Resolution 05 of 1997 modifying the Colombian Foreign Exchange Regime contained in Resolution 21 of 1993, as amended, was adopted on May 19, 1997, by the Board of Directors of the Central Bank ("Resolution 05") . The Central Bank mentioned as objectives for this Resolution the increase of the cost of foreign currency loans to Colombian residents, the discouragement of inflows of foreign capital and avoidance of the revaluation of the Colombian peso. Among the most relevant amendments introduced by the mentioned Resolution are :

1. Effective as of the 20th of May of the current year, drawdowns of all foreign credits not registered with the Central Bank prior to such date will be subject and conditioned to a cash reserve or deposit with the Central Bank equivalent to 30% of the value of the drawdown. Such deposit shall be made for a period of eighteen (18) months, but may be totally or partially redeemed in advance, at a discount determined by the Central Bank. The deposit shall be made in Colombian pesos converted at the Exchange Representative Market Rate applicable in the date of its constitution.

2. The only foreign obligations exempted from deposit shall be:

  • credits in foreign currency with the purpose of financing Colombian foreign investments abroad and payment of personal expenses discharged with international credit cards ;
  • credits to finance exports, granted in foreign currency by authorized intermediaries with resources of BANCOLDEX and with a term of less than one year ;
  • import financing operations with a period of less than six (6) months;
  • financing of capital goods ("bienes de capital") defined by the Central Bank, which may comprise international leasing transactions ;
  • export financing operations through prepayments with a delivery period of less than four (4) months ;
  • financing operations between intermediaries of the Exchange Market and financial foreign entities in order to carry out operations authorized to the former.

It is worth mentioning that the deposit for indebtedness operations to prefinance exports shall be equivalent to 15% of the value of the drawdown and for a term of 36 months.

3. The registration of foreign indebtedness operations is no longer required. Such registration requirement was also eliminated for other financing transactions, such as trade financing and the granting of credit to foreign residents through Exchange Market intermediaries.

In order to ensure the compliance with foreign exchange regulations formerly controlled through the registration procedure, the Exchange Market intermediaries shall hereinafter verify the fulfillment of requirements such as the posting of the deposit and the nature of the foreign financial entities granting the credits, in accordance with a list provided by the Central Bank. In addition, the Central Bank has the power to request information from time to time in order to audit indebtedness operations ; it will also determine which modifications to the conditions of the indebtedness shall be informed to it.

4. Any foreign indebtedness transactions carried out by public entities (Nation, territorial and descentralized entities) will be subject to the mentioned deposit rules.

The maximum interest rates applicable to public external debt were fixed in PRIME plus 50 basis points or LIBOR plus 300 basis points. These maximum rates are also applicable to indebtedness transactions carried out through the placement abroad of debt securities issued by the Nation.

Prepared by Maristella Aldana from Gomez Pinzon & Asociados. These notes are intended to provide only a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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