COUNTRY PROFILE
Total land area:........................... 1,098,581 sq. km.
Official languages:....................... Spanish, Quechua, Aymara
Administrative divisions:.............. Nine departments
Legal system:............................. Based on Spanish law and Napoleonic Code; has
not accepted compulsory ICJ jurisdiction.
Executive branch:...................... Chief of state and head of governmentpresident and
vice president, elected for four-year terms by
popular vote. Cabinet appointed by the president from
panel of candidates.Legislative branch:...................... Bicameral National CongressChamber of Deputies
(130 seats) and Chamber of Senators (27 seats).
Judicial branch:.......................... Supreme Court, judges appointed for a 10-year
term by National Congress.
ECONOMIC PROFILE
Currency: Boliviano (Bs)
GDP: US$7.2 billion (1997)
Real GDP growth (at market prices): 4.3 (1997p)
GDP (average annual growth rate): 3.9 (1988-1997)
GDP per capita (1990 US$): 933.3 (1997)
Consumer price index (average annual growth rate): 4.7 (1997)
Nonfinancial public sector overall balance (% of GDP): -3.3 (1997)
Money supply (M1) (% of GDP): 12.9 (1997)
Interest rates (average): Active15.88% (October 1998); Passive7.65% (October 1998).
Current account balance: -US$586 million (1997)
Trade balance: -US$588 million (1997)
Main exports: Jewelry and precious metals, gold (including platinum-plated gold),
tin and tin alloys (unwrought), zinc ores and concentrates, natural
gas, lumber, silver ores and concentrates, platinum and platinum-
group metals, refined sugar, soya beans, oil-seed cake and other
vegetable oil residues.
Main imports: Machinery and transport equipment, road vehicles, chemicals, cereals,
petroleum products, iron and steel, other food, metal manufactures, textile
yarn and cloth, paper, scientific instruments, rubber manufactures.
Nominal exchange rate-average (Bs/US$): 5.57 (September 1998)
Real effective exchange rate (Index 1990=100): 108.0 (1997)
BANKING SYSTEM
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Types of Financial Number of Financial Amount Total Amount Total Amount
Intermediaries Intermediaries of Assets of Deposits of Capital or
in the System Net WorthNational Private Banks 11 US$4.9 billion US$3.1 billion US$396.2 million
Foreign Banks 4 US$354.2 million US$192.3 million US$53.7 million
Savings and Credit Cooperatives 17 US$248.2 million US$169.3 million US$36 million
Savings and Loan Housing Mutuals 13 US$443.4 million US$357 million US$40.1 million
State and Mixed Funds and
Financial Institutions 4 US$308.2 million - US$90.2 million
Private Financing Funds
(Microcredit) 5 US$173.4 million US$116.9 million US$22 million
Financial Services Company 1 US$19.6 million US$45,136 US$3.1 million
Total 55 US$6.5 billion US$3.9 billion US641.6million
BANKING INSTITUTIONS
I. Banking Supervision
1. By law, the Superintendencia de Bancos y Entidades Financieras is the sole agency
in charge of supervision and control of the financial system in Bolivia. The
Superintendencia issues control regulations and procedures for the activities of banks,
savings and loan mutual funds, savings and mutual cooperatives, private mutual funds,
state and mixed funds, general warehouses, and leasing and factoring.
2. The Superintendencia is a public entity with juridical status. It enjoys economic and
administrative autonomy. The Treasury Department oversees the functions of the
Superintendencia.
3. The supervisory authority makes its reports to the Treasury Department.
4. Off-site inspections are conducted permanently. On-site inspections of each financial
entity are carried out at least once every 18 months.
5. Ratings and criteria for banking supervision are as follows:Category Criteria
1 Low supervision (off-site supervision)
2 Medium supervision
3 Intensive supervision (close follow-up that includes visits to the entity)Beginning in the year 2000, for national banks to be considered in good standing,
they will have to be rated at least IC-C by the Country Issuer Rating of Thomson
Bank Watch or receive an equivalent classification by an international company
recognized by Bolivia.
6. At present, Bolivia uses the CAMEL and CAR supervision methods.II. Consolidated Supervision
1.Bolivia has signed an agreement of cooperation and understanding with the
supervisory authority of Peru to perform comprehensive supervision on a
consolidated basis. Similar agreements are being negotiated with the United States
and Panama.
2. Prior consent from Bolivia is needed to open or close a banking institution abroad.
3. According to Bolivia¹s Banks and Financial Entities Law, foreign banking
establishments that request authorization to open or close a branch in Bolivia must
fulfill the same establishment requirements as domestic banks and financial entities.
In addition to these requirements, foreign banks must present certain documents
such as the authorization of the fiscal agency of the home country, the legalization of
the social constitution documents and statutes, etc. Branches have the same rights
and privileges and are governed by same laws, norms and regulations applied to
national banks.
4. According to the agreement mentioned in II:1 above, the Organic Statute (Art. 23)
and the Banks and Financial Entities Law, the Superintendencia de Bancos y
Entidades Financieras has the right to gather information from its cross-border
banking establishments.III. Interest Rates
1. Starting in 1985 with the promulgation of Supreme Decree 21060, interest rates
on loans are determined by the market.
2. The market determines the interest rates on deposits.IV. Insurance on Deposits
1. Bolivia has no governmental agency in charge of deposit insurance. However, the
Central Bank can totally or partially take over the rights of depositors of financial
institutions; the Bank can acquire these rights in advance or term. Cases should be
qualified by the board of directors, as stipulated in Article 38 of the Central Bank
of Bolivia Law. The planned creation of a Warranty Deposits Fund would substitute2. Insurance limits are not applicable.
V. Trade Finance
1. Bolivian law defines credit, regardless of the type of financing. In any case, trade
finance is governed by international criteria and norms established by the International
Chamber of Commerce (ICC 500).
2. Risk relating to trade finance is borne as follows:Type of Finance Bank Risk Government/Sovereign Risk*
Export finance X
Import finance X X
Pre-export finance X
Working capital finance X
Capital goods finance X X
Letters of credit X X
Acceptances X
Drafts X
*Only on operations under the Convenio de Crédito Recíproco, Latin American Integration Association (ALADI).
3. According to the regulations in place, the Central Bank assumes the responsibility on
debts incurred by international finance if such debts are framed in bilateral or multilateral
agreements. In the event of bank liquidation, export, import, pre-export, working capital
finance, letters of credit, acceptances and drafts are considered for payment before the
liquidation process.4. The banking system does not make specific provisions or require reserves for treatment
of trade finance obligations during bank liquidations. However, beginning in June 1998,
funds proceeding from foreign finance are subject to a reserve requirement rate of 12%,
except for trade operations that have an exact hedge between assets and liabilities. In
cases of liquidation such amounts can be used for the cancellation of foreign credits.VI. Capital Adequacy
1. Minimum required capital to open a bank is 5.5 million DEG¹s (Derechos
Especiales de Giro, the special right to exchange Bolivian currency for U.S.
dollars). The Central Bank Law of October 1995 grants the Central Bank
the authority to fix the new minimum capital for banks, which in no case
could surpass the net worth average of banking entities at the moment of its
determination.
2. A banking institution must maintain a net worth equivalent to 10% of its risk-
weighted total and contingent assets (this adequacy coefficient is established
by Article 33 of the Central Bank Law).
3. There are no categories with respect to capital adequacy. Every banking entity
must fulfill the aforementioned adequacy coefficient.VII. Asset Quality
1. Loan portfolios are classified as follows:Loan Classification Definition % of Reserves
Category 1 Normal credits 0%
Category 2 Credits with potential problems 0%
Category 3 Deficient credits 10%
Category 4 Doubtful credits 50%
Category 5 Lost credits 100%It is important to mention that the past-due portfolio does not accrue interest. A
credit is considered past due the day after its maturity date; judicial actions may
be initiated 91 days after the credit becomes past due.
2. Bolivia has no regulation concerning the maintenance of reserves on assets;
nevertheless, for a financial entity to cover eventual losses, it must establish a
Legal Reserve Fund for up to 50% of its paid capital. The entity must assign at
least 10% of its net annual profits to create such a reserve. Financial entities can
create additional reserves according to established policies.
3. The legal lending limit goes up to 20% of the entity¹s net worth if the loan is
collateralized and 5% of the entity¹s net worth without collateral, and up to
the net worth of the debtor.
4. The investment portfolio must be categorized according to criteria such as
hold-to-maturity, available-for-sale and trade portfolio.
5. Bolivia uses the following investment categories:
a) Temporary: Investments with a term of maturity no longer than 90 days and
easy to trade. This group includes investments on deposits in
other financial entities and investments on títulos valores de deuda
issued by other institutions, as well as the earned yields to be
collected from those investments and correspondent provisions.
b) Permanent: Investments with terms of maturity greater than 90 days. This
category includes time deposits in the Central Bank of Bolivia
and in other financial entities, and other títulos valores de deuda
issued by such entities or by public sector entities not negotiable
in the stock market.The following valuation criteria are applicable
to both investment categories:
a) Deposits in other financial entities are valuated against the updated nominal
amount of the deposit.
b) Securities are valued against the least of the updated acquisition cost of the asset
plus the earned yields to be collected, and market value if they are traded in the
stock market, or the present value otherwise.
Both categories of investment are valued every time that an adjustment occurs.
6. The yield and the value of the investment itself affect a bank¹s profit and loss
statement.VIII. Liabilities
1. Minimum reserve requirements on liabilities, except for trade operations
an exact hedge between assets and liabilities, are as follows:
LIABILITIES IN NATIONAL CURRENCY IN FOREIGN CURRENCY
IN NATIONAL CURRENCY IN FOREIGN CURRENCY W/VALUE MAINTENANCE
WITHOUT VALUE MAINTENANCE W/VALUE MAINTENANCE WITHOUT VALUE MAINTENANCE RESERVES IN CASH RESERVES IN SECURITIES DEPOSITS Demand 2%
10% Savings Short Term Borrowing Long Term Borrowing Short -term Foreign Finance
The reserve requirement is 100% for:
Other cash deposits,
Cash transfer deposits in current accounts
Transfer deposits in RAL Funds and participation units of non-banking institutions.There are some exceptions to the reserve requirements for fixed-term deposits according
to the currency, tenure and whether they are registered in the Central Bank of Bolivia.
These categories are:
MATURITY SCHEDULE NATIONAL CURRENCY
FOREIGN CURRENCY AND
NATIONAL CURRENCY WITH
MONETARY CORRECTIONRESERVES IN SECURITIES RESERVES IN CASH RESERVES IN SECURITIES RESERVES IN CASH Up to 180 days Reserves Reserves Reserves Reserves More than 180 days, up to 360 days Reserves No Reserves(*) Reserves Reserves More than 360 days, up to 720 days Reserves(*) No Reserves(*) Reserves No Reserves(*) More than 720 days No Reserves(*) No Reserves(*) No Reserves(*) No Reserves(*) (*) Only if registered in the BCB (Central Bank of Bolivia)
2. Banks can offer savings, current and time deposits accounts in local and foreign currency.
3. There is no limit on the maximum amount of deposits a bank can accept.
4. There is no limit on the level of concentration for any type of deposit.