Chapter

Country Surveys

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
September 1973
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Afghanistan

Exchange Rate System

The par value is 0.0197482 gram of fine gold per Afghani, corresponding to Af 45.0454 = SDR 1 or Af 41.4475 = US$1. 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. The official buying rate applies to the proceeds of exports of karakul (which is exported only to the convertible currency area), wool (except cashmere wool exported to the convertible currency area), cotton, and natural gas (which is exported only to the U. S. S. R.); to 30 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. Exchange subsidies are applied to the official buying rate as follows: Af 7 per US$1 for export proceeds from cotton when payment is received under a bilateral payments agreement; Af 10 per US$1 for proceeds in convertible currencies from exports of wool; Af 25 per US$1 for proceeds in convertible currencies from exports of cotton; and Af 20 per US$1 for proceeds from exports of karakul.

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$1 of the daily free market rate quoted in the bazaar. On December 31, 1972, the free market rate of the Afghanistan Bank was Af 79.50 buying, and Af 80.00 selling, per US$ 1, and the free market rate in the bazaar was Af 78.20 buying, and Af 78.70 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 that 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, 1972, and that for mainland China clearing sterling was Af 221.50 per £ stg. 1. On the same date, the selling rate for clearing dollars under the payments agreements with Bulgaria, Czechoslovakia, Poland, 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, some of them government owned or government controlled, 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.

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.

Exchange is provided at the official rate for imports by the Government. Payments for imports through the banking system may be made only under letters of credit, against which 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 the 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 other invisibles are made at the official rate. All other payments are settled freely at free market rates. Travelers leaving Afghanistan may take out not more than Af 500 in Afghani 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). However, exporters of cotton are required to sell at least 20 per cent of their total exports to countries from which payments will be received in convertible currencies. Karakul is not exported to payments agreement countries.

Exchange receipts from exports of karakul, wool, and cotton must be surrendered at the official rate, irrespective of destination. The net proceeds of all exports other than karakul, wool, and cotton, irrespective of the currency in which they accrue, 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.

Export receipts from cotton are subject to an exchange subsidy at the rate of Af 25 per US$1 for convertible currency receipts and Af 7 per US$1 for exports settled under bilateral payments agreements. Convertible currency receipts from wool exports are paid an exchange subsidy at the rate of Af 10 per US$1 and those from karakul exports are paid an exchange subsidy of Af 20 per US$1.

Proceeds from the export of walnuts received over bilateral payments accounts are subject to an exchange tax of 9.5 per cent.

Proceeds from Invisibles

Thirty 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 70 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 bring in Afghan banknotes not exceeding Af 500.

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 import and purchase, hold, and sell domestically gold in any form. 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 1972

March 20. The exchange subsidy for the proceeds from cotton exports received under bilateral payments agreements was raised from Af 3 to Af 7 per US$1.

May 3. The Afghanistan Bank’s selling rate for mainland China clearing sterling was raised from Af 206.20 to Af 218.50 per £ stg. 1.

July 26. The Afghanistan Bank’s selling rate for mainland China clearing sterling was raised from Af 218.50 to Af 221.50 per £ stg. 1.

August 17. The Afghanistan Bank’s selling rate for U. S. S. R. clearing dollars was raised from Af 60.50 to Af 70.50 per US$1 and its selling rate for clearing dollars under the payments agreements with Bulgaria, Czechoslovakia, Poland, and Yugoslavia was raised from Af 55.50 to Af 65.50 per US$1.

Algeria

Exchange Rate System*

No par value for the currency of Algeria has been established with the Fund. The official unit of currency is the Algerian Dinar, which is defined as having a gold content of 0.18 gram of fine gold. 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. The effective parity relationship for the U. S. dollar is DA 4.54729 = US$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 Area1 are established by the Central Bank of Algeria, 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. 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 they are under certain conditions 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 of Algeria 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 detail of exchange control. Import and export licenses and global import authorizations are issued by the Ministry of Commerce. Import and export licenses require the visa of the Central Bank. The Office National de Commercialisation (ONACO), the Office Algérien Interprofessionnel 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 Sidérurgie (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 of Algeria does not maintain an Operations Account with the French Treasury and Algeria in principle applies its exchange controls to transaction with all countries.2 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, mainland China, Cuba, Czechoslovakia, Egypt, Guinea, Hungary, North Korea, Poland, Romania, the U. S. S. R., and Yugoslavia. 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 or Internal Nonresident Accounts. 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 of Algeria. 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; and with any other payments, up to DA 1,000. The Central Bank may authorize the crediting of other 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.

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. 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, although licenses may be applied for. 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). Imports made “without payment” (sans paiement), i.e., imports which do not involve compensation of any kind, require an authorization by the Ministry of Commerce and are not charged against the global authorizations of public enterprises. 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.

Importers may, as soon as the import has been registered with an authorized bank, purchase the required foreign exchange from the 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 in this case may also, 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 post office, 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: 50 per cent for single persons and married persons having their families in Algeria; 70 percent 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 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 is subject to authorization by the Central Bank of Algeria and allocations cannot exceed DA 1,500 a trip.

Pilgrims traveling to Saudi Arabia may obtain Saudi Arabian riyals up to the equivalent of DA 1,500 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. 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. One petroleum company holding mineral rights, however, must repatriate 75 per cent of its actual export proceeds.

Proceeds from Invisibles

Proceeds from invisibles must be repatriated and surrendered.

There are no restrictions on the import of foreign banknotes, coins (except gold coins), checks, and letters of credit, but nonresidents 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 1972, AGENOR had not yet become operational 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 1972

January 1. The budget for 1972 (Ordinance No. 71-86) came into effect. Exports became exempt from the single global production tax.

January 1. The repatriation and surrender requirements for the export proceeds of petroleum companies were modified.

February 21. An Order of the Ministry of Commerce removed quota restrictions and all approval formalities from imports listed under some 120 tariff headings or their parts. Many of these items had been put under quota restrictions on June 5, 1971. The import of a few of the newly liberalized items continued to be subject to monopoly.

February 21. An Order of the Ministry of Commerce removed quota restrictions (imposed within the framework of Decree No. 63-188 of May 16, 1963) from imports listed under some 460 tariff headings or their parts; all of these items continued to be subject to monopoly.

March 10. Ministry of Finance Notice No. 70 made all imports from all sources subject to domiciliation; previously, imports valued at DA 10,000 or less were exempt. The Notice also contained instructions concerning the domiciliation of (a) goods imported by monopoly companies within the framework of their single global authorizations, and (b) goods subject to import monopoly but imported by holders of a “monopoly visa” (visa de monopole).

With respect to the former, authorized banks had to administer the “financial budgets” of the global authorizations held by national companies and public enterprises which held a monopoly. Prior to domiciliation, banks had to ascertain that the commodity to be imported was covered by the global authorization and that the allocation for that commodity had not been used up. The import payment could be made as soon as domiciliation had taken place. With respect to the other category of imports, banks were required to request production of the visa and the import title before domiciling the transaction. The importer could pay his supplier upon shipment.

New reporting requirements were imposed on the intermediary banks for both types of import transactions.

March 21. Ordinance No. 72-9 gave the State Milk Marketing Office (ONALAIT) the monopoly for the import of fresh milk and cream and of certain dried and powdered milk.

April 8. The import of a small number of commodities for industrial use previously subject to quota was fully liberalized.

April 20. The State Chemical Industries (SNIC) announced that commodities for which, following a transitional period, it was given an import monopoly by virtue of Ordinance No. 71-53 of July 15, 1971, could be imported henceforth only through its offices. Accordingly, SNIC no longer granted a visa for such imports to private importers.

April 28. A Notice to Importers was issued listing the goods that on December 1, 1971 had been freed from the requirement of the prior import authorization (API) introduced on June 5, 1971.

May. SONATRACH announced that a number of specified commodities for which, following a period of transition, it was given an import monopoly by virtue of Ordinance No. 71-48 of July 15, 1971, could be imported henceforth only through its offices. Accordingly, SONATRACH no longer granted a visa for such imports to private importers.

June 2. Notice No. 41 ZF withdrew the delegated authority to authorized banks to sell foreign exchange for transfers abroad of savings from salaries by French nationals working in Algeria under the program for technical cooperation. With effect from July 1, such transfers had to be made through the Postal Administration, and persons having their families abroad were required to document this in order to be entitled to the highest percentage allocation.

June 7. Ordinance No. 72-24 approved the agreements reached in the second half of 1971 by the Algerian Government and SONATRACH with various foreign oil companies, and notably those with respect to compensation for the complete or partial nationalization of French oil companies operating in Algeria.

June 7. Decree No. 72-120 dissolved, effective January 1, 1972, those French oil companies whose social capital had been taken over in its entirety by SONATRACH. Also with effect from January 1, 1972 the Decree transferred their assets to the latter.

June 14. Instruction No. 12 HC to authorized banks and customs specified that henceforth the domiciliation of exports of liquid hydrocarbons could be made up to 15 days following the date of shipping.

July 10. Ministry of Finance Notice No. 71 increased the limit on the sale of foreign exchange for travel abroad by Algerian workers holding a card of the Office Nationale de la Main-d’Oeuvre (ONAMO) from the equivalent of DA 200 to the equivalent of DA 500 for each person for the first trip; for each subsequent trip abroad the limit remained fixed at the equivalent of DA 200 for each person. The Notice provided further that an Algerian national who normally resided abroad and traveled to Algeria on vacation, was entitled, when returning abroad, to purchase foreign exchange equivalent to one tenth of the amount brought in and sold to an authorized intermediary at the border at the time of entering Algeria, but not in excess of DA 500.

July 27. Decree No. 72-169, implementing Article 24 of the 1972 budget, set the amounts available for export subsidies at DA 5 million for olive oil and DA 5 million for all other products, and the amount available for price equalization support on imported cereals, cereal derivatives, and dried vegetables at DA 60 million.

August 1. A Ministry of Finance Order authorized the Caisse Nationale d’Epargne to open for resident and nonresident physical persons a special type of savings account denominated in Algerian dinars (compte épargne-devises). These could be credited only with proceeds from the conversion by the account holder of convertible foreign exchange (including banknotes) and with interest and the premium mentioned below; they could be debited only for withdrawals by the holder or his heirs in Algerian dinars, which could be made at any time. Balances on the accounts would earn interest of 3.5 per cent per annum exempt from all taxes. In addition, depositors were to be paid a premium (prime d’encouragement) equal to one eighth of the dinar countervalue of the foreign currency converted. The premium, which would be financed by the Treasury, would earn the same interest as the deposited balances and would also be exempt from all taxes. These provisions were declared applicable also to the savings accounts denominated in Algerian dinars and held by nonresidents by virtue of the Ministry of Finance Order of May 6, 1971 (which had introduced a system of comptes épargne-devises), and to any comptes épargne-devises held or to be held with commercial banks. Holders of the new accounts would also be entitled to all the advantages of the housing-savings scheme (système d’épargne-logement) introduced by the Ministry of Finance Order of February 19, 1971.

September 4. The Ministry of Commerce announced that imports of liberalized commodities were subject to a ceiling for 1972 of DA 200 million.

September 9. A bilateral trade agreement with Ghana was signed and came into force immediately. All settlements were to take place in convertible currencies.

October 16. Ministry of Finance Order No. 74 extended the obligatory period of repatriation for proceeds from exports of four commodities from 60 days to 90 days.

December 29. Ordinance No. 72-68 of the same date containing the 1973 budget was published. It introduced with effect from January 1, 1973 a new customs tariff. The import tariff henceforth comprised only a normal tariff (tarif de droit commun), 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 special tariff.

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. In the commercial market, the Central Bank of Argentina deals with banks and authorized institutions at the official 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, 1972 it was $a 9.98 (selling) per US$1. The effective exchange rate for most exports and for most 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. Exports and imports of books, newspapers, periodicals and gold coins are settled entirely through the financial market. Imports of specified intermediate and capital goods, specified less essential goods, and pearls, diamonds, platinum, and palladium also are settled entirely at the financial rate. Sales of foreign exchange to residents for travel purposes are subject to an exchange tax of $a 2.00 per US$1. 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 forward exchange market, for transactions at the financial rate only, as a seller of U. S. dollars at a premium which at the end of 1972 was 22 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 banks and institutions 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, within the framework of the LAFTA multilateral clearing system. Transactions with other countries must be settled in convertible currencies; proceeds from exports to such other countries normally must be received in U. S. dollars.1

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.

Imports and Import Payments

Imports are in principle free of import and exchange licensing. At the end of 1972, however, all imports of specified nonessential commodities were prohibited, as were all imports by the public sector, unless in the latter case the prior approval of the Ministry of Commerce was obtained. Furthermore, certain imports were suspended, and others required an “attestation” of necessity issued by the Ministry of Commerce. Also, sales of foreign exchange for all imports with foreign financing of less than 180 days require the prior approval of the Central Bank.

Independently of these temporary measures, goods imported by official agencies require approval by the Ministry of Finance 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. All maritime imports are subject to a tax of 10 per cent on the freight.

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 %o of 1 per cent applicable to all imports; 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 taxes ranging from $a 0.02 to $a 0.2 a kilogram on imports of iron and steel for the Steel Program.

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 being 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 family remittances and of 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. The sale of exchange for travel abroad normally is limited to US$30 a person a day (US$10 for neighboring countries) for up to 30 days. 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 foreign banknotes or travelers checks; the limit is $a 500 for travel to other countries. The allocation for travel to neighboring countries may be supplemented, up to a total amount equivalent to $a 400, with the currency of the country of destination. Travelers may take out any amount in domestic banknotes and coins except gold.

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 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.

Many products are subject to export taxes (derechos de exportacíon) 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 1.5 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. This system provides financing for 80-85 per cent of their value, depending on the nature of the commodity or service, with terms of up to eight and one half years for capital goods, three years for durable and semidurable goods, and up to one and one half years for other goods. The same terms apply to the freight and insurance premiums involved, provided that Argentine means of transport and services are used. 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 may be retained and used for authorized transactions. Travelers may bring in freely any amount in domestic or foreign banknotes and coins.

Capital

There are no limitations on inward capital transfers by residents or nonresidents. Outward capital transfers are restricted. 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 Law No. 19328 of October 29, 1971.

A Foreign Investment Law (Law No. 19151 of July 30, 1971) provides that all new foreign investments must have government approval and must be registered. Profits and dividends may then be remitted from the end of the first year of operation. The firms concerned are permitted to receive domestic short-term credit up to 50 per cent of their registered capital and accumulated reserves; this limitation does not apply to export credit. Foreign companies established in Argentina prior to the promulgation of the law are 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 are contained in Decree No. 2400 of April 27, 1972.

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 coins and bars are unrestricted and free of duty; they 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 1972

January 3. All exports were exempted from sales tax.

February 1. The additional import surcharge introduced on November 1, 1971 was reduced from 15 per cent to 10 per cent ad valorem.

February 18. Banks and authorized institutions were required to report to the Ceneral Bank all foreign exchange sales in excess of US$1,000 (previously US$20,000).

February 22. Law No. 19501 abolished the additional import surcharge introduced on November 1, 1971.

February 22. Law No. 19503 empowered the Government to levy variable export duties of up to 15 per cent of the f.o.b. value on traditional as well as promoted exports.

February 23. Exporters of promoted products were permitted to sell 47 per cent of their exchange proceeds at the commercial rate and 53 per cent at the financial rate (previously 60 per cent and 40 per cent, respectively).

February 23. The mixing rate for the exchange proceeds from nonpromoted (traditional) exports and for payments for imports was depreciated by a reduction from 70 per cent to 57 per cent in the portion settled at the commercial rate. Imports of pearls, diamonds, platinum, and palladium henceforth had to be settled entirely at the financial rate.

February 23. Decree No. 1001 reduced tax rebates being received by exporters, and increased export taxes. It also introduced an incentive payment of 6 per cent for specified export commodities.

February 28. Allocations of foreign exchange for payments in respect of licensing fees, royalties, and technical services became subject to prior approval by the National Registry of Contracts, Licenses, and Transfer of Technology.

March 17. U. S. dollar-denominated external bonds (“External Dollar Bonds”) could henceforth be used also to liquidate obligations abroad in respect of profits, dividends, and royalties corresponding to dates after October 31, 1971. The Central Bank was also prepared to consider, subject to the same regulations, payment of due debts incurred for other purposes. (Central Bank Circular No. R. C. 429.)

March 20. Decree No. 1579 reduced the incentive payment introduced by Decree No. 1001 to 2 per cent. It also increased export taxes on a number of commodities.

March 20. A new mixing rate for the exchange proceeds from exports and for payments for imports came into effect, with 64 per cent of each exchange transaction settled at the financial rate and 36 per cent at the commercial rate; settlements, however, in respect of imports and exports of books, newspapers, magazines, other publications, and gold coins continued to be effected entirely at the financial rate, and imports of pearls, diamonds, platinum, and palladium also continued to be settled entirely at the financial rate. Promoted exports no longer received a more favorable exchange rate than traditional exports.

The 64:36 ratio was on July 21 changed to 70:30 and on August 29 to 74:26; on both occasions, certain nonessential imports (those listed in the previous paragraph) continued to be settled entirely at the financial rate.

May 2. Decree No. 2400 of April 27 was published to implement the Foreign Investment Law, Law No. 19151 of July 30, 1971. The Decree gave definitions of “foreign investor” and “foreign investment.” All existing and new foreign investments in Argentina required registration. Any domestic credit restrictions would apply also to corporations with foreign majority ownership of 51 per cent or more.

May 2. By Telephone Communication No. 2600 the Central Bank advised that all private and public sector imports must be financed abroad for a period of at least 180 days from the date of shipment, unless the prior approval of the Central Bank was obtained for shorter terms.

May 5. Central Bank Circular No. 432 reduced from US$20,000 to US$10,000 the value beyond which imports of specified capital goods were subject to prescribed minimum credit terms.

On the same date, the Central Bank in Telephone Communication No. 2602 advised that the existing exemptions from these minimum credit terms were being maintained, but that the contracts henceforth required the prior approval of the Central Bank.

May 12. Central Bank Circular No. R. C. 433 announced the procedures for payment of interest and amortization on External Dollar Bonds.

May 15. Decree No. 2867 extended for one year the prohibition on the import of specified nonessential commodities that had been introduced on June 30, 1971 by Decree No. 2118. The Decree also added certain goods to the list of these suspended imports.

May 15. Payments for the nonessential imports added by Decree No. 2867 to those listed in Decree No. 2118/71 had to be effected entirely at the financial rate (Central Bank Circular No. R. C. 434).

May 15. New export promotion measures were introduced. These included an increase in support prices for wheat, linseed, and other exportable grains, an expansion of the list of export products benefiting from export rebates, and an additional 5 per cent rebate (for one year) for exports of new manufactured products or manufactures exported to nontraditional markets.

May 22. Central Bank Circular No. R. C. 435 added some 1,800 items to the list of goods exempt from advance import deposit.

June 29. Central Bank Circular No. R. C. 439 announced the issue of a new series of External Dollar Bonds to be used for the transfer of dividends, profits, royalties, and due debts of other kinds.

September 18. Foreign exchange allowances for travel abroad were reduced to US$30 a person a day (US$10 for neighboring countries), for up to 30 days.

September 19. The tax on sales of foreign exchange for foreign travel was increased from $a 0.50 to $a 2.00 per US$1.

September 21. The Central Bank by Telephone Communication No. 2657 announced that, until an Import Policy Commission had been formed, all imports required prior approval by the Government. A temporary ban on imports was established. All applications for the opening of letters of credit submitted to banks as of September 21 required the specific approval of the Central Bank.

September 21. Central Bank Circular No. R. C. 444 announced that remittances relating to repayments on foreign loans henceforth required Central Bank authorization except in the following cases: (1) repayments on financial loans previously converted in the official exchange market; (2) foreign loans obtained from specified international agencies; (3) foreign loans falling due after September 21 for which new repayment schedules were negotiated; and (4) foreign currency swaps concluded with the Central Bank.

September 25. Central Bank Circular No. R. C. 445 limited transfers abroad in respect of scholarships and student expenses to US$300 a month for each beneficiary and limited family remittances to US$50 a month for each remittor and beneficiary. The contracting of insurance in foreign currency with local insurance companies also was restricted.

October 19. Decree No. 7251 provided, with certain exceptions, for a 90-day suspension of imports.

October 20. Central Bank Circular No. R. C. 446 (together with Decrees Nos. 7250 and 7251 and Ministry of Commerce Resolution No. 474) introduced a new import regime. Imports were divided into four categories. List 1 comprised raw materials and essential intermediate goods; approval for these commodities would be automatic, and payment could be made at the existing mixing rate (74 per cent financial rate and 26 per cent commercial rate). List 2 comprised certain intermediate products and capital goods; for these commodities the prior approval of the Ministry of Commerce was required, and payment had to be made entirely at the financial rate. List 3 contained certain goods whose importation would be suspended for 90 days, during which period an Interministerial Commission would consider their assignment to Lists 1 and 2. List 4 covered certain nonessential and luxury items whose importation would be suspended for 180 days (this prohibition being additional to the one of Decree No. 2118, as amended).

Banks would be permitted to open letters of credit, or transmit any other instrument of payment, for imports in Lists 1 and 2 only upon presentation by the importer of a sworn statement, confirmed by the Ministry of Commerce, attesting the necessity of the goods to be imported.

The instructions of Telephone Communications Nos. 2522 of October 22, 1971 and 2600 of May 2, 1972 remained in force. (The former provided that the sale of foreign exchange for imports required the prior approval of the Central Bank when goods were not covered by documents presented through banking channels, when documents presented through banking channels showed no maturity date or an amended maturity date, or when import payments were five days or more past due.)

October 31. Decree No. 7473 specified those foreign investments in Argentina which required registration not later than December 30, 1972. (On December 29, the deadline was extended to March 30, 1973.)

December 21. Central Bank Circular No. R. C. 451 increased the surrender period for the exchange proceeds from exports of books to 18 months after shipment.

December 22. Central Bank Circular No. R. C. 452 announced the issue of External Dollar Bonds of the second series.

December 28. Telephone Communication No. 2705 of the Central Bank provided that with effect from January 2, 1973 the time limit for the utilization of documentary credits for imports could not normally exceed 180 days (one year for capital goods covered by Circular No. R. C. 328).

December 29. Law No. 20046 increased the tax on sales of foreign exchange by authorized institutions from 3 per mill to 10 per mill. It also increased the statistical tax on imports and exports from 3 per mill to 6 per mill.

Australia1

Exchange Rate System*

The par value is 1.04360 grams of fine gold per Australian Dollar, corresponding to $A 0.851544 = SDR 1 or $A 1 = US$1.2750. From time to time Australia sets official limits within which banks must effect spot transactions with the public in U. S. dollars, the intervention currency; on December 31, 1972 these limits were US$1.2774 and US$1.2726 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 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. Banks are free to determine their own forward rates for all currencies.

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 Commonwealth Treasurer, but considerable discretionary powers are delegated to the trading banks authorized to handle foreign exchange transactions. Import and export licensing is generally administered by the Department of Customs and Excise, with the Department of Minerals and Energy administering export licensing of minerals and metals, the Department of Transport the import licensing of ships, and the Department of Primary Industry being responsible for export licensing of some rural products.

Prescription of Currency

Australia 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 for imports may be made in Australian currency through the account of an overseas bank with a bank in Australia, or in any foreign currency.2 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 containing funds ineligible for remittance overseas.

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. 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 classed 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.3

Payments for Invisibles

All payments for invisibles are subject to exchange control, but, with the exception of transfers to specified bodies in Viet-Nam4 and remittances to Rhodesia (except in certain circumstances), they are not restricted; the control operates primarily to prevent unauthorized capital transfers. 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 a basic exchange allowance of $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 is satisfied that the exchange is to be used for bona fide travel expenses and not for an unauthorized capital transfer. Limits are placed on remittances for family maintenance and gifts; however, applications for such transfers are treated liberally, and amounts beyond the normal limit for family maintenance are approved on application. 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.5 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 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 including the following: to ensure adequate supplies to meet Australia’s domestic requirements (e.g., copper and copper scrap, stainless steel scrap, and natural gas), to ensure adequate and reasonable prices, to enable balanced development of Australian mineral resources to be pursued, to enable Australia to comply as required with international obligations (e.g., tin and uranium), 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, but all domestic currency lending to overseas-owned or overseas-controlled enterprises in Australia is unrestricted. 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.

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.

Approval is required for residents to borrow Australian or foreign currency from any nonresident, or to incur a liability to a nonresident. In addition residents are required to obtain approval 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 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 25 per cent of the amount drawn. Deposits are held for the period of the borrowing and are refundable proportionately as loans are repaid.6 For the time being, Australian banks are required to sight specific Reserve Bank approval for all inward capital remittances of $A 250,000 or more.

Inward equity investment requires approval but is generally unrestricted. Measures introduced on September 26, 1972 provide for the control of foreign takeovers of Australian businesses considered by the Government to be contrary to the national interest. The Companies (Foreign Take-Overs) Act, 1972 gave 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 takeover, but before any action is taken against the proposal the Minister must also be satisfied that the acquisition of shares in question would lead to the transfer of effective control to foreign persons and that this would be contrary to all national interest. The Act is not applied where no loss of Australian control is involved or in general to the take-overs of companies whose assets do not exceed $A 1 million, unless there are special circumstances involved. 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.7

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 in foreign securities among themselves. The export of securities and certain transactions in foreign securities are subject to approval.

The trading banks’ overall net position in foreign currency is subject to limitation; excess holdings must be sold to the Reserve Bank. 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 of Australia all gold coming into their possession 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.8 Newly mined gold acquired by the Reserve Bank is made available at its official buying price of $A 29.80 a fine ounce to an association of gold producers for sale at free market prices to local industrial users or overseas purchasers. Certain domestic gold production is subsidized 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 the issue of 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 1972

January 1. An increase in assistance to large producers of gold under the Gold-Mining Industry Assistance Act came into effect. The period of operation of the Act was extended from June 1973 to June 1975.

May 11. The Banks (Shareholdings) Act, 1972 prohibited the acquisition by any person or company, without approval, of 10 per cent or more of the shares of a bank incorporated in Australia.

June 21. It was announced that the Government was considering the introduction of a screening system for foreign capital to ensure that foreign capital entering Australia for investment would be employed to the country’s advantage.

June 23. Australia ceased to be a Scheduled Territory in terms of the U. K. Exchange Control Act, 1947.

June 23. Foreign exchange operations were suspended. The Reserve Bank would not, for the time being, provide forward exchange facilities.

June 28. Foreign exchange operations by banks were resumed on a limited scale.

July 4. Restrictions on foreign exchange operations were further eased to permit banks to buy and sell foreign exchange for all normal trade and current account transactions and to enable residents to settle amounts contractually due under commercial and financial contracts entered into on or before June 23, but for other transactions for individuals only for an amount up to $A 5,000 a resident. (This amount was increased to $A 250,000 on July 10.)

July 10. Forward exchange facilities for trade transactions were restored. Forward cover for banks was provided by the Reserve Bank in U. S. dollars at a specified rate, a discount of 1 per cent per annum being set initially on the spot buying and selling rates. Forward cover was also given in sterling and Canadian dollars, at daily rates based on these currencies’ rates against the U. S. dollar in markets abroad. (Until June 23, there had been a fixed charge for forward cover in sterling and a variable margin for that in U. S. dollars and Canadian dollars, based on these currencies’ rates against sterling in markets abroad.)

July 13. The temporary limitations on banks’ spot exchange transactions were removed for all transactions which met exchange control requirements.

July 20. Banks were advised that the distinction between Sterling Area and non-Sterling Area in the prescription of currency rules was removed. Residents henceforth could arrange to receive payments from and make payments to overseas countries in any foreign currency.

September 19. It was announced that the trade agreement with the United Kingdom would be terminated with effect from February 1, 1973. The tariff preferences enjoyed by the United Kingdom would gradually be dismantled. (On February 1, 1973 the first step was taken by the abolition of a 7½ per cent duty on by-law imports from nonpreferential countries.)

September 26. It was announced that legislation would be introduced to prevent foreign take-overs of Australian businesses considered by the Government to be contrary to the national interest and to establish an independent authority to analyze and report on cases referred to it by the Government. Interim measures were to be brought into immediate effect under which departmental machinery would be used in place of the independent authority. The measures would apply to acquisitions of shares or other assets by overseas interests which might reasonably be expected to result in control of an Australian business passing to overseas hands. The acquisition of 15 per cent or more of the voting power in a company by any one overseas interest or associated group, or 40 per cent or more by overseas interests in the aggregate would constitute, prima facie, a foreign take-over. The measures would also apply to the transfer of all or a significant part of the ownership or rights over mineral areas to overseas interests. The measures would not apply where the take-over would simply transfer control from one overseas interest to another, where overseas interests could demonstrate that an acquisition would not give a significant degree of foreign control, or to cases where the offeree company had assets of $A 1 million or less, except in special circumstances. The criteria to be used in judging whether a proposed take-over would be contrary to the national interest were outlined in the announcement.

September 27. The Reserve Bank no longer granted exchange control approval for borrowings abroad by Australian residents, including foreign companies resident in Australia, where such borrowings were repayable, or carried options to repay, in two years or less; for administrative simplicity, borrowings not exceeding $A 100,000 in any one year were exempt for the time being. Loan agreements for which exchange control approval had been received and borrowings specifically to finance trade transactions on normal credit terms were not affected.

September 27. The Sterling Area exemption was revoked, under which many types of transactions between persons and companies in Australia and residents of overseas Sterling Area countries (other than Hong Kong) had been exempted from the application of exchange control regulations, and some types of capital inflows from the overseas Sterling Area (as defined by Australia’s regulations) had in effect been unrestricted. The exemption from approval requirements had included borrowing in Australian dollars by Australian residents from other Sterling Area residents. Henceforth, transactions between residents of the Australian currency area and residents of overseas Sterling Area countries were on the same footing as transactions with all other nonresidents. The authority of the Reserve Bank was therefore required by residents of the Australian currency area before (1) borrowing Australian or foreign currency from any nonresident; (2) crediting or making payments to or on behalf of any nonresident; (3) entering into contracts (except for the purchase of goods) or acknowledging debts so that actual or contingent rights to payments, any other valuable consideration, or services were created in favor of any nonresident; or (4) allotting or transferring securities to, or registering securities in the name of, any nonresident.

September 27. The May 1965 guidelines on borrowing in Australia by enterprises in which more than 25 per cent of the equity is held directly or indirectly by overseas interests were abolished.

September 27. Controls over outward portfolio investment, which had been virtually prohibited since 1939, were relaxed. Applications by individuals would normally be readily approved to invest abroad up to $A 10,000 in any period of 12 months, and institutional investors, public companies, and the like could normally expect to be permitted to make investments up to $A 1 million in any period of 12 months, with individual consideration being given in special circumstances to applications in excess of these amounts. Eligible investments would include shares, stocks, and real estate, but not investment in loans or other fixed-interest securities. Policy toward direct investment overseas would continue to be very liberal.

October 24. The Companies (Foreign Take-Overs) Bill was introduced in Parliament. (It was enacted on November 2 and came into operation on November 9, 1972.) The legislation provided legal backing to the measures announced on September 26 insofar as they relate to foreign take-overs of companies through the acquisition of shares. The Act was stated to be interim legislation and by its own terms would expire on December 31, 1973. The main powers of intervention provided were powers to make orders prohibiting the implementation of particular take-overs on an interim or final basis, and the power to limit the beneficial interests that a particular foreign interest or associated group of interests may have in a specified company in those cases deemed by the Government to be contrary to the national interest.

December 23. The par value was changed from 0.995310 gram to 1.04360 grams of fine gold per Australian dollar. The effective parity relationship for the U. S. dollar was changed from $A 1 = US$1.21600 to $A 1 = US$1.2750.

December 23. The Reserve Bank changed its official buying price for newly mined gold from $A 31.25 to $A 29.80 a fine ounce.

December 23. It was announced that the coverage of the embargo on overseas borrowing repayable within two years would be broadened. (With effect from February 2, 1973 the restrictions on borrowing abroad were extended to cover certain indirect forms of borrowing and certain transactions having a similar effect on the inflow of capital.)

December 27. A variable deposit requirement in local currency, initially set at 25 per cent of the amount borrowed, was introduced on drawings under new borrowing in foreign or Australian currency from overseas lenders at terms of over two years. The nonassignable deposits, which would bear no interest, would have to be lodged concurrently with the receipt of loan proceeds and held with the Reserve Bank during the entire borrowing period, although they would be refunded pari passu with the loan repayments. Exempt were (1) borrowings specifically to finance trade transactions on normal trade credit terms; (2) borrowings of $A 100,000 or less in any 12-month period; and (3) drawings under foreign loan agreements already approved by the Reserve Bank.

Austria

Exchange Rate System*

The par value is 0.0359059 gram of fine gold per Austrian Schilling. A central rate of S 23.30 per US$1 has been established, corresponding to S 25.2971 = SDR 1, and Austria avails itself of wider margins. The official limits for the U. S. dollar, the intervention currency, are S 22.78 buying, and S 23.82 selling, per US$1—rates at which the Austrian National Bank will buy or sell. The rate for the U. S. dollar fluctuates in the exchange market between these limits. Market rates for other currencies vary between limits which result from combining the official limits for the U. S. dollar maintained by Austria and such limits in force in the country of the other currency concerned, or, if no such limits are observed, are based on market rates in the principal exchange markets abroad. “Agreement dollars” are quoted at par with the U. S. dollar. Effective costs may deviate in switch transactions. 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 the exchange control and issues licenses where required. Most exchange transactions pass through those Austrian banks that have been authorized to implement 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 the countries with which Austria maintains bilateral payments arrangements1 are made through clearing accounts expressed either in U. S. dollars (for Romania) or in schillings (for Eastern Germany). Settlements with all other 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), “multilateral nonmember countries” (other countries with which settlements are in convertible currencies), and “bilateral countries” (with which clearing arrangements are in force).

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 many payments for 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. The liberalization depends on the group of countries from which they are imported; for such liberalized goods, licenses are issued by the customs at the time of clearance.2 Nearly all imports from GATT countries, their associated territories, and other countries3 are liberalized. Many 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 and salt. Global quotas apply to specified imports from OECD countries and all other GATT countries, except Cuba, 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, and certain fertilizers are imported in accordance with a special system of controls and regulations maintained under Agricultural Marketing Laws.

In principle, import licenses are issued only to importers who have received trade licenses. For new importers there is a newcomers’ quota, which is up to a maximum of 20 per cent of the corresponding global quota. 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.4 Payments for imports of goods not subject to import license from, or originating in, countries with which Austria maintains bilateral payments agreements (see footnote 1) require exchange licenses, which are granted without restriction if the payments are made in the appropriate bilateral currencies; payments for licensed imports shipped from and originating in one and the same bilateral country are covered by a general permission.

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 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 the terms of existing bilateral payments arrangements and other 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 (to bilateral countries only through the appropriate bilateral channel). Other payments abroad up to S 1,000 may be made freely and at any time. The remaining payments to “multilateral nonmember countries” and to bilateral 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. Residents may buy travelers checks, etc., up to the equivalent of S 26,000 a trip from authorized banks in agreement currencies or local currencies for travel to bilateral countries. 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. Deposits in bilateral clearing currencies may be used in accordance with the terms of an individual or general payments license.

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

Purchases by nonresidents of Austrian securities, shares or participations in Austrian companies or firms, and Austrian real estate, are subject to individual approval by the National Bank.5 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 require prior approval by the National Bank and may be restricted. Thus, the granting of permissions for commercial credits to finance imports of consumer goods, especially passenger cars, is restricted. Loans from nonresident relatives to residents are in practice authorized freely up to S 260,000 a borrower a year. The short-term foreign assets and liabilities in convertible currencies of authorized banks are not subject to direct 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 the sterilization of 75 per cent of such increases. A number of authorized banks are permitted to accept from abroad and to employ abroad funds in convertible currencies for a period 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 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.

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 for imports (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 1972

January 1. Following the termination on December 31, 1971 of the bilateral payments agreements with Bulgaria, Czechoslovakia, and Poland, settlements with these countries henceforth took place in convertible currencies.

January 1. Settlements with Eastern Germany henceforth took place through clearing accounts denominated in schillings rather than accounts denominated in U. S. dollars.

January 1. The National Bank withdrew from direct foreign exchange transactions with the public; previously, its commercial business with nonbanks had already been reduced to exchange transactions.

January 1. Restrictions on goods of Japanese origin were further reduced.

January 1. A new antidumping law came into force.

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 extended for six months. (Subsequent renewals carried the program over into 1973.)

February 1. The gentlemen’s agreement of August 18, 1971, which aimed at preventing domestic credit institutions from importing liquidity and 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, was extended until June 30, 1972. The borrowing of foreign currency from nonresidents to cover exchange risks related to export transactions now was excluded from the agreement. In connection with the renewal, the credit institutions undertook to appeal to their large customers not to borrow abroad and the National Bank would approve capital exports more liberally than before.

February 4. Agreement in principle was reached with Romania to terminate the bilateral payments agreement in the near future. In December, it was agreed to place settlements on a convertible currency basis with effect from July 1, 1973.

March 16. The scope of the general license permitting banks, when acting for the account of customers, to engage in forward and swap transactions in convertible foreign currencies for periods of up to 12 months, was reduced. Henceforth, the permission was restricted, where the sale of foreign currencies was involved, to claims of residents on nonresidents expressed in a fixed amount of foreign currency and resulting from a contract effectively concluded and already fulfilled by the resident. Correspondingly, the National Bank’s undertaking to grant residents approvals to take up credits and loans in “multilateral member countries” for the refinancing of existing export claims was defined to cover only the refinancing of export claims after fulfillment of the export delivery. As a result, foreign credits to cover exchange risks on export contracts could be taken up only on delivery of the goods.

March 29. Banks were granted a general license to effect forward exchange transactions in freely convertible currencies with a maturity of up to 12 months, for the account of exporters, to cover exchange risks resulting from export claims; cover henceforth could again be obtained as soon as export contracts were signed.

April 1. Generalized tariff preferences on imports of specified industrial and agricultural products from most developing countries went into effect.

April 21. Exchange risk cover was made available by the Government for export transactions on which an export credit guarantee was granted by the Oesterreichische Kontrollbank. The facility was available for all currencies quoted on the Vienna Stock Exchange and for maturities falling due at least one year after the date of application. Exchange rate losses of less than 2 per cent had to be borne by the exporter himself. The premium, payable in advance in yearly installments, was ⅛ of 1 per cent for each quarter of the duration of the export credit guarantee, computed on the amounts covered by the exchange risk guarantee. The guarantee normally was given in respect of the exchange rate ruling on the date of application.

June 15. The gentlemen’s agreement of August 18, 1971 was extended until December 31, 1972. It was also agreed that the Government would not borrow abroad in 1972 (borrowings of S 2.8 billion had been planned). The banks agreed to place abroad (or invest in 3 per cent National Bank cash certificates) additional funds totaling S 1.5 billion and to maintain these placements until the end of the year.

June 15. Parliament passed legislation to introduce a value-added tax with effect from January 1, 1973. The general rate would be 16 per cent. It would replace the general 5½ per cent turnover tax.

June 23. The exchange market was closed. It reopened on June 28.

July 22. An industrial free trade agreement with the EEC was signed, to come into force on January 1, 1973. Under an interim agreement signed on the same day, an advance 30 per cent across-the-board tariff cut for industrial products came into effect on October 1, on which date a first tariff cut of 5 per cent for the so-called sensitive items also came into effect. A global agreement and an interim agreement were also signed with the ECSC.

September 15. It was announced that the Federal Government would contribute to the current stabilization policy inter alia by advance repayment of S 400 million of foreign public debt.

September 21. The credit institutions agreed to prolong for six months their June 15 undertaking to hold abroad until December 28, 1972 an additional S 1.5 billion. (On January 16, 1973 this gentlemen’s agreement was extended until June 30, 1973. The gentlemen’s agreement of August 18, 1971, providing for the sterilization of 75 per cent of the growth in bank’s external liabilities, was also extended on January 16, 1973, until May 31, 1973. Both agreements were on May 30, 1973 extended until the end of 1973.)

October 9. A gentlemen’s agreement was concluded between the National Bank and the domestic banks on the restriction of sales of domestic fixed-interest-bearing securities to nonresidents. From September 30, 1972 until March 31, 1973, nonresidents could no longer purchase registered or negotiable fixed-interest-bearing securities, cash certificates, and medium-term bonds issued by banks, nor certificates of those Austrian mutual funds, the security assets of which consist of fixed-interest-bearing securities of domestic issuers. Other domestic fixed-interest-bearing securities denominated in schillings could be sold to nonresidents only up to the amount for which each credit institution repurchased such securities from nonresidents (plus redemptions and amortization); in addition, however, these securities could be sold to nonresidents up to a total of S 500 million during the period the agreement was in effect, with subquotas to be allocated to individual banks. (These regulations were subsequently extended until September 30, 1973.)

October 23. The following measures were announced. Building societies agreed with effect from November 1 to limit credit to nonresidents for the purchase of land and dwellings in Austria and to conclude new savings contracts with foreigners only if the latter had been residents for exchange control purposes for at least one year. Other credit institutions were to exercise restraint in such lending to foreigners.

November 2. A trade and payments agreement with mainland China was signed, which provided for settlements on a schilling basis. The agreement came into effect on June 1, 1973, when it replaced the agreement concluded on the Chamber of Commerce level.

November 7. A new trade agreement for the period 1973 through 1977 was signed with Czechoslovakia. Austria would apply full GATT liberalization of imports by the end of 1974.

November 11. A new long-term trade agreement with Hungary was signed. Austria would apply full GATT liberalization of imports by the end of 1974.

November 16. The Council of Ministers decided on additional stabilization measures. These included increased liberalization of imports of industrial products and automatic licensing of imports of beef and pork. It was announced that it appeared necessary to limit long-term borrowing abroad by nonbanking enterprises to the amounts required for the repayment of existing debts.

November 27. Within the framework of a new stabilization program, the liberalization of inward capital movements was suspended until May 31, 1973 and a number of other external measures were taken, also to be effective until May 31, 1973. The individual approval of the National Bank was required for virtually all types of capital inflows and transactions that could lead to capital inflows. These measures had the effect of restricting the purchase by nonresidents of all types of Austrian securities, of shares or participations in Austrian companies or firms, and Austrian real estate, and of the extension by residents of mortgage credits on domestic real estate to nonresidents (except when the loan proceeds were to be used abroad). Furthermore, the taking up by nonbank residents of credits and loans in foreign currency (or schillings from Free Schilling Accounts) from nonresidents, for which the prior approval of the National Bank is required, was restricted. This applied particularly but not exclusively to (1) investment credits for producing enterprises; (2) import and export finance; (3) capital provided to domestic firms by their foreign partners or stockholders; and (4) borrowing by individuals from close relatives abroad. In practice, however, family loans to residents were authorized freely.

(On May 30, 1973 the suspension of the liberalization of these capital transactions was extended until the end of 1973; in addition, the gratuitous acquisition by nonresidents of domestic real estate was subjected to control. With effect from June 1, 1973 loans from nonresident relatives were liberalized again to the extent indicated in the section on Capital, above.)

December 1. It was agreed, within the framework of the stabilization program, that the banks would limit their increase in lending during the 12 months from November 30, 1972, to about 12 per cent, to be spread as evenly as seasonal factors permitted. To this end, for the period December 1, 1972-May 31, 1973, the banks’ lending ceilings under the Credit Control Agreement were lowered from 51 per cent to 37 per cent (or, in the case of certain small institutions, from 49 per cent or less to 35 per cent) of any increase in their liabilities, with the proviso that both the proceeds received from and the loans made against medium-term notes were included in calculating each bank’s lending ceiling or assessing its actual performance. In addition, restrictions in regard to interim loans and to the waiting period for ordinary loans were agreed with the building societies. It was also agreed that specialized finance houses and installment credit institutions would keep their increase in domestic lending down to a maximum annual rate of 12 per cent from December 1972 to May 31, 1973, and that members of the Association of Austrian Insurance Companies would not allow their total of outstanding loans to residents to expand by more than 6 per cent in the six months from November 30, 1972. (On May 30, 1973, these measures were extended with minor modifications until the end of 1973. A maximum annual rate of 12 per cent of the increase in domestic lending continued to be the general principle. Only in cases where the credit ceiling was not sufficient to ensure the 12 per cent rate would the National Bank tolerate the nonobservance of such credit ceilings.)

December 5. The Minister of Finance requested provincial and communal authorities to discontinue the sale of land to foreign nationals.

December 10. It was agreed that the trade agreement with Japan would be renewed without change for another year from January 1, 1973.

December 11. The Ministry of Commerce issued internal instructions providing for an easing with effect from January 1, 1973, of the application of the remaining quantitative restrictions on goods of Japanese origin.

December 12. The Government announced that it would introduce legislation to enable it to make the equivalent of S 1 billion available out of the monetary reserves for investment in international development institutions.

Bahrain1

Exchange Rate System*

The currency of Bahrain is the Bahrain Dinar, which is defined as equivalent to 1.86621 grams of fine gold per Bahrain dinar. No par value has yet been established for the Bahrain dinar. The Bahraini Currency Board quotes daily rates for sterling based on London rates for the U. S. dollar against sterling. On December 29, 1972, the Currency Board’s buying and selling rates for sterling were BD 1.035 and BD 1.025 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 30, 1972 their buying and selling rates for the U. S. dollar were BD 0.44375 and BD 0.435, respectively, per US$1. The Currency Board does not deal with the public.

Administration of Control

There is neither exchange control legislation nor an exchange control authority in Bahrain. Bahrain is a member of the Sterling Area, although it has ceased to be a Scheduled Territory in terms of the U. K. Exchange Control Act, 1947. The United Kingdom issues annually broad guidelines to the commercial banks concerning payments to nonresidents of the 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. In practice, settlements with Sterling Area countries usually take place in sterling.

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. 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. 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 1972

June 23. Bahrain ceased to be a Scheduled Territory of the Sterling Area.

June 26. The gold parity of the Bahrain dinar was maintained and the currency was unpegged from sterling, for which previously a fixed relationship of BD 1 = £0.875 had been observed. The Currency Board henceforth quoted daily buying and selling rates for sterling based on sterling-U. S. dollar rates in London. The effective parity relationship for the U. S. dollar remained unchanged at BD 1 = US$2.28.

Bangladesh1

Exchange Rate System*

No par value for the Bangladesh currency, the Taka, has been established with the Fund. The official exchange rate is T 18.9677 = £ stg. 1, which at the end of 1972 corresponded to about T 8.02 = US$1. The exchange rates for currencies other than sterling and the Indian rupee are based on the London market rates for the currencies concerned. On December 31, 1972, the spot buying and selling rates of the Bangladesh Bank (the central bank) vis-à-vis authorized dealers were T 18.7501 per £ stg. 1 and T 18.8501 per £ stg. 1, respectively. On December 31, 1972, the spot buying and selling rates (telegraphic transfers) of authorized dealers were T 18.7143 per £ stg. 1 and T 18.8857 per £ stg. 1, respectively. On the same date, the central bank’s spot buying and selling rates for the Indian rupee were T 100 and T 100.05, respectively, per Rs 100, and the corresponding rates of the commercial banks were T 99.95 and T 100.10 per Rs 100. A buying rate of T 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. The forward transactions of the Bangladesh Bank are confined to purchases of sterling. Forward facilities at authorized banks are available only for sterling export proceeds.

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 Trade and Commerce 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 Jute Export Corporation.

Prescription of Currency

Bangladesh is a member of the Sterling Area, although it has ceased to be a Scheduled Territory in terms of the U. K. Exchange Control Act, 1947. Settlements with all countries are subject to exchange control. Settlements with countries with which Bangladesh has bilateral payments agreements2 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 (a) in takas for credit to an account held by a resident of that country; (b) in pounds sterling for credit to an account held by a resident of that country; (c) in the local currency of that country; or (d) in any other currency specified by the exchange control authorities. Export proceeds must be received in convertible foreign exchange,3 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.4

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. A high proportion of total imports consists of aid imports. 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 1972, 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 146 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 T 20,000 during the July-December 1972 “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 petroleum, certain chemical and metal products, cotton textiles and yarn, 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, sugar, 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 these industrial sectors are given an entitlement for importation of specified raw materials and packing materials, and licenses are issued at ratios of 10, 25, 50, or 100 per cent 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. During the January-June 1972 shipping period, certain importers (mainly the TCB) were, as a special facility, allowed to import on credit terms of six months to one year.

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 (net of tax) if the terms of employment have been approved.

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 T 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 T 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.

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 T 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.

Capital5

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 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.

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 1972

January 1. A new currency unit, the taka, was issued to replace the Pakistani rupee, the par value of which was PRs 4.76190 = US$1. The new exchange parity was established at T 18.9677 = £ stg. 1 (corresponding at the time to T 7.2793 = US$1). A unitary exchange rate system replaced the bonus voucher system, under which several effective exchange rates were considerably more depreciated than the par value.

January 1. The Bangladesh Bank began operations as the central bank.

January 1. Export taxes of T 30 a bale on long jute and T 15 a bale on jute cuttings were introduced. They were abolished on November 15.

January 2. The central bank quoted fixed buying and selling rates for spot sterling, to commercial banks only. It also announced forward buying and selling rates for sterling.

January 3. The prohibition on exports of raw jute to India was revoked.

February 8. A bilateral trade and payments agreement with the U. S. S. R. was signed; it came into effect immediately. A second agreement was signed on November 29.

February 11. Bangladesh was listed as a separate Scheduled Territory under the United Kingdom’s exchange control regulations.

February 15. A bilateral trade and payments agreement with Czechoslovakia was signed; it came into effect immediately. A second agreement was signed on December 22.

February 16. A bilateral trade and payments agreement with Poland was signed; it came into effect immediately.

March 3. A bilateral trade and payments agreement with Bulgaria was signed; it came into effect immediately. A second agreement was signed on December 19.

March 6. The central bank quoted fixed buying and selling rates for the Indian rupee, to commercial banks only.

March 19. A bilateral trade and payments agreement with Hungary was signed; it came into effect immediately.

March 23. A bilateral trade agreement with Burma was signed. Trade was to be conducted on a self-balancing basis; settlements were to be effected through an account denominated in sterling and held at the People’s Bank of the Union of Burma. The agreement came into effect immediately.

March 27. Domestic banks and insurance companies were nationalized, as were shortly thereafter the jute, cotton, and sugar industries, most inland water transport, and most establishments in other sectors when their assets exceeded T 1.5 million.

March 28. A bilateral trade and payments agreement with India was signed; it came into effect immediately. (With effect from January 1, 1973, a special clearing arrangement for travel between the two countries was added.)

April 5. A bilateral trade and payments agreement with Yugoslavia was signed; it came into effect immediately.

April 20. The import policy for the first half of 1972 was announced. The import of all luxury goods was banned.

May 30. The Bangladesh Jute Export Corporation was established.

June 14. The Trading Corporation of Bangladesh was established.

June 23. Bangladesh ceased to be a Scheduled Territory of the Sterling Area.

June 23. The central bank suspended its sterling quotations.

June 30. Following the floating of sterling, the parity relationship to sterling was maintained at T 18.9677 = £ stg. 1. As a result, the taka began to depreciate in terms of the U. S. dollar. The parity relationship with the Indian rupee, which also floated with sterling, remained unchanged.

July 1. The export of raw jute was nationalized.

July 6. The central bank quoted new, fixed buying and selling rates for spot sterling. It resumed forward purchases of sterling, but its forward sales of sterling remained suspended.

July 27. A premium payments scheme for certain personal inward remittances was introduced for the period ending June 30, 1973. The beneficiaries in Bangladesh of inward remittances made in convertible currencies by Bangladesh nationals working abroad could convert the foreign currency at T 30 per £ stg. 1.

August 1. The import policy for the second half of 1972 was announced. There was some relaxation of import restrictions, but imports of consumer goods remained severely restricted. Incentives to export industries were provided through a Raw Materials Replenishment Scheme.

August 4. A bilateral trade and payments agreement with Romania was signed; it came into effect immediately.

August 8. Insurance companies were nationalized.

October 10. Border trade with India was suspended.

October 31. The Central Bank Presidential Order specified the functions of the Bangladesh Bank. These included the management of the official exchange reserves and the administration of exchange control.

December 15. A bilateral trade and payments agreement with Egypt was signed; it came into effect immediately.

December 16. Bangladesh became a contracting party to the GATT.

December 31. The import policy for the first half of 1973 was announced. 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 T 20,000 to T 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, food, and medicines.

Barbados

Exchange Rate System*

The par value is 0.444335 gram of fine gold per East Caribbean Dollar, corresponding to EC$2 = SDR 1 or EC$ 1.84211 = US$1, but no exchange transactions take place at the par value. Barbados is a participant in the East Caribbean Currency Agreement of 1965, which established the East Caribbean Currency Authority to issue and manage a common currency in its member countries.1 The Currency Authority maintains a fixed relationship for the East Caribbean dollar with sterling at the rate of EC$4.80 = £ 1. Consequently, all exchange transactions other than those in sterling or currencies linked to sterling take place at fluctuating rates.

The East Caribbean Currency Authority is authorized to levy a commission charge of up to 1 per cent on inward and outward transfers of sterling. On December 31, 1972 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 East Caribbean Currency Authority maintains fixed buying and selling rates at ⅛ of 1 per cent either side of parity for the Guyana dollar, the Jamaica dollar, and the Trinidad and Tobago dollar. 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 30, 1972, the banks’ buying and selling rates for the U. S. dollar were based on EC$200.60 per US$100.

Under an arrangement with the central banks of Jamaica and Trinidad and Tobago, the East Caribbean Currency Authority purchases at par notes and coins issued by the monetary authorities of the countries concerned and repatriates the currency in return for reciprocity of treatment with respect to collections of East Caribbean dollars. The currency of Guyana is purchased at EC$0.9211 per Guyana dollar.

Administration of Control

Exchange control applies to all countries outside the Sterling Area. It is administered by the Minister of Finance, operating as the Exchange Control Authority, which 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 East Caribbean 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 East Caribbean dollars in Barbados and no distinction is made between these accounts and accounts maintained in East Caribbean 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 opened, with exchange control approval, for nonresidents of the Sterling Area and are maintained in East Caribbean 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 other 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 mainland 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 and goods which compete with domestic products, such as coconut oil, milk, 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), of which Barbados is a member. Imports affected by these requirements include pork, eggs, fruits, vegetables, and nuts, all of which are licensed to conform to 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 EC$ 1,000 a person may be allocated for each travel year, expenses of education abroad (EC$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.

Residents of Barbados and other Sterling Area countries may take out unlimited amounts in travelers checks denominated in 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 EC$100 in the currencies of Sterling Area countries and EC$ 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 mainland 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, 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 the Caribbean Free Trade Association. 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 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; when permission is granted, such investments must be channeled through the investment currency market in the United Kingdom. The purchase by residents of Barbados of non-Sterling Area securities and of real estate for private purposes outside the Sterling Area is not normally permitted. When permission is granted, however, the purchase of non-Sterling Area securities or of real estate situated outside the Sterling Area must be financed through the investment currency market in the United Kingdom. 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 EC$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 EC$24,000 a year.

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 and export gold are issued by the Ministry of Trade, Industry, and Commerce. Official institutions in Barbados do not purchase gold.

Changes during 1972

May 2. A central bank was established. It would commence operations in 1973.

June 6. Customs duties were increased on a number of commodities when imported from non-CARIFTA countries.

June 23. Barbados ceased to be a Scheduled Territory in terms of the U.K. Exchange Control Act, 1947. Transactions in foreign exchange were suspended. They were resumed on June 27.

June 27. It was announced that the fixed relationship between the East Caribbean dollar and sterling would be maintained unchanged at EC$4.80 = £1. As a result, the East Caribbean dollar began to depreciate in terms of the U. S. dollar, the effective parity relationship for which had been EC$ 1.84211 = US$1.

June 27. No changes in exchange control were made. Both the system of nonresident accounts and the prescription of currency arrangements were maintained unchanged. Export proceeds received in Sterling Area currencies remained exempt from surrender requirements.

October 17. The Miscellaneous Controls (General Open Import License) Regulations, 1972 added a number of items, mostly foodstuffs and manufactured goods (including automobiles), to the list of commodities subject to individual import license irrespective of origin. Several commodities, including coconut oil, were also added to the list of those requiring an individual license when imported from CARIFTA countries.

November 13. The Customs (Rates of Exchange) Notice 1972, No. 3 came into effect, which specified new selling rates for sight drafts in respect of imports as follows: EC$2.097 per Canadian dollar, EC$2.067 per U. S. dollar, and EC$0.921 per Guyana dollar. Rates for other currencies continued to be those quoted from time to time by the commercial banks.

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 44.8159 = US$1, corresponding to BF/Lux F 48.6572 = SDR 1, and avail themselves of wider margins, except in respect of the Netherlands guilder. There are two spot exchange markets—the official (réglementé or 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.

In the official exchange market, only authorized banks may carry out exchange transactions permitted in that market.1 Margins of approximately 2¼ per cent either side of the central rate or the cross-parity are maintained in this market for the U. S. dollar, the Danish krone, the deutsche mark, the French franc, the Italian lira, and the Norwegian krone. The spot exchange rate for the U. S. dollar (the intervention currency notified to the Fund on December 27, 1971) fluctuates within official limits of BF 43.8075 buying, and BF 45.8250 selling, per US$1. The rates for most of the convertible currencies not mentioned above fluctuate between limits which result from combining the official limits for the U. S. dollar maintained by Belgium-Luxembourg and such limits in force in the country of the other currency concerned. The exchange rate for the Netherlands guilder in the official market is maintained within margins of 1½ per cent either side of the cross-parity of f. 1 = BF 13.812 or BF 100 = f. 7.24. The rate for the zaïre fluctuates between limits of 2¼ per cent either side of BF 89.6318 (US$2), i.e., between BF 87.6150 buying, and BF 91.6500 selling, per Z 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-Luxembourgeois 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 29, 1972, the free market rates between banks for the U.S. dollar were BF 44.34 buying, and BF 44.42 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 Commision 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 countries2 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), while outward payments for all others and all inward payments can be transferred through either the official or 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.

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, DBilateralBilateral3
Inward Payments
A, BConvertibleConvertibleOfficialConvertible
CConvertibleConvertible OtherOfficial or free Free
Convertible or Financial
DConvertibleAnyFreeFinancial
A, BBilateralConvertibleOfficialBilateral or Convertible3
CBilateralConvertible OtherOfficial or free FreeBilateral or Convertible3
DBilateralAnyFreeBilateral3

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.4 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.5

2. Financial Accounts. These accounts may be opened only for residents in convertible area countries,6 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 2), 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, mainland China, Czechoslovakia, Eastern Germany, Hong Kong, Hungary, Japan, North Korea, Outer Mongolia, Poland, Romania, the U. S. S. R., and North Viet-Nam,7 and (2) a number of imports from all other countries except Luxembourg.8 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 when payment is made through 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. Certain agricultural imports of non-Benelux EEC origin or originating in third countries are subject to compensatory levies.

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. 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 2) 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.9 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 zaïres; inward payments for capital transactions with bilateral countries may be made in Belgian or Luxembourg francs through Bilateral Accounts, in any currency through the free market, or in the case of Zaïre, in zaïres.

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 relating to the official market and, vis-à-vis nonresidents, in Belgian francs and Luxembourg francs in Convertible Accounts, to increase beyond specified levels. Banks have also been instructed that their overall external 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.

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 1972

During the year a considerable number of Eurobond issues denominated in Luxembourg francs took place; one such issue denominated in Belgian francs was authorized. Also in 1972, most of Belgium’s short-term foreign public debt was liquidated.

January 1. The temporary export tax of 1.75 per cent was abolished.

February 18. Unwrought lead was added to the list of goods subject to import licensing from all sources except Luxembourg, effective April 18.

March 6. The economic union between Belgium and Luxembourg was extended for ten years.

March 9. The IBLC instructed banks in Belgium and Luxembourg not to allow their net debtor spot positions relating to the official market and, vis-à-vis nonresidents, in Belgian francs and Luxembourg francs in Convertible Accounts, to increase beyond the level at the close of business on that date; banks having a net external creditor position or a balanced position were instructed not to incur a net debtor position. Temporary excesses of up to 10 per cent were permitted, however, in order not to disturb the normal performance of current transactions. Banks were also asked to take measures to restrict the accumulation by nonresidents of Convertible Account balances not required for normal current transactions and to limit their own recourse to foreign money markets to their nonspeculative requirements. The IBLC in addition informed banks on April 5 that they could not deliberately incur any considerable long or short overall foreign currency position (spot and forward combined) in the official market.

March 15. A recodification of the basic exchange control regulations took place, primarily to incorporate the principles of the decisions of May 10, 1971 that had separated the two exchange markets and enabled foreign currency to go to a discount in the free market. At the same time, however, certain minor changes were introduced, as follows: (1) income collected more than six months after the due date was shifted back from the free market to an option between official market and free market; (2) the prohibition on receiving advance payments for transit transactions in excess of BF 5 million was lifted; (3) all receipts and payments in respect of invisibles up to BF 50,000 were exempted from the submission of documentary evidence; (4) the provisions about the surrender of any exchange profits on official market forward contracts were modified; (5) also modified were the provisions concerning balances in official market accounts that are not utilized within 30 days after a change of parity; (6) the Japanese yen was included among the currencies traded in the official market (but was not officially quoted); (7) inward payments in foreign currencies from bilateral countries, when in respect of transactions in List C, were shifted from the official market to an option between free and official market, and when in respect of List D were shifted from the official market to the free market; and (8) purchases of securities in the BLEU by foreign insurance companies were shifted from the official market to the free market. (Subject to individual approval, they could with effect from May 8 again make certain purchases to the debit of Convertible Accounts.)

April 24. The National Bank narrowed the margins in the official exchange market for the deutsche mark, the French franc, and the Italian lira to 2¼ per cent either side of the cross-parities. From May 1 until June 23 this regime was also applied to sterling. Narrower margins for the Danish krone and the Norwegian krone came into effect on May 1 and May 23, respectively. The Benelux intervention arrangement was continued on April 26, with margins of 1½ per cent either side of the cross-parities, as previously.

May 9. A Royal Decree was issued allowing the Office National du Ducroire to cover exporters’ losses resulting from exchange rate fluctuations of foreign currencies under contracts concluded after December 31, 1971. Eligible were contracts relating to the export of capital goods to any non-EEC country, provided the period between the signing of the contract and the date of payment of the last installment exceeded two years and provided that cover for credit risks was also applied for. Only amounts falling due more than one year after the date of signature would qualify. The guarantee would normally be limited to contracts concluded in U. S. dollars, pounds sterling, Swiss francs, or an EEC currency. The first 3 per cent of the exchange risk had to be borne by the exporter. The premium was 0.7 per cent a year payable in advance.

May 29. Agreement was reached on the unification of excise duties within Benelux, to take effect on January 1, 1973.

June 23. The exchange markets were closed. They reopened on June 28.

July 3. A law was given Royal Assent which would formalize the revaluation of the Belgian franc from 0.0177734 gram of fine gold per BF 1 to 0.0182639 gram of fine gold per BF 1, the latter corresponding to the central rate of BF 44.8159 per U.S. dollar announced on December 21, 1971. The same law would amend the Belgian Currency Law of April 12, 1957, to give the Government authority in an emergency to change the parity of the franc, after consulting the National Bank, whereas previously, parity changes were subject to formal parliamentary procedures. (The new law had not come into force by the end of 1972.)

July 26. The National Bank concluded a gentlemen’s agreement with the major commercial banks in which these undertook to place part of their Convertible Account liabilities, an amount set at BF 10 billion, in blocked noninterest-bearing accounts at the National Bank; each bank’s contribution to this monetary reserve was to be calculated weekly, mainly on the basis of the level and growth of banks’ liabilities to nonresidents in Convertible Accounts in Belgian francs. The agreement was initially to run until October 31. At the same time, the National Bank reduced its rediscount and visa ceilings in order to prevent the banks from offsetting the liquidity impact of the agreement by increased recourse to central bank facilities.

August 24. The March 9 ceiling on the net foreign liabilities of banks was lowered. The original base level, that of their liabilities on March 9, was replaced by one equal to the average level of those liabilities on July 18, July 25, August 2, and August 8.

September 21. The Government announced that permission to issue Euro-bonds denominated in Belgian francs was under consideration but would in any case be conditional on the use of the proceeds outside the BLEU. Furthermore, residents of Belgium or Luxembourg would not be permitted to subscribe.

October 3. The official quotation of the Danish krone, which had been suspended on September 26, was resumed.

October 31. The gentlemen’s agreement between the National Bank and the commercial banks, concluded on July 26, was extended until November 19.

November 20. A new gentlemen’s agreement was concluded, in which in addition to the major commercial banks, the private savings banks and the main public credit institutions also participated. With immediate effect, a part of all their liabilities, irrespective of form or maturity, was sterilized by transfer to a noninterest-bearing blocked account at the National Bank; the amount of this monetary reserve was calculated by means of a system of coefficients which differed according to the type of liability. As regards the commercial banks, the monetary reserve took into account, among other things, the growth since a given base period (August 31-November 1, 1972) in their net liabilities on Convertible Accounts in Belgian francs, the reserve requirement against such increases being 100 per cent. This agreement had an initial validity until February 28, 1973. It was subsequently extended until May 31, and again until September 30. On May 31, 1973 the sterilized amount had reached about BF 25 billion. (The Luxembourg authorities applied a similar sterilization system, and banks established in Luxembourg undertook with effect from January 2, 1973 to set aside a monetary reserve calculated on nonresidents’ holdings of convertible Luxembourg and Belgian francs. Furthermore, banks in Luxembourg were requested to confine their credits to Belgian enterprises within normal limits. The sterilized amounts were deposited with the National Bank early in January 1973.)

Bolivia

Exchange Rate System*

The par value is 0.0409256 gram of fine gold per Bolivian Peso, corresponding to $b 21.7143 = SDR 1 or $b 20 = US$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 30, 1972 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 and a 2 per mill stamp tax. 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, and Peru 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 subject to licensing, although certain exports may be prohibited 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$38 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 1972

January 1. The reciprocal credit agreement with Brazil came into operation.

March 17. Supreme Decree No. 10151 reduced export taxes on copper. These taxes were further reduced on July 28 by Supreme Decree No. 10379.

March 28. A General Hydrocarbons Law was enacted (Decree-Law No. 10170).

May 30. Imports of many alcoholic beverages were prohibited by Supreme Decree No. 10288.

August 25. Exports of beef and cattle were temporarily prohibited.

October 27. The exchange rate was changed from $b 11.875 (buying) to $b 20 (buying) per U.S. dollar.

October 27. Decree-Law No. 10550 abolished the statistical controls on purchases of foreign exchange, revoked Supreme Decree No. 08986 imposing the requirement of a sworn declaration, and reaffirmed the freedom from restrictions for all current and capital payments and transfers.

October 27. Decree-Law No. 10550 introduced an export tax of 20 per cent on the net export value (after deduction of regalia taxes and foreign processing costs) of traditional exports (minerals, metals, hydrocarbons, cattle and meat, and cotton) and an export tax of 15 per cent on the net export value of all other commodities. An export tax of 40 per cent, however, was applied to the net value of all exports produced or shipped before October 27, 1972; later in the year certain exemptions were granted.

October 31. A new par value of 0.0409256 gram of fine gold per Bolivian peso was established, corresponding to $b 20 per US$ 1. It replaced the par value established on May 14, 1953, at which no transactions had taken place since 1956. Bolivia also availed itself of wider margins.

November 15. Decree-Law No. 10583 abolished the customs surcharge of 10 per cent ad valorem introduced in 1968.

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 or R 1 = US$1.27732. Exchange rates are based on the South African Reserve Bank’s fixed rates for the U. S. dollar against rand (R 0.7809 buying, and R 0.7848 selling, per U. S. dollar) and the London market rates for the currencies concerned against the U. S. dollar.

Botswana is treated under U. K. exchange control regulations as part of the Overseas Sterling Area, although it has ceased to be a Scheduled Territory in terms of the U. K. Exchange Control Act, 1947. Botswana also forms part of the Rand Currency 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 Currency Area, and in principle these are uncontrolled and unrecorded. In relation to countries outside the Rand Currency Area, Botswana applies exchange controls that are generally similar to those of South Africa, although Botswana’s treatment of certain capital transfers to other countries of the Sterling Area 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 1972

June 23. Botswana, Lesotho, South Africa, and Swaziland ceased to be Scheduled Territories of the Sterling Area in terms of the U. K. Exchange Control Act, 1947.

June 30. The existing relationship between the rand and the pound sterling was maintained. The South African Reserve Bank resumed exchange operations. Its fixed quotations for sterling, which had been floating since June 23, remained unchanged at £100 = R 194.6955 (buying) and £100 = R 196.1615 (selling). As a result, the rand began to depreciate in terms of the U. S. dollar, for which the parity relationship had been R 1 = US$1.33333.

July 4. Following the application of exchange control by the United Kingdom to the Overseas Sterling Area countries except Ireland, South Africa’s exchange control regulations were amended. The regulations ceased to distinguish between Sterling Area and non-Sterling Area countries. Instead, they now distinguished between the Rand Currency Area (consisting of South Africa and Botswana, Lesotho, and Swaziland) and the Nonresident Area; the latter was defined in two ways: (a) in the application of the Securities Control Notices it consisted of all countries outside South Africa and (b) for all other purposes it consisted of all countries outside the Rand Currency Area (and thus excluded Botswana, Lesotho, and Swaziland). A South African resident was defined as a person, whether of South African or any other nationality, who has taken up residence in, or is domiciled in, the Republic of South Africa. A nonresident was defined in two ways: (a) in the application of the Securities Control Notices, as a person whose normal place of residence or domicile is outside the Republic of South Africa and (b) for all other purposes, as a person whose normal place of residence or domicile is outside the Rand Currency Area. Thus, residents of Botswana, Lesotho, and Swaziland continued to be regarded as nonresidents for purposes of control over transactions in securities. Nonresident rand accounts were reclassified into three groups: Rhodesian, Nonresident, and Blocked Accounts; the reclassification involved the merging of Nonresident Sterling Area Accounts and External Accounts and their redesignation as Nonresident Accounts.

October 24. A new par value was established and the rand ceased to float with sterling. The par value was changed from R 28.5000 to R 29.7500 per ounce of fine gold, corresponding to SDR 1.17648 per rand. In terms of U. S. dollars, the parity change was from R 1 = US$1.33333 to R 1 = US$1.27732; the latest market rate for the U. S. dollar, however, had been R 1 = US$1.2190. The Reserve Bank of South Africa henceforth quoted fixed rates for the U. S. dollar instead of sterling. The official buying and selling rates were set at US$1.2806 and US$1.2742, respectively, per rand (R 0.7809 and R 0.7848, respectively, per U. S. dollar). The Bank’s quotations for other major currencies were based on their rates against the U. S. dollar in the London exchange market.

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 exchange in Rio de Janeiro and Sao 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 foreign exchange from the banks and to sell exchange to the banks on an adequate basis, for approved transactions; such purchases and sales are made at the official rate. On December 30, 1972, the buying and selling rates quoted by the monetary authorities to the public were Cr$6.180 and Cr$6.215 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). Exchange rates for other currencies (including “agreement currencies” used for settlements with bilateral agreement countries) are based on the U. S. dollar rates in Brazil. 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: (a) special regulations apply to coffee exports (see section on Exports and Export Proceeds, below); and (b) a 10 per cent contribution (“contribution quota” or quota de contribuição) is levied on proceeds from exports of cocoa beans and products.

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, from 1963 onward, is in excess of 12 per cent a year of registered capital 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 are surrendered to the Bank of Brazil. All public sector agencies carry out their exchange operations through the Bank of Brazil. 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 50 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 must be carried out by cable on a spot basis and must be executed within two working days. 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. There is a reciprocal credit agreement between the Central Bank of Brazil and the Central Bank of Iceland. 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$3,000) 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.

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.

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 such remittances of earnings on foreign capital if their average over a three-year period exceeds 12 per cent of the registered capital and reinvestments. Approved firms are exempt from this supplementary tax provided the profits are derived from the export of manufactured goods. 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 are not permitted by a branch or subsidiary established in Brazil to its head office abroad 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. Most exports are free of controls, but exports of certain commodities require prior approval of CACEX, while exports of specified commodities are prohibited. 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 beef are subject to an annual quota.1 Exports of coffee are subject to authorization by the Brazilian Coffee Institute.

The Brazilian Coffee Institute 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 per pound, f.o.b.) fixed from time to time by the Institute. 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 Brazilian Coffee Institute and is fixed in terms of foreign currency; on December 30, 1972 it was US$26.64 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 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 per pound), and (3) the free market rate of exchange. On December 30, 1972 minimum registration prices, depending on the grade of coffee and the port of shipment, were US$0.55, US$0.54, US$0.51, and US$0.495 per pound. The corresponding cruzeiro payments a bag, after deduction of the contribution quota, were Cr$284.03, Cr$275.87, Cr$251.40, and Cr$239.16. Thus the exchange rates for proceeds from coffee exports on sales at the minimum registration price were Cr$3.912, Cr$3.870, Cr$3.734, and Cr$3.660, 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.

Under an agreement signed in April 1971 by the Government of Brazil and the United States, Brazil agreed to make available annually, for purchase by U. S. soluble coffee producers, a specific quantity of green coffee free of the contribution quota.2 Proceeds of exports of soluble coffee are not subject to the contribution quota3 and the exporter receives his full proceeds converted at the prevailing free market rate.

In accordance with the provisions of various Resolutions of the Brazilian Coffee Institute, a price guarantee system for exports of Brazilian coffee is maintained. Under these provisions a foreign importer of Brazilian coffee is entitled to compensation from the Institute, under specified conditions, for any reduction in the price of Brazilian coffee below the level at which the importer’s purchase took place. The compensation to be received by the foreign importer is to equal the largest difference between (1) the International Coffee Organization’s (ICO) average indicator price for unwashed arabica prevailing during 9 market days, of which the fifth day is the date of export registration at the Brazilian Coffee Institute, and (2) the arithmetic moving average over periods of 10 consecutive market days in the period starting on the date of shipment and ending on the thirtieth day after shipment.4 The compensation takes the form of a credit that the importer may use in payment for new direct purchases of coffee from Brazil. The credits must be used within 90 days from the date of issue.

The proceeds from all other exports are also sold at freely negotiated exchange rates, 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.

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 for export, particularly the production of 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. 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 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 financed 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. Under the first 12-month program beginning December 1, 1971, the total amount of financial loans with a maturity of less than one year was not permitted to rise above the level outstanding on November 30, 1971; to achieve this objective, new loans were registered in any one month in amounts no greater than those maturing in that month. Approvals of new financial loans of under one year’s maturity were suspended in June 1972, but authorization for the renewal of maturing loans continued to be granted up to the end of November 1972. Loans with maturities of one year or more 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 1972, the Central Bank’s minimum acceptable maturity stood at six years. Existing loans with maturities of one year or more may be renewed, with the same or a second borrower, provided that the full amount of the foreign exchange remains committed to Brazil for the minimum specified maturity; this enables loans to be made to the final borrower at terms shorter than the final maturity of the debt.

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 25 per cent of the cruzeiro equivalent of the foreign exchange proceeds of loans (Resolution No. 236 and Circular No. 190, both of October 19, 1972). 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 October 1972 but renewed subsequently with a maturity of at least six years are exempt from the deposit requirement. 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 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 30, 1972)5(cruzeiros per U. S. dollar)
Buying

3.660-3.912 (Calculated on the Basis of Official Market Rate, Contribution Quota, and Minimum Registration Price)6

Coffee exports 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.

6.180 (“Manual Market” Rate) Foreign banknotes and travelers checks.

6.180 (Official Market Rate)

All other export proceeds. Other receipts.
Selling

6.215 (“Manual Market” Rate) Foreign banknotes and travelers checks.

6.215 (Official Market Rate) Imports, Invisibles.7 Capital.

Changes during 1972

January 1. The reciprocal credit agreement with Bolivia came into operation.

January 1. Decree-Law No. 1172 of June 2, 1971 came into effect, which amended the rates of the mining tax, including the tax on gold.

January 1. Under Decree-Law No. 1189 of September 24, 1971, exporters of manufactured goods were exempted from import duties and the tax on industrial products (IPI) with respect to imports of goods valued at no more than 10 per cent of the increase in their exports over the previous year. The exemptions applied to machinery and industrial equipment and parts and accessories, raw materials, and intermediate products, for a period of three years.

January 4. IBC Resolution No. 547 revoked the provisions of IBC Resolution No. 545 of December 1, 1971, which had established quotas for exports of coffee for the period January 1, 1971-March 31, 1972. The minimum registration prices of US$0.40, US$0.39, US$0.36, and US$0.345 a pound, depending on the grade of coffee and the port of shipment and established by Resolution No. 546 of December 7, 1971, were maintained unchanged for the period January 5-April 30, 1972. The contribution quota also remained unchanged at US$21.87 a bag.

January 27. The buying and selling rates of the monetary authorities were changed from Cr$5.600 and Cr$5.635 per US$1 to Cr$5.750 and Cr$5.785 per US$1, respectively.

January 27. IBC Resolution No. 548 raised the contribution quota on coffee exports from US$21.87 to US$22.59 a bag.

February 1. The reciprocal credit agreement with Chile came into operation.

February 4. IBC Resolution No. 550 extended the application of the minimum registration prices established by Resolution No. 546 and the contribution quota on coffee exports established by Resolution No. 548 to the period through May.

February 16. FIRCE Communication No. 19 established that registration with the Central Bank for the remittance of funds abroad in respect of contracts or deeds for technical assistance or for the use of patents and trademarks would henceforth be subject to the furnishing of proof that the document had been approved by the National Institute of Industrial Property.

March 13. IBC Resolution No. 552 increased the basic minimum registration prices for coffee established by Resolution No. 546 of December 7, 1971 by US$0.01 a pound, to US$0.41, US$0.40, US$0.37, and US$0.355 a pound, depending on the grade of coffee and the port of shipment, for the period March 14–June 30, 1972. At the same time, the contribution quota was raised from US$22.59 to US$23.91 a bag for the period March 14–March 31, 1972; however, the contribution quota remained unchanged at US$22.59 a bag for April 1-June 30, 1972.

March 14. Under the program for the management of external debt adopted on November 30, 1971, the Central Bank announced further regulations governing the entry into Brazil of foreign financial loans falling within the provisions of Central Bank Resolution No. 63, SUMOC Instruction No. 289, and Law No. 4131. For loans with a maturity of over one year, the minimum acceptable maturity was set at two years; loans maturing within a period of between 24 and 47 months were required to have a minimum grace period of one year, while loans with maturities in excess of 47 months could have a minimum grace period of 6 months. In both cases, repayments could be made in installments of not less than 3 months. Loans maturing between 6 months and 12 months inclusive were henceforth required to have a fixed period for contracting abroad and for entry of the funds into the country.

March 14. CACEX Communication No. 372 permitted foreign wholesalers to provide price statements which were previously acceptable only if provided by the foreign manufacturer or exporter abroad. Moreover, a number of items were added to List A, the list of products not requiring import certificates (guias de importação).

March 15. IBC Resolution No. 553 increased the contribution quota on coffee exports from US$23.91 to US$24.20 a bag for March 1972, and from US$22.59 to US$22.88 a bag for April 1-June 30, 1972.

March 16. The buying and selling rates of the monetary authorities were changed from Cr$5.750 and Cr$5.785 per US$1 to Cr$5.810 and Cr$5.845 per US$1, respectively.

March. The Supreme Federal Tribunal, in Appeal No. 54044, ruled that replacement materials imported for use as such were not subject to the state value-added tax (ICM). The Tribunal confirmed that imported goods subject to the ICM tax were those imported for the purpose of sale and not for the company’s own use (e.g., capital goods).

April 7. GECAM Announcement No. 201 extended the period within which the contribution quota on coffee exports must be paid to the Central Bank from 10 calendar days to 20 calendar days after the date of settlement of the exchange contract.

April 20. Circular Letter GECAM No. 158 authorized banks located in Rio de Janeiro and São Paulo to engage freely among themselves in arbitrage of freely convertible currencies for spot delivery.

April 27. IBC Resolution No. 554 increased the basic minimum registration prices for coffee established by Resolution No. 552 by US$0.01 a pound, to US$0.42, US$0.41, US$0.38, and US$0.365 a pound, depending on the grade of coffee and the port of shipment, for the period April 28-August 31, 1972. At the same time, the contribution quota was raised from US$22.88 to US$24.20 a bag for April 28-June 30, 1972; however, the contribution quota remained unchanged at US$22.88 a bag for July 1-August 31, 1972.

May 4. Decree-Law No. 1215 authorized, subject to the approval of the Ministry of Finance, the granting of refunds, reductions, or exemptions of the 25 per cent withholding tax due on interest, commissions, expenses, or discounts relating to all loans taken up abroad.

May 5. IBC Resolution No. 556 increased the contribution quota on coffee exports from US$24.20 to US$24.54 a bag for the period May 8-June 30, 1972, and from US$22.88 to US$23.22 a bag for July 1-August 31, 1972.

May 8. The buying and selling rates of the monetary authorities were changed from Cr$5.810 and Cr$5.845 per US$1 to Cr$5.880 and Cr$5.915 per US$1, respectively.

May 15. Decree-Law No. 1219 provided additional tax concessions to firms exporting manufactured goods. Included was a provision enabling specified firms to apply any payment of the supplementary tax on profit remittances toward any other tax liability. In addition, these firms were entitled to receive exemptions from customs duties and the industrial products tax (IPI). The Decree also established a Commission for Fiscal Benefits and Special Export Programs (BEFIEX) under the Ministry of Finance to regulate and implement these benefits.

May 16. IBC Resolution No. 558 revoked the export registration for shipments of coffee to traditional markets, as defined by the International Coffee Organization, during the period May 17-May 31, 1972.

May 29. Central Bank Resolution No. 222 established that the reduction or exemption of the 25 per cent withholding tax due on interest, commissions, expenses, or discounts relating to foreign loans (as provided for under Decree-Law No. 1215 of May 4, 1972), would be authorized only in respect of loans with a minimum maturity of ten years.

May 29. Central Bank Circular No. 180 amended the regulations permitting authorized banks which contracted new financial loans abroad under Resolution No. 63 to relend the cruzeiro counterpart of such loans to local borrowers for the purpose of financing fixed or working capital. The loans could henceforth be extended to one or more successive Brazilian borrowers and at maturities less than that of the external loan; however, the minimum maturity of each cruzeiro loan extended by the commercial banks was set at six months, and of loans extended by investment banks and by the National Bank for Economic Development at one year. During periods when the cruzeiro equivalent of such foreign exchange loans was not utilized for lending to domestic borrowers, the funds were required to be invested in short-term treasury bills. Only Brazilian borrowers who were private firms, mixed companies, or public industrial and commercial companies directly engaged in the manufacturing, processing, or distribution of goods and services were eligible for such loans; companies dealing in securities, brokerage firms, insurance companies, holding companies, and other designated financial companies were ineligible.

May 30. Central Bank Resolution No. 223 set a 10 per cent contribution quota on proceeds from exports of cocoa beans and cocoa products. Previously, a contribution quota of 15 per cent was levied on proceeds from exports of cocoa beans and cocoa paste, and a contribution quota of 5 per cent on proceeds from exports of cocoa derivatives.

June 13. IBC Resolution No. 560 increased the basic minimum registration prices for coffee established by Resolution No. 554 by US$0.02 a pound, to US$0.44, US$0.43, US$0.40, and US$0.385 a pound, depending on the grade of coffee and the port of shipment, for June 14-August 31, 1972. The contribution quota was maintained unchanged at US$24.54 a bag for June 1972, and at US$23.22 a bag for July 1-August 31, 1972.

June 20. New regulations concerning borrowing abroad were announced. These were applicable to all new financial loans taken up under the provisions of Central Bank Resolution No. 63, SUMOC Instruction No. 289, and Law No. 4131. (1) Approvals of foreign currency loans with maturities of 6 to 12 months were suspended until December 1972, pending issuance of new directives. (2) The minimum acceptable maturity for new loans registered with the Central Bank was raised to 60 months, with a minimum grace period of 6 months and amortization to be permitted in quarterly installments. (3) Remittance of overdue interest payments on matured foreign loans became subject to prior Central Bank approval. (4) Existing loans under Law No. 4131 could henceforth be renewed only for a minimum period of four years, with a grace period of three and a half years.

July 6. IBC Resolution No. 564 increased the basic minimum registration prices for coffee established by Resolution No. 560 by US$0.01 a pound to US$0.45, US$0.44, US$0.41, and US$0.395 a pound, depending on the grade of coffee and the port of shipment, for the period July 7-September 30, 1972. The contribution quota remained unchanged at US$23.22 a bag.

July 9. IBC Resolution No. 565 suspended export registrations for coffee.

July 13. The buying and selling rates of the monetary authorities were changed from Cr$5.800 and Cr$5.915 per US$1 to Cr$5.930 and Cr$5.965 per US$1, respectively.

July 20. IBC Resolution No. 566 increased the basic minimum registration prices for coffee established by Resolution No. 564 by US$0.10 a pound, to US$0.55, US$0.54, US$0.51, and US$0.495 a pound, depending on the grade of coffee and the port of shipment for the period July 21-September 30, 1972. The contribution quota was raised from US$23.22 to US$27.50 a bag. The Resolution also established a system of individual export quotas for sales to traditional markets, and announced that the IBC would not grant any request for authorization of sales in excess of the established quotas, whether or not such requests resulted from previous commitments. Sales destined for new markets became subject to prior approval by the IBC. Finally, the Resolution fixed a new registration price of US$1.03 a pound for shipments of soluble coffee during August 1-September 30, 1972.

July 26. Further regulations were announced for new foreign currency loans to be taken up under Resolution No. 63, SUMOC Instruction No. 289, and Law No. 4131. For new loans with maturities of 60-71 months, the minimum grace period was set at 18 months, while for loans with maturities of 72 months or more, the minimum grace period remained at 6 months.

July 31. Ministry of Finance Ordinance No. 195 permitted foreign exchange losses, when arising from readjustments of the unpaid cruzeiro balance on foreign loans due to changes in the exchange rate for the cruzeiro, to be deducted as costs or operational expenses for tax purposes.

August 14. IBC Resolution No. 570 reduced the contribution quota on exports of coffee from US$27.50 to US$23.50 a bag for the period August 15-November 30, 1972. The minimum registration prices established by Resolution No. 566 were maintained unchanged. The system of individual export quotas established by Resolution No. 566 was abolished. The price guarantee established by Resolution No. 524 was extended to cover shipments up to November 30, 1972.

August 28. Decree-Law No. 1236 exempted imports of complete industrial plants with technical know-how from the payment of customs duties, provided the new plants were used to produce goods for export.

September 1. Central Bank Resolution No. 229, Central Bank Circular No. 186, GECAM Communication No. 209, and FIRCE Communication No. 20 established new regulations governing foreign financial loans under Law No. 4131. Such loans, when granted directly to Brazilian nonbank enterprises, could henceforth be renewed, at the option of the creditor, with the same borrower or contracted successively with different borrowers, for periods shorter than that of the final maturity of the external loan, provided that the full amount of the foreign exchange remained committed to Brazil for the minimum acceptable maturity period authorized by the Central Bank at the time of the initial entry of the funds into Brazil; the loans could be made only to private firms, mixed companies, or public industrial and commercial enterprises directly engaged in the manufacturing, processing, or distribution of goods and services, and not to companies dealing in securities, brokerage firms, insurance companies, holding companies, and other designated financial institutions. Each loan could be extended at a minimum maturity of 18 months. During interim periods between loan renewals, the foreign exchange proceeds from the foreign loans were required to be deposited with the Central Bank in special foreign currency accounts in the name of the lender; such deposits would earn interest based on the London offered six-month time deposit rate for the currency of the loan, less 25 per cent Brazilian withholding tax. The initial contracting of the external loans, the internal renewal with the same or successive borrowers, and any subsequent changes in the interest rate, remained subject to prior authorization by FIRCE, which would permit interest rate changes only if the agreed interest rate was consistent with the level prevailing in international markets.

September 1. Under the terms of Central Bank Circular No. 187, changes in the rate of interest charged on loans to domestic borrowers by authorized banks taking advantage of the facilities for relending the cruzeiro counterpart of Resolution No. 63 foreign financial loans (as authorized by Central Bank Circular No. 180) became subject to prior authorization by FIRCE. Such changes would be approved only if the agreed interest rate was consistent with the level prevailing in international markets.

September 4. IBC Resolution No. 572 raised the contribution quota on exports of coffee from US$23.50 to US$23.96 a bag.

September 4. Further regulations were announced for the approval of new foreign currency loans taken up abroad under Resolution No. 63 and Law No. 4131. The minimum acceptable maturity for foreign currency loans was extended to 72 months, with a minimum grace period of 6 months.

September 5. The buying and selling rates of the monetary authorities were changed from Cr$5.930 and Cr$5.965 per US$1 to Cr$5.990 and Cr$6.025 per US$1, respectively.

September 15. IBC Resolution No. 573 extended to the period October 1-December 31, 1972 the application of the minimum registration prices for coffee established by Resolution No. 566 and the contribution quota of US$23.96 a bag established by Resolution No. 571.

September 29. Ministry of Finance Ordinance No. 230 regulating Decree-Law No. 1215 of May 4, 1972 established the following conditions for the refund, reduction, or exemption of the 25 per cent withholding tax due on interest, commissions, discounts, or expenses related to foreign loans: (1) the foreign loans must be deemed to be in the national interest; (2) proof must be furnished that the financial costs of the borrower would be effectively lowered through the tax concession; and (3) the minimum acceptable maturity established by the National Monetary Council must be observed.

October 13. IBC Resolutions Nos. 640 and 642 established the following regulations applicable to coffee exports: (1) the minimum registration prices established by Resolution No. 566 and the contribution quota on exports of coffee of US$23.96 a bag were maintained unchanged for October 1972; (2) for the period November 1, 1972-January 31, 1973, the minimum registration prices established by Resolution No. 566 were maintained unchanged; however, the contribution quota was raised from US$23.96 to US$25.28 a bag; (3) Resolution No. 573 was cancelled; and (4) the criteria for determining the price guarantee system for exports of Brazilian coffee were altered for shipments beginning January 1, 1973; henceforth, the compensation to the importer would be based on the difference between (a) the minimum registration price for coffee of grade six to better, free of Rio zone flavor and shipped through the port of Santos, and (b) the price prevailing on the thirtieth day after shipment. Previously, the amount of compensation was calculated on the basis of the ICO indicator price, and the guarantee period was 60 days.

October 13. IBC Resolution No. 641 increased the basic registration price for soluble coffee to US$1.08 a pound, for shipments in the period October 13–December 31, 1972.

October 16. IBC Resolution No. 643 raised the contribution quota on exports of coffee from US$23.96 to US$24.48 a bag for the period October 17-31, 1972, and from US$25.28 to US$25.80 a bag for the period November 1, 1972-January 31, 1973.

October 17. The buying and selling rates of the monetary authorities were changed from Cr$5.990 and Cr$6.025 per US$1 to Cr$6.060 and Cr$6.095 per US$1, respectively.

October 19. National Monetary Council Resolutions Nos. 236 and 237 and Bank of Brazil Circular No. 190 canceled SUMOC Instruction No. 289 of January 14, 1965, which had provided for the contracting of short-term foreign currency loans, subject to the prior authorization of the Central Bank, with the right to repurchase the same amount of foreign exchange free of any restrictions, guarantee deposits, or financial charges. (Approvals for such loans, which were employed primarily by borrowers affiliated with a foreign lender, had since 1969 been limited to the amount of loans maturing in each month.) Henceforth, foreign financial loans could enter Brazil only under the provisions of Central Bank Resolution No. 63 and Law No. 4131.

At the same time, all new foreign currency loans in the form of financial credits under this Resolution and Law became subject to a 25 per cent deposit requirement. The deposit, calculated as 25 per cent of the cruzeiro equivalent of the foreign exchange proceeds of loans, was required to be made on the day the foreign exchange borrowed was sold for cruzeiros. The deposit was to be held at the Central Bank, which would bear the exchange risk on the deposit. The deposit would earn no interest, but it would be subject to “monetary correction” and would be returned to the borrower proportionately with each amortization under the loan agreement. Loans registered prior to this Resolution, but renewed subsequently with a maturity of at least six years, were exempt from the deposit requirement. Also exempt were loans from international agencies or foreign governments and suppliers’ credit on imports from industrial countries.

October 23. IBC Resolution No. 644 confirmed the export registration for soluble coffee to be loaded up to January 31, 1973 and extended the application of the minimum registration price established by Resolution No. 641 of October 13, 1972.

November 8. IBC Resolution No. 645 extended to the period November 9, 1972-February 28, 1973 the application of the minimum registration prices for coffee established by Resolution No. 566 and the contribution quota of US$25.80 per bag established by Resolution No. 643.

November 21. IBC Resolution No. 647 raised the contribution quota on exports of coffee from US$25.80 to US$26.29 a bag.

November 22. The buying and selling exchange rates of the monetary authorities were changed from Cr$6.060 and Cr$6.095 per US$1 to Cr$6.130 and Cr$6.165 per US$1, respectively.

November 22. IBC Resolution No. 648 extended to the period through March 31, 1973 the application of the minimum registration prices for coffee established by Resolutions Nos. 566 and 641 and the contribution quota of US$26.29 a bag established by Resolution No. 647.

November 29. Decree-Law No. 1248 specified certain tax facilities for trading companies, henceforth referred to as commercial export companies. Manufactured products sold to such companies were exempt from the IPI and ICM taxes.

December 11. IBC Resolution No. 649 revoked the registration of coffee exports.

December 15. The buying and selling exchange rates of the monetary authorities were changed from Cr$6.130 and Cr$6.165 per US$1 to Cr$6.180 and Cr$6.215 per US$1, respectively.

December 15. IBC Resolution No. 650 raised the contribution quota on exports of coffee from US$26.29 to US$26.64 a bag. The Resolution also re-established the system of individual export quotas for sales of coffee to traditional markets; sales of soluble coffee were not subject to the export quotas. The registration price was re-established with effect from December 18.

December 27. An amendment to Decree-Law No. 1171 made Brazilian manufacturers of machinery and equipment sold on the domestic market eligible for certain tax facilities previously granted to exporters only. Eligibility would be established on a case-by-case basis by the Ministry of Finance. One of the conditions for eligibility was that payment must be received from foreign funds, i.e., registered capital investments or loans with a maturity in excess of five years.

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 5.3487 per US$1, and Burma avails itself of wider margins. On December 30, 1972 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 5.3487 and K 5.4556, 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.

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. 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 special 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. Consumer goods imports 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: 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 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. However, 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 1972

During the year, quantitative restrictions on imports were tightened further.

January 1. Sixty-nine industrial enterprises were nationalized.

February 7. The buying and selling rates for sterling were changed from 7.3402 pence and 7.0171 pence, respectively, per K 1, to 7.1750 pence and 7.0344 pence, respectively. These rates remained unchanged until June 26.

March 23. A bilateral trade agreement with Bangladesh was signed. Trade was to be conducted on a self-balancing basis; settlements were to be effected through an account denominated in sterling and held at the People’s Bank of the Union of Burma. The agreement came into effect on the day of signature.

June 16. A trade agreement with the U. S. S. R. was signed. Settlements would take place in convertible currencies.

June 26. Following the floating of sterling, the People’s Bank of the Union of Burma posted fixed buying and selling rates for U. S. dollars, of K 5.3487 and K 5.4556 per US$1. These rates were maintained unchanged throughout 1972. The Bank discontinued its fixed rates for sterling and instead quoted buying and selling rates for sterling that were adjusted from time to time to reflect the movement of sterling against the U. S. dollar in London.

September 30. The People’s Bank of the Union of Burma was renamed the Union of Burma Bank.

Burundi

Exchange Rate System*

The par value is 0.00935443 gram of fine gold per Burundi Franc, corresponding to FBu 95.0000 = SDR 1 or FBu 87.50 = US$1. Burundi has availed 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 87.06 buying, and FBu 87.94 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 Rwanda franc and the Tanzania shilling, on their par values. 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 Kenya shillings and Uganda shillings. Buying rates lower than FBu 87.06 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 two and a half 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 exchange 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 application is submitted; 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.

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 certain export commodities (cotton and hides), 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. Except for coffee shipped via Kigoma, 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, the proceeds from coffee shipped via Kigoma may be delivered to authorized banks 75 days after shipment; unfavorable exchange rates are applied when surrender occurs more than 75 days 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 100 a gram.2 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 1972

January 11. The Fund noted that Burundi availed itself of wider margins under paragraph 3 of Executive Board Decision No. 3463-(71/126).

May 18. New regulations were issued for exports of coffee when shipped via Kigoma. These provided for different buying rates according to the time elapsed between shipment and delivery of the foreign currency proceeds. The buying rate of FBu 87.06 per U. S. dollar was applicable only when this period did not exceed two and a half calendar months, and progressively lower buying rates were set for longer periods; for a period of between four and five months, for example, the buying rate was only FBu 85.75 per U. S. dollar.

May 18. Unless prior central bank approval to the contrary was obtained, shipping insurance on coffee exports had to be taken out in Burundi francs with brokers or insurers established in Burundi.

May 18. For coffee exports, the central bank’s visa on the Declaration of Collection of Foreign Exchange was made dependent on the advice of the Coffee Committee.

August 5. Burundi advised the GATT that it had some time ago ceased to invoke the provisions of Article XXXV in respect of Japan.

November 2. The par value was changed from 0.0101562 to 0.00935443 gram of fine gold per Burundi franc. The new par value replaced the central rate of FBu 87.50 = US$1. The effective parity relationship for the U. S. dollar remained unchanged at FBu 87.50 = US$1. The central bank’s fixed buying and selling rates for the U. S. dollar also remained unchanged, at FBu 87.06 and FBu 87.94. The Fund noted that Burundi availed itself of wider margins under paragraph 1 of the above-mentioned Fund Decision.

November 15. Foreign exchange for goods imported under global import licenses henceforth was not made available until after customs clearance.

December 29. Restrictions on transfers of profits were introduced and restrictions on transfers of rents were intensified.

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 Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC)2 and commercial banks take place at the rate of CFAF 1 = F 0.02, free of commission charges.

Exchange transactions relating to foreign countries, i.e., countries other than France, 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 BCEAEC, 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 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 CFAF 255.785 = US$1.

With the exception of those relating to gold, Cameroon’s exchange control measures do not apply to (1) France and its Overseas Departments and Territories (except the French Territory of the Afars and the Issas) 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, the Malagasy Republic, Mali, Mauritania, 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.

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 supervises 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 BCEAEC maintains an Operations Account with the French Treasury; settlements with France, 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. BCEAEC banknotes may be credited to Financial Accounts in Francs when mailed direct to the Yaoundé agency of the BCEAEC 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, 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 25,000. 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, 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, 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 BCEAEC banknotes. Travelers to other countries may take out any amount in BCEAEC 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. Exports to countries in the French Franc Area are free of license. Proceeds from exports to foreign countries must be collected within a month 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, 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 BCEAEC, 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, 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 and its Overseas Departments and Territories (except the French Territory of the Afars and the Issas), 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 abroad3 require the prior approval of the Ministry of Finance, unless they take the form of a capital increase resulting from reinvestment of undistributed profits; the full or partial liquidation of such investments requires only a report expost 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 Cameroon4 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: (a) loans constituting a direct investment abroad for which prior approval has been obtained, as indicated above; (b) 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; (c) loans contracted by registered banks and credit institutions; and (d) 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: (a) loans constituting a direct investment abroad for which prior approval has been obtained, as indicated above; (b) 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 (c) 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 1972

April 1. The import program for 1972 became effective. A number of commodities were added to the list of those that required a special authorization from all sources. These included stockfish, specified canned and prepared meat, certain alcoholic beverages, soap and detergents, and specified textile products.

May. Following a similar measure taken in France on May 5, 1972, a number of current transactions were shifted from the financial franc market to the official exchange market. The principal current payments and receipts that continued to be channeled through the financial franc market were travel expenses, capital earnings, and workers’ remittances.

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 30, 1972 was Can$0.9950 per US$1. Canada has no exchange restrictions on foreign payments. 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 gasoline and natural gas, and for material and equipment for the production or use of atomic energy. For some of the agricultural items, such as most 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.1 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, mainland China, Czechoslovakia, Eastern Germany and East Berlin, Hungary, North Korea, Mongolia, Poland, Rhodesia, Romania, North Viet-Nam, and 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.

Capital

No exchange control requirements are imposed on capital receipts or payments by residents or nonresidents. Certain nonmandatory guidelines issued in 1966 and 1968 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) to 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. 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$38 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. Exports of gold are subject to the following conditions: (1) exports to Albania, Bulgaria, mainland China, Czechoslovakia, Eastern Germany and East Berlin, Hungary, North Korea, Mongolia, Poland, Rhodesia, Romania, North Viet-Nam, and 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 not of Canadian origin may only be re-exported to a country other than the United States 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 1972

May 2. The Government introduced a bill which would establish a screening mechanism to rule on proposed foreign take-overs of Canadian-controlled businesses. The bill was not enacted. (A proposed Foreign Investment Review Act was introduced in Parliament on January 24, 1973.)

May 8. The buying price of the Royal Canadian Mint for newly produced gold was increased from US$35 to US$38 an ounce.

May 16. The Bank of Canada withdrew its request of December 16, 1967 to Canadian banks and other financial intermediaries to refrain from extending credit on gold or on other security for the purchase of gold and not to facilitate forward purchases of gold.

May 25. The 1966 and 1968 guidelines on capital outflows were revised, retroactive to March 31, 1972, to bring the Canadian program more closely into line with the U. S. program. (1) Securities denominated in Canadian dollars issued or guaranteed by central governments or central banks of developing countries became exempt from the 1966 guideline, under which all Canadian investors (individuals and corporations) were requested not to acquire “offshore” securities issued by U. S. companies and their foreign subsidiaries for sale outside the United States. (2) Canadian dollar term loans by banks and nonbank financial institutions made to or guaranteed by central governments or central banks of developing countries became exempt from the 1968 guidelines. New export financing in foreign currency or Canadian dollars by banks and nonbank financial institutions, designed to facilitate Canadian exports also became exempt from the 1968 guidelines, under which these institutions were asked not to increase their foreign currency claims on residents of countries other than Canada or the United States unless such an increase was accompanied by an equal increase in the total foreign currency liabilities to such countries or arose from net earnings of foreign branches or subsidiaries. (In March 1971, banks and nonbank financial institutions had been informed that transfers of Canadian dollars to residents of third countries should be regarded in the same way as transfers of other currencies.)

June 8. Order in Council P.C. 1972-1305 amended the Anti-Dumping Regulations.

June 10. The authorities approved an agreement among the chartered banks uniformly to reduce the interest rates paid on nonpersonal term and notice deposits by close to 1 percentage point.

June 12. The chartered banks announced that, with the concurrence of the Minister of Finance, they had agreed to pay no more than 5½ per cent on deposits of Can$ 100,000 or more for terms of less than one year. (On November 27, chartered banks reduced the relevant interest rates by a further ⅛–¼ percentage points.)

June 26. The Government introduced a bill containing legislation for the establishment of a generalized system of tariff preferences for specified goods originating in developing countries. The bill was not enacted because a general election intervened in October, but steps were subsequently taken to reintroduce the bill.

July 10. The Government announced that, although it preferred the provinces to borrow at home, it would set up an information center to assist provincial governments to borrow money in foreign markets in an orderly fashion, by spacing out their foreign borrowings.

July 27. Order in Council P.C. 1972-1716 introduced procedures to take effect on September 1 under which foreign exporters must declare to the customs authorities on a “special exporters’ declaration,” for all shipments valued at Can$ 10,000 or more, (a) whether their company or any other company was entitled to a reduction, deferral, or exemption from corporate income taxes in respect of income earned on exports and (b) whether these facilities affected the sale prices of the goods concerned.

October 3. Export restraint arrangements with major supplying countries were announced with respect to the import of certain knitted fabrics.

November 15. A gold futures market was opened by the Winnipeg Commodity Exchange. Access to this market was open to residents and nonresidents.

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 Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC)2 and commercial banks take place at the rate of CFAF 1 = F 0.02, free of commission charges.

Exchange transactions relating to foreign countries, i.e., countries other than France, 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 BCEAEC, 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 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 CFAF 255.785 = US$1.

An exchange tax of 2½ per cent (subject to a minimum of CFAF 500) is levied on most exchange transactions with, and payments to, countries other than France, 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, Monaco, or the Operations Account countries; (4) government expenditures in countries other than France, 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 and its Overseas Departments and Territories (except the French Territory of the Afars and the Issas) 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, the Malagasy Republic, Mali, Mauritania, 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 principle 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 on 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 BCEAEC,3 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 BCEAEC maintains an Operations Account with the French Treasury; settlements with France, 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.4

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. BCEAEC banknotes mailed direct to the BCEAEC in Bangui by the foreign correspondents of authorized banks may freely be credited 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 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, 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, 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 foreign exchange in excess of the equivalent of CFAF 5,000 remaining 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 BCEAEC 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 BCEAEC 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 BCEAEC 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, 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, 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 BCEAEC, 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, 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, over inward and outward direct investment, and over the issuing, advertising, or offering for sale of foreign securities in the Central African Republic; these controls relate to the transactions themselves, not to payments or receipts. With the exception of those over the sale or introduction of foreign securities in the Central African Republic, the control measures do not apply to relations with France and its Overseas Departments and Territories (except the French Territory of the Afars and the Issas), Monaco, and those other countries whose bank of issue is linked with the French Treasury by an Operations Account.

Direct investments abroad5 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 Republic6 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 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, 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 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 1972

April 27. Ordinance No. 72/035 created a National Diamond Office.

May. Following a similar measure taken in France on May 5, 1972, a number of current transactions were shifted from the financial franc market to the official exchange market. The principal current payments and receipts that continued to be channeled through the financial franc market were travel expenses, capital earnings, and workers’ remittances.

June 24. Presidential Decree No. 72/186 provided that all draft legislation, decisions, correspondence, and contracts having a direct or indirect bearing on the finances of the State required the prior approval of the Minister of Finance.

June 29. Ministry of Finance Order No. 0149 delegated the approval authority provided for in Decree No. 72/186 to the Director of the Budget.

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 Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC)2 and commercial banks take place at the rate of CFAF 1 = F 0.02, free of commission charges.

Exchange transactions relating to foreign countries, i.e., countries other than France, 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 (collectivités publiques). All other settlements with foreign countries, as well as transactions in banknotes of foreign countries and banknotes issued by the BCEAEC, 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 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 CFAF 255.785 = US$1.

With the exception of those relating to gold, Chad’s exchange control measures do not apply to (1) France and its Overseas Departments and Territories (except the French Territory of the Afars and the Issas) 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, Dahomey, Gabon, Ivory Coast, the Malagasy Republic, Mali, Mauritania, 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 BCEAEC maintains an Operations Account with the French Treasury; settlements with France, 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. BCEAEC 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 BCEAEC 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, 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 BCEAEC banknotes. Travelers to other countries may take out any amount in BCEAEC 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 BCEAEC 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 monoply 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, 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 BCEAEC, 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, 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 and its Overseas Departments and Territories (except the French Territory of the Afars and the Issas), Monaco, and those other countries whose bank of issue is linked with the French Treasury by an Operations Account.

Direct investments abroad3 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 Chad4 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 CFAF 50 million for any one borrower. The contracting of loans referred to under (4) that are free of authorization, and each repayment thereon, must be declared to the Minister of Finance within 20 days of the operation, unless the total outstanding amount of all loans contracted abroad by the borrower is CFAF 5 million or less.

Lending abroad by physical or juridical persons, whether public or private 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. This ratio is 7 per cent of rediscountable credit granted in 1971 plus 10 per cent of the nonrediscountable credit.

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, CFAF 3,000, CFAF 5,000, CFAF 10,000, and CFAF 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 they 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 1972

During the year following a similar measure taken in France on May 5, 1972, a number of current transactions were in effect shifted from the financial franc market to the official exchange market. No exchange control regulations to this effect were issued, however.

February 18. The Directorate-General of the Budget and the Public Accounts, in the Ministry of Finance, was abolished. The exchange control powers previously delegated by the Minister of Finance were transferred from the Directorate-General to the Office of the Minister of Finance.

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; brokers are not at present permitted to operate in either market and only the Central Bank, the Banco del Estado, and certain government-owned commercial banks operate in the brokers’ market. There are multiple exchange rates in both markets. Outward transfers through both markets are controlled. Through the banking market pass government transactions, proceeds from exports, receipts from a few invisibles, and payments for imports and for some commercial invisibles. Most invisibles and some capital transactions pass through the brokers’ market. In general, capital transactions are entitled to the same exchange market treatment on exit as on entry. However, the servicing and withdrawal of some capital received through the brokers’ market may be effected through the banking market. Transactions in the banking market are for both spot and forward delivery at the same exchange rate; for imports of most commodities, forward exchange purchases are mandatory. For both types of transaction, settlement in escudos is effected at the time the exchange contract is negotiated. Transactions in the brokers’ market are for spot delivery only. There is some restriction on the availability of exchange in that the Central Bank sells exchange to the commercial banks only for forward delivery.

On December 31, 1972 the basic buying rates in the banking market were as follows: E° 20.00 per US$1 for export proceeds from all minerals except iron. E° 25.00 per US$1 for exports of iron, agricultural products, and most other commodities not subject to the other export rates in the banking market; exchange accruals to the Government; and specified receipts from invisibles. E° 30.00 per US$1 for exports of books and magazines, manufactured goods of copper, iron alloy, and explosives. A variable exchange rate, determined on a case-by-case basis, was applicable in this market to exports of nontraditional items. In addition, a buying rate of E° 40.00 per US$1 was applicable to certain capital receipts and certain other exchange proceeds.

On the same date the selling rates in the banking market (including banking commissions) were as follows: E° 20.08 per US$1 for payments for imports of foodstuffs and fuel oils and related current invisibles. E° 25.00 per US$1 for government transactions. E° 25.10 per US$1 for payments for imports of specified raw materials and intermediate goods and related invisibles, as well as for payments for other specified invisibles. E° 40.16 for payments for imports of capital equipment, spare parts, and related invisibles; for profit and dividend remittances; for interest, amortization, and capital repatriation on nonofficial loans and on investments which had entered through the banking market; and for payments for other specified invisibles. E° 80.32 per US$1 for payments for imports of luxury goods and related invisibles and payments for cable, postal, and other international communications services.

The buying rate in the brokers’ market on December 31, 1972 was E° 46.00 per US$ 1 and the basic selling rates in the brokers’ market (including banking commissions) were E° 36.14, E° 46.18, and E° 85.34, per US$1; these selling rates were, however, subject to the payment of several exchange taxes, resulting in a large number of effective selling exchange rates (see Table of Exchange Rates, below). In addition, sales of exchange for remittances to students abroad took place at the rate of E° 36.19 per US$1 under a temporary regime.

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 from the United Kingdom, Commonwealth countries, and socialist countries (including Cuba); Austrian schillings, Belgian francs, Canadian dollars, Danish kroner, deutsche mark, 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 may be received in U. S. dollars only when stemming from sales to the United States or to Latin American countries with which reciprocal credit agreements are maintained. Proceeds from exports to other countries must be received in Austrian schillings, Belgian francs, Canadian dollars, Danish kroner, deutsche mark, French francs, Italian lire, Japanese yen, Netherlands guilders, Norwegian kroner, pounds sterling, Spanish pesetas, Swedish kronor, or Swiss francs. Certain payments and transfers to South Africa are prohibited. All settlements with Poland and certain settlements with Bulgaria are made through special accounts established under bilateral payments agreements.

Imports and Import Payments

Imports from Rhodesia are prohibited.

All imports, except those of defense materials, must be registered with the Central Bank. Imports are divided into four categories (Lists A to D) according to which of the four basic selling rates in the banking market applies. There is a List of Permitted Imports; commodities not appearing on it are prohibited unless imported (for some of these goods) 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 normally be imported in any amount. The Central Bank, however, is empowered to reject import applications (registrations), and during 1972 this authority was used in lieu of an import licensing system. Imports on deferred credit 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. Most private importers are required to deposit with commercial banks within ten days of the issuance of import registration, an amount in escudos equivalent to 130 per cent of the c.i.f value of the goods (the deposit is 100 per cent when made in foreign currency). Upon receipt of documentation showing that the importer has complied with this requirement, the Central Bank provides foreign exchange to the commercial banks according to the following schedule: (a) import letters of credit financed against external lines of credit or against external suppliers’ credit: on the date payment is due abroad; (b) import letters of credit financed against the banks’ own foreign exchange resources: 180 days from the date of shipment; (c) imports on a documentary collection basis and valued at up to US$1,000: upon the processing of the relevant documentation, with no fixed waiting period; (d) imports on a documentary collection basis and valued at over US$1,000: 122 days from the date of the bill of lading.

Imports are subject to a registration tax of 3 per cent on the c.i.f. value.

Payments for Invisibles

All payments for invisibles are subject to exchange control. Payment through the banking market is permitted for a few commercial invisibles; all other invisibles are settled through the brokers’ market. Payments through the brokers’ market may be effected up to established limits for the following purposes: for tourist travel (in addition to fares; all limits are per person per 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; the allocations for children under seven are half the amounts listed below, and 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 as including the Bahamas, Curaçao, 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 for travel to countries outside the Western Hemisphere, with a maximum of US$20 a day; for family remittances US$100 a month for each beneficiary, with an annual maximum of US$600 for each beneficiary; for purchases of books and subscriptions to periodicals US$100 a person a year; and for student registration fees US$50 a person a year. 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 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 medicine and pharmaceutical products may only be made provided that the product in question is not available in Chile. Transfers in excess of these limits, and those in respect of other transactions, require the prior authorization of the Central Bank and are not normally approved. All purchases of exchange in the brokers’ market, except those for which the Central Bank has approved a transfer application (solicitud de giro), are subject to a tax of 53.15 per cent; the only documentation required for invisibles that are neither covered by the approval authority delegated to authorized 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° 1,3501 a trip. Resident travelers may take out Chilean banknotes up to the equivalent of US$200 a person (US$500 for a family group); any additional amounts are subject to registration of their exportation with the Central Bank. The export of Chilean banknotes by nonresident travelers is prohibited. There are special regulations, however, for the export of Chilean banknotes by certain travelers to Argentina.

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.

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

Receipts of exchange from news and communications agencies’ fees, from specified transactions by national insurance companies, from commissions, from reimbursements of insurance claims, and from credit granted in foreign currency by the commercial banks must be sold in the banking market. Exchange received in payment for personal services rendered by residents must be surrendered at the brokers’ market rate; however, foreign nationals who have been resident in Chile less than two years may retain 50 per cent of such remittances in foreign currency accounts with the Banco del Estado. Exchange derived from other invisibles, including tourism, may be sold in the brokers’ market or retained. The delivery by banks to residents of foreign exchange transferred from abroad is subject to prior Central Bank authorization. Travelers must declare all foreign currency held on entry. Tourists must change into local currency a minimum of US$10 for each day of stay (US$5 for minors); tourists from neighboring countries must change into local currency at least US$8 a day (US$4 for minors) if their stay exceeds seven days. Upon exit only escudos in excess of the minimum daily quotas may be reconverted into foreign currency. The import of Chilean banknotes is subject to a 10,000 per cent prior import deposit requirement.

Capital

Capital may be brought into Chile through either exchange market; no capital can flow out freely through either market. Normally, capital is subject to the same exchange market treatment on exit as on entry; this policy applies also to remittances of dividends and profits on the capital. 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.

Foreign capital may enter Chile under one of three different arrangements, depending on the purpose and the type of the investment. All new foreign borrowing or refinancing of existing credits by commercial banks requires prior approval by the Central Bank.

(1) Article 14 of Decree No. 1272 (September 7, 1962) stipulates that capital brought into the country in the form of foreign exchange (aporte de capital) may be sold freely in the brokers’ market through authorized banks when the investor (individual or corporation, national or foreign) has registered with the Central Bank.

Such capital may only be repatriated through the brokers’ market with the prior approval of the Central Bank. The same is true for the transfer of interest and profits on such capital. All capital repatriation under Article 14 of the above Decree is subject to an exchange tax consisting of a basic tax of 18.15 per cent plus a variable tax equal to the per cent increase in the consumer price index since August 1970 to the day before the retransfer is effected. Repatriation is only allowed in accordance with the amortization schedule established upon registration.

Table of Principal Effective Exchange Rates (as at December 31, 1972)(escudos per U. S. dollar)
BuyingSelling2
Banking market
20.00

Proceeds from exports of all minerals, except iron (List E).

25.00

Proceeds from exports of iron, agricultural products, most manufactured goods, and all other products not specified in Lists E, G, or H (List F); all exchange accruals to government and public entities, including official foreign loans: specified invisible receipts.

30.00

Proceeds from exports of books and magazines, manufactured goods of copper and iron alloy, explosives, and other specified exports (List G).

Variable

Proceeds from exports of specified nontraditional products (List H).

40.00

Nonofficial capital receipts under Decree No. 1272 and Decree-Law No. 258 if banking market is selected; compensation for goods insured abroad.
20.08

Import payments for foodstuffs and fuel oils (List A) and connected invisibles.

25.00

Government transactions, including interest and amortization of official foreign loans.

25.10

Import payments for all imports not on Lists A, C, or D (List B) and connected invisibles.

40.16

Import payments for capital equipment and spare parts (List C) and connected invisibles; profit and dividend remittances; interest, amortization, and capital repatriation on nonofficial loans and investments under Decree No. 1272 and Decree-Law No. 258 if entered through the banking market; and specified invisible payments.

80.32

Import payments for luxury goods (List D) and connected invisibles. Payments for cable, postal, and other international communications services.
Brokersmarket
46.00

Residual invisible and capital receipts.
28.15 (Temporary Rate)3

Family remittances for students abroad under temporary regime.

36.194

Student registration fees; and remittances for students abroad on scholarship, when temporary regime lapses.

55.355

Purchase of medicines without commercial value; and family remittances for students abroad not on scholarship, when temporary regime lapses.

36.19plus indexed 18 per cent tax6

Other repatriation of capital under Article 14, Decree No. 1272.

70.727

Specified invisible payments, including insurance premiums, contracts denominated in foreign currency, royalties, film rentals, remittances for cultural and sports events and for medical treatment abroad.

46.25plus indexed 18 per cent tax8

Repatriation of nonofficial foreign capital, interest payments, and profit remittances under Decree No. 1272 and Decree-Law No. 258 if entered through the brokers’ market.

130.709

Specified invisible payments, including air and sea fares, tourist expenditures, and family remittances for nonstudents.

(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. In these cases, the investor has an option between the banking market and the brokers’ market; the Central Bank guarantees access to the exchange market chosen for the entry of the capital, 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 3 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 brought in for the promotion of exports of agricultural, industrial, and mining products may be sold in the brokers’ market, while its repatriation may take place in the banking market, 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 2 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 repayment of capital, and the transfer of interest or profits thereon, may be effected through the banking market, provided that the amount does not exceed 50 per cent of the amount of exchange resulting from the volume increase in exports. If this criterion prevents the transfer of the full amount of amortization, interest, and profits through the banking market, the transfers may be completed through the brokers’ market. 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 3 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 industrial users in the form of Chilean gold coins at E° 786.64 a gram.10 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 1972

January 3. Central Bank Circular No. 1632 established new regulations governing sales of passenger tickets and provision of airfreight services by airlines, effective January 17. Henceforth, such sales could be made only in foreign currency and not against payment orders or charge accounts, and the foreign currency could be used only for tourist class or charter flight tickets or for freight. Chilean and foreign nationals resident in Chile could purchase the foreign exchange from authorized banks at the prevailing rate of exchange in the brokers’ market, plus the applicable tax, no more than 15 days in advance of the date of travel.

January 5. Circular No. 1634 added Swedish kronor, Danish kroner, Norwegian kroner, French francs, and Italian lire to the list of currencies in which import transactions must be agreed. These currencies could henceforth also be made available for payments in respect of imports.

January 6. Circular No. 1635 permitted authorized banks to sell foreign exchange forward, at the rate of E° 12.21 per US$1, for imports under Law No. 12008 into the “free port” zones of Chiloé, Aysén, and Magallanes, provided the goods either had entered customs or had been shipped prior to December 13, 1971.

January 11. Circular No. 1637 gave implementing instructions for banks’ exchange transactions in accordance with Circular No. 1616 of December 10, 1971.

January 20. Circular No. 1643 shifted payments in respect of international communications services to the basic banking market rate of E° 25.00 per US$1.

January 24. Circular No. 1645 modified the exchange rates for the importation of goods into the “free port” zones of Chiloé, Aysén, and Magallanes established by Circulars Nos. 1616 and 1635. Banks were permitted to sell exchange forward at E° 12.21 per US$1 for imports whose registration had been approved under the 1971 import budget; however, for such imports registered under the 1972 import budget, goods were classified into several categories to which exchange rates of E° 12.21, E° 15.80, and E° 19.00 per US$1 were applicable independently of the categories established by Circular No. 1616.

January 24. Circular No. 1646 announced that temporarily all imports of the large copper mining companies that had been approved by the Copper Corporation could be effected at E° 19.00 per US$1, irrespective of the commodity classification in Circular No. 1616.

January 29. Jeep-type vehicles were added to the List of Permitted Imports; they became subject to the 10,000 per cent advance deposit requirement.

February 17. Circular No. 1656 provided that settlements with Poland must be effected through clearing accounts established under the payments agreement with that country.

March 1. A reciprocal credit agreement with Brazil came into operation.

March 10. Circular No. 1661 modified the regulations established by Circular No. 1632. Airlines were permitted to collect in domestic currency tourist class or charter flight fares and airfreight charges, provided that travel or shipment took place within 30 days.

March 13. Circular No. 1664 added reinsurance premiums to the items eligible for the basic selling rate in the banking market of E° 19.00 per US$1.

March 13. Circular No. 1662 revoked Circular No. 1615 and provided that foreign shipping companies must settle all expenditures in Chile in foreign currency. (This measure was amended on April 7 by Circular No. 1670 and on May 8 by Circular No. 1679.)

March 22. Circular No. 1666 instructed banks to charge 18 per cent interest for the extension by up to 60 days of forward purchases of foreign exchange from exporters, as authorized by Circular No. 1626 of December 23, 1971. (This measure was amended on April 14 by Circular No. 1674.)

March 29. Circular No. 1667 permitted the export by Chilean or foreign nationals resident in Chile, when traveling abroad, of domestic banknotes up to the equivalent calculated at the brokers’ market rate of US$200 a person, subject to a limit of US$500 for a family group. (On May 24, Circular No. 1694 exempted cases covered by the Labor Agreement or the Social Security Agreement with Argentina.)

April 7. Circular No. 1669 shifted freight earned by Chilean shipping companies to the buying rate of E° 19.00 per US$1 in the banking market.

April 7. Circular No. 1671 shifted imports of vehicles equipped for the exclusive use of crippled persons to the basic selling rate in the banking market.

April 13. Circular No. 1672 established a buying rate of E° 42.00 per US$1 for purchases of foreign currency from delegates to the UNCTAD III Conference. (The application of this measure was widened on April 20 by Circular No. 1677.)

April 14. Circular No. 1675 revoked the Central Bank Resolution of August 12, 1963 concerning imports under Law No. 12858 by the large copper mining companies. These imports henceforth had to be authorized and registered by the Central Bank.

April 20. Circular No. 1676 required the prior visa of the Directorate-General of Sports and Recreation for the registration of imports of sports equipment.

April 28. Circular No. 1678 added Spanish pesetas and Austrian schillings to the list of currencies in which export and import transactions could be agreed.

May 8. Circular No. 1680 added the Japanese yen to the list of currencies in which import and export transactions could be agreed.

May 11. Circular No. 1683 amended the rules of Circular No. 1616 governing the exchange operations of authorized banks. The major changes were (1) with effect from May 17 banks were permitted to maintain for their own account overbought and oversold positions in the banking market, and overbought positions in the brokers’ market, up to limits established by the circular for each bank (no position in gold was permitted); (2) banks were permitted to charge commissions on sales of exchange up to 2 per mill; and (3) the minimum period for forward purchases of exchange from exporters was set at 10 days, and the maximum at 90 days. The exchange rates established by Circular No. 1616 of December 10, 1971, and subsequent amendments, were maintained unchanged.

May 17. Circulars Nos. 1687 and 1688 of May 16 changed from E° 28.00 to E° 42.00 per US$1 the buying and selling rates in the brokers’ market applicable to travel fares, exchange allocations to residents for travel abroad, conversions of foreign currency by foreign travelers, and various other payments and receipts in respect of invisibles (including outward transfers of pensions, alimony, and family remittances, and inward transfers of royalties and copyright earnings).

May 22. Circular No. 1693 codified the classification and administrative procedures applicable to invisible foreign exchange operations. It also specified the outward payments that required a solicitud de giro and introduced a new form for the solicitud.

May 25. Circular No. 1695 prohibited the large copper mining companies and the mixed mining companies from making payments in foreign currency in fulfillment of contracts concluded with Chilean residents or foreign juridical persons authorized to operate in Chile. Labor contracts denominated in foreign currency were exempt.

May 26. Circular No. 1698 made imports of scientific and technical books and textbooks, and subscriptions to scientific and technical journals eligible for the basic selling rate of E° 19.00 per US$1, up to US$100 a person a year.

June 7. Circular No. 1702 gave operating instructions for settlements under the new payments agreement with Bulgaria.

June 12. Circular No. 1704 permitted the use of suppliers’ credit of up to two years for imports of books.

June 13. Circular No. 1705 added remittances in respect of authors’ copyrights to the items eligible for the basic selling rate of E° 25.00 per US$1 in the banking market.

June 21. Circulars Nos. 1706 and 1707 modified the regulations governing sales of foreign exchange established by Circulars Nos. 1546 and 1683, as follows: (1) the maximum period an importer was permitted to wait before entering into a forward exchange contract for import payments was for most imports extended from 60 days to 70 days from the date of shipping documents (from 120, 210, 240, or 360 days to 120, 240, 360, or 720 days for specified imports); (2) imports financed with external suppliers’ credits, imports without foreign exchange cover, imports financed with importers’ own foreign exchange resources, imports paid for with treasury funds, and imports of spare parts up to US$ 1,500 were exempt from these maximum waiting periods; (3) while the minimum waiting period between the date of shipping documents and the date an importer could enter into a forward exchange contract remained unchanged at 50 days for most imports, specified foodstuffs were exempted from the minimum waiting period requirement; (4) the Central Bank’s delivery period for forward exchange was extended from 72 days to 105 days for most imports; (5) commercial banks were permitted to sell foreign exchange spot to private importers for imports on a documentary collection basis when valued at up to US$1,000; (6) for other imports on a documentary collection basis or against letters of credit with maturities of over 180 days, the Central Bank undertook to provide foreign exchange to the commercial banks 5 days before the due date of the payment abroad; and (7) banks were authorized to charge commissions of up to 4 per mill on sales of foreign exchange.

June 22. Circular No. 1709 amended Circular No. 1568 concerning the sale of foreign exchange in the brokers’ market for travel expenses. Henceforth, the Central Bank could upon application, on a case-by-case basis, authorize the sale of foreign exchange in excess of quotas for business travel, service commissions, medical expenses, etc.

July 4. Circular No. 1712 extended the application of the rate of E° 42.00 per US$1 to additional transactions in the brokers’ market. On the selling side were added remittances of consular fees (except those in respect of exports), while on the buying side the following exchange receipts became eligible for this rate: diplomatic and consular representation fees; office maintenance expenses of diplomatic missions in Chile; expenses of installation, maintenance, and operation of offices of international organizations in Chile; purchases of equipment, buildings, and furniture by diplomatic missions and international organizations; and salaries and other remuneration of personnel of international organizations in Chile.

August 1. Circular No. 1724 established new basic exchange rates in the brokers’ market, with effect from August 2, as follows: E° 36.00 per US$1 for sales of exchange in connection with remittances to students abroad, purchases of medicines, and certain specified capital and interest payments (Area I); E° 85.00 per US$1 for sales of exchange in connection with travel expenditures, family remittances, and other specified invisible payments (Area III); and E° 46.00 per US$1 for all other sales of exchange in the brokers’ market (Area II) and for all purchases of exchange in that market. However, the rate of E° 28.00 per US$1 was retained for sales of exchange in connection with specified capital and interest payments until September 15, 1972, and for exchange sales in connection with student remittances until a further decision by the Central Bank. (Previously, there had been two basic exchange rates in the brokers’ market: E° 42.00 per US$1 for purchases and sales of exchange in connection with travel and the items covered by Circular No. 1712, and E° 28.00 per US$1 for all other brokers’ market transactions.) Differential exchange taxes continued to apply to sales of exchange for specified purposes, resulting in a large number of effective exchange rates.

August 4. Circular No. 1727 introduced new basic exchange rates in the banking market, with effect from August 7. On the selling side, four basic exchange rates were established: E° 20.00 per US$1 for import payments for foodstuffs and fuel oils (List A) and connected invisibles; E° 40.00 for import payments for capital equipment and spare parts (List C) and connected invisibles, profit and dividend remittances, specified capital and interest payments, and specified invisibles; E° 80.00 per US$1 for import payments for luxury goods (List D) and connected invisibles; and E° 25.00 per US$1 for import payments for all imports not listed on Lists A, C, or D (List B), connected invisibles, and payments made by the Government, including interest and amortization of official foreign loans. (Previously, the exchange rates applicable to sales of exchange for imports on Lists A, B, C, and D were E° 12.21, E° 15.80, E° 19.00, and E° 25.00 per US$1, respectively, and government transactions were effected at E° 15.80 per US$1.) On the buying side, four basic exchange rates were established in the banking market: E° 20.00 per US$1 for the purchase of export receipts from all minerals except iron (List E); E° 30.00 per US$1 for exports of books and magazines, manufactured goods of copper and iron alloy, and explosives (List G); a variable exchange rate, to be determined on a case-by-case basis, for exports of certain nontraditional items to be specified in List H; and E° 25.00 per US$1 for exports of iron, agricultural products, and all other products not specified in Lists E, G, or H (List F), all exchange accruals to government and public entities, and specified invisible receipts. (Previously, the two basic buying exchange rates in the banking market were E° 15.80 and E° 19.00 per US$1.)

In addition to the new basic exchange rates, a selling rate of E° 56.00 per US$1 resulted from the sale of 60 per cent of the exchange for the payment of cable, postal, and other international communications services at the rate applicable to List C import payments and of the remaining 40 per cent at the rate applicable to List D import payments. Furthermore, an additional buying exchange rate of E° 40.00 per US$1 resulted from the application of the List C rate for import payments to the proceeds from specified capital transactions entering through the banking market.

August 7. The Central Bank’s selling price for gold coins was increased from E° 50 to E° 292.91 a gram.

August 11. Circular No. 1731 canceled Circular No. 1646 and, with effect from August 7, 1972, shifted the imports of the large copper mining companies to the new selling rate of E° 25.00 per US$1.

August 16. Circular No. 1733 modified the regulations established by Circular No. 1645 governing the exchange rates applicable to the importation of goods under Law No. 12008 into the “free port” zones of Chiloé, Aysén, and Magallanes. Goods imported prior to August 7, 1972 and whose processing had been completed could, under certain conditions, be imported at rates of exchange prevailing prior to that date. Specified goods imported prior to August 7, 1972, but whose processing could not be completed prior to October 15, 1972, were subject to the exchange rate of E° 17.00 per US$1. Payments for all other goods could be effected at rates of E° 20.00, E° 25.00, E° 40.00, or E° 80.00 per US$1, depending on the categories to which they were assigned and independently of the classification established by Circular No. 1727. The new Circular also established that sales of exchange for the importation of goods falling within List D of Circular No. 1727 would be effected at E° 40.00 per US$1. (For public sector imports, this Circular was amended on December 15 by Circular No. 1797.)

August 22. Circular No. 1734 required the prior visa of the Central Bank for all contracts with foreign suppliers under credit agreements with a maturity of over three years signed by the Central Bank of the Corporación de Fomento (CORFO) with foreign banks or organizations. The requirement was applicable to both the public and the private sectors.

August 31. Circular No. 1738 modified Circular No. 1727 by establishing a requirement that the value of the raw copper component in exports of manufactured goods and chemical products subject to the List G exchange rate of E° 30.00 per US$1 would henceforth be subject to the rate applicable to List E, i.e., E° 20.00 per US$1; this was not applicable to copper handicraft articles. The exchange earnings of Chilean shipping companies were removed from List E, and became subject to the buying rate applicable to List F, i.e., E° 25.00 per US$1.

September 6. Circular No. 1742 modified the import regulations established by Circular No. 1706. Banks could no longer open documentary credits for imports unless the importer had deposited no later than seven days after the issuance of an import registration an amount in escudos equivalent to 130 per cent of the c.i.f. value. If made in foreign currency, the required prior import deposit was 100 per cent. The deposits were applied against the import payment and were calculated at the exchange rate prevailing on the day of deposit. Circular No. 1706 was canceled with effect from October 1. Banks could release shipping documents to an importer only if the latter had paid in full the escudo value of the import transaction. If the escudo were depreciated and the additional 30 per cent deposit were insufficient to cover the escudo equivalent of the transaction on the date of payment, the importer would be required to deposit the additional escudos needed no later than 15 days after the receipt of shipping documents by the bank concerned. If there were no depreciation, or if the 30 per cent deposit were more than sufficient to cover the additional amount required in escudos, the difference would be refunded to the importer.

Upon receipt of the escudo equivalent of the transactions, the Central Bank undertook to deliver exchange to the commercial banks according to the following schedule: (1) import letters of credit financed against external lines of credit: on the due date of payment abroad; (2) import letters of credit financed with the banks’ own resources: 180 days from the date of shipment; (3) import letters of credit financed against suppliers’ credits: on the due date of payment abroad; (4) imports on a documentary collection basis of up to US$1,000: upon the processing of the relevant documentation by the Central Bank; (5) imports on a documentary collection basis valued at over US$1,000: 180 days from the date of shipping documents (unless the supplier had provided longer terms, in which case the exchange would be delivered on the due date of payment abroad).

September 6. Circular No. 1741 provided revised export regulations. Included were rules about exports of Chilean banknotes, gold, and personal effects (and reduced travel allocations for persons exporting personal effects in excess of US$500 or US$1,000).

September 11. Circular No. 1745 modified Circular No. 1698. Imports of scientific and technical books and textbooks, and subscriptions to scientific and technical journals, up to US$100 a person a year, could be made at the basic selling rate of E° 40.00 per US$1, subject to the prior approval of the Central Bank. The Central Bank could authorize higher amounts for educational or nonprofit institutions.

September 14. Circular No. 1748 made any change in the form of payment for an import transaction, after its registration, subject to Central Bank approval.

September 14. Circular No. 1749 revoked the provisions of Circulars Nos. 1683 and 1707 relating to forward purchases of exchange from exporters. Henceforth, authorized banks were permitted to purchase export proceeds on a spot basis only.

September 14. Circular No. 1750 modified Circular No. 1742. The period within which importers were required to make the 130 per cent prior import deposit was extended to 10 days from the date of issue of the import registration. The period for the delivery of exchange by the Central Bank for imports on a documentary collection basis valued at more than US$ 1,000 was reduced from 180 days to 122 days, counting from the date of shipping documents.

September 15. Circular No. 1752 introduced minor modifications in Lists C and D of Circular No. 1727.

September 29. Circular No. 1758 changed the operative date of Circular No. 1742 (except in respect of the 130 per cent prior import deposit) to October 16.

October 2. Circular No. 1759 added certain pickup trucks to the List of Permitted Imports, subject to an advance deposit of 10,000 per cent.

October 2. Circular No. 1761 increased the Central Bank’s delivery period for forward exchange from 105 days to 120 days from the date an importer entered into a forward exchange contract.

October 9. Circular No. 1762 shifted certain insurance indemnities from the banking market buying rate of E° 25.00 per US$1 (List F) to the buying rate of E° 40.00 per US$1 (List C). Outward payments of certain insurance premiums were added to List C of the banking market.

October 11. Circular No. 1765 made exchange earnings of national shipping companies eligible for List F of the banking market.

October 13. Circular No. 1766 provided that advance deposit requirements were applicable also to goods from LAFTA countries and Andean Group countries. Imports from those countries of prohibited imports would be permitted, subject to an advance deposit.

October 16. Circular No. 1768 postponed the effective date of application of Circular No. 1742 (except in respect of the 130 per cent import deposit) to October 30.

October 16. Circular No. 1769 exempted from the 130 per cent import deposit all imports paid for with foreign exchange provided by the Treasury and all imports made by specified agencies and enterprises (including CODELCO, the large copper mining companies, CORFO, and the Mint).

October 17. Circular No. 1770 modified the travel allowances established by Circular No. 1568 of September 1, 1971. A global allocation of US$300 a person a calendar year was established. For travel to all countries not specified below, the daily allocation was US$20 a person. For travel to destinations within 500 kilometers of the Chilean border or anywhere in Argentina except the cities of Buenos Aires, Bahía Blanca, and Comodoro Rivadavia, the allowance was US$5 a person a day, subject to a maximum of US$30 a trip. For travel to other parts of Latin America (defined so as to include the Bahamas, Curaçao, Jamaica, and Puerto Rico), US$15 a day up to US$105 a trip. For Canada and the United States, the maximum for a trip was US$200, and for travel to Europe and other countries, US$300. However, persons receiving invitations to travel to Cuba were subject to a maximum per trip of US$30, and those receiving invitations from Bulgaria, mainland China, Czechoslovakia, Eastern Germany, Hungary, Romania, and the U. S. S. R. were subject to a maximum of US$80.

October 20. Circular No. 1773 amended Circulars Nos. 1727 and 1742 and revoked Circular No. 1707. The sale of exchange in connection with all payments for invisibles in the banking market became subject to the following rules: (1) the commercial banks were henceforth required to remit to the Central Bank the escudo equivalent of the transaction on the day of receipt of the funds from an applicant; and (2) the Central Bank undertook to provide the equivalent in foreign exchange 122 days from the date of deposit of local currency by an applicant with the commercial bank. As regards procedures governing payment for imports of goods, the commercial banks were authorized to furnish an importer with a copy of the import registration enabling him to clear the goods through customs, provided the importer had met the 130 per cent deposit requirement. Commercial banks were authorized to sell exchange on a spot basis for their own account for the following: (1) consular fees payable in foreign exchange and related to exports, up to US$2,000; (2) freight charges on exports, up to US$2,000; (3) freight payable to national shipping companies; (4) expenses in connection with letters of credit opened but subsequently canceled; and (5) payments for imports or invisibles expressly authorized by the Central Bank.

October 25. Circular No. 1774 added certain items, including fresh fruits, to the exports eligible for the buying rate of E° 30.00 per US$1 (List G).

November 3. Circular No. 1778 added certain items, including newsprint and cellulose, to the list of exports eligible for the buying rate of E° 30.00 per US$1 (List G).

November 17. Circular No. 1782 revoked the provisions of Circular No. 1738 relating to the raw copper component in exports of manufactured goods and chemical products. Two items were added to the list of exports eligible for the buying rate of E° 30.00 per US$1 (List G).

November 20. Circular No. 1783 shifted certain sports goods to the exchange rate of List C in Circular No. 1727 and made them subject to an advance deposit of 10,000 per cent.

November 22. Circular No. 1784 established that persons traveling abroad for whose fare no charge was made would be entitled to only 40 per cent of the normal travel allocations.

November 23. Circular No. 1785 added eight minor items to the list of exports eligible for the buying rate of E° 30.00 per US$1 (List G).

December 1. Circular No. 1788 made some minor shifts of commodities between the lists of Circular No. 1727.

December 4. The Central Bank’s selling price for gold coins was increased from E° 292.91 to E° 786.64 a gram.

December 13. Circular No. 1793 shifted payments for postal and other communications services from the mixing rate provided for in Circular No. 1727 (60 per cent List C and 40 per cent List D) to the List D rate.

December 13. Circular No. 1794 amended Circulars Nos. 1670 and 1679 concerning payments made in Chile by foreign shipping companies.

December 15. Circular No. 1795 added various types of sawn lumber to the list of exports eligible for the buying rate of E° 30.00 per US$1 (List G).

December 22. Circular No. 1799 with effect from January 1, 1973 shifted certain remittances to students to the Area I brokers’ market rate.

Republic of China

Exchange Rate System*

The par value is 0.0204628 gram of fine gold per New Taiwan Dollar, corresponding to NT$43.4286 = SDR 1 or NT$40.00 = US$1, and China avails itself of wider margins. The official buying and selling rates for the U. S. dollar are NT$40.00 and NT$40.10, 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.

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, 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 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 24 appointed banks. Most foreign exchange transactions are conducted through appointed banks, i.e., authorized banks.

Prescription of Currency

Export receipts must be obtained in Australian dollars, deutsche mark, Hong Kong dollars, Malaysian dollars, pounds sterling, Swiss francs, or U. S. dollars.3 Currencies not officially posted may be accepted by authorized 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

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. The holder of an import license is entitled to obtain the necessary foreign exchange from an authorized bank. Exchange settlement corresponding to 20 per cent of the f.o.b., c. & f., or c.i.f. value of imports (raw cotton financed under the U.S. P.L. 480 program is exempt) 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 10 per cent for usance imports, and 15 per cent for imports of machinery and equipment payable in installments that do not require a bank guarantee.5 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 certain imports from Eastern European countries are now being licensed. The Chinese 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 and Macao. Certain commodities financed with U. S. aid funds (including P.L. 480 funds) can be imported only from the United States.

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 and6 a number of luxury goods and less essential items, such as certain Chinese luxury foods, cigarettes, cigars, liquor, jewelry, certain medicines, tea, sugar (and its substitutes), and molasses. The controlled list contains three types of goods: some consumer luxury items,7 certain goods that are also produced locally of good quality and in sufficient quantity to meet domestic demand and whose ex-factory prices are not more than 5 per cent higher than the landed, duty-paid prices of comparable imported goods; and goods subject to regulation and allocation. The first two types are licensed restrictively;8 goods of the third 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. Imports on the permissible list are licenced liberally and can be made by both end-users and traders. The importation of items on the controlled list is permitted only to factories and end-users. On December 31, 1971, of 11,584 classified import items, 14 were prohibited, 2,122 were controlled, and 9,448 were permissible. On December 31, 1972, the corresponding figures were 14 prohibited, 2,013 controlled, and 9,557 permissible.9

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 authorized bank. An automatic approval system is applied to certain items on the permissible list. Under this system, importers may obtain foreign exchange at any authorized bank by submitting import licenses which are automatically approved. Application of the automatic approval system was limited to a few items initially but was later expanded. On December 31, 1971, the system applied to 2,444 items, and on December 31, 1972 to 3,955 items.

Special regulations apply to 4 commodities normally imported in bulk shipments.10 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). In certain manufacturing industries, a stipulated minimum ratio of the value of the manufactured product must be met by use of domestic resources.11

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.12

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$100 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$2,400 a year in the second to fifth academic years. Residents are granted an exchange allowance equivalent to US$600 a trip (US$300 for each accompanying dependent under the age of 12) for any approved type of travel; visas for tourist travel, however, are not normally granted to Chinese nationals. For business travel, an allowance equivalent to US$ 1,000 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 Proceeds13

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 canned mushrooms and asparagus. The export of a few other foodstuffs also is restricted. There are ceilings on the export of textiles to Canada, the United States, and the member countries of the EEC.14

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$10015 may be sent abroad. When leaving the Republic of China, tourists are allowed to take out domestic products valued up to US$10015 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. 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.

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.

Changes during 1972

January 1. Quantitative restrictions on imports of passenger automobiles and taxis were lifted.

January 5. The minimum advance settlements in foreign exchange for opening sight letters of credit, usance letters of credit, and downpayments for imports of machinery and equipment on an installment basis were reduced from 30 per cent to 20 per cent, from 15 per cent to 10 per cent, and from 20 per cent to 15 per cent, respectively.

January 6. A new procedure came into force for the screening by the Board of Foreign Trade of import applications by government enterprises. Import applications could not be submitted where the price of similar locally produced goods, of good quality and produced in sufficient quantity to cover domestic demand, exceeded the import cost (c.i.f. price plus taxes and dues) by less than 10 per cent.

January 15. New regulations came into force concerning the export of products processed from imported raw materials and the import of raw materials by manufacturers engaged in the export of processed industrial products. Factories could be registered as export processing factories only if the required raw materials were either not available locally or sold at prices 10 per cent or more in excess of their c.i.f. import prices.

March 5. It was announced that restrictions on imports from Eastern European countries were being relaxed and that the Government was considering permitting exports to those countries.

April 3. The Central Bank of China introduced forward cover facilities in respect of imports and exports. Such cover could be obtained from authorized banks for periods from 30 to 180 days, at forward rates set daily by the Central Bank. For each forward contract, 5 per cent of its amount had to be deposited in new Taiwan dollars, for the duration of the contract, as a margin deposit. Applications for cover in excess of US$100,000 had to be submitted to the Central Bank for prior approval.

May 8 (Washington time). The par value was changed from 0.0222168 gram to 0.0204628 gram of fine gold. China also availed itself of wider margins. The basic exchange rate for the U. S. dollar remained unchanged at NT$40.00 = US$1.

May 11. New regulations came into force governing imports by “productive enterprises.”

June. Certain measures were taken to facilitate inward direct investment. Permission to import capital equipment could be given even where the equipment was also available locally, and permission could be given to import a six months’ supply of raw materials included on the controlled list.

August 26. Importers of goods on the permissible list henceforth could contract on documents against payment, documents against acceptance, or usance letter of credit terms. Previously, imports normally had to be made on a sight letter of credit basis.

September 8. Contracts for imports from Japan were restricted to US$20,000 each, and importers and producers were advised to shift to other sources of supply. Subsequently, these directives were eased.

October 31. The capital and “export record” requirements that must be met to be accepted as a “registered” importer were raised.

Colombia

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 December 31, 1972 the average selling rate in the certificate market was Col$22.83 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$22.00 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. The different exchange rates and the types of transaction to which they apply are set out in the Table of Exchange Rates, below. On December 31, 1972, the fluctuating buying rate for proceeds from coffee exports (after taking into account a 20 per cent exchange tax) was Col$18.22 per US$1, and that for most other exports about Col$26.16 per US$1. All imports are paid for at the certificate market rate. In principle, all payments and receipts in respect of current invisibles and capital also take place at that rate but different effective rates arise from the application of advance deposit requirements on exchange purchased for foreign travel and of advance payments deposits for purchases of exchange 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 licence, 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 95 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, subject to the normal requirement of a local currency guarantee deposit.

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 direct to the Presidency of the Republic, enforces control and supervision over exchange transactions and is responsible for applying penalties for violation of the exchange regulations currently in force.

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, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela are made through accounts maintained within the framework of the LAFTA multilateral clearing system, and settlements with the Dominican Republic are also made through special accounts.

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

Imports are classified as follows: goods whose import is prohibited; goods whose import is subject to prior licensing by the Institute of Foreign Trade; and goods that may be imported freely without license but subject to registration. In this last category, there is a global free list applicable to all countries and a National Free List applicable to LAFTA countries only; the latter contains all commodities that are on the global free list as well as some additional ones. These liberalized imports corresponded to about 30 per cent of 1972 reimbursable imports;1 they comprise mainly certain raw materials and some types of machinery. All import registrations by public sector agencies are screened by the Institute of Foreign Trade to determine whether local substitutes are available. The prohibited list comprises mainly such items as arms and habit-forming drugs, certain foodstuffs, such as corn and milk, certain textiles and garments, jewelry, and a number of other consumer goods; imports of certain goods on this list may be licensed from time to time.

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 in Colombian currency must be made with the Bank of the Republic before import registration is permitted; the deposit is normally returned 85 days after the goods have cleared customs, but at the time of customs clearance if it is used to pay for imports concerned. The advance import deposit is payable at one of many rates, depending on the type of goods; those important in practice are the rates of 1, 5, 10, 30, 50, 70, and 100 per cent.2

The following imports are exempt from prior deposits: nonreimbursable imports;1 imports brought into Colombia under special import-export arrangements (Vallejo Plan); nearly all goods included in the Colombian National List and the special lists granting concessions to LAFTA countries; all imports made under preferential arrangements from Andean Group countries; goods financed with credits having a maturity of at least 40 years;3 noncommercial capital goods and components imported by the Government, departments, municipalities, official undertakings, semiofficial bodies, and public service agencies, and noncommercial goods when intended for mineral exploration or exploitation; goods imported by the National Federation of Coffee Growers for its own use; goods exempt by virtue of an international agreement; capital goods, components, and raw materials imported by firms sponsored and supported by the Government, and firms holding foreign commitments backed by the Government; machinery and equipment coming under the tariff headings for the basic industries; goods of prime necessity imported by the Institute of Agricultural Marketing (IDEMA); most imports by universities and other nonprofit-making educational institutions; scientific and literary books, newspapers, and reviews that contribute to the culture of the Colombian people, together with capital goods for the production of such items; and sacramental wine. 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”).

A prior exchange license is required for all payments for imports, except when they are made through credit institutions or are financed by letters of credit opened by banking institutions in countries with which bilateral payments arrangements or reciprocal credit agreements are in force (including the Dominican Republic). Licenses are granted by the Exchange Office, provided that it is satisfied that the goods have been cleared through customs and that payment is due. At least 20 days prior to filing an application for an exchange license, the importer must provide an advance payments deposit in pesos equivalent to 95 per cent of the exchange requested, calculated at the Ministry of Finance exchange rate (see above). Exempt are 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, payment 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, imports for which payment is made within 30 days of shipment, and payments, whether made by letters of credit or not, for imports from countries with which bilateral payments arrangements or reciprocal credit arrangements are in force (including the Dominican Republic).

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 payment deposit is required for invisibles, except for travel allowances, for which a 50 per cent prior deposit in local currency is required.4 Payments for travel abroad are limited to US$30 a person a day, not to exceed US$1,050 a person 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$504 a month for up to 12 months, while for other students the ceilings vary from US$200 to US$300 a month, depending on the cost of living in the country concerned. 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

There is a list of exports that are either prohibited or are subject to special requirements. Prior application for registration 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, petroleum and petroleum products, and cattle hides receive tax credit certificates (CATs) in an amount of 15 per cent of the total earnings surrendered, converted at the Ministry of Finance exchange rate. These certificates, which are freely negotiable and are quoted on the stock exchange, are accepted at par by tax offices six months after issuance for the payment of income tax, additional taxes, customs duties, and sales taxes (three months after issuance where exports of manufactured goods are involved). At the end of 1972 certificates just issued were quoted at a discount of about 8.5 per cent for six-month certificates and 4.4 per cent for three-month certificates; hence the effective exchange rate was Col$26.01 per US$1 for manufactured exports and Col$25.87 per US$1 for other nontraditional exports.

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$91.20 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$22.00 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 30 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$ 19.00 per US$1.5 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. Advance surrender of anticipated export proceeds from products other than coffee may be made at the average rate of exchange certificates for the previous month, as determined by the Ministry of Finance, provided that the actual surrender takes place within 6 months of the provisional surrender, or within 12 months if the export value exceeds US$500,000. For these other exports, the peso payment to the exporter at the time of actual surrender is based on the certificate market rate on the day6 when the actual surrender takes place. (For exports of emeralds only 10 days are allowed between advance and actual 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 non-bank residents,7 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.8 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 percent, 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 a maximum interest rate of 8½ per cent per annum. Such loans 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.

A peso advance deposit corresponding to 95 per cent of the exchange requested is required for repayments of principal on private suppliers’ credits.

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 ounce 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. When the Bank sells newly mined gold abroad at market prices in excess of US$38 an ounce, it reimburses the producer for the difference.

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. The Bank’s exports of gold are made at world market prices and the excess over its purchase price of US$38 is paid out to the producers who have supplied the gold. Imports of gold also 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 1972

During the year, the selling rate in the certificate exchange market was gradually depreciated from Col$20.94 per U.S. dollar to Col$22.83 per U.S. dollar. There was no major liberalization of the import system. Measures were taken to bring private sector borrowing abroad under the control of the monetary authorities and to increase the volume of import payments effected before the end of 1972. (Import liberalization was increased sharply in February and May 1973.)

Table of Exchange Rates (as at December 31, 1972)(pesos per U. S. dollar)
BuyingSelling
18.22 (Certificate Market Rate less 20% Exchange

Tax, Fluctuating Rate)

Coffee exports.9

22.00 (Accounting Rate of Bank of the Republic) Conversion of Government’s receipts from exchange tax on coffee exports.

22.78 (Certificate Market Rate, Fluctuating Rate) Net proceeds from exports of crude oil and petroleum derivatives,10 exports of cattle hides. Exports from free ports. All receipts from invisibles and capital transfers.

26.16 (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,9,11,12,13
20.00 (Fixed Rate)

Purchases of crude oil from foreign-owned companies in Colombia for domestic refining.14

22.00 (Accounting Rate of Bank of the Republic) Government’s purchases of exchange for servicing of public debt, diplomatic expenses, official travel, etc.

22.83 (Certificate Market Rate, Fluctuating Rate) All imports. All other transactions.15

January 2. The reciprocal credit agreement with Paraguay came into operation.

January 3. A circular of the Bank of the Republic established that all trade with the Federal Republic of Germany could be settled in deutsche mark.

January 7. The Ministry of Finance exchange rate (used for the calculation of import duties, advance import deposits, advance payments deposits, and the 3 per cent tax on the c.i.f. value of imports) was set at Col$20.83 per US$1 for transactions effected between January 5 and February 4.

January 27. All importation of oil-bearing seeds, grease, and animal and vegetable oils was reserved for IDEMA (Instituto de Mercadeo Agropecuario). (Ministry of Agriculture Resolution No. 025.)

February 4. The Ministry of Finance exchange rate was set at Col$21.01 per US$1 for transactions effected between February 5 and March 4.

February 15. By Decree No. 2382/71 the redemption date of tax credit certificates was reduced from nine to three months for manufactured products and from nine to six months for all other eligible exports. Council of Foreign Trade Resolution No. 02 listed all goods not considered as manufactured goods.

February 23. The minimum maturity permitted for private loans raised abroad was set at 12 months. The maximum interest rate for loans with a maturity of up to two years was lowered to 8 per cent and that on loans with a maturity exceeding two years was lowered to 8½ per cent. (Monetary Board Resolution No. 13.)

February 23. The maximum maturity for credits granted by travel companies operating in Colombia for the purchase of tickets for travel abroad or expenses to be incurred abroad was set at 12 months. (Monetary Board Resolution No. 16.)

February 26. As the first step in an overall tariff reform, the rates of import duty for some 800 items were altered; tariffs were raised by 5 or 10 percentage points on most items while the rates on many others were reduced. (Decree No. 305.)

February 23 and March 1. The advance import deposit rates for a wide range of goods (including organic chemicals, metal products, machinery, and laboratory apparatus) were reduced from 70 per cent, 100 per cent, and 130 per cent to 50 per cent and 30 per cent. The deposit rates for 22 items were reduced from 30 per cent to 10 per cent. (Monetary Board Resolutions Nos. 14 and 17.)

March 7. The Ministry of Finance exchange rate was set at Col$21.18 per US$1 for transactions effected between March 5 and April 4.

March 8. The minimum surrender price per 70-kilogram bag of coffee was raised from US$72.00 to US$73.50 (Monetary Board Resolution No. 20).

March 8. Additional reductions in advance import deposit requirements took place. (Monetary Board Resolution No. 21.)

March 22. The minimum surrender price for coffee exports was raised to US$74.50. (Monetary Board Resolution No. 25.)

April 5. The Ministry of Finance exchange rate was set at Col$21.35 per US$1 for transactions effected between April 5 and May 4.

April 12. Many rates of import duty that had been lowered by Decree No. 305 on February 26, 1972, were restored to their former level. (Decree No. 570.)

April 26. Additional reductions in advance import deposit requirements took place. (Monetary Board Resolution No. 30.)

May 3. The official price for sales of newly mined gold to the central bank was raised from US$35 to US$38 per troy ounce of fine gold. (Monetary Board Resolution No. 33.)

May 5. The Ministry of Finance exchange rate was set at Col$21.52 per US$1 for transactions effected between May 5 and June 4.

May 24. Monetary Board Resolution No. 37 amended and codified the regulations pertaining to private external debt. (1) As regards private external loans, the minimum maturity for private (nonbank) loans raised abroad was increased from one to two years. Limits were set on the rate of amortization. Maximum interest rates were to be set periodically by the Monetary Board on the basis of the interbank rate in the international market. The requirement that a deposit in local currency corresponding to 95 per cent of loans taken up be placed with the Exchange Office was abolished. Debt service had to be effected in the currency in which the loan was obtained. (2) Direct lines of credit for import financing were made subject to a maximum maturity of four months, although a longer maturity was permitted for capital goods. The maximum interest rate, including fees and commissions, had to conform with Monetary Board regulations. (3) As regards export prefinancing, the maximum term between advance surrender and actual surrender was reduced from 24 to 18 months for exports valued at more than US$500,000. (4) As regards external operations, the reserve requirement on commercial banks’ short-term foreign liabilities was raised from 18 per cent to 25 per cent, effective July 3, and for investment banks the reserve requirement was set at 30 per cent. Foreign liabilities of branches of foreign banks and of Colombian banks with branches abroad were exempt from the reserve requirement but had to conform to the regulations on maturity and interest rate that were applicable to private external loans. A marginal reserve requirement of 25 per cent, applicable to both commercial and investment banks, was set on increases in export financing liabilities after May 30, 1972 (investment banks previously were subject to a marginal reserve requirement of 30 per cent, but commercial banks were exempt).

Provisions were also included regarding foreign exchange guarantees. An absolute limit of 100 per cent of paid-in capital and legal reserves was set for foreign exchange guarantees extended by commercial and investment banks. The monthly increase in such guarantees could not be more than 1 per cent over the level on May 31, 1972. The limitation applied only when total outstanding guarantees in foreign exchange exceeded US$1 million. (Some flexibility was available in that a cumulative limit of a 6 per cent increase in six months, beginning July 1, was substituted for the monthly limit of 1 per cent.) The following guarantees in foreign exchange were exempt from the foregoing limitation: (a) those ensuring fulfillment of loan contracts or payment for imports; (b) those connected with export financing by the Export Promotion Fund; (c) those granted in favor of international organizations or official export credit institutions; (d) those granted for obligations of authorized institutions of higher learning; (e) those granted for obligations for the financing of multinational projects in which the Colombian public sector takes part, and for credit operations of basic industries of an official character, subject to individual approval of applications by the Monetary Board.

May 24. The maximum interest rate on direct lines of credit for import financing was set at 6.5 per cent a year, with effect from June 1. (Monetary Board Resolution No. 38.)

May 25. Additional customs duties that had been reduced on February 26 were restored to their former level. (Decree No. 875.)

May 31. The minimum surrender price for coffee exports was raised to US$76.20. (Monetary Board Resolution No. 39.)

May 31. The Monetary Board confirmed that, as previously, foreign mining companies selling gold to the central bank would receive 50 per cent of the price in foreign exchange, and the rest in Colombian currency at the certificate market rate. Locally owned producers would receive the entire proceeds in local currency. The new price of gold (see May 3, above) also was confirmed. (Monetary Board Resolution No. 40.)

June 6. The Ministry of Finance exchange rate was set at Col$21.69 per US$1 for transactions effected between June 5 and July 4.

June 6. Additional import duties that had been reduced on February 26 were restored to their former level. (Decree No. 946.)

June 21. The advance surrender of proceeds from exports of emeralds had to be converted into actual surrender within ten days. (Monetary Board Resolution No. 46.)

June 24. Additional customs duties that had been reduced on February 26 were restored to their former levels. (Decree No. 1100.)

June 28. The increase from 18 per cent to 25 per cent in the reserve requirement applied to commercial banks’ short-term foreign liabilities (Monetary Board Resolution No. 37, May 24, 1972) was phased so that the 25 per cent requirement did not become applicable until July 17. (Monetary Board Resolution No. 48.)

July 5. Import duties on a number of products needed as inputs in domestic industries were reduced. (Decrees Nos. 1145, 1146, 1147, and 1148.)

July 5. It was clarified that Monetary Board Resolution No. 37 of May 24 implied that direct lines of credit could only be used for payments for imports of goods. In the future, the prefinancing of exports other than coffee could only be effected through duly authorized domestic credit institutions or through the Export Promotion Fund. Furthermore, domestic credit institutions could apply for transfers of interest payments only when they were cosignatories or otherwise were permanently involved with the loan (Exchange Office General Circular No. 25).

July 5. The coffee retention quota was set at a quantity of untreated coffee equivalent to 23 per cent of the coffee to be exported. (Decree No. 1144.)

July 5. The advance payments deposit requirement was suspended until August 15 for purchases of foreign exchange for import payments. (Monetary Board Resolution No. 49.)

July 5. The Ministry of Finance exchange rate was set at Col$21.84 per US$1 for transactions effected between July 5 and August 4.

July 12. The minimum surrender price for coffee exports was raised to US$80.40. (Monetary Board Resolution No. 50.)

July 18. Decree No. 1234 provided that all technical service contracts as well as trademarks, patents, and licensing and royalty agreements with foreign firms required both the prior approval of the Exchange Office and authorization by the Royalty Commission. It also set out the criteria for acceptance or rejection of applications for approval.

July 19. Monetary Board Resolution No. 52 eliminated the 85-day waiting period after customs clearance for the return of advance import deposits when the funds were used for the payment of current imports. The resolution also permitted advance repayment of foreign loans of which the foreign currency proceeds had been surrendered before December 31, 1971.

July 19. Resolution No. 17 of the National Council for Economic and Social Policy provided that all foreign investments in Colombia needed prior approval by the National Planning Department, with the exception of foreign investment in the petroleum sector and of reinvestments not exceeding 5 per cent of the company’s net value. The resolution spelled out the criteria to be used by the Planning Department in its consideration of applications.

July 21. The coffee retention quota was raised to 25 percent. (Decree No. 1274.)

July 26. The foreign exchange guarantees granted by commercial and investment banks to support external credits utilized to finance or refinance imports made by official entities in order to maintain a normal supply of primary goods were exempted from the limits on their increase that had been set by Monetary Board Resolution No. 37. (Monetary Board Resolution No. 53.)

July 31. The coffee retention quota was raised to a quantity of untreated coffee equivalent to 27 kilograms per 70-kilogram bag exported, i.e., to 39 per cent. (Decree No. 1322.)

August 4. The Ministry of Finance exchange rate was set at Col$21.98 per US$1 for transactions effected between August 5 and September 4.

August 22. The time limit for the surrender of proceeds from exports of books and magazines was increased from 12 to 18 months. (Institute of Foreign Trade Resolution No. 547.)

August 30. The time limit for the conversion of advance export surrender deposits into actual surrender of export proceeds was reduced for products other than coffee and emeralds from 12 to 6 months for exports valued up to US$500,000, and from 18 to 12 months for exports valued at over US$500,000. Substitution of the product for which the advance export surrender had been made would not be permitted. (Monetary Board Resolution No. 59.)

September 5. The Ministry of Finance exchange rate was set at Col$22.10 per US$1 for transactions effected between September 5 and October 4.

September 6. The Exchange Office was authorized to register special direct lines of credit in U. S. dollars, subject to prior recommendation in each case by the Monetary Board. Such lines of credit would be for the financing of imports of capital goods or of intermediate goods needed for the manufacture of durable consumer goods. They could also be used for export financing.

Registration of import credits was subject to the following conditions: (1) The amortization period for each drawing under the credit line must not be less than 24 months. (2) The effective interest rate for operations with a maturity of two years must not exceed 8 per cent, and for operations with a maturity in excess of two years it must not exceed 8.5 per cent. (3) Drawings under each credit line had to be at least US$1 million a year. Direct credits granted by foreign corporations to subsidiaries in Colombia to finance imports of raw materials had to conform to the minimum term of two years.

The conditions for the registration of export credits were: (1) The amortization period for each drawing under the credit line must be less than 18 months. (2) The effective interest rate must not exceed 8 per cent. (3) Drawings under each credit line must be at least US$ 1 million a year. Credit operations connected with export prefinancing by commercial banks and investment banks were limited to the average level of these operations from June to August 1972, or to the balance on August 31, 1972. (Monetary Board Resolution No. 61.)

September 6. The minimum surrender price for coffee exports was raised to US$91.20. (Monetary Board Resolution No. 63.)

September 8. The coffee retention quota was reduced to the equivalent of 22.5 kilograms per 70-kilogram bag of coffee to be exported (i.e., to 32 per cent). (Decree No. 1639 Bis.)

September 30. With effect from January 1, 1973, Decree No. 1841 lowered the tax credit certificate rate for exports of emeralds from 15 per cent to 12 per cent.

October 3. It was provided that with effect from January 15, 1973, all remittances abroad related to film distribution contracts would require the prior approval of the Royalty Commission. (Resolution No. 1 of the Royalty Commission.)

October 5. The Ministry of Finance exchange rate was set at Col$22.27 per US$1 for transactions effected between October 5 and November 4.

October 6. The functions of the National Council on Customs Policy were specified. (Decree No. 1868.)

October 16. A tripartite agreement was concluded concerning the sharing among coffee producers, Coffee Fund, and local producers’ committees of any excess of the domestic support price for coffee over a specified New York spot price.

October 20. The coffee retention quota was reduced to the equivalent of 30 per cent of coffee exports. (Decree No. 1939.)

October 30. It was announced that persons who had effected imports prior to June 30, 1971 and whose external credits were to expire before December 31, 1972, would be permitted to obtain foreign currency under the ordinary exchange budget at the time of expiration. As from January 1, 1973 no foreign exchange would be made available for such payments. (Monetary Board Resolution No. 70.)

November 1. Physical and juridical persons in Colombia were prohibited from taking up loans abroad during November and December. The conversion into Colombian currency of foreign currency derived from private external loans was suspended until December 31, 1972. Credit institutions were forbidden to arrange refinancing or extension of obligations in foreign currency unless this was part of the original contract. Private external loans converted after January 1, 1973 would have 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 would be 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.)

November 7. The Ministry of Finance exchange rate was set at Col$22.42 per USS1 for transactions effected between November 5 and December 4.

November 8. Further reductions in the advance import deposit requirements took place. (Monetary Board Resolution No. 72.)

November 22. Monetary Board Resolution No. 75 extended the regulations given in Monetary Board Resolution No. 70 of October 30 concerning payments for imports. However, as of January 1, 1973, the exchange application for payments for imports effected before June 30, 1971 would have 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.

November 22. The maximum maturity for import credits granted by credit institutions was increased to six months for consumer goods and raw materials, and to one year for capital goods. In special cases the maturity for capital goods could be up to three years. The prohibition in Monetary Board Resolution No. 69 against the extension or refinancing of obligations in foreign currencies was revoked. (Monetary Board Resolution No. 76.)

November 29. The range of permissible remittances to students studying abroad was increased from US$120-200 to US$200-300 a month, depending on the cost of living in the country concerned (ICETEX Resolution No. 1505 and Exchange Office Circular No. 46, September 30).

November 29. Further reductions in advance import deposit requirements took place. (Monetary Board Resolution No. 77.)

December 1. Decree No. 2248 provided for certain measures for the protection of domestic manufacturing industries. Public sector purchases were to be directed primarily to domestic industrial products.

December 5. The Ministry of Finance exchange rate was set at Col$22.55 per US$1 for transactions effected between December 5, 1972 and January 4, 1973.

December 7. It was clarified that the deposits of 150 per cent and 200 per cent prescribed by Monetary Board Resolution No. 75 were required also for payments to countries with which payments agreements were in force. (Exchange Office General Circular No. 45.)

December 13. The exchange rate for the actual surrender of proceeds from coffee exports, after 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. The advance surrender continued to be effected at Col$19 per US$1. The actual surrender had to take place within 60 days of the advance surrender, but with the approval of the National Coffee Growers’ Association and the central bank that period could be extended by another 60 days. Coffee exporters were given 60 days from the date of advance surrender to pay the coffee tax—impuesto cafetero—(Monetary Board Resolution No. 79).

December 14. An export tax on coffee of Col$0.25 per bag of 70 kilograms, which had been in existence since 1937, was eliminated. (Law No. 11 of 1972.)

December 20. The interest rate paid on exchange warrants was raised from 5 per cent to 7 per cent per annum (Monetary Board Resolution No. 83.)

December 20. The accounting rate of the central bank was raised from Col$20.15 per US$1 to Col$22.00 per US$ 1, to be applicable for the first time to the balance sheet for December 1972. (Monetary Board Resolution No. 84.)

December 30. Import duties on 569 tariff items were increased by an average of 3 to 4 percentage points, in order to adapt the Colombian customs tariff to the Minimum External Tariff and the Common External Tariff of the Andean Group. (Decree No. 2523.)

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 Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC)2 and commercial banks take place at the rate of CFAF 1 = F 0.02.

Exchange transactions relating to foreign countries other than France, 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 BCEAEC, take place through the financial franc market at freely fluctuating rates. The principal payments and receipts channeled through the financial franc market are those relating to travel expenses, capital earnings, and workers’ remittances. Exchange rates in the offiical market are based on par values and central rates; the effective parity relationship for the U. S. dollar in this market is CFAF 255.785 = US$1.

Payments to the following countries, although subject to declaration, are unrestricted: (1) France and its Overseas Departments and Territories (except the French Territory of the Afars and the Issas) 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, the Malagasy Republic, Mali, Mauritania, 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, 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 salaries of Congolese diplomats abroad, the expenditures of official missions abroad, and the scholarships of persons studying or training abroad.3 Payments to other foreign countries and credits to Foreign Accounts in Francs are subject to a commission of 0.60 per cent or, for imports of petroleum and petroleum products, 0.10 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 BCEAEC maintains an Operations Account with the French Treasury; settlements with France, 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 mainland China are made through special accounts established under a bilateral payments agreement.4 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 BCEAEC banknotes to Financial Accounts in Francs is permitted when they have been mailed direct to the BCEAEC in Brazzaville by 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 (UDEAC). Also outside the program are imports for the Government under foreign aid and bilateral payments agreements and imports made by OFNACOM (Office National du Commerce) or BCCO (Bureau pour la Création, le Contrôle et l’Orientation des Entreprises et Exploitations d’Etat). 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 mainland China.

All import transactions relating to countries other than France, Monaco, and the Operations Account countries must be domiciled with an authorized bank. Licenses for imports from countries other than France, 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, 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, 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 (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 zaïre 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, Monaco, or an Operations Account country may take out CFAF 25,000 in BCEAEC banknotes or French banknotes.5 Resident and nonresident travelers going to foreign countries other than France, Monaco, or the Operations Account countries may take out up to a maximum of CFAF 25,000 in BCEAEC banknotes, French banknotes, and banknotes issued by any other institute of issue maintaining an Operations Account with the French Treasury.6,7

Nonresident travelers may take out foreign banknotes and coins up to the amount declared by them on entry or, if no declaration was made, up to the equivalent of CFAF 175,000, as well as any foreign means of payment obtained from an authorized bank to the debit of a Financial Account in Francs or a Foreign Currency Account; they may reconvert up to CFAF 175,000 in BCEAEC banknotes into foreign currency.8

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, 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 BCEAEC, 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, 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 abroad9 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 Congo10 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.

Under the Investment Code of June 1961, as amended on December 29, 1962, any enterprise established in Congo, 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 fiscal and other privileges may be accorded to firms investing in specified new industries or in the expansion of existing ones. Preferential treatment A applies to enterprises whose activity and market are limited to the national territory of Congo; 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 (the Central African Republic, Chad, Congo, and Gabon). Preferential treatment C is reserved for enterprises of prime importance to the country’s economic development; it provides for stabilization of their fiscal charges for up to 20 years. The granting of any one of the three kinds of preferential treatment automatically includes the application of specified exemptions from direct taxes which are granted to all investments in Congo.

Requests for approval for preferential treatment must be submitted to the Minister of Finance and the Budget, 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. Preferential treatment A is granted by decree issued by the Council of Ministers. Preferential treatment B is granted by an act of the Executive Committee of the Central African Customs and Economic Union upon the recommendation of the Council of Ministers. Preferential treatment C requires legislation.

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 BCEAEC 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 1972

January 1. Commissions payable to the Treasury were levied on transfers to foreign countries and on credits to Foreign Accounts in Francs. They ranged from 0.10 per cent to 0.60 per cent, subject to a minimum of CFAF 100.

June 14. The import monopoly of OFNACOM for a few basic products was extended indefinitely by Order No. 2619. In addition, salt, dried fish, milk, and enamelware were added to the import monopoly.

August 7. Order No. 3656 increased the exchange allowance for tourist travel to foreign countries from the equivalent of CFAF 150,000 a person a trip, for any number of trips a year, to CFAF 175,000 a person a trip (CFAF 87,500 for children under ten), and the amount of foreign banknotes which nonresidents could take out freely from CFAF 25,000 to CFAF 175,000. The travel allocations henceforth could be taken up also in the form of travelers checks denominated in French francs.

August 7. Following a similar measure taken in France on May 5, 1972, Circular No. 052 shifted a number of current transactions from the financial franc market to the official exchange market. The principal current payments and receipts that continued to be channeled through the financial franc market were travel expenses, capital earnings, and workers’ remittances. Transactions in French and foreign banknotes also took place in the financial franc market.

August 30. Economic cooperation with Zaïre was resumed.

September 22. It was announced that outward transfers of profits would be more strictly supervised.

September 22. Congo announced its withdrawal from the Common Organization of African, Malagasy and Mauritian States.

November 18. Decree No. 72/374 revoked certain provisions of Decree No. 67/150 of June 30, 1967 and extended exchange control to France, Monaco, and the Operations Account countries (which previously were not defined as foreign countries). Financial relations with other countries continued to be governed by the provisions of Decree No. 69/35 of January 30, 1969. The new Decree defined foreign countries as all countries outside the People’s Republic of the Congo. Definitions of residents, nonresidents, and investments also were provided. Exchange transactions, capital movements, and settlements of all types between Congo on one hand and France, Monaco, and the Operations Account countries on the other became subject to declaration and could be effected only through the intermediary of authorized banks or the Postal Administration. The export by travelers of BCEAEC banknotes would be limited to a ceiling to be fixed by the Minister of Finance and the Budget. (Previously, their export to France, Monaco, and the Operations Account countries was unrestricted.) Provided they were declared, transfers of funds to France, Monaco, and the Operations Account countries would remain unrestricted, but they would be subject to a commission, the rate of which would be fixed by the Minister. All transactions giving rise to a claim on France, Monaco, or an Operations Account country also had to be declared. Residents were obliged to repatriate all claims on foreign countries, including export proceeds and investment income.

All Congolese investments in foreign countries, as well as their full or partial liquidation, required prior authorization by the Minister, and each act of investment or disinvestment had to be reported to the Minister within 20 days of the date on which it took place. Investments in Congo by nonresidents required prior authorization by the Minister, unless the investment involved the creation of a mixed economy enterprise, in which case only a report ex post was needed. The full or partial liquidation of foreign investments in Congo became subject to declaration to the Minister, and each act of investment or disinvestment in Congo to a report ex post.

Borrowing by residents from nonresidents required prior authorization by the Minister, with the following exceptions: (1) loans constituting an investment in Congo for which approval had been obtained; (2) borrowing by banks registered in accordance with Law No. 24/63; and (3) any other borrowings contracted by physical or juridical persons, provided that the outstanding amount of such loans did not exceed CFAF 10 million for any one borrower. Loans exempt from authorization, as well as all repayments thereof, had to be declared within 20 days of the act.

Lending by residents to nonresidents also required the prior approval of the Minister, with the following exceptions: (1) loans granted by registered banks; and (2) any other loans, provided that the outstanding amount of such loans did not exceed CFAF 5 million for any one lender. Loans exempt from authorization, as well as all repayments thereof, had to be declared within 20 days of the act.

The issuing, advertising, or offering for sale of foreign securities in Congo required the prior authorization of the Minister, unless they involved borrowing guaranteed by the Congolese Government or related to securities whose issuing, etc. had previously been authorized.

The collection of data for the compilation of the balance of payments was entrusted to the Office of External Financial Relations, acting in collaboration with the BCEAEC.

November 28. Order No. 5452 provided that all transfers of funds received from or made to France, Monaco, or Operations Account countries had to be declared to the Office of External Financial Relations. Residents traveling to any of these countries could take out any amount in checks, travelers checks, and letters of credit, but not more than CFAF 25,000 in BCEAEC banknotes or French banknotes (CFAF 12,500 a child under ten).

A commission of 1 per cent, for the benefit of the Office of External Financial Relations, was levied on all transfers to France, Monaco, and the Operations Account countries, transfers being defined so as to include the purchase of banknotes, checks, travelers checks, and letters of credit; exempt from this commission were the salaries of Congolese diplomats serving abroad, the scholarships of persons studying or training abroad, the expenditures of missions abroad, and all foreign payments of the State.

Residents engaging in transactions giving rise to a claim on France, Monaco, or an Operations Account country had to declare the claim to the Office of External Financial Relations. Claims on all foreign countries had to be repatriated within one month of collection.

Borrowing abroad became exempt from prior authorization provided that the interest date did not exceed 5 per cent a year and the maturity was two years or less.

December 4. Circular No. 090 established that the 1 per cent transfer commission had to be collected by the authorized banks and the Postal Administration whenever they made a foreign payment for their own account or for the account of their customers. The minimum amount to be levied was CFAF 100. (A number of additional exemptions from this commission were granted by Order No. 0866 of February 28, 1973. They included exemptions for all transfers of the Postal Administration and the Central Bank.)

The commission on transfers to foreign countries other than France, Monaco,, and the Operations Account countries remained unchanged a 0.60 per cent (0.10 per cent for payments in respect of imports of hydrocarbons.)

Costa Rica

Exchange Rate System*

The par value 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 0 6.62 and 0 6.65, respectively, per US$1. The official market rates apply to most export proceeds, listed imports classified as essential, receipts from and payments for specified invisibles, capital receipts and debt service payments of the public sector, and registered private capital inflows and their service payments. Official transactions with CACM countries, when settled through the Cámara de Compensación Centroamericana (a clearinghouse established by the central banks of Central America to foster the process of economic integration of their countries) are effected at a uniform buying and selling rate of Ȼ 6.625 per US$ 1. Two mixing rates of Ȼ 7.5975 and Ȼ 7.5950 per US$1 apply to nontraditional industrial 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. All other sales and purchases may be made freely in a free market in which the exchange rates also are fixed; the buying and selling rates for the U. S. dollar were 0 8.57 and 0 8.60, respectively, on December 31, 1972.

Further mixing rates may arise from the fact that 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.

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

Administration of Control

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 Rica 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.

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. All other imports pass through the free market.

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 Central American Common Market; (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 Central American Common Market 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.

Residents traveling abroad by air must pay a travel tax of 5 per cent of the value of the tickets plus 0 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 in the official exchange market. Only in the case of certain non-traditional industrial exports may exporters surrender 50 per cent of the proceeds by sale in the free market.2 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 non-ferrous 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, which requires a sales contract approved by the Coffee Office, in order to control exports under the coffee quotas; 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.

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 expenditures; 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.

Gold3

Only the Central Bank is permitted to purchase or sell gold. Any physical or juridical person who has or acquires gold coins or gold bars must sell these to the Central Bank within 60 days from the date on which they became his property; small amounts in coin collections, jewelry, or family keepsakes are exempt. Imports and exports of gold are made only by the Central Bank. The Central Bank does not supply gold to artistic or professional users.

Changes during 1972

February 1. The 15 per cent and 30 per cent exchange surcharges in the official market were eliminated; they had been applied to payments for two groups of semiessential imports (Lists B and C) and had resulted in effective selling rates of 0 7.65 and 0 8.65 per US$1. Foreign exchange at the official rate continued to be provided for imports covered by the CACM’s General Treaty of Economic Integration or by the tripartite Free Trade Agreement between Costa Rica, Nicaragua, and Panama, but imports from the rest of the world henceforth had to be financed at the free market rate (Ȼ 8.60 per US$1) unless the commodities were included in a new List of Essential Import Goods.

Capital goods, however, could be imported at the official rate if financing was obtained from previously approved foreign financial institutions, and provided the amount outstanding after a downpayment of 20 per cent or less was made would be repaid in five equal installments over at least five years.

March 10. Taxes of 15 per cent and 10 per cent, respectively, were introduced on remittances abroad of dividends and interest; certain borrowing abroad (e.g., from government banks) was exempt.

March 12. A selective consumption tax of 10 per cent to 50 per cent (10, 15, 20, 30, 40, or 50 per cent) ad valorem on the c.i.f. value was levied on the value of goods imported from outside the CACM (and Panama). The same tax was applied at reduced rates to goods manufactured within the CACM (or in Panama). The sales tax was unified at a rate of 5 per cent.

May 6. Quotas were imposed on imports of textiles from Guatemala and El Salvador. They were removed on October 23.

May 8. It was announced that the par value of the colón had been changed from 0.134139 to 0.123549 gram of fine gold. The buying and selling rates for the U.S. dollar were maintained unchanged in both exchange markets. The new par value had not been agreed with the International Monetary Fund.

May 8. Certain expenses for the promotion of non-traditional exports to the CACM countries and Panama became eligible for foreign exchange at the official rate.

June 16. The period expired during which it had been agreed that Costa Rica would make payments automatically through the clearing mechanism of the Cámara de Compensación Centroamericana. The Central Bank of Costa Rica on October 23 again authorized payments for imports from the rest of Central America to be made in this manner.

June 27. Decree No. 2377-T-H increased the stamp tax on tickets for air travel abroad from Ȼ 5 to Ȼ 20.

August 18. The Central Bank announced that exchange at the official rate would be granted, in chronological order, for goods included in the List of Essential Import Goods of February 1, when originating outside the CACM and Panama and already paid for through the free market.

September 1. Imports from CACM countries ceased to be eligible for foreign exchange at the official rate unless they were included in the List of Essential Import Goods of February 1 to imports from the rest of the world. With respect to goods of Panamanian origin, it was announced that those covered by the Free Trade Agreement between Costa Rica, Nicaragua, and Panama were eligible for the official market; the Central Bank of Costa Rica could refuse access to the official market for Panamanian goods classified as subject to the free market rate when there was no local production of these or similar goods.

October 23. The List of Essential Import Goods was expanded to include raw materials for the production of insecticides, fungicides, and disinfectants; pharmaceuticals; chemical fertilizers; seeds; agricultural tools; and spare parts for buses, trucks, agricultural, industrial, and construction machinery.

A restricted list of imports was introduced, applicable to all countries, for which payments would be made at the official market rate of 0 6.65 per US$1. Exports to CACM countries of these goods, and of goods manufactured from raw materials eligible for the official exchange rate, would be settled at Ȼ 6.625 per US$1. Payments for goods not included in the restricted list, irrespective of origin, were henceforth made at 0 8.60 per US$1.

October 23. All payments for imports from the CACM and Panama registered prior to October 23, 1972 could be discharged at the official rate.

October 23. Fifty per cent of the proceeds from nontraditional industrial exports could be converted at the free market rate (Ȼ 8.57 per US$1). The remaining 50 per cent had to be surrendered at the official rate (Ȼ 6.625 per US$1 for exports to the CACM and 06.62 per US$1 for exports outside the CACM). The resulting mixing rates were Ȼ 7.5975 and Ȼ 7.595 per US$1, respectively.

Export proceeds from products included in the List of Essential Import Goods as well as from goods produced with raw materials contained in that list had to be surrendered at the official rate. Exporters affected by this stipulation were entitled to obtain foreign exchange at the official rate for all of their imports.

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 0.383772 = US$1. The Central Bank quotes daily buying and selling rates for pounds sterling, Swiss francs, and U. S. dollars. The rate for the U. S. dollar on December 30, 1972 was US$2.6100 buying, and US$2.6070 selling, per £C 1, and that for sterling was £ stg. 1.1120 buying, and £ stg. 1.1090 selling, per £C 1.

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 banks. 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 in pounds sterling. 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, but cannot be credited to the Blocked Account. 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 1,000, as well as a further amount of up to £C 5,000 in any calendar year, provided that the amount applied for in respect of the latter release represents the proceeds of redemption or sale of securities that were held for account of the nonresident beneficiary for a continuous period of at least four years.3

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, mainland 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, 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, mainland China, 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 up to £C 10 in value (not to be sold), 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. 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 bank; 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. Foreign investment involving participation in domestic industries not exceeding 49 per cent of the share capital is normally approved; participation above this limit may be permitted in exceptional circumstances. 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 5,000. 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 1972

June 23. Cyprus ceased to be a Scheduled Territory of the Sterling Area.

June 23. Authorized banks were instructed to suspend all exchange transactions involving capital transfers. Such transactions were resumed on July 7 (subject to new exchange control regulations, see below).

June 29. The par value in terms of gold was maintained and the Cyprus pound was unpegged from sterling, with which it had been at par. As a result, the currency began to appreciate in terms of sterling.

June 30. The House of Representatives enacted an amendment to the Exchange Control Act empowering the Council of Ministers to make transactions with Sterling Area countries subject to exchange control approval and to treat sterling as a foreign currency. By decision of the Council, these powers were invoked on July 6, when the Exchange Control (Amendment) Law, 1972 and the Exchange Control (the Republic) Order, 1972 were published in the Official Gazette.

July 5. The Central Bank began quoting daily buying and selling rates for sterling and resumed quotations for the U. S. dollar.

July 14. Exchange control was extended to cover transactions with Sterling Area countries. The Cyprus pound accounts of residents of the Sterling Area not resident in Cyprus were designated External Accounts. Regulations for remittances of foreign exchange to the Sterling Area countries were made identical to those already applicable to all other foreign countries. Exports to Sterling Area countries were made subject to licensing and the foreign exchange proceeds subject to surrender.

August 11. Imports of wood and articles of wood, paper and paperboard, carpets, tubes, and pipe fittings were made subject to licensing.

September 26. The exchange allocations for study abroad were increased from £C 500-1,700 a year to £C 700-2,200 a year.

November 1. The maximum exchange allocation for tourist travel was increased from £C 250 to £C 350 a person a year, and the minimum allocation for business travel from £C 10 to £C 20 a day.

December 19. An agreement of association was signed with the EEC. Association would take place in two stages. The agreement did not come into effect during 1972.

December 31. The Commonwealth tariff preferences granted to the United Kingdom expired.

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 charges.

Exchange transactions relating to foreign countries, i.e., countries other than France, 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 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 CFAF 255.785 = US$1.

With the exception of those relating to gold, Dahomey’s exchange control measures do not apply to (1) France and its Overseas Departments and Territories (except the French Territory of the Afars and the Issas) 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, the Malagasy Republic, Mali, Mauritania, 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 Planning, 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 the banks and the Postal Administration, 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 Planning, except those for gold, which are granted by the Minister of Economy and Planning personally. Exports of diamonds require the prior approval of the Directorate of Mines. There are three special offices for the import and export of precious metals and precious mineral materials. 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 (including its Overseas Departments and Territories, except the French Territory of the Afars and the Issas), 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.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, 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, 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. Travelers to other countries 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. Exports of gold require the prior approval of the Minister of Finance personally, and those of diamonds must be authorized by the Directorate of Mines. 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, 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 surrender 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, 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 and its Overseas Departments and Territories (except the French Territory of the Afars and the Issas), 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, Monaco, and the Operations Account countries.

All investments abroad by residents of Dahomey require prior authorization by the Minister of Economy and Planning.3 Foreign direct investments in Dahomey4 must be declared to the Minister of Economy and Planning 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 Planning 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 Planning. Exempt from authorization, however, are operations in connection with (1) loans backed by a guarantee from the Dahomean Government, and (2) shares similar to 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 Planning. 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 Planning) 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 Planning. 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 large enterprises 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. 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. Imports and exports of gold from or to any other country require prior authorization by the Minister of Economy and Planning, 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 1972

January 8. Ordinance No. 72-1, containing a new Investment Code, came into force. The new Code replaced that of December 31, 1961 (Law No. 61-53), which was revoked. Law No. 60-18 of July 13, 1960 also was revoked.

January 17. Decree No. 72-7 was issued, which established the method of application of the new Investment Code.

January 18. Circular No. 5 revoked Circular No. 86 of December 8, 1971, which had provided that, with certain exceptions, Foreign Accounts in Francs and Financial Accounts in Francs could only be debited for payments in francs to residents and no longer for purchases of foreign exchange.

January 18. The limits imposed on August 19, 1971 by Letter No. 1330 of the Minister of Economy and Planning on authorized banks’ net overall positions in foreign currencies and in francs vis-à-vis foreign countries were revoked by the Minister’s Letter No. 4.

June 6. Dahomey advised the GATT that it had ceased to invoke the provisions of Article XXXV of the GATT with respect to Japan.

June 21. Following a similar measure taken in France on May 5, 1972, Order No. 28 shifted a number of current transactions from the financial franc market to the official exchange market. The principal current payments and receipts that continued to be channeled through the financial franc market were travel expenses, capital earnings, and workers’ remittances.

June 21. Order No. 27 increased the exchange allocation for tourist travel to foreign countries from the equivalent of CFAF 75,000 a person a trip, for two trips a year, to CFAF 175,000 a person a trip, for any number of trips a year; for children under ten, this allocation was increased from CFAF 37,500 to CFAF 87,500 a trip. The maximum allocation for business travel was increased from CFAF 200,000 to CFAF 400,000 a trip. The tourist allocation henceforth could also be taken up in the form of travelers checks denominated in French francs.

Nonresident travelers were allowed to take out freely (1) the equivalent of CFAF 25,000 in BCEAO banknotes, French banknotes, and banknotes issued by Operations Account countries; (2) the equivalent of CFAF 25,000 in foreign banknotes; and (3) any amount in other foreign means of payment established abroad in their names (travelers checks, etc.).

June 21. Circular No. 66 increased the amount below which exports to foreign countries were exempt from domiciliation from CFAF 50,000 to CFAF 500,000.

June 21. Circular No. 67 increased the amount up to which imports from foreign countries were exempt from domiciliation from CFAF 20,000 to CFAF 500,000. The moment at which foreign exchange could be purchased for goods already imported was advanced from eight days to one month before the due date of the payment. A similar relaxation was applied to advance payments for imports.

June 21. Circular No. 68 informed the authorized banks and the Postal Administration that transfers on behalf of residents to foreign countries up to the equivalent of CFAF 50,000 a transfer could be effected freely.

June 21. Circular No. 69 provided that domestic and foreign securities accruing in Dahomey to a nonresident by donation could henceforth be placed in a foreign securities dossier.

October 23. Ordinance No. 72-38 introduced a state monopoly for the importation of basic consumer goods.

October 23. Decree No. 72-276 gave to SOCAD the monopoly of the importation of sugar, rice, wheat, wheat flour, and condensed milk. (Further details were given in Order No. 1046 of November 20.)

December 29. A commercial and financial agreement was signed with mainland China.

Denmark1

Exchange Rate System*

The par value is 0.118489 gram of fine gold per Danish Krone. The central rate is DKr 6.98 = US$1, corresponding to DKr 7.57829 = SDR 1, and Denmark avails itself of wider margins. However, Denmark participates in the EEC arrangements for the narrowing of exchange rate margins and maintains margins of approximately 2¼ per cent either side of the cross-parity for the Belgian franc, the deutsche mark, the French franc, the Italian lira, the Luxembourg franc, the Netherlands guilder, and the Norwegian krone.2 The official limits for the U. S. dollar are approximately 2¼ per cent either side of the central rate, i.e., DKr 6.823 buying, and DKr 7.137 selling, per US$1, at which rates the exchange authorities stand ready to intervene; the rate for the U. S. dollar fluctuates in the exchange market between these limits. Market rates are quoted daily for the 16 currencies that are used most often.3 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 (other than Danish kroner on East German accounts). 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.

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.

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; the latter has its own currency, however.

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. 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. The only exceptions to this rule are that payments to Eastern Germany must be settled through inconvertible krone accounts and that virtually all payments in favor of residents of Rhodesia must be credited to a special account. Payments from Eastern Germany are normally settled through inconvertible krone accounts, but may also be settled otherwise.

Nonresident Accounts4

Nonresident krone accounts are convertible. The only exceptions are Capital Accounts and Foreign Accounts, which play an insignificant part in foreign settlements, and East German accounts.

Krone accounts may be opened by authorized banks for foreign banks, insurance companies, and shipping companies. 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 unless the amount concerned was held as of September 30, 1972 or stems from the subsequent liquidation of the account holder’s capital investments in Denmark.

Capital Accounts are kept for nonresidents 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 emigration. Certain payments to residents may be made freely from these accounts and the balances are in any case made convertible one year after emigration. Capital accounts are also kept for residents of Rhodesia; balances in these accounts are inconvertible.

Foreign Accounts are nonresident accounts with savings banks and small cooperative banks. These accounts are kept mainly by private persons and for private purposes. The rules governing such accounts follow broadly the same principles as those established for convertible krone accounts, except that transfers abroad may be made only through an authorized exchange dealer.

Imports and Import Payments

Most commodities are liberalized and free of licensing from all sources. The import licensing system is based on three negative commodity lists and three country lists.5 Commodities listed in Annex 1A to Executive Order No. 489 issued by the Minister of Commerce on December 15, 1970 (as amended) require a license irrespective of country of purchase or origin. All commodities require a license when purchased from or originating in countries or territories listed in Annex 2 III (mainland China, the Republic of China, Eastern Germany, North Korea, Mongolia, Rhodesia, and North Viet-Nam).

Goods listed in Annex 1C require a license when purchased from or originating in countries of Annex 2 II (Albania, Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and the U. S. S. R.6) or Annex 2 III (see above). Goods specified in Annex IB require a license when purchased from or originating in countries of Annex 2 I (Japan and the Republic of Korea) or Annexes 2 II and 2 III (see above).

With these exceptions, imports are free of license, provided that for the countries of Annexes 2 I and 2 II the country of origin and the country of purchase are identical. Imports originating or purchased in Rhodesia are not being licensed. Some of the goods in the three commodity lists are subject to global or bilateral quotas, but most are being licensed automatically when originating or purchased in countries of Annex 2 II. Only cut flowers are imported under licenses which apply to a specific country. Imports of bread grain, feed-grain, and certain grain products are subject to equalization charges representing the difference between specified minimum import prices and the lowest prices payable for grain c.i.f. Danish ports.

The transfer of funds to, or for the benefit of, Rhodesia is prohibited. With this exception, payments for imports and the related shipping expenses7 may be made freely within two years from the end of the month in which the goods were cleared through customs, or within five years for imports of ships, aircraft, large machines, and major plants, provided that payments of debts are not made more than 14 days before the day stipulated as the latest in the contract (or before the latest customary date in the trade). However, commercial credits with the latest day of payment within 90 days from inward clearance can be paid at any time within that period if any savings are achieved as a result. The authorized exchange dealer may make payment before clearance of the goods, provided that the probable date of clearance lies within two weeks from the date of payment. For ships, aircraft, heavy machinery, and major installations, advance payments cannot be made more than 14 days before the date stipulated as the latest permissible date in the contract, and not more than one year before the expected inward clearance of the goods (or the recording in a Danish ship register). Documentary credits for imports may be established up to 90 days (180 days for specified Far Eastern countries) before the expected date of inward clearance. All other advance payments for imports require prior approval by the National Bank; they are approved when the payment is genuine and in accordance with the traditions of the trade.

Many commodities are subject to a temporary import surcharge of 4 per cent; the principal exemptions are for raw materials and foodstuffs.8

Payments for Invisibles9

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 14 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 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 2,000 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 two weeks before the trip if the amount applied for exceeds the equivalent of DKr 2,000. Foreign exchange in banknotes and coins may be purchased from agencies or individuals other than the authorized exchange dealers, provided that the amount does not exceed DKr 2,000 for each transaction.

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 2,000 in Danish banknotes and coins, and any amount in foreign banknotes or other means of payment. The DKr 2,000 limit may be exceeded by nonresidents, who may 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.

Exports to any country of major agricultural and fishery products require export licenses issued by the Ministry of Agriculture or the Ministry of Fisheries.10 Exports of poultry, bacon, and cheese to the United Kingdom are licensed up to annual quotas and exports of pigs and pork to other EEC countries are subject to export levies.11 Exports of other agricultural products are permitted freely to all countries except Rhodesia. Exports of all products to CMEA countries and specified Far Eastern countries and exports of a few industrial products to all other countries require licenses issued by the Ministry of Commerce, the primary purposes of the regulations being to safeguard the fulfillment of bilateral obligations, to avoid excessive credits to importing countries, and to serve strategic purposes.

Export proceeds must be transferred to Denmark without undue delay unless the National Bank permits otherwise.12 However, this obligation does not apply to amounts which are to be used within a short period 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, except that an individual resident may hold foreign banknotes and coins not exceeding DKr 2,000 in value.

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).12

Travelers may bring in any amount of Danish banknotes and coins, foreign banknotes, and other Danish or foreign means of payment.

Capital13

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) is based on Denmark’s obligations as a member of the OECD. 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. The National Bank has granted a general permission to authorized exchange dealers to make transfers abroad, within certain limits, for account of their resident customers in connection with direct investments or with the private acquisition of real estate abroad. The authority is limited to DKr 40,00014 a year for each foreign enterprise for direct investments and to DKr 60,000 a person for private acquisition of real estate. Permission from the National Bank is required for most other transfers abroad of a capital nature by residents. Direct investments abroad by residents are normally approved in accordance with Denmark’s obligations as a member of the EEC and the OECD, but portfolio investment abroad is generally not allowed. The private acquisition of real estate in excess of DKr 60,000 normally is approved only when the property is situated in a member country of the EEC. Loans and credits involving nonresidents and made in connection with commercial transactions are normally permitted, subject to certain limitations. 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 1973) 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 50 million. A positive net “commercial” foreign position is allowed 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.

Danish emigrants are granted an exchange allowance of up to DKr 40,000 for each person at the time of emigration. Funds exceeding these amounts must be credited to a Capital Account in the name of the owner and may in any case be transferred abroad one year after emigration.

Direct investment in Denmark by nonresidents may be made without any special license if the transaction concerns industry, commerce, handicrafts, the hotel business, or transportation, and if the investment does not increase total direct foreign investment in the enterprise concerned by more than DKr 40,00015 in each calendar year. Other direct investment by nonresidents requires permission from the Ministry of Commerce, which is granted liberally in accordance with Denmark’s obligations as a member of the EEC and the Organization for Economic Cooperation and Development. The purchase by a nonresident of real property in Denmark usually requires a special license from the Ministry of Justice. Nonresidents may purchase or subscribe to bonds that are quoted daily and are expressed solely in Danish kroner, when the funds have been obtained from the liquidation of investments in Denmark.16 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; the quota for the first half of 1973 is DKr 125 million (cost price). 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. In addition, nonresidents may freely purchase or subscribe to shares that are quoted daily 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 bonds. Nonresidents may grant credits within certain limits to residents to finance purchases of commodities abroad and to finance the granting of credits for exports. They may, further, grant loans of up to DKr 5 million per borrower in a calendar year to finance the borrower’s own enterprise in most industries, provided that the activity in question does not exclusively or essentially consist in financing, trading in real estate, or certain building and construction activities, and provided that the maturity is at least five years. Finally, they may grant loans up to DKr 200,000 per 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 must not be amortized or repaid in full more than 14 days before the amortization payment or repayment is due, or before the customary date in the trade; commercial credits for which the latest permissible date of payment under the contract lies within 90 days from inward clearance may be repaid at any time within that period if it results in any savings.17

Inheritances and gifts to relatives may normally be transferred to any country without limitation. Individual payments above DKr 2,00018 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 certain exceptions, 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.

Gold

Residents may freely buy, hold, and sell gold coins in Denmark. 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. 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 1972

January 1. Generalized tariff preferences on specified imports originating in most developing countries came into force.

January 13. The 1972 “bond” quota for nonresidents’ purchases of Danish kroner bonds was fixed at DKr 100 million, the same amount as in 1971. The provision that sales by residents had to be effected for the account of the National Bank of Denmark and had to be spread evenly over the year continued to apply.

January 13. New regulations concerning the execution of forward exchange transactions were issued to take into account the possibility of considerable changes in exchange rates other than changes in parities (for which similar regulations already existed). The new rules would be applicable when between the date of the contract and the settlement date there were changes in excess of 4 per cent in the spot selling rates in Denmark for currencies involved in transactions in which foreign currency was traded against kroner, or changes in excess of 4 per cent in the cross-rates where one foreign currency was transacted against another.

January 20. A Capital Market Council was established.

January 22. Membership negotiations with the EEC were completed. Among the special arrangements agreed upon were the following. (1) For a period of two years after accession, Denmark could defer the full liberalization of purchases by nonresidents of bonds denominated in Danish kroner and dealt in on the stock exchange in Denmark (including the physical transfer of the securities in question). (2) For a period of five years after accession, Denmark could defer the full liberalization of purchases by residents of foreign securities listed on stock exchanges abroad and of repurchases from abroad of Danish listed bonds denominated exclusively or partly in foreign currency (including the physical transfer of the securities in question). (3) From the date of accession, Denmark would proceed to a progressive liberalization of the operations under (1) above.

March 22. Supplementary “bond quotas” were fixed for the period up to June 30 (DKr 40 million) and for the third quarter of 1972 (DKr 35 million).

May 1. The National Bank narrowed the exchange rate margins for the currencies of member countries of the EEC and the United Kingdom. On May 23 these arrangements were extended to the Norwegian krone. On June 23 they were suspended in respect of sterling. On June 27 the arrangements were suspended entirely and Denmark observed wider margins of up to 4½ per cent either side of the cross-parities for EEC currencies, Norwegian kroner, and most other currencies. The narrower margin arrangements were restored on October 10, except for sterling, which continued to float.

June 16. Authorized dealers were informed that, subject to specified conditions, loans and credits taken up by residents from nonresidents could at any time be converted from one currency to another and be transferred from one creditor to another.

June 30. The National Bank tightened its control over forward purchases of foreign currency against kroner by banks’ foreign correspondents and by other nonresidents. For amounts in excess of DKr 1 million, information about the underlying contract, the names of the debtor and the creditor, and the due date of underlying amount had to be supplied to the National Bank before a forward transaction could be entered into. With respect to spot transactions in foreign currency against kroner, authorized banks were reminded that transactions with foreign correspondents normally could be entered into only for delivery in two days; transactions in excess of DKr 1 million henceforth required National Bank approval if they were for a shorter delivery term.

July 1. The temporary import surcharge was reduced from 10 per cent to 7 per cent.

September 25. Forward exchange transactions were restricted temporarily.

October 6. Denmark and Norway agreed to continue until the end of 1973 their mutual industrial free trade arrangements.

October 16. A supplementary “bond quota” of DKr 50 million for nonresidents’ purchases of Danish kroner bonds was announced for the fourth quarter of 1972.

October 17. Purchases of kroner bonds by nonresidents who were or had been Danish nationals became subject to the same rules as purchases by other nonresidents. Previously, sales by residents to such nonresidents were covered by an open general license and were not charged against the “bond quota.”

December 23. Denmark and Finland agreed to continue until the end of 1973 their mutual industrial free trade arrangements.

December 29. A quota of DKr 125 million was set for nonresidents’ purchases of listed Danish kroner bonds in the first half of 1973. As under the earlier quotas, banks had to spread transactions evenly over the entire quota period.

December 29. The National Bank issued a number of new exchange regulations applicable to authorized dealers, to become effective on January 1, 1973. It also addressed letters to the largest exchange dealers concerning their permitted “commercial” net external position (see January 1, 1973, below). The exchange regulations applicable to savings banks, cooperative banks, and the Office of the Public Trustee would shortly be completely revised.

Note.—The following changes took place on January 1, 1973:

January 1. Denmark became a member of the EEC.

January 1. Portfolio investment by nonresidents in Danish shares, whether officially listed on the main Copenhagen stock exchange or listed there at “street” or “curb” market prices, 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 bonds. Before any purchase or subscription was effected, the nonresident acquiror was required to submit a declaration to the National Bank to the effect that the intended 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.

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 state 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 in the course of the entry negotiations. There was no immediate announcement of specific measures to ease the restrictions on inward and outward direct investment or on outward portfolio investment.

January I. 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. Sales of krone bonds to nonresidents would continue to be made through exchange dealers and for the account of the National Bank, but the special agent commission on such sales was canceled.

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 such accounts 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 subsequent liquidation of the account holder’s capital investments in Denmark. The latter rules were made applicable also to the krone accounts of other nonresidents, with the exception of foreign correspondents, shipping companies, and insurance firms. 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. Certain amendments to the scheme of generalized tariff preferences came into effect, as set out in Executive Order No. 560 of the Ministry of Finance.

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.

Dominican Republic

Exchange Rate System*

The par value is 0.818513 gram of fine gold per Dominican Peso, corresponding to RD$ 1.08571 = 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. 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. Multiple currency practices result from the requirements of fully prepaid letters of credit and prepayment of import duties for certain imports.

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. AID 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. 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 and the importer (where necessary in accordance with Decree No. 239) prepays import duties and surcharges to the customs, 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 bank 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. Importers of most commodities subject to the prepaid letter of credit obligation are also required to prepay to the customs 80 per cent of the estimated value of customs duties and surcharges on the goods prior to the opening of the letter of credit.

In principle, exchange for import payments is made available within not more than five working days from the receipt of the application, but since May 1966 there have been delays in the provision of exchange.2

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, but there have occasionally been slight delays; at the end of 1972 allocations were current.

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 a 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 1972

January 13. A Monetary Board resolution revised the foreign investment registration rules. Investments in agriculture, livestock, mining, manufacturing, tourism, transportation and communications, and finance companies could be registered. Registration would be a prerequisite for permission to transfer annual dividends and profits, and these would be subject to a limit of 18 per cent of net registered capital, unless the investments had been registered prior to February 6, 1972.

April 28. The Monetary Board modified the January 13 resolution (see above). The registration of investments in additional economic sectors could be authorized when they contributed to the economic development of the country. Furthermore, the Board could permit the remittance of profits and dividends in excess of 18 per cent a year when the investment was considered important to the economy, involved special risks, or required a long gestation period. Special contracts could specify such higher rates of transfer.

May 9. The par value was changed from 0.888671 gram to 0.818513 gram of fine gold per Dominican peso. The effective parity relationship for the U. S. dollar remained unchanged at RD$1 = US$1. The new par value replaced the central rate of RD$1 = US$1.

May 29. Law No. 346 imposed a 10 per cent ad valorem import duty on all goods formerly imported free of duty and raised to 10 per cent existing duties of less than 10 per cent. In addition, a 5 per cent tax was imposed on all goods imported under import duty exemption contracts approved by the Department of Exonerations of the Secretariat of Finance.

June 15. Monetary Board Resolution No. 20 extended the system of import controls until September 30, 1972.

July 20. The Central Bank was authorized to accept from commercial banks, for exchange into domestic currency, 10 specified foreign currencies when received from shops in the free trade zones.

September 7. A Monetary Board resolution was revoked that had limited expenditures in currencies other than the U. S. dollar to payments through letters of credit. (With effect from February 13, 1973, transactions in foreign currencies other than the U. S. dollar again could take place only through letters of credit.)

September 12. Monetary Board Resolution No. 2 extended the system of import controls until December 31, 1972.

September 14. In order to ensure proper payment of taxes and surrender of exchange proceeds, all export sales of sugar and by-products required the prior approval of a commission comprising the Minister of Finance, the Governor of the Central Bank, and the Executive Director of the Sugar Institute.

October 12. Many types of smoked or dried fish, as well as canned sardines and mackerel, were freed from import quota and prohibition. These imports had to be paid for under fully prepaid letters of credit.

December 7. The requirement of prepaid letters of credit was revoked for the importation of jeep-type vehicles.

December 15. Monetary Board Resolution No. 1 extended the system of import controls until December 31, 1973.

Ecuador

Exchange Rate System*

The par value is 0.0355468 gram of fine gold per Ecuadoran Sucre, corresponding to S/ 25.00 = SDR 1. There are two exchange markets. The effective parity relationship for the U. S. dollar in the official market is S/ 25.00 = US$1. In the official market the Central Bank maintains rates of S/ 24.75 buying and S/ 25.25 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. All other transactions take place in a free market where the rate fluctuates and all purchases and sales of foreign exchange are subject to a tax of 1 per cent. The free market buying and selling rates on December 30, 1972 were about S/ 25.00 per US$1.

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.

Prescription of Currency

Most settlements with Bulgaria, 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$100 c.i.f. or less (US$100 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 advance deposits and additional import taxes have been paid, that the required prepayments 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.

The advance deposit requirement applies to most public and private imports financed with official exchange. Imports of goods originating in Bolivia are exempt from advance deposit. The other exceptions include imports under the agricultural surplus agreements with the United States, goods donated by foreign governments and organizations, imports of certain goods to be used for the construction and equipment of hotels, all imports from Paraguay, imports financed by international organizations, imports of capital goods financed by suppliers’ credit for at least one year after arrival, imports of medical supplies and equipment made by official health or social service institutions, imports by the universities and polytechnical schools, certain nonconsumer goods destined for the agricultural sector, imports of nonmonetary gold, and imports of machinery, equipment, and materials needed for public works. The advance deposit must be made in sucres by the importer when applying for an import license; the importer must at the same time lodge with the Central Bank a prepayment in local currency of the import duty. Import deposit receipts for List I goods are negotiable. The rates for the advance import deposits are determined in accordance with the type of goods imported. There are five categories of imports, three in List I and two in List II. At the end of 1972, they ranged from 10 per cent to 130 per cent of the c.i.f. value, but for imports by the Government or by official agencies they cannot exceed 100 per cent of the c.i.f. value. Deposits for List I goods are retained for 90 days, and those for List II goods for 180 days. These prepayments are released pari passu with the making of import payments. That part of the prepayments which exceeds 100 per cent of the c.i.f. value is released at the time of customs clearance. The prescribed prepayment of import duty is 100 per cent for both List I and List II commodities. 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.

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. Tickets for foreign travel are taxed at the rate of 8 per cent on tickets for departure from Ecuador and 4 per cent on tickets 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 (except when shipped to nontraditional markets), 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.

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.1 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 of Ecuador. For foreign capital entering in the form of machinery and equipment, the investor must document that the merchandise has been nationalized (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 of Ecuador; for private loans registration is optional. 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.2

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, are payable through the official market, and are free of advance deposit. 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, are payable through the free market, and are free of advance deposit. Gold bars are exempt from import duty, while that on semiworked gold is 70 per cent ad valorem.

Changes during 1972

January 7. Decree No. 297 required applications for import licenses to be accompanied by an insurance certificate.

January 11. Monetary Board Resolution No. 600 re-established the validity of Resolution No. 567 of December 10, 1970, which exempted imports for the construction and maintenance of roads from advance import deposits.

January 11. Monetary Board Resolution No. 601 exempted from advance import deposits imports effected by public entities (or for social services by private bodies) when financed by foreign funds.

January 11. Monetary Board Resolution No. 603 exempted from advance import deposits certain pharmaceutical products classified as List I goods.

January 20. Monetary Board Resolution No. 608 modified the import deposit system by requiring uniform deposits of 50 per cent of the c.i.f. value for List I imports and 100 per cent of the c.i.f. value for List II imports. The differentiation of the deposit requirements according to the terms of payment thus was terminated.

January 20. Monetary Board Resolution No. 609 ruled that applications for import licenses must be accompanied by evidence of payment of the 4 per cent tax on commercial transactions due on imports of the preceding months.

January 30. Decree No. 136 suspended until December 31, 1972, the 15 per cent ad valorem export tax on coffee shipped to countries listed in Annex B of the International Coffee Agreement. During the suspension period, a 5 per cent ad valorem “contribution” would be collected instead.

February 23. Resolution No. 312 of the Superintendency of Banks made foreign exchange houses operating in the free market subject to the authority of the Superintendency. Minimum capital and guarantee requirements were set. The provisions of the general banking law were extended to exchange houses.

March 16. Fifty per cent of the coffee export quotas for traditional markets was assigned to producers and the remainder to the commercial sector; previously, the shares were 25 per cent and 75 per cent, respectively.

March 21. Decree No. 112 exempted books, magazines, and printed or recorded music from consular invoices and import licenses.

April 11. The 1 per cent exchange tax levied on sales and purchases in the free market and collected by the Central Bank was formally integrated into the national budget by Decree No. 226.

April 24. Monetary Board Resolution No. 610 exempted from advance import deposits all imports financed with credits extended by recognized international financial agencies and registered with the Central Bank.

April 25. Exchange Office Circular No. 41 provided that imports of nonmonetary gold had to be paid for with foreign exchange purchased in the free market. However, importers could also purchase such gold from the Central Bank, which would itself purchase abroad such additional supplies as might be required, with foreign exchange acquired in the free market. At the same time, nonmonetary gold was shifted from List II to List I, but remained subject to advance deposit.

May 4. Monetary Board Resolution No. 611 reduced the rate of advance import deposits for List I goods to a uniform 45 per cent and amended the rates for List II goods as follows: Category IIa, 100 per cent; Category IIb, 110 per cent; Category IIc, 120 per cent; and Category lid, 130 per cent.

May 10. Decree No. 341 provided that the Ministry of Production would be exclusively responsible for importing wheat, oats, rye, barley, oilseeds, and other essential foods. It could exceptionally authorize private firms to import these foodstuffs. This Decree was suspended on October 3 by Decree No. 1147.

May 17. Monetary Board Resolution No. 613 reduced the advance import deposit on List I goods to 25 per cent when imports were effected under the terms of the Industrial Development Law, the Agriculture and Livestock Development Law, or the Law for the Development of Crafts and Small Industries.

June 14. Monetary Board Resolution No. 617 exempted from advance import deposits the imports of any trader who simultaneously exported Gros Michel bananas of equivalent value to nontraditional markets at a price of at least US$70 a metric ton. For every application, however, List II goods were not to exceed 40 per cent of the total value of such compensating imports.

June 14. Monetary Board Resolution No. 619 reestablished the validity of Resolution No. 535 (issued on April 29, 1969) which exempted from advance import deposits the imports of universities and polytechnical schools.

June 23. The Ecuadoran State Petroleum Corporation (CEPE) was created.

July 19. Monetary Board Resolution No. 625 exempted from advance import deposits some 75 categories of imports of raw materials, fertilizers, intermediate goods, and capital goods included in List I, provided that the goods were destined for the agricultural sector.

July 24. Decree No. 673 comprising the Law for the creation of the Export Promotion Fund was issued.

July 27. The Export Fund was established. It commenced operations on August 4.

July 29. Decree No. 707 established a new scale of reference prices for exports of crude petroleum. They would remain in effect until December 31, 1972.

August 2. Monetary Board Resolution No. 628, amending Decree No. 1740 of November 22, 1971, established new regulations for foreign petroleum companies which had signed concessionary contracts with the Government.

Terms and conditions of any foreign loan agreements had to be approved by the Central Bank to qualify for registration. Interest, commissions, and other financial expenses related to registered loans could be remitted provided they did not exceed the rates of interest prevailing in the financial market of the creditor country by 2 per cent. Annual amortization would be permitted according to the relevant agreement, subject to a maximum of the sum of undistributed profits, depreciation of fixed assets and liquidated assets, and variations in working capital. In each case, the Ministry of Natural Resources would specify the amount of capital and profits which a company could be permitted to remit through the official market.

August 3. Decree No. 670 exempted from export taxes certain banana exports realized directly by the Regional Unions of Banana Cooperatives of the Central and Southern Zones.

August 9. Decision No. 240 of the Ministers of Natural Resources and Tourism and of Finance defined the role of that Ministry, the Ministry of Finance, and the Central Bank with respect to petroleum exports.

August 14. Monetary Board Resolution No. 627 of July 19 changed the structure of advance import deposit rates. List I was divided into three categories of goods, namely: Group A—machinery, capital equipment, and “essential” consumer goods, subject to a deposit of 20 per cent; Group B—“essential” semimanufactured goods, 30 per cent deposit; and Group C—other goods, 40 per cent deposit. On the other hand, List II was consolidated into two categories, namely: Group A—“nonessential” items, 100 per cent deposit; and Group B—“luxury” items, 130 per cent deposit (100 per cent for public sector imports). The advance deposit requirements were applicable also to goods of LAFTA origin (except goods originating in Paraguay).

August 28. Monetary Board Resolution No. 632 exempted imports of nonmonetary gold from advance deposits. Payments for imports of nonmonetary gold (which had been shifted from the official to the free market on April 25, see above) continued to be payable through the free market.

August 29. The Monetary Board declared receipts issued for advance import deposits on List I imports to be negotiable.

September 1. Decree No. 914 of August 25 modified the export incentives based on tax credit certificates. Where the national content of eligible exports was at least 50 per cent, the incentive would be based on the total f.o.b. value; otherwise, it would be based on the national content only.

September 6. Decree No. 933 provided that the receipts of CEPE must be deposited in a special account with the Central Bank.

September 27. Decree No. 1103 provided that with effect from January 1, 1973 industrial firms must submit their applications for import licenses to the Central Bank.

October 6. Monetary Board Resolution No. 638 established in the Central Bank a Guarantee and Development Fund for aid to small industrial firms.

October 23. Monetary Board Resolution No. 641 of October 20, reduced the advance deposit rates for List I imports by 10 percentage points, as follows: Group A, to 10 per cent; Group B, to 20 per cent; and Group C, to 30 per cent. In addition, the retention period for List I commodities was reduced from 120 days to 90 days.

October 25. Decree No. 1186, which reformed the income tax law, imposed a withholding tax of 40 per cent on remittances abroad of profits, interest, royalties, and other payments derived from Ecuadoran sources.

October 27. Monetary Board Resolution No. 645 established limitations on guarantees extended by financial institutions in Ecuador in respect of external obligations.

November 22. Monetary Board Resolution No. 647 established in the Central Bank a Fund for Agricultural Development and Diversification.

December 8. Monetary Board Resolution No. 649 restored the Central Bank’s power to open irrevocable letters of credit and to allow advance payments to cover 100 per cent of the c. & f. value of imports.

December 27. The amount that foreign companies establishing subsidiaries in Ecuador are required to deposit with an Ecuadoran bank was increased from 25 per cent to 100 per cent of the new company’s capital.

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$2.30. The Central Bank of Egypt’s buying and selling rates for the U. S. dollar on December 31, 1972 were LE 0.434782 and LE 0.437390, respectively. An exchange tax of 5 per cent is applied to most outward remittances of invisibles and capital at the official rate. A premium of 35 per cent of the f.o.b. price is applicable in principle to the convertible currency proceeds of certain agricultural exports. An exchange rate of US$1.54 per LE 1 is applicable to the conversion of convertible foreign currency by foreign travelers and by Egyptian citizens working abroad, to sales of exchange for certain invisibles, to sales of exchange for certain imports by private sector enterprises, and to purchases of export proceeds from motion pictures and phonograph records. (On January 10, 1973 the incentive rates were changed from LE 0.65 to LE 0.66 buying, and from LE 0.68 to LE 0.70 selling, 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 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 Economy and Foreign Trade. The exchange control laws, ministerial orders, decree-laws, instructions of the Minister of Economy and Foreign Trade, and decisions of the Supreme Committee are carried out by a Director of Exchange Operations appointed by the Minister of Economy and Foreign Trade. A foreign exchange budget is established annually. Exchange control is implemented under the supervision and instructions of the Under Secretary for 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 Under Secretary. 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 controls 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 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.

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; for amounts of foreign currency sold to obtain an exchange premium; and for sales of foreign currency for Egyptian pounds to the bank at which the account is held, at a rate of US$1.54 per LE 1.

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 a rate of US$1.54 per LE 1.

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, when imported by private sector enterprises, are financed at the US$1.54 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. Egyptian citizens working abroad are permitted to import a passenger automobile once every two years, provided they have resided abroad for at least six consecutive months.

A Supreme Council for Foreign Trade at the Ministry of Economy and Foreign Trade, chaired by the Deputy Premier and Minister of Economy and Foreign Trade, is entrusted with establishing a long-term policy for exports and imports, controlling the annual export and import plan, and supervising the execution of the foreign exchange budget. The ministries concerned are responsible for setting priorities regarding imports and their timing, within the framework of quarterly foreign exchange programs. Determination 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. The necessary authorizations for the implementation of import transactions are issued to banks through the General Control Authority for Imports and Exports.

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.

Imports of new personal effects exceeding LE 50 in value and imports not requiring the transfer of foreign exchange are subject to import licenses, which are issued by the General Control Authority. All other 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 curency 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 acting as intermediaries and up to specified amounts, the foreign exchange required for travel expenses and certain other purposes, at the US$1.54 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 Determination Committees. Cotton, rice, and petroleum are exported by the public sector only. A premium of 35 per cent of the f.o.b. price is applicable in principle to the convertible currency proceeds of exports of citrus fruits, fresh vegetables, potatoes, and groundnuts. Export proceeds in convertible currencies from motion pictures and phonograph records may be retained in domestic foreign currency accounts, balances in which may be used by the holder to import goods required in his profession or may be sold to banks at the US$1.54 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

A premium exchange rate of US$1.54 per LE 1 is applied to foreign exchange remitted by Egyptians abroad and sold to a bank, 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 nonresidents 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

Residents may hold and acquire gold coins and gold jewelry in Egypt. The monetary authorities and authorized industrial users are allowed to hold or acquire gold in any other form. 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 require licenses.

Changes during 1972

January 6. Foreign Currency Resident Accounts of Egyptian citizens could be credited, in foreign currency, with bank interest.

January 9. Tourists and other foreign nationals holding an entry visa (for purposes other than study, work, or residence for a period exceeding three months) were granted a premium of 35 per cent on the official rate of LE 1 = US$2.30 on specified (convertible) foreign currencies exchanged at authorized banks; the resulting effective exchange rate was LE 1 = US$1.70. For bank transfers, banks had to apply the premium to the Central Bank’s buying rates, and for “acceptable” banknotes to the buying rates set by the Permanent Committee for Foreign Banknotes.

January 18. Free Nonresident Accounts could be maintained by international organizations with headquarters in Egypt.

February 2. The import of a wide range of luxury consumer goods was prohibited. These included certain cotton textiles, television sets, radios, cigarettes, cigars, refrigerators, washing machines, stoves, carpets, and diesel-operated automobiles. Import duties on large passenger automobiles were doubled to 200 per cent. (Imports of additional luxury goods were prohibited on May 1.)

February 9. All domestic retail sales to Egyptian nationals against payment in foreign currency were prohibited.

April 20. The value of goods that Egyptian nationals returning from abroad were allowed to import without a license was reduced from LE 100 to LE 50. Exempt from this measure were, among others, nationals permitted to work abroad (provided they had stayed abroad for at least a year) and those employed in Egyptian embassies.

May 1. A wide range of imported consumer goods henceforth could be purchased by Egyptian citizens only in public sector retail stores.

May 10 (effective May 31). The premium granted on the conversion of specified foreign currencies by Egyptian citizens was increased from 35 per cent to approximately 50 per cent; the U. S. dollar rate for this purpose was changed to US$1 = LE 0.65, equivalent to LE 1 = US$1.54. The facility was available for (1) amounts surrendered by debit to Foreign Currency External Accounts of Egyptian Citizens or Foreign Currency Resident Accounts of Egyptian Citizens and (2) foreign currency savings of Egyptian nationals not holding such accounts, if accumulated in the form of banknotes or other bank payments instruments, when the currencies involved were Austrian schillings, Belgian francs, Canadian dollars, Danish kroner, deutsche mark, French francs, Italian lire, Japanese yen, Kuwaiti dinars, Netherlands guilders, Norwegian kroner, Saudi Arabian riyals, pounds sterling, Swedish kronor, Swiss francs, or U. S. dollars. Quotations for banknotes in certain other “acceptable” currencies could be obtained from the Permanent Committee for Foreign Banknotes. Prescribed net buying rates were set for each of these currencies. Banks were not allowed to charge the public a commission on their purchases at these rates. The facility was limited to the savings surrendered net of the percentages of earnings from various activities that had to be repatriated and surrendered at the US$2.30 rate.

May 30. The pocket money allowance for Egyptian nationals leaving on foreign travel was increased from LE 15 a person a trip to £ stg. 30 or the equivalent in other convertible currencies.

May 31. The exchange rate for the conversion of specified foreign currencies by foreign nationals was changed to US$1 = LE 0.65, equivalent to LE 1 = US$1.54. Thus, the premium granted was increased from 35 per cent to approximately 50 per cent. The facility was available for (1) bank transfers, travelers checks, and banknotes converted to cover local expenditures by foreign tourists and by other foreign nationals holding an entry visa for purposes other than study or residence for more than three months and (2) similar conversions by Syrian and Libyan nationals exempt from entry visa (for visits not exceeding six months). The Egyptian pound equivalent could also be used, up to LE 100 a person, for purchases of goods to be taken out by the traveler. Buying rates were announced for the U. S. dollar and 15 other convertible currencies; furthermore, quotations for banknotes denominated in certain other “acceptable” currencies could be obtained from the Permanent Committee for Foreign Banknotes. All of these rates were identical to those applicable to the conversion of savings of Egyptian nationals (see May 10, above). Banks were instructed not to charge the public a commission when buying foreign currency at these rates. Reconversion by foreign travelers of any excess Egyptian pounds also was to take place at these exchange rates, again free of commission.

May 31. The purposes were specified for which foreign currency purchased by banks at incentive rates (under the above-mentioned regulations of May 10 and 31) could be sold to the public. Selling rates were set for the 16 convertible currencies, which included a commission added to the buying rate, and special selling rates for certain other currencies were announced by the Permanent Committee for Foreign Banknotes; sales at these rates were free of the 5 per cent transfer tax.

The purposes for which banks could sell foreign currency at these rates were mainly limited to (1) the pocket money allowance (equivalent to £ stg. 30) for Egyptian citizens traveling abroad; (2) payments or transfers up to LE 75 (inclusive of the pocket money allowance) to residents obtaining an exit visa for “tourism for old age” or for a visit to a family member studying abroad; (3) payments or transfers up to LE 75 (inclusive of pocket money) for attendance of conferences; (4) payment of subscriptions to academic books and periodicals, certain membership dues, and correspondence courses, subject in each case to an annual limit of LE 50 a person or for each private sector unit (£ stg. 100 for university professors); and (5) payment of travel tickets for immigrants returning to Egypt, as well as tickets for their return abroad. On August 10, the use of these funds was also permitted for the financing of import operations covered by Ministerial Decree No. 653 of 1972 (see third July 1 entry, below).

June 26. Following the floating of sterling, exchange rates for sterling and other convertible currencies were based on New York quotations. The buying and selling rates under the incentive scheme of May 31 were not affected.

July 1. Nonresident foreign nationals granted an entry visa were required to exchange for Egyptian pounds at least £ stg. 30 or its equivalent in other foreign currencies; exemptions included diplomatic personnel, persons studying in Egypt, and tourist groups whose local expenditures were covered by approved group transfers. Upon leaving Egypt, such persons could reconvert their Egyptian pound holdings only after deduction of the equivalent of £ stg. 5 for every night spent in Egypt.

July 1. The administration of exchange control was reorganized. The banking system was authorized to perform all executive operations relating to foreign exchange. Within the framework of this authorization, banks could make payments abroad without having to obtain specific exchange control approval. Similarly, exchange control approval for licensed exports ceased to be required; the collection and surrender of export proceeds henceforth was supervised by the banks. The National Bank of Egypt took over all banking operations related to foreign trade transactions of the public sector.

July 1. Decree No. 653 abolished the facility allowing private sector enterprises to import certain goods “without the use of foreign exchange.” Such imports of raw materials, semimanufactures, and spare parts for the private sector, as well as agricultural machinery and transportation equipment, henceforth could be financed by special foreign exchange allocations derived from funds resulting from the application of the incentive rates. Thus, the effective exchange rate for such imports became LE 1 = US$1.54.

September 10. The President issued legislation according Libyan physical and juridical persons the right to own agricultural land in Egypt.

September 12. Payments for imports henceforth could be made only to the country of origin, unless special authorization to the contrary was obtained.

September 18. Agreement was reached on the establishment of a political and economic union with the Libyan Arab Republic.

October 3. A preferential trade agreement with the EEC was signed, to come into effect on January 1, 1973.

December 15. A bilateral trade and payments arrangement with Bangladesh was signed. It came into effect immediately.

December 20. Exporters of movies and phonograph records were allowed to retain their convertible currency export proceeds in special foreign currency accounts with authorized banks in Egypt. Foreign currency held in such accounts could be used by the holder, subject to import license, to import goods required in his profession. Alternatively, the holder could sell such foreign currency to an authorized bank at the incentive rates for convertible currencies (corresponding to LE 1 = US$1.54).

El Salvador

Exchange Rate System*

The par value is 0.327405 gram of fine gold per Salvadoran Colón, corresponding to 0 2.71429 = SDR 1 or 0 2.50 = US$1. The rates of the Central Reserve Bank of El Salvador for transactions with the public are 0 2.49 buying, and 0 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 0 100,000 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

Exchange control authority is exercised by the Central Reserve Bank through its Exchange Control Department. Authority to approve certain payments is delegated to the commercial banks. Exchange licenses for imports are issued by 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. The accounts of nonresidents may be utilized freely, but the commercial banks must make periodic reports to the Central Reserve Bank of the movements on such accounts.1

Imports and Import Payments

Imports from all countries must be registered with the Central Reserve Bank before orders are placed. 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 require exchange licenses, which are granted freely, 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 are authorized by the Exchange Control Department when the terms of payment do not exceed three years.2 (2) Imports of staple food products, medicinal products, and medical and surgical supplies must be paid for within one year.3 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. All goods not mentioned previously in this paragraph may be imported only against payments before customs clearance. 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.

The commercial banks are authorized to provide exchange for import payments not exceeding US$10,000 for imports from Central American countries and US$2,000 for imports from all other countries; larger amounts have to be approved by the Central Reserve Bank.4 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 of 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$6,000 a year5 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

Payments for current invisibles require exchange licenses, which are granted freely for most items, although for certain payments only up to specified limits. Permission to purchase exchange for travel outside the Central American area (interpreted to mean the Central American Common Market) for tourism, business, or health reasons is granted by the Exchange Control Department free from deposit requirements up to the equivalent of US$600 a person a trip, on the basis of US$50 a person a day (US$300 for children under 16 on the basis of US$25 a day);6 for amounts in excess of US$600 a person a trip, up to an additional US$1,500 (for amounts in excess of US$300, up to an additional US$750 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.7,8 The Department also generally authorizes transfers of up to US$150 a month, for up to six months, to each adult Salvadoran with permanent residence abroad;9 larger amounts may be authorized when the need therefor is shown. Students also are allowed US$150 a month,10 in addition to an installation allowance, tuition, and other expenses.

For nationals traveling to Central American countries, the commercial banks have been delegated authority to provide exchange as follows: for travel to Costa Rica, Honduras, and Nicaragua, the equivalent of 0 500 a trip in Costa Rican colones, lempiras, or córdobas; for travel to Guatemala, Guatemalan currency notes up to Q 1,000 a trip, or a cashier’s check in Salvadoran colones up to the equivalent of 0 2,500 a trip (for payment in Guatemala through the Cámara de Compensación Centroamericana).11 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 for 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 0 200 in domestic notes and coins. This limit is subject to modification, however, to facilitate border trade with other Central American countries.

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 0 200 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. 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 1972

March 7. Certain imports by small businesses were exempted from the prior import deposit requirements.

April 4. Imports from countries outside the Central American Common Market which impose discriminatory restrictions on imports from El Salvador were made subject to payment before customs clearance.

May 8. The par value was changed from 0.355468 gram of fine gold per colón to 0.327405 gram of fine gold. The exchange rate of the U. S. dollar was maintained unchanged at Ȼ 2.50 = US$1.

September. The export tax on coffee was waived until January 31, 1973 for exports from the 1971/72 crop to new markets.

September 22. Exports of cattle on the hoof were suspended.

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. The effective parity relationship for the U.S. dollar is EG Ptas 64.4737 – US$1. 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, EG Ptas 500, EG Ptas 750, EG Ptas 1,000, and EG Ptas 5,000; these are legal tender. Except for these coins and jewelry, residents are not permitted to hold gold.

Changes during 1972

January 3. The tariff preferences accorded to Spain were terminated. Previously, all goods of Spanish origin were exempt from customs duty.

March 7. A circular issued to implement Decree-Law No. 1/1970 set out regulations pertaining to transfers abroad of various types of income. The transfer of all rents from real estate was prohibited.

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$2.30263 = US$1. Ethiopia has availed itself of wider margins, and the intervention currency is the U.S. dollar. The official rates on December 30, 1972 were Eth$2.28536 buying, and Eth$2.35444 selling, per US$1. The National Bank of Ethiopia (the central bank) does not deal with the public; authorized banks in dealing with the public must observe the official buying and selling rates for the U. S. dollar. Their spot exchange rates for other currencies are based on the rates against the U. S. dollar in the London exchange market. Authorized banks may freely undertake forward exchange transactions.

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 apply quantitative restrictions on imports, but has not invoked this authority.

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 hold nonresident accounts either in Ethiopian dollars or in foreign currencies at authorized banks. Balances in these 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, 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 permitted. Goods ordered through a third country must be supported by evidence of original cost. 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; this time limit does not apply to foreign nationals who are in contractual service with the Ethiopian Government, with an autonomous government organization, or with certain private institutions, and who have an employment contract specifically entitling them to remit a stated percentage of their earnings. 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. 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, Rhodesia, and South Africa 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

All receipts of capital in the form of foreign exchange must be surrendered. There is no discrimination regarding the currencies in which foreign investments are accepted. Special concessions are made to approved new enterprises financed by domestic or foreign capital; these concessions include exemption from taxes for a period of five years, admission of all 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. 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.

Borrowing abroad requires exchange control approval and is restricted. 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

Residents may hold and acquire in Ethiopia gold coins of a special commemorative issue, as provided in Legal Notice No. 318 of 1966 and Legal Notice No. 422 of 1972; such coins are legal tender and are offered for sale 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 slightly below US$38 an ounce. Imports and exports of gold in any form other than jewelry require exchange licenses issued by or 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 by the National Bank on behalf of the Ministry of Mines.

Changes during 1972

July 2. It was announced that importers would be required to present to customs (in addition to the exchange license, the invoice, and the shipping documents) a signed manufacturer’s price list. This regulation, however, did not come into effect.

July 6. The transaction tax on imports was increased from 12 per cent to 15 per cent ad valorem.

July 20. Legal Notice No. 422 provided for the issue of additional commemorative gold coins. These would be legal tender.

Fiji

Exchange Rate System*

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$1.98. As a result, all exchange transactions except those in sterling and currencies directly linked to sterling take place at fluctuating rates. For telegraphic transfers, the banks’ buying and selling rates for the U.S. dollar on December 31, 1972 were F$ 1.1934 and F$ 1.1692, respectively.

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 Minister of Finance operating as the Exchange Control Authority, who 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 Ministry of Finance, residents of Fiji are required to offer for sale to an authorized dealer all foreign currencies they receive.1 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. Settlements with residents of other parts of the Sterling Area may be made freely in any Sterling Area currency, including External Account sterling. Payments from Fiji to residents of countries outside the Sterling Area may be made in any foreign currency except Rhodesian currency. Payments by nonresidents of the Sterling Area to residents of Fiji may be made in any currency, but the prescribed manner of payment for exports to countries outside the Sterling Area is payment in Fiji currency from an External Account in the Sterling Area or in any foreign currency. All payments to Rhodesia are prohibited.

Nonresident Accounts

Fiji distinguishes between two classes of “residents” for exchange control purposes—a resident of Fiji and a resident of any country outside Fiji. A resident of Fiji is a person who either has lived or intends to live in Fiji for a period of at least three years. The bank accounts in Fiji of residents are designated resident accounts.

A nonresident is a person whose country of established residence is a country outside Fiji. A nonresident 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 Ministry of Finance. These accounts may be credited freely with interest payable on the account, payments from other External Accounts, the proceeds of sales of foreign currency by the account holder, and Fiji currency which the account holder brought into Fiji or acquired with 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. Foreign currency accounts are conducted on a basis similar to External Accounts.

Imports and Import Payments

All imports from Rhodesia are prohibited, and imports originating in mainland China and the CMEA countries2 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 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 Ministry of Finance.

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 Ministry of Finance. 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$500 a journey. In addition, each traveler may take with him F$1003 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 Ministry of Finance, provided the Ministry is satisfied that the additional amount is required to meet genuine travel expenditures. Travelers may not take out more than F$1003 in domestic currency notes and F$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 Ministry of Finance and are normally permitted only where benefits will accrue to Fiji within a reasonably short term. 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 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 Ministry of Finance. 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 and bullion requires the specific permission of the Ministry of Finance. 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 Commonwealth sources (the duty is 25 per cent for other sources) and does not require any license when valued at less than F$200.

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 1972

June 23. Fiji ceased to be a Scheduled Territory for purposes of the U. K. Exchange Control Act, 1947.

June 23. Exchange transactions were suspended. They were resumed on June 26.

June 26. Fiji maintained the fixed relationship between the Fiji dollar and the pound sterling unchanged at £ stg. 1 = F$2.09. As a result, the currency began to depreciate in terms of the U. S. dollar, the effective parity relationship for which had been US$1 = F$0.802085.

June 29. Exchange control was extended to the Sterling Area. It was stated that there was no intention, however, to restrict current payments. The basic travel allowance for travel to any overseas country was set at F$500. Henceforth all outward direct investment and all purchases of overseas securities would require prior approval, but where such approval was obtained, foreign exchange would be made available at official market rates of exchange. (Previously, direct investments did not require approval when made in the Sterling Area as defined prior to June 23, 1972. Purchases of non-Sterling Area securities required prior approval of the Ministry of Finance.) Local registered foreign companies and local companies controlled by overseas residents could not borrow in Fiji without the prior approval of the Ministry of Finance. Direct investment in Fiji and the purchase of shares in locally registered companies by overseas residents became subject to control also when the investor was a resident of the Sterling Area as defined prior to June 23, 1972. Fijian banks would generally be able to continue to provide credit within their existing commitments to overseas residents. The procedures applying to transfers of emigrants’ funds to non-Sterling Area countries now applied to transfers to any country. The normal limit on cash gifts was changed to F$500 a donor a year and became applicable to all countries. The purchase of private property in Sterling Area countries became subject to control. Exports to the Sterling Area became subject to license, and their proceeds had to be paid into a bank in Fiji. Foreign currencies were redefined as all currencies other than the Fiji dollar; previously the term denoted non-Sterling Area currencies only.

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

October 25. The fixed relationship between the Fiji dollar and the pound sterling was changed from £ stg. 1 = F$2.09 to £ stg. 1 = F$1.98. 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. The central rate is Fmk 4.10000 = US$1, corresponding to Fmk 4.19997 = SDR 1, and Finland has availed itself of wider margins. The Bank of Finland’s official buying and selling rates for the U. S. dollar, the intervention currency, vary within a range of Fmk 4.008-4.192 per U. S. dollar; on December 29, 1972 they were Fmk 4.160 and Fmk 4.178 per US$1. The market rates for the U.S. dollar are applicable also to clearing dollars. Market rates for certain other currencies1 vary between limits which result from combining the official limits for the U. S. dollar maintained by Finland and such limits in force in the country of the other currency concerned, or, in the case of sterling and the Canadian dollar, are based on market rates abroad. The Bank of Finland 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. Official fixed buying and selling rates are applied to the clearing ruble. 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. Forward transactions with residents must have a commercial basis.

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 mainland 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 four categories of nonresident accounts: Foreign Exchange Accounts, Convertible Markka Accounts, Restricted Markka Accounts, and Capital Accounts.3

1. Foreign Exchange Accounts are held by nonresidents in convertible or bilateral currencies.4 These accounts may be credited with amounts received in the currency in which the account is kept; with payments authorized to be made in the currency in which the account is kept; and with interest accrued on such accounts. They may be debited for transfers to Capital Accounts; for payments to residents of Finland; and for withdrawals in Finnish currency. If the account is held in a convertible currency, it may also be debited for transfers to other Foreign Exchange Accounts in any convertible currency and for transfers abroad or withdrawals in any convertible currency. If the account is held in a bilateral currency, it may be debited for transfers to other Foreign Exchange Accounts in the same currency and for transfers to the respective bilateral country.

2. Convertible Markka Accounts may be credited with the equivalent in Finnish markkaa of convertible currencies sold to an authorized bank; with authorized remittances from residents of Finland to residents of convertible currency countries; with transfers from other Convertible Markka Accounts; with the value of Finnish banknotes received by an authorized bank from a bank in a convertible currency country; and with interest accrued on the account. They may be debited for authorized payments in Finland, including the purchase of foreign exchange; for remittances abroad; and for transfers to other Convertible Markka, Restricted Markka, or Capital Accounts.

3. Restricted Markka Accounts are held by residents of countries with which Finland has bilateral payments agreements (see footnote 2). They may be credited with the proceeds from the sale of the currency of the country of the account holder or of any convertible currency; with transfers from another Restricted Markka Account of the same country; with authorized remittances payable to the country of the account holder; with the value of Finnish banknotes received by an authorized bank from a bank in the country of the account holder; and with interest accrued on the account. They may be debited for authorized payments in Finland in accordance with the relevant payments agreement; for transfers to other Restricted Markka Accounts related to the country of the account holder; for transfers to the country of the account holder; and for transfers to Capital Accounts.

4. Capital Accounts comprise all other nonresident accounts. They may be credited with funds available for credit to a Foreign Exchange Account, a Convertible Markka Account, or a Restricted Markka Account; with proceeds from the sale to a resident of any asset held in Finland by a nonresident; with interest on the account; with income from nonresident-held assets administered by the account-holding bank; and with sums obtained from the redemption of bonds and debentures. Capital Accounts may be debited for noncommercial current expenses in Finland of and for account of the account holder and for investment in shares and in those bonds and debentures that are denominated in Finnish markkaa, provided that the securities are quoted on the stock exchange and are purchased by a bank on behalf of the holder. 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),5 provided that the goods are purchased from and originate in that area. 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 certain value quotas for specified commodity groups; no industrial goods are restricted by global quotas. The total value of the global quotas for 1972 amounted to some 0.5 per cent of total 1972 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 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 sole agency for the import of wheat, rye, barley, oats, and products of these grains for human consumption. There is a state monopoly also for imports of alcoholic beverages.

Exchange is granted without delay 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. For imports on credit of over six months, the credit must be authorized by the Bank of Finland. Such credit is approved provided that it is considered normal in the traditions of the trade.

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.

A Finnish resident going abroad (except for border travel) may purchase from commercial banks foreign exchange equivalent to Fmk 3,000 a trip. A traveler going to Denmark, Norway, or Sweden may withdraw on a savings account passbook issued by a Finnish monetary institution up to Fmk 500 during one journey, provided that the utilized amount of his travel allocation does not exceed a total of Fmk 3,000. 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; travelers making frequent trips to neighboring countries to destinations not located beyond any municipality adjoining Finland’s land boundary may take out foreign or domestic currency, or any combination of these, up to Fmk 200 a person a trip. 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. 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 must be surrendered to the Bank of Finland or an authorized exchange dealer. However, exporters are permitted to keep a part of their export proceeds in foreign exchange accounts with Finnish banks or with banks abroad. The accounts may be used by the exporter to pay for expenses related to exports and for authorized imports of raw materials intended for his own production. The Bank of Finland may at any time claim the accounts against payment at the official rate.

Proceeds from Invisibles

With the exception of freight earnings, foreign exchange receipts derived from current invisibles do not have to be surrendered. The authorized exchange dealers and shipping firms are allowed to maintain working balances in foreign exchange, under the supervision of the Bank of Finland. 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 transferable without limitation and, subject to certain conditions, are generally transferred automatically up to Fmk 100,000 for each beneficiary. 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. Generally, the Bank of Finland will grant foreign exchange for this purpose.

Nonresidents may purchase through an authorized bank, against convertible or externally convertible currencies or by debiting a Convertible Markka 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 or an externally convertible currency. No permission is needed for the acquisition with funds classified as Capital Accounts of shares, bonds, and debentures quoted on the stock exchange, 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 Markka Account, approval for their export can be obtained freely. The import of securities is unrestricted.

The regulations concerning foreign 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 capital of an enterprise require, in certain cases, the approval of the State Council. This approval, when required, is usually granted liberally. The primary reason for the 20 per cent limit is concern for the protection of natural resources, mainly forests. Direct foreign investment in the forest and mining industries 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 surrendered. Outward transfers of capital by residents require individual approval; investment by residents in foreign securities or real estate is rarely permitted. 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.

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 1972

January 1. The import regulations for 1972 entered into force. The amount of the global quota program for 1972 was unchanged from 1971 and there was no change in the composition of the global quotas.

January 1. Generalized tariff preferences for imports of specified goods orginating in developing countries went into effect.

January 1. The supplementary sales tax of 15 per cent levied since June 6, 1971 on certain consumer durables, whether imported or domestically produced, was abolished.

June 1. The regulations of November 13, 1970 (as amended) were revoked; they had required that import payments for specified commodities, primarily consumer goods, had to be made through an authorized bank prior to customs clearance (or that an amount equivalent to their purchase price be deposited with the Bank of Finland prior to customs clearance). The general permission to importers to avail themselves of commercial credits not exceeding six months granted by nonresidents was restored in full.

July 17. Permitted installment credit terms for a large number of consumer durables were eased; those for passenger automobiles remained unchanged.

July 22. An industrial free trade agreement with the EEC was initialled; the agreement had not been signed by the end of 1972.

September 29. The banks reduced from 4 per cent to 3 per cent the interest paid on foreign exchange placed on time deposit by residents.

December 29. New exchange legislation was passed, which came into operation on January 1, 1973. 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 (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 certain foreign exchange earnings of residents by the obligation to repatriate, with minor exceptions, 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.

France

Exchange Rate System*

The par value is 0.160000 gram of fine gold per French Franc, corresponding to F 5.55419 = SDR 1 or F 5.11570 = US$1, and France avails itself of wider margins. There are two exchange markets, the official market, where exchange rates are based on par values and central rates, and the financial franc market, in which rates are determined by supply and demand, free from official intervention. Market rates for spot exchange transactions in U.S. dollars in the official market are maintained between official limits of F 5.0005 buying, and F 5.2310 selling, per US$1; market rates in the official market for exchange transactions between the French franc and the Belgian franc, the Danish krone, the deutsche mark, the Italian lira, the Luxembourg franc, the Netherlands guilder, and the Norwegian krone are maintained within limits of 2.25 per cent either side of cross parities. Market rates for other currencies that are officially quoted fluctuate between limits which result from combining the official limits for the U.S. dollar maintained by France and such limits in force in the country of the other currency concerned, or, where no margins are observed in the country concerned, are derived from arbitrage with markets abroad.1 In the financial franc market the rate for the U.S. dollar was about F 5.1225 = US$1 on December 31, 1972; in the official market it was F 5.1200 = US$1.

The dual exchange market regulations are not applicable to the Operations Account countries.2 Fixed conversion rates in terms of French francs apply to the currencies of the following countries and territories: Algeria, Morocco, Tunisia, 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. These conversion rates have been maintained at pre-August 15, 1971 levels. Except in the cases of Algeria, Morocco, the New Hebrides, and Tunisia (to all of which the dual market regulations are applicable) these conversion rates 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 (a) all trade transactions (imports, exports, and transit or merchanting trade); (b) most current invisibles; (c) the repayment of commercial credit granted or taken up in connection with import, export, or transit trade transactions; (d) current payments made by the French State and French public bodies to nonresidents or made by any resident in favor of foreign states and foreign public bodies; and (e) 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.

The transactions channeled through the financial franc market 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 1,000 a transfer; and (5) the following current payments (unless made by or in favor of governments or collectivités publiques): (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. There is no official intervention in the forward markets. 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 or 12 months, and for all others for 3 months.3 On the export side, an underlying contract is required and cover is limited to the maturity of the export contract or up to one 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 Réunion), 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 2); 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;4 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, Morocco, Tunisia, North Viet-Nam, the Republic of Viet-Nam, and the Condominium of the New Hebrides.5

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.6 Settlements with all other countries may be made in any of the currencies of those countries, or, depending on the nature of the transaction (see section on Nonresident Accounts, below), 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; the lending of francs to nonresidents for periods of up to two years is covered by a general 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.

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 investments7 or real estate; (5) French banknotes (and those of the Operations Account countries except the Malagasy Republic) 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;7 (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.8

Direct transfers between Foreign Accounts and Financial Accounts are prohibited. 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. 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 mainland 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. Certain agricultural imports from EEC and non-EEC countries are subject to special levies (montants compensatoires).

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 10,000 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 (1) if a documentary credit has been opened, upon receipt of advice from the bank’s foreign correspondent bank that the shipping documents (showing direct shipment either to the French customs territory or to a nearby port, such as Antwerp or Rotterdam) have been submitted to it; (2) if a draft accompanied by shipping documents (effet documentaire, remise documentaire) is presented to the authorized bank, when the bank has verified that the documents cover the goods concerned and that they have been shipped (to the customs territory or a neighboring port); (3) for imports of raw materials, as soon as the importer presents the bill of lading to his bank of domiciliation; or (4) for all other imports, if the importer submits the customs declaration (unless he already did so when purchasing his foreign currency).

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 (see also footnote 3).

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.

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 1,000 a person without indicating their purpose, provided that the transfers do not constitute installments of payments exceeding F 1,000, 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 3,500 a person a trip (F 1,750 for children under ten), which may be taken up for any number of trips a year. The basic allocation for business travel is the equivalent of F 400 a person a day, subject to a maximum of F 8,000 a trip. 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 100 must be surrendered upon return to France. Applications for travel exchange cannot be submitted earlier than one month before departure. The use of credit cards abroad is permitted up to one half of the amount of any travel allocation granted, but such use is set off against the allocation itself. All fares for trips starting in France may be paid in francs in France.

Resident travelers going to foreign countries may take out F 500 in French banknotes. These banknotes may be spent abroad. Nonresident travelers may take out F 500 in French banknotes and may reconvert in the financial franc market into foreign currency any French banknotes up to F 500 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 3,500 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 3,500 in foreign banknotes or in checks. Nonresident travelers may not, in principle, take out more than the equivalent of F 3,500 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 Extérieur (COFACE) has been obtained be more than 180 days after arrival of the goods at their destination.12 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 10,000 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.

Holders of exporters’ cards, which are issued to enterprises that export a specified percentage of their production, are entitled to obtain every year import licenses for any commodity still subject to quota and related to their export activity, up to a value corresponding to 10 per cent of their export proceeds in foreign currencies received in the previous year.13

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. 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, Malagasy 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 in excess of F 100 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. 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, up to F 150,000 per 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 residents must be deposited with a qualified bank or broker. 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. 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 a 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.

Until recently, French direct investment abroad in many cases had to be partially financed abroad, and foreign direct investment in France generally was required to be financed in part with an inflow of foreign exchange. Both financing requirements were eased considerably in 1971, and for outward investment they were terminated in September 1971.

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 2 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, and that the foreign exchange proceeds are surrendered. However, since July 24, 1970 borrowing in francs has been subject to closer scrutiny to prevent excessive interest rates in the Euro-franc market (and, initially, the evasion of the direct controls over domestic bank credit which were abolished in 1971), and the exemptions under (2), (3), (4), and (6) have been limited to borrowing in foreign currency. When the countervalue in francs is made available to the borrower, repayment must be scheduled to take place after at least one year. Since the date mentioned, borrowing in francs by nonbank residents from nonresidents has in effect been prohibited. During the last quarter of 1971, furthermore, banks and industrial companies were not normally allowed to borrow abroad to finance direct investment in France or abroad; these restrictions continued in force in 1972.14

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. Authorized banks have since the imposition of exchange control in 1968 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.15 Lending to nonresidents in francs, however, was until late in 1971 heavily restricted; during 1972, franc loans to nonresidents for up to two years were freely permitted, for any purpose, and the Bank of France approved liberally applications for loans of over two years.16

Authorized banks’ foreign currency assets and their overall liabilities in francs and foreign currency to nonresidents are free from limitation.17 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.18 Nonresident-held franc deposits are subject, however, to differential reserve requirements.19

Nonresidents may freely purchase French short-term securities, including treasury bills, bons de caisse, and private drafts, through the financial franc market.20

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 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, is 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 1972

January 3. The lending of francs by residents to nonresidents to finance purchases of short-term French securities (which had been prohibited since December 3, 1971) was again freely permitted; the general permission covered loans of up to two years’ maturity.

January 3. A system of montants compensatoires went into effect for trade with EEC and non-EEC countries in specified agricultural products and foodstuffs. With respect to Italy, the arrangements were retroactive to December 24, 1971.

January 28. The procedure of the marché d’application, which since April 1970 had allowed exporters to utilize the foreign currency proceeds of their commercial claims in certain circumstances for payment abroad of their own commercial debts, was extended to French shipping companies, in respect of credit and debit balances in shipping accounts (comptes d’escale). At the same time, it was clarified that in all cases a marché d’application had to comprise transactions that were eligible for the same exchange market, i.e., with purchase and sale of foreign currency either both in the official market or both in the financial franc market.

January 28. The period within which French shipping companies were required to repatriate the credit balances in their shipping accounts was increased from three to six months.

January 31. Exchange rate guarantees were made available to exporters unable to invoice in francs. After screening of the contract by the Committee for Foreign Trade Guarantees, the guarantees would be extended by COFACE, with the guarantee of the Government. They would cover the full exchange loss arising when the official market rate for any convertible currency in which a contract was established had depreciated by 3 per cent or more (in terms of francs) between the date of signature of the contract and the date of repatriation of the foreign currency (garantie de change sur rapatriements).21 The full amount of the contract could be insured. The premium was set initially at 0.648 per cent a year, payable to COFACE. Covered exporters had to surrender to COFACE any exchange profit resulting from an appreciation of the currency concerned by more than 3 per cent.

The guarantee was reserved in principle for new export contracts with a maturity of at least two years, but it could be made available retroactively for selected old contracts signed after October 19, 1971, and in exceptional cases for new export contracts with a maturity of less than two years, if concluded in a currency for which the banks did not offer forward cover. No minimum size was set for eligible export contracts, nor a maximum maturity period. (The facility was improved on April 2, 1973, when the minimum exchange rate variation covered was reduced from 3 per cent to 2.25 per cent and the normal minimum maturity of the commercial contract from two years to one year.)

February 10. Authorized banks were again allowed to provide forward cover to importers (up to the due date foreseen in the commercial contract) for periods of 3, 6, or 12 months, depending on the commodity; since September 2, 1971 such forward cover had been restricted to the payments periods imposed on August 20, 1971 (normally three months). (The time limits were removed on April 2, 1973.)

February 10. Authorized banks were allowed to lend foreign currency to importers again, for the purpose of making import payments. Such loans could not be used as forward cover, and repayment had to take place by the purchase of foreign currency in the official market.

February 14. The Customs Administration issued Circular No. 24, essentially a consolidation of its instructions of August 31, September 15, and October 15, 1971. A new provision was that import payments in foreign currency no longer had to be made in the currency of the commercial contract. It was clarified that merchanting transactions were to be settled in the financial market only when taking place between foreign countries outside the French Franc Area. The market classification for mixed import or export transactions in which services accounted for more than 25 per cent of the contract amount was clarified; normally, the exports or imports involved would qualify for the official market and the services (such as assembly, technical assistance, or training of staff abroad) for the financial franc market. Exceptional exemptions from this classification could only be obtained if full data were provided to the Customs Administration.

February 28. Bank of France Circular No. 191 A. F. summarized the existing rules governing lending of francs to nonresidents. Subject, where appropriate, to the regulations concerning direct investments, all such lending was freely permitted for periods of up to two years, provided that the interest rate was the “normal market rate.” Residents were henceforth free to guarantee, subject to the same reservations and conditions, nonresidents’ franc liabilities with a maturity not exceeding two years. The circular also specified the types of lending in francs for which an ex post notification to the Treasury was not required; the exemptions included authorized banks’ loans of francs on a swap basis, with a maturity up to three months, to their foreign correspondents, and current account advances (although the ceilings agreed on such advances were subject to notification ex post).

March. Agreement was reached between the Ministry of Economy and Finance and leading French banks on the conditions under which the latter could participate in international issues of bonds denominated in French francs (Euro-franc bond issues) undertaken by residents or nonresidents. Each syndicate was to be headed by a French bank, the amount of individual issues should not normally exceed F 100 million, and the franc proceeds had to be exported through the financial franc market within two weeks of collection. Issues would be authorized in accordance with a queue system, and an informal ceiling was initially set of F 300 million a month. (Prior to 1972, only three Euro-franc issues had taken place, and the suspension of further issues had been announced on October 25, 1971.)

March 20. The Minister of Economy and Finance announced an early further relaxation of restrictions on outward direct investment.

March 21. The reserve requirements against franc deposits were lowered for resident-owned funds, from 10 per cent to 8 per cent on sight deposits and from 4 per cent to 3 per cent on other deposits. Thus the reserves against nonresidents’ franc deposits, which on December 21, 1971 had been brought back into line with those for resident-owned funds, again were higher than those on the latter.

March 22. By Decree No. 72-215 the French Government declared null and void a decision taken on December 23, 1971 by the territorial assembly of French Polynesia which had introduced a tax on noncommercial transfers to any destination outside French Polynesia.

April 24. The Bank of France narrowed the exchange rate margins for the currencies of the other member countries of the EEC. The arrangements were designed to ensure that the maximum divergence from cross parities between any two currencies of the member states of the EEC did not exceed 2.25 per cent. Subsequently, narrow margins were applied also to the pound sterling, the Danish krone, and the Norwegian krone.

May 2. A decision in principle was announced to introduce additional tax facilities for certain institutional investors established in member countries of the enlarged EEC and investing in French securities.

May 5 (effective date May 8). Payments and receipts in respect of a large number of current transactions were shifted from the financial franc market to the official exchange market. At the same time, restrictions on certain outward capital transfers and on the export of domestic banknotes were eased, as were various exchange control requirements and procedures.

The principal transactions shifted to the official market were: transportation, insurance (premiums and indemnities), commissions and brokerage, payments and receipts relating to intellectual property, professional fees, most other services (including exploration, engineering, and technical assistance), rentals (for commercial use of land, buildings, machinery, and vehicles), surrender of export proceeds in advance of the due date set in the commercial contract, mixed import and export transactions (with more than 25 per cent in services unspecified), transit trade (merchanting), and transactions on commodity markets abroad. (Previously, transportation, insurance, and commissions and brokerage were eligible for the official market only when part of an import or export transaction, payable by or to the importer or exporter or his mandataire, and specified on the invoice.)

The principal current transactions that continued to be settled through the financial franc market (unless payments were made by or in favor of governments or specified collectivités publiques were (1) travel expenditures of residents and nonresidents (other than clearly specified fares paid by residents); (2) capital service (profits, dividends, interest, and amortization, except interest and amortization on commercial credits); (3) workers’ remittances; (4) certain other payments in the personal sphere (wages and salaries, pensions, family remittances, social security premiums and benefits, and alimony); and (5) rentals for real estate, machinery, and vehicles in noncommercial use. All transactions in foreign and domestic banknotes and travelers checks also remained in the financial franc market.

May 5. Increased facilities were made available to residents to buy and sell forward on commodity markets abroad; previously, this was only allowed in exceptional cases (essentially only to cover imports of raw materials by industrial processors). Such transactions remained limited, however, to the covering of spot purchases and sales of commodities (imports, exports, and merchanting), and foreign exchange for the payment abroad of margins and deposits could not be purchased in the French foreign exchange market, although it could be borrowed from a French authorized bank or abroad.

May 5. The conditions were specified under which transit trade and merchanting transactions of residents could be settled, without prior authorization, through the official exchange market. For this purpose, transit trade and merchanting were defined as transactions involving the purchase abroad of a quantity of certain goods and the sale abroad of an equivalent quantity acquired on the same basis; hence, this circular did not provide for cases in which direct importation into France or an Operations Account country took place. Foreign exchange could be purchased spot or forward, provided that the sales proceeds were sold in the official exchange market, spot or forward, within six months from the date on which foreign currency was purchased. The due date of the sales contract could not be later than 180 days after the arrival of the goods at their destination; foreign exchange received before the due date could be retained until that date, at the authorized bank where the transaction was domiciled. If foreign currency was bought and sold forward, the maturity of the forward purchases could not be more than 180 days prior to the date set for the delivery of the foreign currency that was sold forward. Profits had to be repatriated within one month, to the extent they were not used to offset earlier losses. Applications for transactions not meeting the above criteria had to be submitted to the Bank of France.

May 5. Financial Franc Accounts could be credited with the franc proceeds of French or foreign securities accruing in France to a nonresident through inheritance or donation.

May 5. The amount up to which residents could at any time freely and without submission of documents make payments abroad was increased from F 300 to F 1,000 per transfer.

May 5. Resident individuals could freely and at any time make gifts (in money or securities) up to F 50,000 for each beneficiary to nonresident relatives, subject to the intervention of a notary public. Applications for larger amounts could be submitted to the Bank of France.

May 5. Residents could freely transfer abroad up to F 150,000 for the purchase of real estate (or rights to real estate) as a principal or secondary residence; this right was limited to one acquisition for each family unit.

May 5. The making or the liquidation of direct investments abroad by residents were, subject to certain conditions, exempted from prior declaration and, where previously applicable, from prior authorization, provided that the amount involved did not exceed F 1 million a year for each beneficiary firm, and provided that the transactions did not involve holding companies, investment companies, investment trusts, mutual funds, unit trusts, or companies whose purpose it is to facilitate the financing or treasury functions of enterprises belonging to one or more groups. Decree No. 68-1021, as modified by Decree No. 71-144, was amended accordingly. An implementing Order, also of May 5, amended the Order of February 22, 1971 accordingly.

May 5. The amount in domestic banknotes that residents traveling to a foreign country for less than 24 hours could take out freely was increased from F 50 to F 500 a person a trip.

May 5. The basic tourist travel allocation (the equivalent of F 3,500 a person a trip, for any number of trips a year) henceforth could be taken up also in the form of travelers checks denominated in French francs. A prior attestation was no longer required for the use of credit cards abroad, but their use remained limited to half the tourist or business travel allocation. The amount of foreign banknotes that nonresident travelers could take out without submission of documentation was increased from F 500 to F 3,500.

May 5. The amount below which imports and exports generally were exempt from domiciliation with an authorized bank was maintained at F 10,000 but certain additional types of import and export transactions were exempted from this requirement. Furthermore, certain individual importing and exporting firms could obtain dispensation from all domiciliation, their transactions being checked by a computer system. The procedures were eased for payments for raw material imports and for payments for imports valued at less than F 1,000; the former, which previously could only be settled after customs clearance, could now be paid for against shipping documents, a facility previously available only to importers holding a special authorization from the Customs Administration. The maximum value of exports “without payment” was increased from F 1,000 to F 10,000.

June 6. Circular No. 192 A. F. of the Bank of France specified that the new regulations concerning tourist travel and the import and export of means of payment were applicable also to residents of Operations Account countries.

June 12. The Bank of France transmitted to authorized banks a note of the Directorate of the Treasury explaining in more detail how the relaxation of May 5 of the direct investment rules was to be applied. Arbitrage between the two exchange markets was prescribed where the financing involved elements normally eligible for the official exchange market.

June 15. Industries facing strong foreign competition (i.e., where both imports and exports exceed 25 per cent of French production) were released from price regulation contracts.

June 23–June 28. The exchange market was closed.

June 30. An agreement was signed with Tunisia on the protection of French investments in that country. It came into effect immediately. This was the first agreement implementing the investment guarantee system provided for by the Loi de Finances of December 1971.

July 18. Trading in specified Swiss securities outside the official stock exchanges was permitted. With effect from August 1, this was followed by an oral quotation on the Paris stock exchange.

July 21. The minimum reserve requirements for all types of franc deposits were raised; the increase for nonresident-owned deposits was to 12 per cent for sight liabilities other than savings accounts and to 6 per cent for savings accounts and all other liabilities.

August 9. The Bank of France issued a note to authorized banks clarifying certain details of the May reorganization of the dual exchange market. No new shifts of transactions between the two exchange markets were involved. The note specified, among other things, that the service of a loan (interest, banking commission, and amortization) had to be effected through the market for which the principal was eligible.

September 11. The Bank of France issued a note to authorized banks clarifying that interest on Foreign Accounts in Francs had to be credited to an account of the same type, while interest on Financial Franc Accounts had to be credited to Financial Franc Accounts.

September 11. The Bank of France clarified that the May 5 measure allowing residents to purchase a principal or secondary residence abroad, up to an amount of F 150,000, was applicable to acquisitions after May 7, irrespective of whether the resident concerned had on that date already legally acquired a residence abroad. The acquisition of real estate for investment purposes remained subject to prior Bank of France approval.

September 15. The interest rates (taux de sortie) applicable since July 1, 1971 to medium-term and long-term export credit were reduced.

October 16. The National Credit Council empowered the Bank of France to prohibit banks and 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; this authorization did not apply, however, to accounts in the names of (1) physical and juridical persons resident in Operations Account countries, or (2) international organizations, central banks, and foreign public financial institutions (for their balances as of September 30, 1972). (The Bank of France did not introduce this interest prohibition until March 16, 1973.)

November 3. At the request of the Malagasy Republic, banknotes issued by the Malagasy Institute of Issue no longer were accepted for credit to Financial Franc Accounts.

November 10. A decree was published implementing Article 21 of Law No. 72-650 of July 11, 1972. The decree provided that in Saint Pierre and Miquelon the French franc would in 1973 replace the CFA franc issued by the CCCE.

November 16. Medium-term and long-term export credits eligible for rediscounting at the Bank of France were excluded from the computation of the mandatory reserve requirement against credits extended by banks.

November 20. The Bank of France transmitted to authorized banks a note of the Directorate of the Treasury explaining the proper interpretation of some of the regulations governing inward and outward direct investment. The note clarified both the concept of direct investment used in Decree No. 67-78 and the scope of the relaxation measures of May 5, 1972 (Decree No. 72-365). Among the points made were the following:

(1) To determine whether an inward investment transaction by a nonresident or by a foreign-controlled French firm must be considered a direct investment (and hence subject to prior declaration), banks should take into account not only the percentage of the French firm’s capital that as a result of the transaction would be held by nonresidents or foreign-controlled juridical persons, but also the existence of other elements that could markedly strengthen the influence that the participation bestowed upon its holders. Such elements were primarily options on all or part of the remaining outstanding shares; loans or guarantees in amounts large enough to lead to the assumption that the investor was responsible for the financing of the firm; or a link between the participation and the granting of licenses, patents, or commercial contracts which made the firm dependent on the investor. In case of doubt, banks had to consult the Treasury in writing.

(2) It had been found that certain outward investments that had been made freely under cover of Decree No. 72-365 could not be considered genuine direct investments because the capital participation of the resident investor was too minor. Therefore, when outward investments (or liquidation of investments) took place involving firms in which the total participation of residents was and would remain a clear minority participation, and when these were declared as outward direct investments, then the Treasury had to be consulted as to whether the transaction, by its nature, was entitled to the benefit of the relaxation measures of May 5. Here again, the actual influence of the investor as a result of other elements (options, loans or guarantees, patents, licenses or commercial contracts, etc.) would be taken into account.

November 22. The President announced that a revision of certain Franc Area arrangements, including the modalities of certain economic cooperation agreements, was under consideration. The President also announced the cancellation of F 1 billion of debts owed by the Operations Account countries to the French Government.

November 23. A monetary cooperation agreement with the member countries of the BCEAEC was signed which, among other things, provided for the replacement of the BCEAEC by the Banque des Etats de l’Afrique Centrale.

December 4. Law No. 72-1069 modified the monopoly of SEITA (Service d’Exploitation Industrielle des Tabacs et des Allumettes). Henceforth, imports of matches of EEC origin could be undertaken by private importers.

December 14. A futures market for coffee was established in Paris.

Gabon

Exchange System*

No par value for the currency of Gabon 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 Equatoriale et du Cameroun (BCEAEC)2 and commercial banks take place at the rate of CFAF 1 = F 0.02, free of commission charges.

Exchange transactions relating to foreign countries, i. e., countries other than France, 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 (collectivités publiques). All other settlements with foreign countries, as well as transactions in banknotes of foreign countries and banknotes issued by the BCEAEC, take place through the financial franc market at freely fluctuating rates. The principal current payments and receipts channeled through the financial market are those relating to travel expenses, capital earnings, and workers’ remittances. Exchange rates 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 CFAF 255.785 = US$1.

With the exception of those relating to gold, Gabon’s exchange control measures do not apply to (1) France and its Overseas Departments and Territories (except the French Territory of the Afars and the Issas) 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, Dahomey, Gabon, Ivory Coast, the Malagasy Republic, Mali, Mauritania, Niger, Senegal, Togo, and Upper Volta). Hence, all payments to these countries may be made freely. All other countries, except Gabon 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 Foreign Financial Relations in the Ministry of Economy and Finance supervises borrowing and lending abroad, the issuing, advertising, or sale of foreign securities in Gabon, and inward and outward direct investment. Exchange control is administered by the Minister of Economy and Finance, who has delegated his approval authority for current payments to the authorized banks and that with respect to the external position of the banks to the BCEAEC. 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 Directorate of External Trade in the Ministry of Economy and Finance.

Prescription of Currency

Gabon is an Operations Account country of the French Franc Area, since the BCEAEC maintains an Operations Account with the French Treasury; settlements with France, 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 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. BCEAEC banknotes may be credited to Financial Accounts in Francs when they have been mailed direct to the BCEAEC agency in Libreville by authorized banks’ foreign correspondents. Otherwise, the crediting to nonresident accounts of BCEAEC banknotes, French banknotes, or banknotes issued by any other institute of issue that maintains an Operations Account with the French Treasury is prohibited.

Imports and Import Payments

Some imports are prohibited for security or health reasons. Imports of cement and wheat flour from all sources require special authorization. All other imports from countries in the French Franc Area and from member countries of the EEC 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 a joint French-Gabonese Committee. A special licensing procedure is applicable to the import of petroleum products.

Global quotas are established by commodity groups for imports from all non-EEC countries outside the French Franc Area. The global quotas may be used to import goods originating in any of these countries.

All import transactions 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.

Payments for Invisibles

Payments for invisibles to France, 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. 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 200,000 a person a trip (CFAF 100,000 for children under ten) for any number of trips a year; any foreign exchange remaining after return to Gabon must be surrendered. For business travel to foreign countries, there is a special allocation of the equivalent of CFAF 25,000 a day, subject to a maximum of CFAF 500,000 a trip. Tourist and business travel allocations may not be combined. Travelers going to foreign countries may take out up to a maximum of CFAF 25,000 in BCEAEC banknotes; the amount taken out is not deducted from the travel allocation. Travelers to other countries may take out any amount in BCEAEC banknotes.

Nonresident travelers may take out foreign banknotes and coins up to the amount declared by them on entry.

Exports and Export Proceeds

Exports to countries in the French Franc Area are free of license. Exports to other countries of rice, corn, tobacco, cotton, diamonds, and mining products (except sodium carbonate, manganese, and crude petroleum) require licenses. Gold and uranium may be exported only to France. Exporters may obtain import licenses for additional quantities of commodities included in the import program and essential to their export activities, up to an amount corresponding to 10 per cent of the total value of their exports during the preceding year.

Export transactions relating to foreign countries must be domiciled with an authorized bank. Export proceeds received in currencies other than those of France or an Operations Account country must be surrendered. Export proceeds normally must be received within 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 one month of the due date.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France, 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 a month of the due date. Resident and nonresident travelers may bring in any amount of banknotes and coins issued by the BCEAEC, 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 Gabon and France, Monaco, and other Operations Account countries in the French Franc Area are free of exchange control; capital transfers to all other countries require the approval of the Office of Foreign Financial Relations and are restricted, but capital receipts from such countries are permitted freely. All foreign securities, foreign currency, and titles embodying claims on foreign countries o