DOES INTEGRATED SUPERVISION WORK IN EMERGING MARKETS-THE CASE OF BOLIVIA--

PRESENTATION BY

Pablo Gottret, Ph.D

World Bank Senior Economist and Former Superintendent of Pensions, Insurance and Securities of Bolivia

THE RATIONALE OF THE MERGER: THE RATIONALE OF THE MERGER: INTERSECTORIAL RELATIONSHIPSINTERSECTORIAL RELATIONSHIPS

OBJECTIVES AND VISION SET FOR THE SUPERINTENDENCY OF PENSIONS,

INSURANCE AND SECURITIES

OBJECTIVES: Promote and control the prudent and transparent sustainable growth of the sectors under its supervision.

VISION: Institutional investors channeling long term internal savings through the capital markets to the real sector, infrastructure and services, on the basis of risk rated instruments (investment grade or better) according to a prudent portfolio requirement which generates a market rate of return for such savings.

INSTRUMENTS AND WORK ETHICSINSTRUMENTS: Organized under 4 pillarsRegulation: Draft and issue (according to mandate) appropriate

regulation for the capital markets, pension and insurance laws.Supervision: Supervise compliance of regulationInformation: Ensure availability and access to on time and accurate

information regarding the sectors under supervision, market behavior and the supervised institutions.

Education: Educate the population regarding the different markets and the rights and obligations of the different economic agents in those markets.

WORK ETHICS: Honesty, Transparency, Professionalism and Team Work.

Impact of the Merger on the Bolivian

Capital Market

9

377

208

98

61

415

255

330

133

279

7643

256238

60

138

216203

244

198

192

185197

200

0

60

120

180

240

300

360

420

Dec/92

Jun/93

Dec/93

Jun/94

Dec/94

Jun/95

Dec/95

Jun/96

Dec/96

Jun/97

Dec/97

Jun/98

Dec/98

Jun/99

Dec/99

Jun/2000

Dec/2000

Jun/2001

Dec/2001

Jun/2002

Jul/2002

Aug/2002

Sep/2002

Oct/2002

Nov/2002

Dec/2002

MUTUAL FUNDS PORTFOLIOMUTUAL FUNDS PORTFOLIO ((inin US$ MILLIONS US$ MILLIONS - at end of each period) - at end of each period)

DDeec-1992 c-1992 toto DecDec-2002 -2002

BBOLIVIAN STOCK EXCHANGEOLIVIAN STOCK EXCHANGE TRANSACTION RATES OF RETURNTRANSACTION RATES OF RETURN

(Fixed Income Securities - 28 day averages in US$)(Fixed Income Securities - 28 day averages in US$) SeptemberSeptember 2001 2001 toto DecemberDecember 2002 2002

7.16

5.585.24

4.05

4.76

3.19

2.62

3.29

5.39

6.02

4.80

3.26 3.132.87

2.15

0.67 0.681.01

1.21

2.85

8.408.78

2.25

4.79

3.84

3.28

2.65

1.56 1.51 1.601.88

3.24

6.47

7.39

2.94

4.21

4.00

4.08

5.21 5.18

2.10

4.114.77

3.13 2.83

4.07

4.93

3.81

0.00.5

1.01.52.0

2.53.03.5

4.04.55.0

5.56.06.5

7.07.58.0

8.59.0

SEP OCT NOV DIC ENE FEB MAR ABR MAY JUN JUL AGO SEP OCT NOV DIC

TRADING REPOS GENERAL

SHAREHOLDERS IN MUTUAL FUNDS SHAREHOLDERS IN MUTUAL FUNDS (N° of INVESTORS - at end of each period)(N° of INVESTORS - at end of each period)

DDeec-199c-19988 toto DecDec-2002 -2002

14,595

12,198

9,552

16,437

13,675

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

VVOLUMESOLUMES T TRADED IN THERADED IN THE B BOLIVIANOLIVIAN S STOCKTOCK E EXCHANGEXCHANGE

((in in US$ MUS$ MILLIONSILLIONS, Period 199, Period 19988-200-20022))

3,608

2,359

1

1,668

1,673

3,345

6 3 72 91500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1998 1999 2000 2001 31/ 12/ 2002

FIXED INCOME SHARES

1,165

1,366

2,730 2,675

1,181

1,084934615

509 495500

1,000

1,500

2,000

2,500

3,000

1998 1999 2000 2001 31/12/02

REPOS TRADING

VVOLUMESOLUMES T TRADED IN THERADED IN THE B BOLIVIANOLIVIAN S STOCKTOCK E EXCHANGEXCHANGE

((in in US$ MUS$ MILLIONSILLIONS, Period 199, Period 19988-200-20033))

SECURSECURIITIES TRADETIES TRADEDD IN THE BOLIVIAN STOCK IN THE BOLIVIAN STOCK EXCHANGE EXCHANGE

(YEAR 200(YEAR 20022, , percentagespercentages))

CENTRAL BANKREPAYMENT

DEPOSIT CERTIFICATES

0.19%

BOND COUPONS2.87%

SHORT TERM CORPORATE

BONDS0.06%

CENTRAL BANK BONDS6.68%

SHARES3.72%

SECURITIZATION

BONDS1.25%

T-BILLS7.01%

LONG TERM CORPORATE

BONDS9.95%

TREASURE BONDS32.65%

TIME DEPOSITS35.62%

Total 2,450 US$ Millions

CORPORATE BONDS ISSUED

Year US$ Number of I ssue

1998 1,550,000 2

1999 5,000,000 2

2000 40,000,000 3

2001 247,000,000 6

2002 170,500,000 5

SECURITIZATIONS ISSUED

Year US$ Nunmber of I ssue

2001 4,000,000 1

2002 12,500,000 1

TREASURY BONDS ISSUED

Year Currency Kind of I ssue US$ TOTAL US$

Bs Long Term 11,009,767.38

Bs with value mantained to US$ Long Term 144,500,000.00

US$ Long Term 11,780,000.00 167,289,767.38

1999 Bs with value mantained to US$ Long Term 157,500,000.00 157,500,000.00

Bs with value mantained to US$ Long Term 142,500,000.00

US$ Long Term 26,000,000.00

US$ Central Bank Public Sale 114,408,000.00 282,908,000.00

Bs with value mantained to US$ Long Term 137,000,000.00

US$ Central Bank Public Sale 281,853,000.00 418,853,000.00

Bs with value mantained to US$ Long Term 199,500,000.00

US$ Central Bank Public Sale 76,665,000.00

Bs with value mantained to Unit f or dwelling (UFV´s) Long Term 7,382,550.34 283,547,550.34

1998

2000

2001

2002

T-BILLS ISSUED

Year US$

2001 293,043,148

2002 175,601,381

Structure and Crisis

How the new structure helped during the crisis:• Depth of secondary markets for long term

instruments.• Supervision of Conglomerates• Relevance of supervising authority in decision

making

UNFINISHED JOB

Corporate Governance: Transparency, auditing and internal control systems, minority right protection.

Conflicts of Interest Regulation.

Property Rights and Registries

Crowding out and investment abroad.