowing abroad, other than borrowing by the State or import credits, is subject to a selective deposit requirement, the terms of which are set ad hoc by the Bank of Finland.

Gold

Residents may freely hold, buy, and sell gold in any form at home. Imports of gold in any form other than jewelry require licenses issued by the Licensing Office; such licenses are not normally granted except for imports by or on behalf of the monetary authorities and industrial users. The global quota list contains a quota for industrial gold. Commercial imports of articles containing gold require licenses issued by the Licensing Office; for most such articles, these are granted freely. Exports of gold are subject to the same regulations as exports of other commodities, i.e., an export control declaration approved by the Licensing Office is usually sufficient.

Changes during 1973

January 1. New exchange legislation came into operation. The Law on Trade in Foreign Exchange (of December 30, 1959), the Law on the Regulation of Foreign Exchange (of December 4, 1959), and the relevant decrees and regulations were abrogated. They were replaced by the Law on the Right to Deal in Foreign Exchange (Statute Roll No. 909/72), the Law on Foreign Exchange (No. 910/72), and the related Decisions of the Council of State (No. 911/72) and the Bank of Finland (No. 912/72) on the application of the new legislation. The Law on the Right to Deal in Foreign Exchange was of a permanent nature, while the Law on Foreign Exchange and the related Decisions of the Council of State and the Bank of Finland were to expire on December 31, 1974.

The main purpose of the reform was to bring the exchange legislation up to date without altering the degree of control. A major feature was the replacement of the surrender requirement for foreign exchange receipts of residents by the obligation to repatriate all foreign exchange proceeds; repatriated foreign currency could either be converted into Finnish markkaa or held in a domestic foreign exchange account with an authorized bank in Finland. Previously, the surrender requirements were applicable mainly to export proceeds, freight earnings, and proceeds from the sale of securities and real property.

The scope of the powers delegated to authorized banks to approve outward payments, which had been increased on November 1, 1972, was maintained.

January 1. The system of nonresident accounts was reorganized. The Foreign Exchange Accounts, in which convertible or bilateral foreign currencies could be held, were discontinued, and the Convertible Markka Accounts and Restricted Markka Accounts, in which only domestic currency could be held, were replaced by Convertible Accounts and Restricted Accounts, which could be denominated either in domestic or foreign currency. Under the new arrangements, all nonresident accounts could be freely debited, but funds withdrawn from Capital Accounts could be transferred abroad only with the approval of the Bank of Finland.

January 1. The import regulations for 1973 entered into force. The global quota program consisted of 11 quotas amounting to Fmk 57.2 million.

January 1. Lending of domestic currency to nonresidents was freely permitted up to Fmk 50,000 for each borrower, for expenditures in Finland only.

February 1. The industrial free trade arrangements applicable to imports from Denmark and the United Kingdom were provisionally extended until December 31, 1973.

February 15. Following the announcement that the U.S. dollar was being devalued, Finland established a new central rate of Fmk 3.90 = US$1 to replace the central rate of Fmk 4.10 = US$1, and continued to avail itself of wider margins.

May 16. A treaty of cooperation was signed with the Council for Mutual Economic Assistance. It came into force on July 14. The agreement was to be seen as a general accord providing a framework for more detailed agreements on cooperation in various economic fields.

June 4. The Bank of Finland ceased to ensure the enforcement of the lower exchange rate margin and the markka began to appreciate in terms of the U.S. dollar. Exchange rate policy would continue to aim at ensuring that the effective value of the markka remained stable in terms of a weighted average of exchange rates of Finland’s main trading partners.

June 15. The general permission to importers to avail themselves of commercial credits not exceeding six months granted by nonresidents was revoked. Import payments for specified commodities, primarily automobiles and other consumer durable goods, had to be made through an authorized bank or an amount equivalent to their purchase price had to be deposited with the Bank of Finland prior to release by the customs authorities. The goods concerned represented about one fourth of total imports; the arrangements were similar to those in effect from 1970 to 1972.

June 15. Medium-term and long-term borrowing abroad under loan agreements approved by the Bank of Finland after June 14 became subject to a selective deposit requirement. The borrower had to undertake to deposit in an interest-bearing account with the Bank of Finland such portion of the credit as might be agreed upon. The proportion to be deposited and the deposit period depended on the estimated financing requirements of the investment project in question and the stage of the business cycle at the time of the loan approval. The interest rate would be determined in advance. It was set at the rate obtained by the Bank by placing the currency concerned on international money markets. The deposits, which normally would be lodged in the currency borrowed, were to be released when price pressures and the danger of an overheated economy were reduced. Exempt from the deposit requirement were loans contracted by the State and import credits. The Bank of Finland announced that, despite the introduction of the deposit requirement, it would continue to give favorable consideration to applications for borrowing abroad.

August 29. A temporary import licensing system was introduced for certain consumer durable goods (passenger automobiles, motorcycles, boats, boat engines, household refrigerators and freezers, washing machines, sewing machines, radio and television sets, stereo appliances, record players, and similar household appliances). Many of these goods were among those affected by the June 15 measure.

September 12. The acceptance of advance payments for exports of wood, articles of wood, and charcoal required the authorization of the Bank of Finland, to which authorization conditions could be attached. The Bank prescribed that part of any prepayments authorized be deposited with it on an interest-bearing account. Balances would be released pari passu with the realization of export shipments. (These arrangements were terminated on January 22, 1974.)

October 5. The industrial free trade agreement with the EEC, which had been initialed in 1972, was signed. It became effective on January 1, 1974.

October 31. Exports of petroleum products were restricted.

November 1. The country coverage of Finland’s generalized tariff preferences was expanded.

France1

Exchange Rate System2

The par value is 0.160000 gram of fine gold per French Franc, corresponding to F 5.55419 = SDR 1 or F 4.60414 = US$1, and France avails itself of wider margins. At present, however, no exchange transactions take place at the par value. There are two exchange markets, the official market, where the Exchange Stabilization Fund may intervene to ensure its orderly operation, and the financial franc market, in which rates are determined by supply and demand, free from official intervention. In neither market are exchange rates for spot exchange transactions maintained between any announced limits.3 On February 28, 1974 the closing rate for the U.S. dollar in the financial franc market was F 4.8250 = US$1; in the official market it was also F 4.8250 = US$1.

The dual exchange market regulations are not applicable to the Operations Account countries.4 Fixed conversion rates in terms of French francs apply to the currencies of the following countries and territories: the Operations Account countries, the French Overseas Departments, the French Overseas Territories (except the Territory of the Afars and the Issas), and the Condominium of the New Hebrides. (Previously, this was true also for Algeria, Morocco, and Tunisia.) These conversion rates have been maintained at pre-Au-gust 15, 1971 levels and are applied irrespective of the nature of payments or receipts.

The transactions with foreign countries or nonresidents that are eligible for the official market are essentially (1) all trade transactions (imports, exports, and transit or merchanting trade); (2) most current invisibles; (3) the repayment of commercial credit granted or taken up in connection with import, export, or transit trade transactions; (4) current payments made by the French State and French public bodies (collectivités publiques) to nonresidents or made by any resident in favor of foreign states and foreign public bodies; and (5) current payments received by the French State or French public bodies from nonresidents or received by any resident from foreign states and foreign public bodies. All other transactions (including all transactions between residents and nonresidents in domestic or foreign banknotes or between residents in foreign banknotes) must take place in the financial franc market (but see footnote 2).

The transactions channeled through the financial franc market (but see footnote 2) are mainly the following: (1) imports and exports of capital, with the exception of (a) credit granted or taken up on import, export, and transit trade transactions and (b) funds credited or debited by authorized banks acting on behalf of nonresidents to Foreign Accounts in Francs, involving conversion in the official exchange market; (2) transactions between residents and nonresidents in domestic or foreign banknotes, as well as transactions between residents in foreign banknotes; (3) nonresident travelers’ purchases of goods and services in France; (4) residents’ transfers abroad, free of documentation or authorization, up to F 1,500 a transfer; and (5) the following current payments (unless made by or in favor of governments or collectivitéspubliques): (a) travel expenditures of residents and nonresidents, other than clearly individualized fares paid by residents; (b) capital service (profits, dividends, interest, amortization, and banking commission, except interest, amortization, and banking commission on commercial credits); (c) workers’ remittances; (d) certain other payments in the personal sphere (wages and salaries, pensions, family remittances, social security premiums and benefits, and alimony); and (e) rentals for the noncommercial use of real estate, machinery, and vehicles.

Authorized banks in France and in Monaco, which may also act on behalf of banks established abroad or in Operations Account countries, are permitted to deal spot or forward in the official exchange market and the financial franc market in France. Authorized banks may also deal spot and forward with their correspondents in foreign markets in all currencies. Nonbank residents may purchase forward exchange only in respect of imports and of certain merchanting transactions, but their forward sales of foreign currency are free, whether these represent export proceeds or other receipts. On the import side, forward cover is available for some commodities for 6 to 12 months, and for all others for 3 months. On the export side, an underlying contract is required and cover is available for the full maturity of the export contract or up to 1 month after the date on which the proceeds are collected.

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

Exchange Control Territory

The exchange control regulations are applicable in all territories of the French Republic except the French Territory of the Afars and the Issas, i.e., in continental France, Corsica, the Overseas Departments (Guadeloupe, Martinique, Guiana, and Reunion), and five of the six Overseas Territories (Comoro Islands. St. Pierre and Miquelon, New Caledonia, Wallis and Futuna Islands, and French Polynesia). No exchange control is applied in relation to the Principality of Monaco or the Operations Account countries (see footnote 4); payments between France and these countries are free of restriction on the French side and take place at fixed exchange rates. All other countries are considered foreign countries for exchange control purposes;5 all payments between France and foreign countries are subject to exchange control and take place at exchange rates resulting from the dual market regulations. The Condominium of the New Hebrides is considered a foreign country for exchange control purposes. For imports and exports of gold, the Operations Account countries are also considered foreign countries.

Certain controls that are independent of the exchange control regulations are maintained over inward and outward direct investment and over borrowing abroad; these transaction controls are not applicable to the Operations Account countries or Monaco, and those over direct investment do not apply to member countries of the EEC. Privileged treatment in respect of trade transactions is accorded to (1) the Operations Account countries and (2) Algeria, Guinea, the Khmer Republic, Laos, the Malagasy Republic, Mauritania, Morocco, Tunisia, North Viet-Nam, the Republic of Viet-Nam, and the Condominium of the New Hebrides.6

Administration of Control

The Directorate of the Treasury of the Ministry of Economy and Finance is the coordinating agency in the field of financial relations with foreign countries. It is in charge of exchange control and of all matters relating to inward and outward direct investment and to borrowing abroad, unless these matters relate to real estate companies, when the Bank of France screens applications and notifications. The Directorate of the Treasury also evaluates the balance of payments, together with the Bank of France, which collects the data for its compilation. Certain exchange control powers have been delegated to the Bank of France, including the authority to license imports and exports of gold. Other exchange control powers have been delegated to the Directorate-General of Customs and Indirect Taxes and in the Overseas Departments and Territories to the Caisse Centrale de Coopération Economique (CCCE).

The Directorate of Insurance of the Ministry of Economy and Finance has certain powers in respect of matters relating to insurance, reinsurance, annuities, etc. The material execution of all transfers has been delegated to authorized banks and stockbrokers and to the Postal Administration. The Directorate-General of Customs and Indirect Taxes establishes import and export procedures and controls, within the framework of commercial policy directives given by the Directorate of Foreign Economic Relations; the Directorate-General also issues import and export licenses, is responsible for any legal problems arising from the exchange regulations, and in particular handles any litigation relating thereto. Technical visas required for certain imports and exports are issued by the competent ministry or by the Directorate-General of Customs and Indirect Taxes. The Ministry of Industrial and Scientific Development has certain responsibilities in respect of licensing contracts and contracts relating to technical assistance.

Prescription of Currency

Settlements with Operations Account countries may be made in French francs or the currency issued by any institute of issue that maintains an Operations Account with the French Treasury.7 Settlements with all other countries may be made in any of the currencies of those countries, or, depending on the nature of the transaction (but see footnote 2), through nonresident Foreign Accounts in Francs or Financial Accounts in Francs. Settlements with Algeria, Morocco, and Tunisia, however, normally take place in French francs only. Importers and exporters are free to invoice in any currency.

Nonresident Accounts

A nonresident account in francs may be freely opened by an authorized bank for nonresidents, including French nationals (other than French officials) who have been residing abroad for at least two years. All overdrafts on nonresident-held franc accounts are subject to general or specific permission. Nonresident accounts are mainly of two kinds: Foreign Accounts in Francs and Financial Accounts in Francs; these are related to the official exchange market and the financial franc market, respectively (but see footnote 2).

Foreign Accounts in Francs may be freely credited with (1) the franc proceeds of the spot or forward sale of foreign currencies (but not in banknote form) on the official exchange market by a nonresident; (2) the franc equivalent of an authorized bank’s arbitrage in foreign currencies on a foreign market, provided that the regulations of the country concerned allow the transaction; (3) transfers from other Foreign Accounts in Francs; and (4) any authorized payment by a resident to a nonresident that is eligible for the official market, including interest on balances in Foreign Accounts in Francs. These accounts may be freely debited for (1) the equivalent in francs of arbitrage abroad in foreign currencies by an authorized bank, provided that the regulations of the country concerned allow the transaction; (2) transfers to other Foreign Accounts in Francs; (3) any payment to a resident when the regulations permit the sale of the foreign currency in the official market; and (4) purchases of any foreign currency on the official exchange market by a nonresident.

Financial Accounts in Francs may be freely credited with (1) the franc proceeds of foreign currency sold spot or forward in the financial franc market by a nonresident; (2) the franc proceeds of the sale of foreign banknotes (not those of the Operations Account countries) to an authorized bank by a nonresident; (3) transfers from other Financial Accounts in Francs; (4) liquidation proceeds of nonresident-held direct investments8 or real estate; (5) French banknotes (and those of the Operations Account countries) mailed direct from abroad to the main office of the Bank of France by an authorized bank’s foreign correspondents; (6) any payment made by a resident to a nonresident when the regulations permit access to the financial franc market, including interest on balances in Financial Accounts in Francs; (7) the franc equivalent of an authorized bank’s arbitrage in foreign currency on a foreign market, provided that the regulations of the country concerned allow the transaction; and (8) the sales proceeds, income, and amortization from French and foreign securities held in a foreign dossier in France, including securities accruing in France to a nonresident by donation or inheritance.

Financial Accounts in Francs may be freely debited for (1) francs purchased against foreign currency by an authorized bank in an arbitrage transaction with a foreign market; (2) approved direct investment in France by nonresidents;8 (3) purchases in France of French or foreign securities; (4) purchases of real estate from residents; (5) transfers to other Financial Accounts in Francs; (6) any payment in favor of a resident when the sale of foreign currency is eligible for the financial franc market; (7) purchases by nonresidents of any foreign currency, including foreign banknotes, on the financial franc market; and (8) French banknotes (and those of Operations Account countries) mailed by authorized banks direct to their foreign correspondents.

Direct transfers between Foreign Accounts and Financial Accounts are prohibited (but see footnote 2). Transfers between the two types of accounts may, however, be effected by conversion through spot exchange transactions in the two exchange markets concerned (arbitrage sur les marchés des changes).

If French francs accruing to a nonresident are not transferable, or not immediately transferable, they may be credited to a Suspense Account in francs in the name of the beneficiary, balances in which up to F 50,000 are freely transferable. The unremittable funds of emigrants of French nationality, however, must be retained in resident accounts (comptes intérieurs); emigrants of foreign nationality may take out all of their assets upon departure.

Imports and Import Payments

Goods originating in and shipped from other parts of the French Franc Area or from certain 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 restriction and individual license. Imports of goods which originate in other countries and are not covered by French import liberalization require individual licenses. Some imports from EEC countries and some other imports from non-EEC countries are subject to minimum prices; these require an administrative visa and sometimes, exceptionally, an import license.

For import control purposes, countries outside the French Franc Area are divided into four groups according to the extent of import liberalization: (1) the former OEEC countries, their dependent territories and certain former dependent territories, Andorra, Canada, Finland, the United States, and Yugoslavia; (2) 49 specified countries;9 (3) the Eastern European countries (Albania, Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and the U.S.S.R.) and the People’s Republic of China; and (4) Eastern Germany. Commodities that may be imported free of quantitative restrictions from one group of countries include all the commodities that may be freely imported from the next group of countries plus some other specified commodities. 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 such restrictions are applied to a number of agricultural products; there is relatively little difference between the lists of goods which may be imported freely from different countries in this group, these differences relating mainly to Hong Kong and Macao. 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, there are global quotas that are allocated semiannually and apply to all countries other than those having the benefit of bilaterally negotiated quotas or of privileged treatment. Imports from all countries of certain agricultural items and certain raw materials are free of quantitative restrictions.

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

Liberalized imports are not subject to trade control formalities, only a customs document that constitutes the customs declaration being required; however, as an exchange control measure, the domiciliation of the import transaction at an authorized bank may be prescribed. For some liberalized imports, an administrative visa issued by the central Customs Administration or by the competent technical ministry is required on an import declaration. Imports of the products of the European Coal and Steel Community require licenses 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 applicable to specified countries or areas in accordance with trade agreements or an import plan drawn up for a definite period.

Moreover, licenses may be issued under the compensation transaction procedure, which applies mainly to goods of Eastern European origin. Because of the high degree of import liberalization, imports under this scheme are of slight importance.

Payments for imports from foreign countries must be made by credit to a Foreign Account in Francs or with foreign currency purchased in the official exchange market; imports valued at less than F 10,000 may also be paid for through postal channels. Import transactions relating to foreign countries and valued at F 50,000 or more must be domiciled (registered) with an authorized bank, to which the necessary import documents must be presented and through which all payments related to the import must be made.

Authorized banks may without special authorization allow advance payments to be made that are provided for in the commercial contract, up to 30 per cent of the price for capital goods and up to 10 per cent for all other goods. Higher advance payments require prior approval by the Customs Administration. For all imports, importers may purchase spot foreign currency one month before the payment falls due (one month before shipment if a documentary credit is opened). There is no restriction on the use of suppliers’ credit. The import payment itself can be made as soon as the importer can present evidence to his bank of domiciliation that the goods have been dispatched.

By virtue of a circular of January 19, 1974 three months’ forward cover for import payments can be obtained for any commodity; for the import of specified raw materials and specified foodstuffs (unroasted coffee, corn, rice, etc.) forward cover for six months or one year is available. The foreign currency may be purchased forward at the time of domiciliation, but the maturity of the forward exchange contract must not exceed the date on which the commercial payment is due.

Payments for Invisibles

Payments for current invisibles to foreign countries are controlled but not restricted as to amount. Settlement for most transactions must take place through the official exchange market (but see footnote 2).

If justifying documents are presented and certain exchange control requirements are met, authorized banks are permitted to approve applications for payments without any limitation for many categories of current invisibles, and up to established limits for certain other categories of current invisibles. Applications for all other payments for invisibles and for amounts in excess of established limits are referred to the Bank of France to prevent unauthorized capital transfers; such applications are approved if a genuine current payment is involved. Any resident may freely and at any time make remittances abroad up to the equivalent of F 1,500 a person without indicating their purpose, provided that the transfers do not constitute installments of payments exceeding F 1,500, are not for purposes subject to special allocation, and do not serve to accumulate funds abroad.

Payments which may be authorized without limitation by authorized banks include those related to approved trade transactions; income accruing to nonresidents in the form of profits, dividends, and royalties; banking commissions, patent fees, and specified categories of taxes; specified insurance payments; fees to medical doctors, lawyers, etc.; alimony in accordance with court decisions; and net salaries or wages of foreigners employed in France, provided that the transfer takes place within three months from the date of payment.

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.

The basic exchange allocation for tourist travel to foreign countries by residents (defined for this purpose as including residents of Operations Account countries) is the equivalent of F 5,000 a person a trip, which may be taken up for any number of trips a year. The basic allocation for business travel is the same plus the equivalent of F 500 a person a day. Applications for exchange in excess of the basic allowance for any type of travel are approved by the Bank of France, provided that no capital outflow is involved. Any unutilized foreign currency in excess of the equivalent of F 1,000 must be surrendered upon return to France. Applications for travel exchange cannot be submitted earlier than one month before departure. The use abroad of credit cards issued in France is unrestricted for the settlement of expenditures; in addition, the holder may use them to obtain funds from banks abroad up to F 1,000 a week. All fares for trips starting in France may be paid in francs in France, as may hotel costs and other transportation expenses.

Resident travelers going to foreign countries may take out F 5,000 in French banknotes. These banknotes may be spent abroad. Nonresident travelers may take out F 5,000 in French banknotes and may reconvert in the financial franc market into foreign currency any French banknotes up to F 5,000 obtained by the conversion in the financial franc market of foreign means of payment that they declared upon entry or obtained by debit to a Financial Account in Francs; any remaining French banknotes must be deposited with the customs against issuance of a receipt.

Resident travelers may freely take out the equivalent of F 5,000 in foreign notes and coins when acquired in the financial franc market against a tourist travel allocation, or, if they are leaving on a business trip, the equivalent of F 5,000 in foreign banknotes or in checks. Nonresident travelers may not, in principle, take out more than the equivalent of F 5,000 in foreign banknotes unless they were declared upon entry and the annotated declaration form shows that the amount to be taken out does not exceed that imported minus any amounts exchanged for francs plus any reconversion of francs into foreign currencies. However, nonresident travelers may also freely take out any other means of payment established in their name abroad, as well as, subject to the submission of an authorized bank’s declaration, any amount in foreign banknotes or foreign currency travelers checks acquired in France from an authorized bank by conversion of foreign exchange in the financial franc market, by debit to a Financial Account in Francs, or by debit to a foreign currency account.

Exports and Export Proceeds

Certain goods on a prohibited export list may only be exported if a special license is issued. Some other exports also require individual licenses; but if the total value does not exceed F 500, these exports may be permitted without any formality, subject to certain exceptions. Regardless of their value, exports through compensation transactions with certain countries10 require licenses if the commodities are those for which export licenses are required.

Exports to foreign countries are subject to exchange control. Payment must be received through the official exchange market. The repatriation11 and, where appropriate, the surrender in the official market of proceeds from exports to foreign countries is required, normally within one month of the date on which the payment falls due. Authorized banks may freely extend foreign currency advances to exporters; such advances and their repayment are eligible for the official exchange market, as are the proceeds from the discounting of foreign currency drafts presented by exporters. The due date of the commercial contract (and, therefore, the due date of the export receipts) cannot, except with special authorization or when a guarantee by the Compagnie Française d’Assurance pour le Commerce Exterieur (Coface) has been obtained, be more than 180 days after arrival of the goods at their destination. Export proceeds must not be received in French or foreign banknotes or banknotes issued by an institute of issue maintaining an Operations Account with the French Treasury, or by debit to a postal checking account in France. All export transactions relating to foreign countries and valued at F 50,000 or more must be domiciled with an authorized bank; the Director-General of Customs and Indirect Taxes, however, may exempt certain approved firms from domiciliation.

Certain goods purchased in France by persons not normally residing in France are considered as exports even when paid for in French francs, and are exempt from taxes. Sales to foreign tourists normally are settled through the financial franc market, although the regulations provide for the possibility of using the official exchange market if certain special customs requirements are fulfilled.

Proceeds from Invisibles

Proceeds from transactions in invisibles with 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 repatriated and, where appropriate, surrendered, within one month from the due date. Settlement for most types of transactions must take place in the official exchange market (but see footnote 2). 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 banknotes and coins (except gold coins) in French francs, CFA francs, CFP francs, or any foreign currency; however, the exchange of banknotes issued by Algeria, Morocco, and Tunisia is prohibited at the request of those countries. Resident travelers must within a month of entry sell in the financial franc market any foreign banknotes or travelers checks in excess of F 1,000 that they bring in.

Capital

Capital movements between France and Monaco and the Operations Account countries are free of exchange control; capital transfers between France and all other countries are subject to exchange control approval. Most inward and outward capital transfers between France and foreign countries (between residents and nonresidents) must be effected through the financial franc market (but see footnote 2). With the exception of purchases of French and foreign securities abroad, outward transfers of resident-owned capital generally are restricted; capital receipts from foreign countries generally are permitted freely, provided that the foreign exchange proceeds are surrendered by sale in the appropriate exchange market (but see below for special controls over borrowing abroad and over inward direct investment). Capital assets abroad of residents are not subject to repatriation. Residents are freely permitted to purchase real estate abroad for personal use as their principal residence, up to F 300,000 a family unit. The transfer abroad of nonresident-owned funds in France, including the sales proceeds of capital assets, is not restricted.

French and foreign securities held in France by nonresidents can be exported, provided that they have been deposited with an authorized bank in a foreign dossier (dossier étranger de valeurs mobilières); French and foreign 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 an authorized 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 authorized bank or broker. The exportation 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 that are summarized below, residents may freely purchase French and foreign securities on stock exchanges abroad, through authorized banks and provided that settlement takes place in the financial franc market. Such French and foreign securities may be held or sold abroad, but they may also be imported and then either be held or sold on a French stock exchange. The proceeds of the sale abroad of French or foreign securities must be sold on the financial franc market within two months of receipt, unless used within that period for reinvestment in securities abroad. Correspondingly, nonresidents holding French or foreign securities abroad (whether acquired before November 24, 1968 or later) may freely import them into France and hold them in a foreign dossier, or sell them on a stock exchange in France and repatriate the proceeds through the financial franc market.

Special controls (additional to any exchange control requirements that may be applicable) are maintained over borrowing abroad and over inward and outward direct investment. In principle, these controls relate to the transactions themselves, not to payments or receipts. At present, however, their application is in many instances affected by exchange control requirements. With the exception of the controls over capital issues in France, the transaction controls do not apply to countries whose bank of issue is linked with the French Treasury by an Operations Account. Furthermore, the transaction controls over direct investment are not applicable to member countries of the EEC, direct investment transactions with which are subject to exchange control declaration and exchange control approval only.

Foreign direct investments in France and French direct investments abroad require prior declaration to the Minister of Economy and Finance; in relations with member countries of the EEC, the declaration is required under the exchange control regulations rather than under the special transaction controls, and prior exchange control authorization is required for all direct investment operations liable to involve a capital movement. 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 per cent of the capital of a company whose shares are quoted on the stock exchange; any participation in any other type of firm is considered a direct investment. The Directorate of the Treasury, in evaluating the degree of control, takes into account any special relationships resulting from stock options, patents and licenses, commercial contracts, etc. Except in respect of EEC countries, the Minister has a period of two months from receipt of the declaration during which he may request the postponement of the projects submitted to him. Unless the amount involved is less than F 1 million, documentary evidence must be submitted to the Directorate of the Treasury before the liquidation proceeds of foreign direct investments in France may be transferred abroad, and the liquidation itself must be reported to the Minister within 20 days after it takes place. As an exception to the declaration and approval requirements summarized earlier in this paragraph, the making or the liquidation of direct investments abroad by residents is exempt from prior declaration or prior authorization when the amount involved does not exceed F 1 million a year for each beneficiary firm abroad, and provided that the transactions do not involve holding companies, investment companies, investment trusts, unit trusts, mutual funds, or companies whose purpose it is to facilitate the financing or treasury functions of enterprises belonging to one or more groups.

Foreign issues on the French capital market are subject to prior authorization by the Minister of Economy and Finance. 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 already are 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, requires prior authorization by the Minister of Economy and Finance.

The following types of borrowing are, in principle, exempt from this authorization: (1) loans constituting a direct investment, which are subject to prior declaration, as indicated above, and whose postponement may be requested by the Minister up to two months after receipt of the declaration; (2) borrowing by industrial firms for the execution of works abroad; (3) borrowing by any type of firm to finance imports or exports; (4) loans related to certain international merchanting transactions; (5) loans contracted by banks expressly permitted to borrow abroad (these include all authorized banks); and (6) loans other than those mentioned above, when the total amount outstanding of these loans does not exceed F 10 million for any one borrower, provided that the interest rate is a “normal” market rate, that the borrowing is not for the purpose of direct investment, that the foreign exchange proceeds are surrendered, and that each drawing against the loan is separated by at least one year from the corresponding repayment. (However, between July 24, 1970 and the third quarter of 1973 borrowing in francs was restricted, the exemptions under (2), (3), (4), and (6) were limited to borrowing in foreign currency, and borrowing in francs by nonbank residents from nonresidents was in effect prohibited. Furthermore, during 1972 and most of 1973 banks and industrial companies were not normally allowed to borrow abroad to finance direct investment in France or abroad.)

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, which is given or withheld within the framework of directives issued by the Treasury. Since the imposition of exchange control in 1968, authorized 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 resident importers and exporters. Lending to nonresidents in francs, however, is prohibited, with minor exceptions.

Authorized banks’ foreign currency assets and their overall liabilities in francs and foreign currency to nonresidents are free from limitation. Authorized banks may freely sell foreign exchange on the official exchange market (as well as the financial franc market) for the account of nonresidents, spot or forward. They are allowed to pay interest on nonresident-owned franc or foreign currency deposits. Nonresident-held franc deposits are not subject to reserve requirements, whether on balances held or on increases therein.

Nonresidents may freely purchase French short-term securities, including treasury bills, bons de caisse, and private drafts, through the financial franc market (but see footnote 2).

Gold

Residents are free to hold, acquire, 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 coins in Paris, to which residents have free and anonymous access and in which normally no official intervention takes place. Imports and exports of gold into or from the territory of continental France require prior authorization by the Bank of France, which is not normally granted for monetary gold but usually is given for industrial gold. Exempt from this requirement are (1) imports and exports of gold addressed to or shipped by the Bank of France; (2) imports and exports of manufactured articles containing only a minor quantity of gold, such as gold-filled and gold-plated articles; (3) imports and exports of gold objects (other than medals, coins, and bars, but including both personal and other jewelry) whose combined weight does not exceed 500 grams; and (4) collectors’ items of gold and gold antiques that are exported under “02 licenses” granted with the approval of the Directorate of Museums. Both licensed and exempt imports of gold are subject to customs declaration. The import and export of certain gold objects that are considered merchandise, such as gold watches, are subject to both the regular import and export licensing arrangements and to licensing by the Bank of France. Imports and exports of industrial gold are settled in the official exchange market.

A 20-franc gold coin, the napoleon, is legal tender but does not circulate. It is actively traded on the Paris stock exchange. In domestic trading, purchases of monetary gold (bars and coins) are not subject to value-added tax. Imports of monetary gold are exempt from customs duty and value-added tax.

Changes during 1973

January 1. The CCCE ceased to be the institute of issue for St. Pierre and Miquelon. The French franc replaced the CFA franc as legal tender in St. Pierre and Miquelon.

January 1. Upon the accession of Denmark, Ireland, and the United Kingdom to the EEC, imports of additional commodities were liberalized when originating in these countries.

January 3. The restrictions in force since late 1971 on borrowing abroad by banks and industrial or commercial companies to finance direct investment in France or abroad were eased; approvals were now given when such borrowing was intended to finance direct investment abroad and the direct investor did not dispose of, and was unable to raise, sufficient funds either in France or from subsidiaries abroad.

January 3. A new Charter for the Bank of France was issued by Law No. 73-7 of the same date. It was complemented by Decree No. 73-102 of January 30. Articles 20 through 23 of the Law dealt with the Bank’s functions with respect to the foreign exchange market and relations with foreign countries, including the implementation of exchange control.

February 1. The official quotation of the Portuguese escudo, which had been suspended since 1966, was resumed.

February 1. Imports of additional commodities were liberalized when originating in Denmark, Ireland, and the United Kingdom.

February 12. The exchange markets were closed. They reopened on February 14.

February 13. Following the announcement that the U.S. dollar was being devalued, France maintained the par value of its currency in terms of gold and continued to avail itself of wider margins. The effective parity relationship for the U.S. dollar, previously F 5.11570 = US$1, became F 4.60414 = US$1. New official buying and selling limits for the U.S. dollar were set at F 4.5005 and F 4.70775.

March 2. The exchange markets were closed. They reopened on March 19.

March 13. A new Operations Account Agreement was signed between France and the BEAC, to replace that with the BCEAEC. The BEAC could hold 20 per cent of its external assets outside the Operations Account, in foreign currencies.

March 14. The exemption from the mandatory reserve requirements against bank lending already applicable to medium-term and long-term claims on nonresidents was extended to claims resulting from the leasing of French equipment to foreign firms outside France.

March 16. The Bank of France prohibited banks and other financial institutions from remunerating directly or indirectly any accounts in francs, at sight or with a maturity of up to 180 days, opened for nonresidents. Exempt were (1) physical and juridical persons resident in Operations Account countries; and (2) international organizations, central banks, and foreign public financial institutions (for their balances as of September 30, 1972). (Bank of France Instruction No. 112.)

March 16. With effect from March 21, a reserve requirement of 100 per cent was applied against any increases after January 4, 1973 in nonresidents’ demand and time deposits in francs. The minimum reserve requirements on the level of nonresident-owned deposits remained unchanged at 12 per cent for sight liabilities and 6 per cent for savings accounts and time deposits. The same exemptions were given as under Instruction No. 112. (Bank of France Instruction No. 113.)

March 16. The net long forward position in foreign currencies of resident banks vis-à-vis their foreign correspondents was limited to that of February 28. (Bank of France Circular No. 5 P.B.)

March 16. The use of Financial Accounts in Francs for the purchase of French short-term securities (including treasury bills, bons de caisse, and private drafts) and for transfers to savings passbooks was prohibited; exempt were debits up to the amount of wages, salaries, social security payments, and pensions received to the credit of accounts held by nonresident physical persons. There was no de jure prohibition on the acquisition of short-term securities by nonresidents. On March 30, Bank of France Note No. 54 defined short-term securities for these purposes as any security or obligation with 180 days or less to run to maturity.

March 19. The exchange markets were reopened. France henceforth maintained a maximum margin of 2¼ per cent for rates in exchange transactions in the official market between the French franc and the Belgian franc, the Danish krone, the deutsche mark, the Luxembourg franc, the Netherlands guilder, the Norwegian krone, and the Swedish krona. The fixed conversion rates for the currencies of countries and territories of the French Franc Area (see section on Exchange Rate System, above) were maintained, but no announced margins were observed for other currencies. The official limits for the U.S. dollar were suspended. As a result, the French franc began to appreciate in terms of the U.S. dollar.

March 27. Decree No. 73-413 abolished the exporters’ card, which entitled the holders to special import facilities.

March 29. Bank of France Circular No. 193 A.F. instructed authorized banks not to undertake any new transactions (or renew existing ones) that involved the lending of foreign currency in a swap against francs with their private nonresident customers, whether physical or juridical persons. (Transactions of the same nature with their foreign correspondents remained subject to Circular No. 5 P.B. of March 16, 1973.)

April 1. New monetary cooperation agreements signed on November 23, 1972 between France and the five member countries of the BEAC came into force.

April 2. With effect from April 5, authorized banks were allowed to provide forward cover to importers of all commodities for any period, provided it did not exceed the due date foreseen in the commercial contract. Since February 10, 1972 such cover had been allowed for periods of up to 3, 6, or 12 months, depending on the commodity.

April 2. The limitation of export credit to 180 days after the arrival of the goods at their destination (unless a special authorization or a Coface guarantee was given) was terminated. Henceforth, the due date of the export payment was defined as the due date foreseen in the commercial contract, and the latter was not circumscribed.

April 2. The banks decided to impose a negative interest charge on new nonresident franc deposits by levying a flat monthly commission of 0.75 per cent on increases in balances over January 4, 1973 levels in the Foreign Accounts and Financial Accounts of certain nonresident nonbank customers.

April 5. The exchange rate guarantees for exporters introduced on January 31, 1972 were improved. The minimum exchange rate variation covered was reduced from 3 per cent to 2¼ per cent and the normal minimum maturity of the commercial contract from two years to one year.

May 7. Bank of France Circular No. 194 A.F. raised the limit up to which authorized banks could transfer abroad funds as working capital for French firms having tendered for foreign public works or service contracts, to 10 per cent of the value of each contract, but subject to a limit of F 5 million for each contract.

July 1. The Malagasy Republic ceased to maintain an Operations Account with the French Treasury and henceforth was considered a foreign country for exchange control purposes. French exchange controls and transaction controls became applicable to relations between residents of France or the Operations Account countries and residents of the Malagasy Republic.

July 5. With effect from July 21, reserve requirements on nonresident sight deposits in francs were increased from 12 per cent to 14 per cent, while those on resident deposits were increased from 10 per cent to 12 per cent. (Bank of France Instruction No. 116.)

July 9. Mauritania ceased to maintain an Operations Account with the French Treasury and henceforth was considered a foreign country for exchange control purposes. French exchange controls and transaction controls became applicable to relations between residents of France or the Operations Account countries and residents of Mauritania.

July 11. Bilateral and global quotas for imports of many commodities from “third” countries (non-EEC countries not associated with the EEC) for the second half of 1973 were increased by 20 per cent; licenses for the first half of the year were increased retroactively. (Quota imports from these countries were estimated at the time to be equivalent to about F 3.5 billion a year.)

August Transactions with Morocco and Tunisia ceased to take place at a fixed exchange rate.

August 9. The Ministry of Economy and Finance announced a wide range of measures to simplify and liberalize the exchange control regime. The principal measures were (1) The basic travel allocations were increased to F 5,000 a person a trip and made uniform for all types of travel (with the exception that for business travel the equivalent of F 500 a day could be taken up in addition to the tourist travel allocation). (2) Hotel and transportation expenses could be settled in France, without limitation, and no longer were charged against the travel allocations. (3) The restrictions on the use of credit cards abroad were removed. (4) The amount of domestic banknotes that residents could take out when traveling to countries outside the French Franc Area was increased from F 500 to F 5,000 a person a trip.

(5) The amount that residents could at any time transfer abroad without indication of purpose was raised from F 1,000 to F 1,500 per transfer. (6) The basic allocation for family remittances was increased from F 1,000 to F 1,500 a donor a month. (7) The basic allocation for purchases of personal real estate abroad (as a principal residence) was raised from F 150,000 to F 300,000 a family unit. (8) The ceiling on gifts between relatives was raised from F 50,000 to F 500,000 a gift.

(9) An increased initial allocation of F 20,000 a person was introduced for settling-in expenses of emigrants, and any amount of installation expenses could be transferred upon submission of documents; furthermore, any assets held in France at the time of redesignation as a nonresident, i.e., two years after departure, could be transferred freely. (10) The Bank of France was empowered to authorize freely the transfer (through the financial franc market) of nonresident-owned franc assets, up to a ceiling of F 50,000, which had been held in suspense accounts or suspense dossiers pending the granting of a transfer permit, and to authorize individually the transfer of assets of F 50,000 or more. (11) Exports and imports valued at less than F 50,000 (instead of F 10,000 as previously) were exempted from the domiciliation requirement. (12) The authorization to pay for imports once goods have been dispatched was extended to all transactions, irrespective of the method of transportation (previously, payments could not normally be made until after the goods had arrived in France).

(13) The prohibition on the import or export by mail of bills and drafts by importers and exporters was lifted. (14) Forward cover for imports, previously limited to merchandise, was extended to encompass imports of any services (except wages) covered by a contract. (15) Forward cover for exports, previously limited to cases where a contract existed, was extended to include the risks taken by exporters, before the signing of a contract, by commitments made on bids to foreign clients. (16) The renewal of forward cover, previously not allowed, could freely be undertaken for periods of up to three months, and the Bank of France could approve longer extensions.

August 27. Bank of France Circular No. 198 defined more precisely the circumstances under which authorized banks could lend foreign currency for the financing of imports and exports. No liberalization measures were involved, foreign currency loans to importers and exporters having been permitted since 1968. The existing limits on advance payments for imports (normally 30 per cent for specified capital goods and 10 per cent for all other goods) were maintained.

September 20. The financing in francs of nonresidents’ real estate operations in France ceased to be required.

September 20. The policy of prescribing that in principle inward and outward direct investments should be financed entirely in francs was eased.

September 20. The Bank of France requested commercial banks to observe moderation in lending francs to nonresidents. The request was withdrawn on September 28.

September 21. With effect from October 21, the reserve requirement against resident-owned sight deposits was brought into line with that on nonresident sight deposits, by an increase from 12 per cent to 14 per cent (Bank of France Instruction No. 117).

October 5. The restrictions on short-term capital inflows introduced on March 16 were removed: (1) The prohibition on the payment of interest on nonresident franc deposits of less than 180 days was suspended (Bank of France Instruction No. 118). (2) With effect from October 21, the mandatory reserve requirement of 100 per cent applied to the increase in nonresident franc deposits above their level on January 4, 1973 was abolished. At the same time, the reserve requirement on the level of nonresidents’ time deposits was reduced from 6 per cent to 5 per cent, bringing it into line with the requirement on resident-held time deposits (Bank of France Instruction No. 119). (3) Commercial banks were again permitted to undertake transactions which involved the lending of foreign currency in swaps against francs with their private nonresident customers. (4) The instruction by which the net long forward position in foreign currencies of resident banks vis-à-vis their foreign correspondents was limited to that of February 28, 1973 (Bank of France Circular No. 5 P.B.) was revoked. (5) The prohibition on the debiting of Financial Accounts in Francs in respect of nonresidents’ purchases of French short-term securities was removed.

October 8. Authorized banks discontinued the practice started informally in April 1973 of imposing a negative interest rate of 0.75 per cent a month on increases in balances over January 4,1973 levels in the Foreign Accounts and Financial Accounts of certain nonresident nonbank customers.

October 19. Restrictions were imposed on exports and re-exports of crude petroleum and petroleum products.

November 13. At a conference of members of the French Franc Area it was agreed in principle that the access of the Operations Account countries to the French capital market would be facilitated.

November 27. The regulations concerning shipping accounts (comptes d’escale) were modified.

December 4. New monetary cooperation agreements were signed between France and the six countries of the West African Monetary Union.

December 4. A new Operations Account Agreement was signed between France and the BCEAO. The BCEAO could hold 35 per cent of its external assets outside the Operations Account, in foreign currencies. An exchange rate guarantee was given on the BCEAO’s creditor balance in the Operations Account.

December 14. Bilateral and global import quotas for “third” countries were increased by 50 per cent for the first half of 1974, with certain exceptions for “sensitive items” (ammonium nitrates, gloves, radio and television receivers, and textile products).

Note.—The following changes took place early in 1974:

January 7. It was announced that agencies and enterprises in the energy sector were with immediate effect being allowed to borrow abroad at medium term and long term on the foreign and international capital markets.

January 15. With effect from January 21, the remaining reserve requirements against nonresident-owned franc deposits were rescinded.

January 19. It was announced that during the next six months, and on a provisional basis, the interventions of the Exchange Stabilization Fund in the official exchange market would no longer aim at limiting the exchange rates between the franc and certain other currencies within predetermined margins; during this period the monetary authorities would operate the exchange market in an orderly fashion. Restrictions were being introduced on capital outflows but not on current payments. No changes in the classification of transactions between official exchange market and financial franc market were announced.

January 20. All lending of francs to nonresidents, whether by banks or nonbanks, was made subject to authorization, and such authorization was not normally granted. Previously, such lending was freely permitted up to periods of two years.

January 20. The general permission to authorized banks to credit nonresident franc accounts with the amount of loans in francs granted by residents was revoked. They could still debit such accounts for the repayment of franc loans granted to nonresidents prior to January 20.

January 20. Forward cover facilities for outgoing payments were again limited to imports and such cover was normally restricted to 3 months, although periods of 6 or 12 months were permitted for specified commodities.

January 21. Transactions with Algeria ceased to take place at a fixed exchange rate.

January 21. Export credit again was limited, unless special authorization or a Coface guar