aide-memorie of the banco de guatemala 2007aide memorie of the banco de guatemala 2007 i n d e x...

Aide Memorie of the Banco de Guatemala 2007

AIDE-MEMORIE of the

BANCO DE GUATEMALA 2007

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AIDE-MEMORIE of the

BANCO DE GUATEMALA

2007

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MONETARY BOARD

María Antonieta Del Cid Navas de Bonilla

President

Julio Roberto Suárez Guerra

Vice-president

TITLE MEMBERS

Mefi Eliud Rodríguez García Max Erwin Quirín Schoder Minister of Public Finance Elected by Business, Industry and Agricultural

Associations

Luis Oscar Estrada Burgos Julio Vielman Pineda Minister of Economy Elected by the Presidents of the Administration

Councils or Boards of Directors of National Private Banks

Bernardo Jesús López Figueroa René Arturo Villegas Lara Minister of Agriculture, Animal Husbandry Elected by the Superior Council of the And Food Universidad de San Carlos de Guatemala Luis Fernando Pérez Martínez Elected by the Congress of the Republic

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DEPUTY MEMBERS

Edgar Alfredo Balsells Conde Sergio de la Torre Gimeno Elected by the Congress of the Republic Elected by Business Associations

of Commerce, Industry and Agriculture

Miguel Angel Lira Trujillo Gabriel Biguria Ortega Elected by the Superior Council of the Elected by Presidents of Administration Universidad de San Carlos de Guatemala Councils or Board of Directors of the National Private Banks

Note: Titular and Deputy Members that were executing their functions to December 31st, 2007.

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PERMANENT ADVISORS

Manuel Augusto Alonzo Araujo Oscar Roberto Monterroso Sazo General Manager Director of Economy Sergio Francisco Recinos Rivera Leonel Hipólito Moreno Mérida Financial Manager Juristic Manager

Johny Rubelcy Gramajo Marroquín Willy Waldemar Zapata Sagastume Director Superintendent of Banks Department of Economic Studies

Armando Felipe García Salas Alvarado Secretary Monetary Board Note: Authorities and Higher Officials that are in exercise of their positions since December 31, 2007.

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BANCO DE GUATEMALA

AUTHORITIES

María Antonieta Del Cid Navas de Bonilla Julio Roberto Suárez Guerra President Vice-president

Manuel Augusto Alonzo Araujo Oscar Roberto Monterroso Sazo General Manager Director of Economy

Sergio Francisco Recinos Rivera Lidya Antonieta Gutiérrez Escobar Financial Manager Administrative Manager

Leonel Hipólito Moreno Mérida Juristic Manager

SUPERIOR OFFICERS Johny Rubelcy Gramajo Marroquín Sergio Rolando González Rodríguez Director Sub-director Department of Economic Studies Department of Banking and Financial Analysis Manuel de Jesús Castro Aguirre Luis Felipe Granados Ambrosy Sub-director Advisor II Department of Economic Studies Department of Banking and Financial Analysis Carlos Eduardo Castillo Maldonado Juan Carlos Castañeda Fuentes Sub-director Director Department of Economic Studies Department of Economic Investigations Otto René López Fernández Sergio Javier López Toledo Director Sub-director Department of Economic Statistics Department of Economic Investigations Fernando Wladimir Danilo Estrada Pérez Enrique Antonio Amurrio Comparini Sub-director Director Department of Economic Studies Department of Communication

And Institutional Relations Rómulo Oswaldo Divas Muñoz Edgar Rolando Lemus Ramírez Director Director Department of Monetary Stabilization International Department

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Operations Jorge Vinicio Cáceres Dávila Jorge Aníbal Del Cid Aguilar Sub-director Sub-director Department of Monetary Stabilization International Department Operations Héctor Adelso Del Cid Solórzano Mynor Humberto Saravia Sánchez Director Director Accounting Department Department of Administrative Services and Security Byron Leopoldo Sagastume Hernández Mario Roberto León Ardón Sub-director Sub-director Accounting Department Department of Administrative Services and Security Salvador Orlando Carrillo Grajeda Ariel Rodas Calderón Director Director Department of Human Resources Department of Technology and Information Erick Prado Carvajal Byron Saúl Girón Mayén Sub-director Sub-director Department of Human Resources Department of Technology and Information José René Lorente Méndez Romeo Eduardo Campos Sánchez Sub-director Director Department of Human Resources Department of Monetary Issue Armando Felipe García Salas Alvarado José Fernando Ramírez Velásquez Secretary Sub-director Monetary Board Department of Monetary Issue Aníbal García Ortiz Gerardo Noél Orozco Godínez Sub-Secretary Advisor III Monetary Board Juristic Advice Bernardino González Leiva César Augusto Martínez Alarcón Internal Auditor Advisor III Juristic Advice Erwin Roberto Camposeco Córdova Fernando Villagrán Guerra Internal Sub-auditing Advisor II Juristic Advice Note: Authorities and Superior Officers that are exercising said positions to December 31, 2007.

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I N D E X

Page

CHAPTER I

NATURE AND ADMINISTRATIVE STRUCTURE OF THE

BANCO DE GUATEMALA

1. Nature 2

2. Administrative Structure 3

CHAPTER II

OPERATIONS AND ACCOUNTS OF THE BANCO DE GUATEMALA 1. Term Deposits 8

1.1 In quetzales 8 1.2 In US dollars 8

2. Portfolio Bonds of the Banco de Guatemala 9

3. Treasury Bonds received to cover net deficiencies 9 4. International Monetary Reserves and transactions in foreign currency 10

4.1 International Monetary Reserves 10 4.2 Administration of the international monetary reserves 10 4.3 Letters of Credit 17 4.4 Issue of Drafts and payment orders 17

5. Letters of Credit 18 6. Deposits from the non-financial public sector 19 7. Financial State Agent 21

7.1 Operations with the Treasury Bonds of the Republic of Guatemala 21 7.2 Administration of amortization funds 22 7.3 Trusts and guarantee funds 22

8. Funds for Savings Protection 23 9. Trustee Funds of Banking Capitalization 25

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10. Payment System 27

10.1 Banking Clearing House 27 10.2 Gross Settlement System in Real Time -LBTR- 28

10.3 Modernization of the payment system 32

11. Bills and coins issued and amortized 33

12. Contributions of Guatemala to international financial organizations 35

13. Financial Statements 36 13.1 General Balance 36 13.2 Results Status 37

CHAPTER III TRANSPARENCY AND ACCOUNT RENDERING

1. Transparency and account rendering 40 1.1 Appearance of the President of the Banco de Guatemala before the

Congress of the Republic 40 1.2 Publication of information 40 2. Strategy of communication 41

CHAPTER IV OTHER CENTRAL BANK ACTIVITIES

1. Participation of International Meetings 44 2. Improvement of economic statistics 45

2.1 Economic surveys 46 2.2 Updating of the National Directory of Businesses and their

Addresses -DINEL- 46 2.3 Advances in the implementation of the V Manual of Payments Balance

of the IMF 46

2.4 Advances in the implementation of the Manual of Monetary Financial

Statistics of the IMF 47

2.5 Implementation of the National Quarterly Accounts System 48

2.6 Survey of Inflation Expectations from the Panel of Private Analysts -EEI- 49 2.7 Survey of Business Opinion -EOE- 49

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3. Academic Events 49 3.1 "Doctor Manuel Noriega Morales" Contest 50

3.2 Economic days 50

3.3 Program of Higher Studies 51

3.4 Participation in the Investigators Network in the Central Banks

Of Latin America 52

ANNEXES 1. State of Assets, Liable and Condensed Patrimony Fund for Savings

Protection 54 2. Financial Statements of the Banco de Guatemala 55 3. Main resolutions issued by the Monetary Board 57

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CHAPTER I

NATURE AND ADMINISTRATIVE STRUCTURE OF THE BANCO DE

GUATEMALA

Multiple use reserve of the Atitlán Lake Basin -RUMCLA-. Sololá. Consejo Nacional de Áreas Protegidas -CONAP- National Council for Protected Areas.

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http://www.conap.gob.gt/


NATURE AND ADMINISTRATIVE STRUCTURE

OF THE BANCO DE GUATEMALA 1. Nature

Article 2 of the Organic Law of the Banco de Guatemala stipulates that the institution, as

the Central Bank of the Republic, is a decentralized, autonomous entity, a juristic personality,

with a private estate, with the full capacity to acquire rights and to assume responsibilities, with

indefinite duration and with domicile in the territorial division of Guatemala.

Fundamental objective

According to article 3 of the mentioned law, the Banco de Guatemala has as its

fundamental objective to contribute in the creation and maintenance of the most favorable

conditions for the organized development of the national economy; therefore, it will provide the

monetary, foreign exchange rate and credit conditions that promote the stability in the general

level of prices.

Functions

The Central Bank has, among other functions determined by its organic law, has the

following:

a) To be the only issuer of the national currency; b) To try to maintain an adequate liquidity rate of the banking system, by using the

instruments established in its organic law; c) To pursue the good operation of the payment system; d) To receive in deposit the banking legal reserve and the legal deposits referred to in said

law; e) To administer the international monetary reserves, according with the guidelines

established by the Monetary Board; and,

f) To carry out the other functions compatible with its nature as a Central Bank, assigned by legal mandate.

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2. Administrative Structure

Clause h) of article 26 of the mentioned law establishes that the Monetary Board has the

responsibility of approving or modifying the administrative structure of the Banco de Guatemala,

proposed by the General Manager. Based on said decision, the Monetary Board, through

resolution JM-156-2006, approved the Income and Expenditure Budget of the Banco de

Guatemala for 2007 and modified said administrative structure.

Said modification was mainly due to the implementation of the “Action Plan for the

Organizational Re-dimension of the Banco de Guatemala”, which need to strengthen the

management areas of the institution, in order to make their operation smoother, following the

principles of the organization and specialization that are suggested by modern administrative

techniques. The referred modification is summarized in the following: a) Integrate work

processes of Organizational Development to the Department of Human Resources, becoming the

first Organizational Analysis System subscribed to said department; b) Integrate the Department

of Banking Security to the Supply and Diverse Services Department, which will be then named

the Department of Supplies and Diverse Services; and, c) change the Name of the Information

Department and its sections, in order that the same be according to international standards.

Following is a presentation of the organizational chart, in which the administrative

structure from the Banco de Guatemala is shown:

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INSTITUTIONAL STRATEGIC PLAN

OF THE BANCO DE GUATEMALA

The Institutional Strategic Plan is a joint effort of the General Manager’s office and

officers of the Banco de Guatemala, which consists of the determination of the strategic

objectives that allow orienting its management, through the establishment of middle and long-

term actions, so that the institution can exercise the decreed in the organic law and fulfill its

fundamental objective.

In that sense, is its administration policy of the Central Bank to give follow up to the

execution of the referred plan, as well as evaluate the results that have been reached, with the

purpose of adapting the changes in the environment, to review the validity of its long-term

objectives and the consistency of the strategies that have been contemplated, which allows taking

into consideration the implications that said changes represent for the fulfillment of the

mentioned strategic plan.

Below are the relevant elements of the Institutional Strategic Plan 2003-2007, which was

reviewed and updated in October 2006.

MISSION

To promote the stability in the general level of prices.

VISION

The Banco de Guatemala will continue being a well known, reliable institution, carrying out only the functions that correspond to a central bank, which promotes the stability in the general level of prices, through the full exercise of its autonomy, transparent management, organizational quality and availability of resources.

INSTITUTIONAL VALUES

• Ethical • Transparent • Identification and commitment • Loyalty • Responsibility

• Efficiency • Leadership • Quality • Empathy • Respect

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STRATEGIC OBJECTIVES

1. To advance in the adoption process of a scheme of explicit inflation goals.

2. To strengthen the administration management and investment of international

monetary reserves, according to international standards.

3. To consolidate processes of the payment system.

4. To strengthen the numerary administration.

5. To strengthen the transparency culture.

6. To administrate the risks that the institutional management faces.

7. To improve and strengthen the efficient operation of the institution.

It is necessary to point out, that based on the Institutional Strategic Plan1, the different

offices of the Banco de Guatemala formulate and execute the respective operative work plans,

including the projects and strategic actions that are required for its fulfillment.

1 In August 2007, the General Manager of the Banco de Guatemala approved the Institutional Strategic Plan 2008-2012.

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CHAPTER II

OPERATIONS AND ACCOUNTS OF THE

BANCO DE GUATEMALA

Monumento Natural Semuc Champey. Lanquín, Alta Verapaz. Consejo Nacional de Áreas Protegidas -CONAP- National Council for Protected Areas.

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OPERATIONS AND ACCOUNTS OF THE BANCO DE GUATEMALA

1. Term Deposits

1.1 Expressed in quetzales

As part of the monetary stabilization operations that the Banco de Guatemala

carries out in the execution of the monetary, foreign exchange rate and credit policy, in 2007, the

reception of term deposits continued through the different fund-raising mechanisms, for the term

and interest rate as well as the maturity date and yield. In that regard, at the end of said year, the

balance of said deposits was of Q11,937.3 million, amount lower by Q3,681.7 million than the

one registered at the end of 2006. The fund-raisings carried out through the different mechanisms

were of Q150,850.0 million, while the maturities were of Q154,531.7 million, as shown in the

following table:

TABLE 1

BANCO DE GUATEMALA TERM DEPOSIT MOVEMENTS

(Millions of quetzales)

Balance to Balance to Absolute CONCEPT FUND-RAISING MATURITIES 12/31/2007 12/31/2006 Variation

TOTAL

1.2 Expressed in dollars from the United States of America

To December 31st, 2007, the balance of the term deposits in dollars of the United States of

America that the system’s banks registered in the Banco de Guatemala as legal banking reserve

was of US$9.5 million, higher in US$1.8 million than the registered at the end of 2006 (US$7.7

million).

15,619.0 150,850.0 154,531.7 11,937.3 -3,681.7

5 ,387.9 Bidding per term 6,687.2 1,512.9 2 ,812.2 -1,299.3 Bidding per due date 0.0 67.7 0.0 6 7.7 67.7

6 9.3 69.3Direct bidding of public entities 0.0 404.4 3 35.1 MEBD ¹/ And stock exchange 3,056.5 119,481.0 1 21,882.5 655.0 -2,401.5

4 ,987.7 Term per window 5,247.6 29,028.5 2 9,288.4 -259.9 Window per maturity date 0.0 145.1 0.0 1 45.1 145.1 Remunerated legal banking reserve 627.7 210.4 2 13.5 624.6 -3.1

Electronic Money Banking Table.

YEAR 2007

1/

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As to the balance of term deposits in US dollars, made at the window with pubic entities

to December 31, 2007, this was at US$46.7 million; amount higher by US$20.7 million to the

registered the year before (US$26.0 million).

In summary, at the end of 2007, the total balance of the term deposits in dollars of the

United States of America was of US$56.2 million, higher by US$22.5 million to the observed to

December 31st, 2006, as shown in the following table:

TABLE 2

BANCO DE GUATEMALA MOVEMENT OF TERM DEPOSITS

(Millions of US dollars)

BALANCE TO ABSOLUTE BALANCE TOCONCEPT FUND-RAISING MATURITIES 12/31/2007 VARIATION 12/31/2006

TOTAL 56.2 33.7 75.1 52.6 22.5

46.7 Window 26.0 67.4 46.7 20.79.5 1.8Remunerated legal banking reserve 7.7 7.7 5.9

YEAR 2007

2. Bonds in portfolio of the Banco de Guatemala

The balance of portfolio bonds of the Banco de Guatemala, by the end of 2007, was of

Q2.0 million, completely integrated by banking bonds with guarantee of mortgage booklets

acquired by the Central Bank before 1990. Said balance is lower in Q2.2 million (52.38%)

regarding the one observed at the end of 2006, reduction that mainly corresponds to programmed

amortization of capital.

3. Treasury bonds received to cover net deficiencies

In fulfillment of the established in clause b) of article 9 of the Organic Law of the Banco

de Guatemala, the State, through the Ministerio de Finanzas Públicas, on August 27th, 2007 issue

in favor of the Banco de Guatemala Representative Certificates of the Treasury Bonds of the

Republic of Guatemala of Q593.8 million, to cover the net deficiency of the Central Bank that

corresponds to the fiscal year 2005, to a term of 30 years and an annual interest rate of 4.13%, so

to December 31, 2007, the balance of the referred titles under the Central Bank rose to Q2, 717.0

million.

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4. International Monetary Reserves and transactions in foreign currency

4.1 International Monetary Reserves

The level of the absolute international monetary reserves of the Banco de Guatemala, net as well

as absolute, at the end of 2007 was at US$4,320.3 million, higher by US$259.2 million regarding

the level observed at the end of 2006.

TABLE 3

BANCO DE GUATEMALA NET AND ABSOLUTE INTERNATIONAL

YEARS 2006 - 2007(Millions of US dollars)

VARIATION CONCEPT 2006 2007ABSOLUTE RELATIVE

259.2 Absolute reserves 4,061.1 4,320.3 6.4I.

0.0 II. Obligations up to a year term 0.0 0.0 0.0

259.2 6.4III. Net reserves (I - II) 4,061.1 4,320.3

MONETARY RESERVES

4.2 Administration of the international monetary reserves

The Monetary Board, in resolution JM-29-2004 dated April 1st, 2004, modified by

resolution JM-135-2004 dated November 10th, 2004, JM-16-2006 dated February 1, 2006 and JM

68-2006 dated July 5, 2006, authorized the investment policy of the international monetary

reserves of the Banco de Guatemala, so that said reserves are invested according to liquidity

security and profitability criteria and established the distribution mechanism of the same, for the

effect creating, the Liquidity and Portfolio tranches.

The Settlement tranche is directly administered by the Banco de Guatemala and its main

purpose is to provide coverage to potential exits of reserves in a one year period. This tranche is

made up of two sub-tranches known as Work Capital and Settlement Administration, which have

as their objective: first, to cover potential exits of reserves in a one month period and, second, to

give coverage to the foreign currency obligations estimated for up to a twelve month period.

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The investments that constitute the Settlement Tranche, per sub-tranche, to December 31st, 2007,

are shown below:

TABLE 4

BANCO DE GUATEMALA INTERNATIONAL MONETARY RESERVES

To December 31, 2007(Millions of US dollars)

AMOUNT SUBTRANCHES

675.4 TOTAL

100.0 CAPITAL FOR WORK

100.0 Deposits at sight in the New York Federal Reserve Bank

575.4 SETTLEMENT MANAGEMENT

a/ 575.4 Banco de Guatemala

a/ Refers to the accountable value of the portfolio.

SETTLEMENT TRANCHE

On their part, the Portfolio Tranche is administered by the financial institutions of

recognized international prestige, specialized in portfolio management, for which effect the

Monetary Board has authorized the General Management of the Banco de Guatemala to hire the

services of the institutions of this nature. Said tranche is constituted by the difference between

the amounts of the susceptible liquid reserves to be invested and the resources assigned to the

Settlement Tranche.

The distribution of the resources of the Portfolio Tranche, to December 31, 2007, is

shown as follows:

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TABLE 5

INTERNATIONAL MONETARY RESERVESBANCO DE GUATEMALA

PORTFOLIO TRANCHE

(Millions of US dollars and percentages )

STRUCTURE ADMINISTRATOR AMOUNT

a/TOTAL 100.0 3,436.7

32.2 UBS Global Asset Management (UK) Ltd. 1,106.729.6 Allianz Global Investors Advisory GmbH 1,016.421.5 JPMorgan Asset Management (UK) Ltd. 739.9

World Bank (RAMP) 16.7 573.7

a/ Refers to the accountable value of the portfolio.

TO DECEMBER 31, 2007

The funds that constitute the investment portfolios of the Tranche Portfolio and of the

sub-tranche for Settlement Management for the Settlement Tranche are under the custody of the

State Street Bank and Trust Company, entity that was hired to render technical services of global

custody to the Banco de Guatemala.

According to clause e) of article 4 of the Organic Law of the Banco de Guatemala and in

the referred investment policy of the international monetary reserves, the General Direction of the

institution, during 2007, the international monetary reserves of the Banco de Guatemala were

invested in repurchase agreements; in deposits immediately demandable and term deposits in

international financial institutions and in first-order foreign banks; in letters, notes and treasury

bonds; in securities issued or guaranteed by international organizations, financial institutions or

foreign governments of recognized solvency; in securities issued or guaranteed by governmental

agencies with sovereign guarantee; and, in other long-term instruments.

Regarding the liquidity and security of the investments, both criteria are evidenced in the

qualification of the instruments in which the international monetary reserves of the Banco de

Guatemala are invested. For that reason, for the short-term securities the qualifications allowed

are those not lower than A -1, of Standard & Poor’s; and, P-1 de Moody’s Investors Service;

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whereas the qualifications allowed for the long-term securities are those not lower than AA-, of

Standard & Poor’s; and, Aa3, of Moody’s Investors Service6.

As to the average net profitability of the international monetary reserves investment,

considering the market value of the investment portfolio of the Banco de Guatemala abroad,

during 2007 was of 6.75% annually for the Settlement Tranche and of 7.13% annually for the

Portfolio tranche. It is worth indicating that due to the modifications to the Investment Policy of

the International Monetary Reserves of the Banco de Guatemala approved in resolution JM-16-

2006 of the Monetary Board dated February 1, 2006, the investment of resources in the Work

Capital Sub-tranche are evaluated based on the current federal funds interest rate of the United

States of America, as long as the profitability of the investments of the Settlement Management

sub-tranche resources, investment portfolio that previously made up the Portfolio tranche, are

evaluated based on the approved benchmark by the Monetary Board for said sub-tranche.

Therefore, the corresponding rendering of the Settlement Tranche is calculated as the weighted

average of the yield obtained by the two sub-tranches that make it up.

The following tables show the invested amounts and the profitability obtained in the

Settlement Tranche and in their sub-tranches named Work Capital and Settlement Management,

during 2007.

6 The referred grading in the short term define that the ability of the issued to fulfill the financial commitment is “Extremely strong”; in other

words, that the same correspond to instruments of high credit quality and to a high re-payment ability, on behalf of the issuer. As to qualifications for long term., they define that the ability of the issuer to fulfill the financial commitment as “Extremely Strong” or “very strong”; in other words, that the same correspond to instruments of the same high quality credit and a low one ov very low expectation of investment risk.

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TABLE 6

BANCO DE GUATEMALA

YIELD FOR THE SETTLEMENT TRANCHE INTERNATIONAL MONETARY RESERVES

YEAR 2007

ANNUAL MILLIONS OF MONTH YIELD RATE US DOLLARS

TOTAL 52.0 6.75%

January 1.5 3.22%February 5.4 9.75%March 4.2 4.81%April 3.4 4.73%Mao 0.1 0.10%June 3.6 5.20%July 7.6 9.87%August 6.7 11.10%September 4.7 8.28%October 2.7 4.67%November 10.4 20.30%December 1.7 2.96%

TABLE 6-A


MONTH

TOTAL 8.2 4.90%

January 1 19.2 0.5 5.25%February 1 65.4 0.7 5.27%March 4 47.7 2.0 5.27%April 1 74.5 0.8 5.24%May 1 50.7 0.7 5.16%June 1 71.5 0.7 5.04%July 2 02.5 0.9 5.13%August 1 30.3 0.5 4.76%September 9 7.7 0.4 4.90%October 1 04.9 0.4 4.70%November 9 5.3 0.3 4.17%December 9 0.7 0.3 3.92%

(Millions of US dollars)YEAR 2007

AND OF THE SETTLEMENT SUB-TRANCHE

AVERAGE ANNUALINVESTED YIELD YIELD AMOUNT RATE

YIELD OF THE WORK CAPITAL SUB-TRANCHE

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TABLE 6-B

BANCO DE GUATEMALA

YIELD OF THE SETTLEMENT MANAGEMENT TRANCHEINTERNATIONAL MONETARY RESERVES

YEAR 2007

ANNUAL 1/ YIELD YIELD AMOUNTMONTH

RATE

TOTAL 7.24% 43.8

January 2.50% 334.3 1.0 11.02% February 589.0 4.7

March 4.46% 591.1 2.2 April 4.60% 708.7 2.6 May -0.97% 708.1 -0.6

5.23% June 7 11.1 2.9 11.16% July 7 47.8 6.7 12.42% August 6 24.0 6.2 8.81% September 6 28.3 4.3

October 4.67% 590.6 2.3 November 22.86% 600.7 10.1 December 2.82% 592.1 1.4

1/ Valor de mercado del portafolio de inversión al final de cada mes.

(Millions of US dollars)

As to the Tranche portfolio, in the following table are the market values of the investment

portfolios at the end of each month, as well as the profitability obtained for the same during 2007.

25


TABLE 7


To December 31, 2997 the distribution of the absolute international monetary reserves

was the following:

MONTHE

TOTAL 225.6 7.13%

January 3 ,204.9 6.8 2.65% Februar 2 ,977.8 23.0 10.82% March 2 ,988.4 10.6 4.38% April 3 ,251.0 12.6 4.94% May 3 ,249.1 -1.9 -0.53% June 3 ,262.6 13.6 5.32% July 3 ,391.7 29.1 10.72% August 3 ,422.4 30.7 11.40% September 3 ,445.0 22.5 8.48% October 3 ,459.2 14.2 5.12% November 3 ,515.0 55.8 21.64% December 3 ,523.6 8.6 3.01%

1/ Value of the market of investment portfolios at the end of each month.

(Millions of US dollars)YEAR 2007

YIELD O FTHE PORTFOLIO TRANCHE

ANNUAL AMOUNT1/ YIELD YIELD

RATE

TABLE 8

BANCO DE GUATEMALA

TO DECEMBER 31, 2007(Millions of US dollars)

4,320.3 TOTAL

675.4 I. Investment of the Liquidity Tranche

3,436.7 II. Investment of the Portfolio Tranche

6.3 1/III. Operative Reserve

201.9 2/IV. Other Assets

1/

ABSOLUTE INTERNATIONAL MONETARY RESERVES

In the following Institutions:Citibank, NA, New York; Banco Internacional de Costa Rica,Miami; New Dresdner Bank, AG, Frankfurt; Banca Commerciale Italiana, Milán; The Bank of

New York, York; Bank of Nova Scotia, Toronto; UBS, AG, Zürich; Societé Generalé, Paris; Mitsubishi Bank, Bank of Tokyo Ltd., Tokyo;Lloyds TSB Bank plc, London; y, Wachovia NA,

New York.2/ Mainly Includes contrib tionsu to International Organizations, gold, special rights to

Hold special Drawing Rights, Numerary, Compens agreements ation de And Reciprocal credits and special resource programs.

26


4.3 Credit letters

To hold importation operation letters made in 2007 by the public sector and by the Banco

de Guatemala, credit letters for US$74.8 million were made and settlements for US$61.2

million. As a result of the indicated operations, at the end of 2007, the balance of said credit

letters grew to US$27.1 million, amount higher by US$13.6 million regarding the registered to

December 31, 2006.

Following is a table that illustrates the referred movement of the credit letters:

CUADRO 9

BANCO DE GUATEMALA CREDIT LETTERS

MILLIONS OF US DOLLARS MOVEMENT QUANTITY

Balance to December 31, 2006 53 13.5

(+) Issued credit letters 77 74.8

(-) Settled Credit Letters 58 61.2

Balance to 12/31/2007 72 27.1

YEAR 2007

4.4 Issue of Drafts and Payment Orders

During 2007 the Banco de Guatemala carried out fund transfers and payments to

institutions from abroad for the amount of US$2,584.5 million, higher by US$86.7 million than

that from the previous year. For that reason, it issue written drafts, as well as payment orders

through the SWIF T2 system. Through said transactions the obligations acquired by the public

sector and Banco de Guatemala, the foreign currency operations with the banking system and the

movement of the international monetary reserves was taken care of.

The following table illustrates the referred movement of drafts and payment orders:

2 Acronym of the Society for Worldwide Interbank Financial Telecommunications, entity that provides electronic communications services for

financial institutions around the world.

27


TABLE 10

BANCO DE GUATEMALA

YEAR 2006 - 2007

MILLIONS OF QUANTITY OF ABSOLUTE ABSOUTE CONCEPT US DOLLARSOPERATIONS VARIATION VARIATION

2006 2007 2007 2006

TOTAL 7,958 2,584.5 7,496 -462 2,497.8 86.7

1,184 72.1 994 -190 93.4 -21.3I. Drafts

6,774 2,512.4 II. Payment orders 6,502 -272 2,404.4 108.0

DRAFT ISSUES AN PAYMENT ORDERS

5. Credit Portfolio

Regarding credit operations of the Banco de Guatemala, during 2007 the institution did

not receive any request in that regard and there were no amortizations registered regarding the

advances for financial restructuring granted in previous years to various banking entities of the

system. Consequently, the balance of the credit portfolio to December 31st, 2007 was of Q457.1

million, which, while deducing the reserve for credit assets assessment of Q165.8 million, and

was placed at Q291.3 million.

As to the contingent credit lines granted by the Banco de Guatemala in 2001 to three

banking institutions that were administratively intervened in that year3, the balance of said

funding remained invariable during 2007 (Q1,597.8 million), due that there was no amortization

to said credits, since they are under judicial charge. It is important to mention that on this

portfolio, the Central Bank has a reserve for credit assets assessment equivalent to one hundred

percent of its balance.

For that reason, on December 31st, 2007, the balance of the gross credit portfolio balance

with internal resources of the Banco de Guatemala was of Q2,054.9 million, while the net credit

portfolio was of Q291.3 million. Therefore, it is important to mention that the difference of

Q1,763.6 million registered between both sectors corresponds to the total amount of assessment

reserves that were constituted on the same date of the referred gross portfolio.

3 Banco Empresarial, S. A., according to resolution JM-82-2001; Banco Metropolitano, S. A., according to resolution JM-112-2001; and,

Banco Promotor, S. A., according to resolution JM-113-2001. It is worth indicating that these entities are currently subject to bankruptcy processes in the competent jurisdictional organisms.

28


TABLE 11

BANCO DE GUATEMALABALANCE OF THE CREDIT PORTFOLIO


BALANCE TO CONCEPT 12/31/2007

6. Deposits of the public non-financial sector

The deposits from the non-financial public sector in the Banco de Guatemala are

integrated by the resources that the central government and the rest of the public sector keep in

the Central Bank. In this context, to December 31st, 2007, the total of deposits that the central

government has in the Banco de Guatemala was of Q9,532.0 million, higher by Q1,980.6 million

(26.2%) regarding the amount registered on the same date of 2006. It is important to indicate that

said increase mainly obeys the greater income coming from foreign disbursements. In that sense,

they highlight the disbursements for loans granted by the Central American Economic Integration

Bank-BCIE [For its acronym in Spanish.] – for Q1, 538.1 million to partially finance the “Multi-

sector Program for Investment Strengthening”; of the loans granted by the International

Reconstruction and Development Bank –BIRF [For its acronym in Spanish.] – for Q771.7 million

to finance the “Second Loan for Development policies and broad base growth”; and, the loan

granted by the Inter-American Development Bank –BID [For its acronym in Spanish.] – for the

TOTAL GROSS CREDIT PORTFOLIO 2 ,054.9 a/

I. Advances for financial restructuring 4 57.1

Banco Empresarial, S. A. 5 3.4 Banco Metropolitano, S. A. 1 82.3 Banco Promotor, S. A. 2 21.0 Financiera Agro Comercial, S. A. 0 .4

II. Contingent Crdit Lines 1 ,597.8

Banco Empresarial, S. A. 4 56.8 Banco Metropolitano, S. A. 6 12.9 Banco Promotor, S. A. 5 28.1

III. Reserves for valuation of assets 1 ,763.6

On advances for financial restructuring 1 65.8 On contingent credit lines 1 ,597.8

TOTAL NET CREDIT PORTFOLIO (I+II-III) 2 91.3

YEAR 2007

a/ Balance due.

29


equivalent to Q771.5 million to finance the program named “Program for Quality in Social

Expense Improvement.”

The deposits from the non-financial public sector in the Banco de Guatemala are

integrated by the resources that the central government and the rest of the public sector keep in

the Central Bank. In this context, to December 31st, 2007, the total of deposits that the central

government has in the Banco de Guatemala was of Q217.8 million, higher by Q71.1 million

(48.5%) regarding the registered to December 31, 2006. Said raise is explained by the increase of

deposits by the National Institute of Electricity, the University of San Carlos of Guatemala, the

Guatemalan Tourism Institute and other decentralized entities, for Q21.9 million, Q21.8 million,

Q8.4 million and Q19.0 million, in that order.

Due to the above, the deposits from the non-financial public sector in the Banco de

Guatemala at the end of 2007, was at Q9,749.8 million, amount higher by Q2,051.7 million

(26.7%) regarding the registered balance in 2006.

TABLE 12

DEPOSITS OF THE PUBLIC NON-FINANCIAL SECOR IN THE BANCO DE GUATEMALA YEARS 2006 - 2007


VARIATION

CONCEPT ABSOLUTE 2006 2007

TOTAL 26.7 7,698.1 9,749.8 2,051.7

26.2 I. Central Government 7,551.4 9,532.0 1,980.6

II. 48.5 Rest of the public sector 146.7 217.8 71.1

RELATIVE

7. Financial Agent of the State

During 2007 the Banco de Guatemala, according to article 53 of its organic law, made

several operations, for which it is competent, in its quality of financial agent of the state, which is

described as follows:

30


7.1 Operations with Treasury Bonds in the Republic of Guatemala

To December 31, 2007, according to the order account of the accounting registries of the

Banco de Guatemala, the balance of the treasury bonds in circulation expressed in quetzales are

located at Q20,482.1 million. Said balance is greater by Q4,502.1 million (28.2%) to the

registered to December 31, 2006, as a net result of the placements through the bidding

mechanisms and of bidding for Q4,714.4 million; to deliver to the Banco de Guatemala for

Q593.8 million in treasury bonds to cover its net deficiency corresponding to the 2005 fiscal

year; and for amortizations for Q806.1 million.

On the other hand, the balance of the treasury bonds expressed in US dollars, to December

31, 2007, was at US$1,438.4 million, amount lower by US$210.5 million to the registered on the

same date of the previous year, as a result of the amortizations made during 2007, which includes

a payment for US$150.0 million in Treasury Bonds of the Republic of Guatemala, place in

international markets in 1997.

TABLE 13

OPERATIONS OF TREASURY BONDS OF THE REPUBLIC OF GUATEMALAYEARS 2006 - 2007

2006 2007

7.2 Administration of amortization funds

The amortization funds constituted in the Banco de Guatemala by the public sector to

assist the service of the bonded debt of the central government and municipalities, to December

31st, 2007, were of Q294.9 million, of which Q294.8 million correspond to the central

government and Q0.1 million to the Municipalities of Guatemala and Quetzaltenango.

BALANCE BALANCE

I. TREASURY BONDS IN QUETZALES 15,980.0 5,308.2 806.1 2 0,482.1 4,502.1 28.2

Of the Republic of Guatemala 15,980.0 5,308.2 a/ 806.1 2 0,482.1 4,502.1 28.2

II. TREASURY BONDS IN US DOLLARS 1,648.9 0.0 210.5 1,438.4 -210.5 -12.8

Fiscal year 1997 194.0 0.0 150.0 4 4.0 -150.0 -77.3 Fiscal year 1998 37.5 0.0 0.0 3 7.5 0.0 0.0 Of the Republic of Guatemala 851.8 0.0 23.1 828.7 -23.1 -2.7 Of the Republic of Guatemala –Peace Bonds 565.6 0.0 37.4 528.2 -37.4 -6.6a/ Includes Q593.8 million of Treasury Bonds given to the Banco de Guatemala to cover the net deficiency corresponding to the 2005 accounting year .

RELATIVEABSOLUTE VARIATIONSCONCEPT

NEGOTIATED AMORTIZED

(Millions)

31


It is important to indicate that the balance of the amortization fund of the central

government, to December 31st, 2006 and the supply carried out in 2007 allowed opportunely

taking care of the bonded debt service.

TABLE 14

BANCO DE GUATEMALAAMORTIZATION FUNDS OF THE BONDED PUBIC DEBT OF THE

YEAR 2007 (Millions of quetzales)

FUNDS

CENTRAL CONCEPT MUNICIPALITIES TOTAL GOVERNMENT

Balance to December 31, 2006 0.1 753.7 753.6

(+) 0.0 Provisioning 4,557.0 4,557.0

(-) 0.0 Payment 5,015.8 5,015.8

Capital 0.0 2,189.0 2,189.0

0.0 Interest and services 2,826.8 2,826.8

Balance to December 31, 2007 0.1 294.9 294.8

CENTRAL GOVERNMENT AND OF TWO MUNICIPALITIES

7.3 Trusts and guarantee funds

To December 31st, 2007, the balance of the referred trusts and of the mentioned guarantee

funds are Q900.9 million, higher in Q44.6 million than the one registered the previous year

(Q945.5 million). Said net variation is mainly due to the registered increase in the trust

patrimony: “Fiduciary Banking Capitalization Funds” and the “Global Credito for Micro and

Small Business Credit”, as well as the decrease registered in the “Trust for the National Peace

Fund.”

32


TABLE 15

BANCO DE GUATEMALA TRUSTS AND GUARANTEE FUNDS TO DECEMBER 31, 2006 AND OF 2007

(Thousands of quetzales)

CONCEPT BALANCEABSOLUTE RELATIVE2006 2007

TOTAL 945,551.6 900,902.4 -44,649.2 -4.7

I. TRUSTS 945,509.3 900,865.1 -44,644.2 -4.7

National Peace Trust Funds 180,261.7 109,626.8 -70,634.9 -39.2

Improvement for the Small Coffee Farmer 77,832.5 77,849.4 16.9 0.0

National Science and Technology Admini ration National Trust Fundst -FONACYT [For its acronym in Spanish] 30.9 30.6 -0.3 -1.0

Extraordinary Fund for Specific Reconstruction 10,373.0 10,366.4 -6.6 -0.1

Program for Community Peace Development –DECOPAZ [For its acronym in Spanish] -

27.4 27.4 0.0 0.0

Global Program for Credit for Micro and Small Businesses 88,983.8 91,632.2 2,648.4 3.0

Fiduciary Fund for Banking Capitalization 588,000.0 611,332.3 23,332.3 4.0

II. GUARANTEE FUNDS 10.0 5.0 -5.0 -50.0

Guarantee fund for Housing 10.0 5.0 -5.0 -50.0

III. OTHER FUNDS 32.3 32.3 0.0 0.0

Fund for Industrial Sector Reactivation 32.3 32.3 0.0 0.0

VARIATION

8. Fund for Savings Protection

The Savings Protection Fund regulated in Decree Number 19-2002 of the congress of the

Republic, Law of Banks and Financial Groups, was created with the objective of guaranteeing the

account holder in the banking system the recovery of their deposits up to an amount of Q20.0

thousand or its equivalent in foreign currency, per individual or juristic person. The resources of

this fund are administrated by the Banco de Guatemala and its regulated deposits were approved

by the Monetary Board in resolution JM-187-2002 dated June 1, 2002 and modified in resolution

JM-54-2006 dated May 10, 2006.

According to the forecast in article 86 of the Law of Banks and Financial Groups, the

financing sources for the Savings Protection Fund are the following:

a) The quotas that are compulsory for national banks and branches of foreign banks to pay,

according with article 88 of the referred law;

b) The yield of the investments of their resources, fines and interest;

33


c) The cash that is obtained from the settlement process of the corresponding bank,

regarding the subrogation of rights referred in article 91 of the same law;

d) The cash obtained from the sale of assets adjudicated to said fund, regarding the

settlement process of the corresponding bank, with regard to the subrogation of rights

referred in article 91;

e) The contributions of the state to cover deficiencies of the fund or to enlarge its coverage;

and,

f) Other sources that increase its resources.

The resources for the Savings Protection Fund are not subject to seizure; they are not

reimbursable and can only be applied for the finalities foreseen in the Law of Banks and

Financial Groups.

During 2007, the Banco de Guatemala in its quality of administrator of resources for the

Savings Protection Fund, based on the established in resolution JM-13-2007 dated January 12,

2007 of the Monetary Board, through which the monetary authority resolved immediately

suspending the operations of the Banco de Comercio, Sociedad Anónima, according to the

declared in article 75 of the Law of Banks and Financial Groups; and, at the request of the Assets

and Liabilities Exclusion Board for the Banco de Comercio, S. A., made a contribution of Q371.9

million to the Administration Trust Fund and Excluded Assets of the Banco de Comercio, S. A.,

constituted in the National Financial Corporation, with the purpose of making the coverage for

account holders of the suspended banking institution effective.

Due to the fact that the Savings Protection Fund did not count on the necessary funds for the

mentioned coverage, at the request of the Banco de Guatemala, in its quality of administrator of

said funds, under article 3 of Decree Number 74-2002 of the Congress of the Republic, obtained

financial support of the Fiduciary Trust Funds of Banking Capitalization for Q360.0 million,

having been disbursed on January 19, 2007. Additionally, the Banco de Guatemala requested

that the Ministerio de Finanzas Públicas [Equivalent to the US Department of the Treasury.] to

make a contribution to the Savings Protection Fund, which was approved in Governmental

Agreement Number 59-2007 dated February 21, 2007, for an amount of Q273.6 million which

came into effect on March 16, 2007.

On the other hand, the Banco de Guatemala, in the mentioned quality, with authorization

from the Monetary Board, contained in resolution JM-50-2007 dated February 21, 2007,

34


subscribed bilateral conventions for the strengthening of the Savings Protection Funds with the

banks of the system, for a global amount of Q495.9 million, of which in 2007, Q74.6 million

were amortized, so to December 31, 2007 the balance of said conventions rose to Q421.3 million

and to the interest paid for this concept rose to Q13.8 million.

Due to the operations referenced, the patrimony of the Savings Protection Fund to December

31, 2007 (Annex 1), was at Q135.6 million, amount higher by Q55.7 million to the observed the

previous year (Q79.9 million).

The mentioned balance is the net result of Q135.6 million of the registered income due to

quotas contributed by the banks of the system for Q354.1 million; of contributions by the state for

Q841.8 million and Treasury Bonds of the Republic of Guatemala -Peace Bonds-, for Q540.2

million; of the transfer of funds generated in the fulfillment of the declared by decrees 315 and 4-

2002 of the Congress of the Republic, destined to the Savings Protection Fund, for Q31.4 million;

and, of the accumulated results by Q342.2 million; minus the variation registered in the exchange

account differentials for Q2.2 million and the contributions of the assets exclusion of assets trust

for Q1,971.9 million made to the Administration and Excluded Assets Trust Fund made for the

Banco del Café, S. A., for Q1,600.0 million and of the Banco de Comercio, Sociedad Anónima,

for Q371.9 million.

9. Trust Fund of Banking Capitalization

The Banking Capitalization Trust Fund -FCB- [Acronym in Spanish.] was created through

decree number 74-2002 of the Congress of the Republic of Guatemala, in order to financially

support the sanitation and strengthening process of the national banking system within the

context of banking fusion, acquisition of assets and asset and liability exclusion processes, carried

out based on the Law of Banks and Financial Groups.

According to the referred decree, the resources of the FCB are administered through a

trust constituted in the Banco de Guatemala, which acts as trustee of the same. The trustor is the

state of Guatemala through the Ministerio de Finanzas Públicas [Roughly equivalent to the

Department of the Treasury of the United States of America.] figuring as trustees the banks that

are interested and that are eligible for the financing and the State of Guatemala. The superior

organ of the trust is the Technical Committee integrated by two representatives of the Ministerio

de Finanzas Públicas [Roughly equivalent to the Department of the Treasury of the United States

35


of America.] and two representatives of the Central Bank, which has as part of its attributions, to

issue the regulatory decisions for its operation, as well as those from the trust, which were

approved in the Ministerial Agreement number 51-2004 of the Ministerio de Finanzas Públicas

[Roughly equivalent to the Department of the Treasury of the United States of America.] dated

September 24, 2004 and modified according by Ministerial Agreement number 48-2006 dated

December 8, 2006. In said agreement the following normative was approved:

a) Regulation of the Technical Committee of the Fiduciary Trust Fund for Banking

Capitalization;

b) Regulation of Bank Eligibility to be funded by the Fiduciary Trust Fund for Banking

Capitalization;

c) Regulation of Financial Assistance to Banks of the System;

d) Regulation for the sale of Assets of the Fiduciary Trust Fund for Banking Capitalization;

and,

e) Investment policy of resources of the Fiduciary Trust Fund for Banking Capitalization.

During 2007 the FCB granted financial assistance to banks of the system, for a total of

Q246.9 million, of which to December 31, 2007 had disbursed Q235.9 million and are pending a

disbursement of Q11.0 million.

Due to the suspension of the Banco de Comercio, Sociedad Anónima, FCB according to the

stipulated in article 3 of Decree Number 74-2002 of the Congress of the Republic, granted

financial support to the Savings Protection Fund for Q360.0 million, which came into effect on

January 19, 2007.

The availability of resources of the FCB, to December 31, 2007, rose to Q15.4 million, which

were deposited in term certificates of deposit of the Banco de Guatemala. Regarding the wealth

to date, it rose to Q617.2 million, amount higher by Q22.3 million to the registered the previous

year (Q594.9 million). Said wealth is integrated by Q572.6 million, corresponding to the

contributions in cash made by the state to December 3, 2005 and of December 27, 2006, for

Q193.5 million, equivalent to US$25.0 million and for Q379.1 million, equivalent to US$50.0

million, coming from the second and third disbursement of the BIRF-7130-GU loan, subscribed

between the Republic of Guatemala and the International Reconstruction and Development Bank

–BIRF [For its acronym in Spanish.]; and, for Q44.6 million corresponding to accumulated

results.

36


10. Payment system

The Banco de Guatemala, to give fulfillment to the decided in clause c) of article 4 of its

organic law, as to the procurement of the good operation of the payment system, during 2007

continued exercising legal and regulatory functions corresponding to the director of the Banking

Clearing House and the administrator of the Gross Settlement System in Real Time -LBTR-; in

general terms, are summarized below.

10.1 Banking Clearing House

Article 70 of the Organic Law of the Banco de Guatemala stipulates that the banking legal

reserve, as well as the funds deposited by the banks in the Banco de Guatemala, or in other

entities that for the effect it hires, will served as a base for the check clearing system, through a

clearing house. The Regulation of the Banking Clearing House was approved by the Monetary

Board in resolution JM-51-2003, dated April 23, 2003 and modified in resolution JM-189-2007

dated December 12, 2007.

Following is a table that contains the quantity and value of operations made in the

Banking Clearing House, during 2006 and 2007.

37


TABLE 16

BANCO DE GUATEMALA OPERATIONS OF THE BANKING CLEARING HOUSE

YEARS 2006 - 2007

ABSOLUTE VARIATION CONCEPT 2006 2007

QUANTITY-0.4 Compensated checks 30.2 29.8

-0.5 In national currency 29.9 29.41/ 0.1 In foreign currency 0.3 0.4

VALUE -4,452.6 In quetzales 440,643.4 436,190.8

2,253.0 In US dollars 4,292.4 6,545.4

(Millions)

1/ The total corresponds to US dollars .SOURCE: Main compensator, Computerized Images of Guatemala -ICG-.

As we can observe in the previous table, during 2007 the quantity of checks in national

currency and in foreign currency cleared in the Banking Clearing House was of 29.4 million, for

a value of Q436,190.8 million, amount lower by Q4,452.6 million registered in 2006; and, of 0.4

million, for a total value of US$6,545.4 million, amount higher by US$2,253.0 million to the

registered in 2006, respectively.

10.2 Gross Settlement System in Real Time –LBTR [Acronym in Spanish.]

The Monetary Board in resolution JM-166-2005, dated November 30, 2005 approved the

Regulation for the Gross Settlement System in Real Time -LBTR-. Also, according to the

forecast in article 8 of the referred regulation, the General Manager of the Banco de Guatemala

issued resolutions GG-10-2007, dated December 10, 2007, to add clause B of resolution GG-01-

2006, dated January 13, 2006, clauses e, f, g and h corresponding to schedules to settle the

following operations; e. Term deposits in the Banco de Guatemala and of operations to give

liquidity, through the National Stock Exchange Corporation; f. Purchase-sale of foreign currency

operations made through the Foreign Currency Electronic Negotiation System –SINEDI-; g.

Term deposits constituted in the Banco de Guatemala and of operations of liquidity giving

operations, through the Electronic Banking Money Table-MEBD-; and, h. Transfer of title

38


holding of Term Deposits registered in custody in the Banco de Guatemala. It also gives the

Accounting Department the authority so that, in exceptional cases and duly justified, can

authorize the realization of operations closing of the LBTR system, on working banking days,

outside the established schedule for said effect.

During 2007, the participating entities made the following transactions through the LBTR

system: transfer of funds; payment instructions; investment payments in values titles issued by

the Government of the Republic and term deposits constituted in the Banco de Guatemala;

numerary withdrawal instructions; settlement results of multilateral compensations; public sector

account operations; settlement of operations under the modes of payment upon delivery and

payment upon payment; commissions payments for services rendered in the system; consultations

and generation of files; and, make up and generation of reports and statistical information.

To make and settle operations referenced, the LBTR system interacts with internal

systems in the Banco de Guatemala that affect the deposit accounts constituted in the Central

Bank. In that sense, the Banco de Guatemala developed the interfaces of the internal systems

that interact with the LBTR system: Financial and Accounting Information System –SICOF [For

its acronym in Spanish]-, Integrated System of Values Titles –SITV [For its acronym in Spanish]-

, Till System and Till Verification System –VIC-. Additionally, the design of the operation of the

LBTR system is ready to use two communications networks, a local one (BANCARED) and an

international one (SWIFT).

The following table presents the information regarding the quantity and value of the

operations in quetzales settled in the LBTR system in 2006 and 2007.

TABLE 17

BANCO DE GUATEMALA OPERATIONS SETTLED IN THE GROSS SETTLEMENT SYSTEM IN REAL TIME

YEARS 2006 - 2007

QUANTITY OF MILLIONS OF ABOLUTE ABOLUTE VARIATION OPERATIONS QUETZALESTYPE OF OPERATIONS

2006 2007 2006 2007

TOTALS 39,345 49,870 10,525 330,927.7 336,689.2 5,761.5

I. Made by the participants 29,503 34,546 5,043 245,306.1 194,861.7 -50,444.4

II. Made by the Banco de Guatemala 1,506 2,117 611 8,904.6 5,489.9 -3,414.7

III. Made by the Banking Clearing Clearing House 8,336 11,694 3,358 76,717.0 47,533.2 -29,183.8

IV. Made by the Negotiation 1/ Systems 0 1,513 1,513 0.0 88,804.4 88,804.4

1/

Refers to the Electronic Money Banking Table of Money -MEBD-, to the Electronic Settlement System –SEL- and the Electronic Negotiation System in Foreign Currency -SINEDI-.

VARIATION

39


During 2007, the amount of operations settled in the LBTR system was of 49,870 for a

value of Q336,689.2 million, amount higher by Q5,761.5 million to the registered in 2006. It is

worth indicating that 49,870 operations, 34,546 (for an amount of Q194,861.7 million)

correspond to those made directly by the participants; 51.3% correspond to direct transfers

between participants; 41.6% of payments of diverse services and taxes, 5.6% to cash

withdrawals; 1.1% to direct investments made in the Banco de Guatemala by the participants,

and 0.4% to settlement of operations in the Electronic Money Banking Table –MEBD-. Of the

2,117 operations made by the Banco de Guatemala (for an amount of Q5,489.9 million); 76.9%

correspond to remunerated legal reserve investments; 8.5% to quotas of the Savings Protection

Fund; 7.8% to debit operations lacking in cash deposits made by the banks of the system; 5.2%

by charge of commission for services of the LBTR system; 1.4% for rent of properties of the

Banco de Guatemala; and, 0.2% for other transfers. The 11,694 operations (for an amount of

Q47,533.2 million) made by the Banking Clearing House, are originated in the net multilateral

result4 of the referred house; whereas the remaining 1,513 operations (for the sum of Q88,804.4

million) correspond to settlement operations by the negotiation systems in the following manner:

95.2% come from the Electronic Money Banking Table –MEBD- and of 4.8% of the Electronic

Settlement System –SEL-, not registering operations in the Electronic Foreign Currency

Settlement System –SINEDI-.

The following is a graph that contains information on quantity and amount of operations

in US dollars settled in the LBTR system in 2006 and in 2007.

TABLE 18

BANCO DE GUATEMALA OPERATIONSN SETTLED IN THE GROSS SETTLEMENT SYSTEM IN REAL TIME

YEARS 2006 - 2007

ABSOLUTE ABSOLUTE QUANTITY OF VARIATION VARIATION US DOLLARS TYPE OF OPERATIONS OPERATIONS

2006 2007 2006 2007

TOTALS 8,033 13,444 5,411 3,961.4 3,809.1 -152.3

I. Made by the participants 1,987 3,496 1,509 1,958.1 2,306.8 348.7

II. Made by the Banco de Guatemala 351 570 219 46.1 33.9 -12.2

III. Made by the Banking Clearing House 5,695 9,378 3,683 1,957.2 1,468.4 -488.8

MILLIONS OF

4 It is the sum of the value of all the checks in favor of each participating bank minus the sum of the value of all checks in its charge, operated

or presented in the Banking Clearing House.

40


During 2007, the quantity of operations in US dollars, settled through the LBTR was of

13, 444, for a value of US$3,809.1, amount lower by US$152.3 million to the registered in 2006.

Of the 13,444 operations, 3,496 (for an amount of US$2,306.8 million) correspond to those made

directly by the participants, of which 66.1% correspond to internal transfers between participants

and 33.9% correspond to transfers with credit to deposit accounts made abroad. Of the 570

operations made by the Banco de Guatemala (for an amount of US$33.9 million), 86.3%

correspond to operations made with the investment of the remunerated legal reserve; 13.4% to

quotas of the Savings Protection Fund; and, 0.3% to other transfers. The 9,378 operations (for an

amount of US$1,468.4 million) made by the Banking Clearing House will start in the settlement

of the net multilateral result of the referred house.

On the other hand, according to the agreed in article 16 of the Gross Settlement in Real

Time System Regulation, the Banco de Guatemala, as administrator of the referred system,

derived from the suspended operations of the Banco de Comercio, S. A., decided by the

Monetary Board in resolution JM-13-2007 dated January 12, 2007, proceeded to exclude the

referred banking institution as a participant of the abovementioned system, action taken as of

January 13, 2007. In the same manner, according to the decided in clause j) of article 24 of the

Regulation for the Banking Clearing House, the General Manager of the institution, on January

13, 2007, told the rest of the participants of the referred clearing house, of the operations

suspension of the bank in reference.

Additionally, the General Manager of the Banco de Guatemala, according to the

established in article 17 of the Regulation of the Gross Settlement System in Real Time –LBTR-,

authorized the voluntary withdrawal of the following participants from the referred system: the

banks of Occidente, Sociedad Anónima; SCI, Sociedad Anónima; and, of Exportación, Sociedad

Anónima, on January 15, September 20 and October 2, 2007, respectively, due to the processes

of takeover mergers approved by the Monetary Board. Also, the Central Bank according to

article 10 of the mentioned regulation authorized, as of February 9, 2007, as a direct participant

in the LBTR system, to the Banco Azteca de Guatemala, Sociedad Anónima.

Finally, it is worth pointing out that due to the movement observed to December 31, 2007,

there were twenty-six participating entities authorized and open for operation in the LBTR

41


system made up of twenty-two banks; three financial stock companies; and, the National Stock

Corporation.

10.3 Modernization of the payment system

Taking into account resolution JM-140-2004 dated November 17, 2004, that contains the

“Modernization Matrix of the Payment System”, in 2007 the following actions were mentioned:

Regarding the strengthening of the normative framework of the payment system, the

Banco de Guatemala, in coordination with the Guatemalan Banking Association, made the

Regulation of the Automated Clearing House –CCA, which was approved by the Monetary

Board through resolution JM-140-2007 dated August 1, 2007. Said regulation has as its purpose

to offer the automated mechanisms that, through transparent, efficient and safe processes, allow

the participants to make net and differed settlement operations.

The Monetary Board in resolution JM-189-2007 issued on December 12, 2007, with the

purpose of continuing strengthening the internal control system and contributing to the

administration of the credit and systemic risks that imply the settlement of operations for high

amounts approved the modifications to the Regulation of the Banking Clearing House.

Finally, as to the concerning the institutional cooperation for the modernization of the

regional payments systems, the Banco de Guatemala actively participated in the modernization

and harmonization project of the regional payments system promoted by the Central American

Monetary Council –CMCA [For its acronym in Spanish.], specifically regarding the defining the

feasibility of the design of an Interconnection Payment System –SIP [For its acronym in

Spanish.] for Central America and the Dominican Republic. In that sense, the Executive

Secretariat of the Central American Monetary Council to March 1, 2007, hired a company called

“Academica de Centroamérica (Central American Academy)”, to hold a market study in order to

establish the viability of the implementation of an Interconnection Payment System in the region,

which main objective would be to facilitate the registration and the settlement of payment

instructions between the financial entities of the countries of the Central American region and the

Dominican Republic, through the central banks of each country.

11. Paper money and coins issued and amortized

42


According with clause a) of article 4 of the Organic Law of the Banco de Guatemala and 2

of the Monetary Law, only the Banco de Guatemala can issue money in the national territory. In

this context, in 2007 the Central Bank issued paper money and coins for an amount of Q8,186.5

million. Of said amount, Q8,130.0 million correspond to paper money and Q56.5 million to

metallic coins. On the other hand, the Central Bank amortized paper money for Q2,067.2 million

and did not amortize coins.

TABLE 19

BANCO DE GUATEMALAPAPER MONEY AND METALLIC COINS

YEAR 2007(Thousands of quetzales)

DENOMINATION ISSUED AMORTIZED

TOTAL 2,067,197.8 8,186,490.0

2,067,197.8 8,130,000.0PAPER MONEY(BILLS)

50.0 0.50 40,000.040.0 1.00 0.0

77,500.0 5.00 220,000.0120,000.0 10.00 250,000.0170,000.0 20.00 720,000.0240,000.0 50.00 400,000.0

1,459,607.8 100.00 6,500,000.0

0.0 METALLIC COINS 56,490.0

0.0 0.01 100.00.0 0.05 2,940.00.0 0.10 3,450.00.0 0.25 0.00.0 0.50 20,000.00.0 1.00 30,000.0

ISSUED AND AMORTIZED

In order to take care of our numerary demand, replace deteriorated bills and have an

adequate inventory for the effect, in 2007 the printing of 187.0 million bills were printed for the

bank, with a total nominal value of Q9,200.0 million and the minting of 110.0 million of metallic

coins for a total nominal value of Q50.1 million.

The operations regarding issued and amortized numerary, including those regarding the

deposits, exchanges and cash withdrawal with the banks of the system, were object of new

regulations that update the different processes involved. In that sense, the Monetary Board, in

43


resolution JM-97-2007 dated May 9, 2007, issued the Regulation for the Operations of Deposits

and Numerary Withdrawal, in National Currency, made by the Banks of the System in the Banco

de Guatemala; and, in resolution JM-117-2007 dated June 13, 2007, issued the Regulation for

Paper Money and Coins Issue, as well as the Regulation for the Exchange, Amortization and

Destruction of Paper Money and Coins.

In order to strengthen the management and advance in the adoption of better international

practices regarding the administration of the numerary, the General Manager of the institution on

May 29, 2007 issued General Management Agreement No. 43-2007 that contains the Policy for

the Numerary Administration in the Banco de Guatemala.

On the other hand, the Monetary Board, through resolution JM-169-2007 dated October

17, 2007, authorized the Banco de Guatemala to issue up to 12,000 one quetzal coins,

commemorative to the VII Latin American Series with the title “Latin American Countries and

the Olympics”, program that is coordinated by the National Coin and Tax Manufacturer - Real

Casa de la Moneda de España (Royal Coin House of Spain) which consists in the issue and

commercialization, worldwide, of collection coins for Latin America, Portugal and Spain.

12. Contributions of Guatemala to international financial organizations

According to the corresponding international agreements signed by the Government of the

Republic of Guatemala, the Central Bank, in 2007, in fulfillment of the agreed in resolution JM-

442-99, made a contribution of US$0.3 million to the Corporación Interamericana de

Inversiones -CII-, [Inter-American Investment Corporation.] which corresponds to the payment

of the seventh quota of the participation of Guatemala in the First General Increase of Resources

of said corporation.

Derived from the above, to December 31st, 2007 the balance of the contributions in

national and foreign currency to international financial organizations was of Q341.0 million5 and

US$120.7 million, respectively, as is shown in the following graph:

5 The contributions in quetzales are subject to adjustments to keep the value.

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TABLE 20

BANCO DE GUATEMALA

YEAR 2007(Millions)

BALANCE TO BALANCE TO CONTRIBUTIONS

13. Financial Statements6

13.1 General Balance

To December 31, 2007, the assets of the Banco de Guatemala rose to Q60,336.7 million,

amount that is integrated to the balance of the following accounts: Foreign Securities

Investments, for Q31,409.1 million; Estate Restorations for Uncollected Credit to the State, for

Q18,132.8 million; Contributions to International Financial Organizations, for Q3,523.0 million;

Treasury Bonds from the Republic of Guatemala Received to cover Net Deficiencies, for Q2,

717.0 million; Other Assets, for Q1,941.1 million; Monetary Gold, for Q1, 408.9 million;

Treasury Bonds from the Republic of Guatemala Acquired from the Saving Protection Fund

according to resolution JM-123-2006, for Q458.6 million; Investments in National Currency, for

6 The explanatory notes of the financial statements and the description of accounts that make up the general balance of the institution can be

Lockheed up on the Internet site of the Banco de Guatemala (www.banguat.gob.gt).

12/31/2007ORGANISM 12/31/2006 VARIATIONABSOLUTE ADJUSTMENTS

Q. US$ Q. US$ Q. US$ Q. US$

TOTALS 329.0 116.8 0.0 0.3 12.0 3.6 341.0 120.7 12.0 3.9

Inter-American Development Bank 28.5 24.1 0.0 0.0 0.0 0.0 28.5 24.1 0.0 0.0

International Monetary Fund 242.8 73.4 0.0 0.0 12.0 a/ 3.6 b/ 254.8 77.0 12.0 3.6

Central American Economic Integration Bank 46.0 9.0 0.0 0.0 0.0 0.0 46.0 9.0 0.0 0.0

International ReconstructionAnd Development Bank 11.2 1.2 0.0 0.0 0.0 0.0 11.2 1.2 0.0 0.0

International Development Association 0.5 0.1 0.0 0.0 0.0 0.0 0.5 0.1 0.0 0.0

Inter-American Investment Corporation 0.0 3.9 0.0 0.3 0.0 0.0 0.0 4.2 0.0 0.3

International Financial Corporation 0.0 1.1 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0

Others 1/ 0.0 4.0 0.0 0.0 0.0 0.0 0.0 4.0 0.0 0.0

a/ b/

1/

Corresponds to the fluctuation of the DEG regarding the US dollar.

Refers to the Central American Fund for Monetary Stabilization

Of the M/N value Maintenance Fluctuation

in M/E

CONTRIBUTIONS OT INTERNATIONAL FINANCIAL ORGANISMS

Corresponds to adjustments for maintenance of value per variation in the exchange rate of the Special Drawing Rights –DEG [For its acronym in Spanish]- regarding the US dollar and in this regard the quetzal.

45


Q33.4 million; Domestic Credit, for Q291.3 million; and, the sum of the balances of other asset

accounts, for Q121.5 million. As to Liable, these were at Q56,256.8 million, amount that is

integrated by the balance of the following accounts: National Numerary, for Q20,010.8 million;

Titles of the Central Bank, for Q12,596.2 million; General Government Deposits, for Q9,847.1

million; Monetary Deposits, for Q7,857.9 million; Obligations with the International Financial

Organisms, for Q2,920.7 million; Near monetary Liable, for Q1,625.1 million; and, Other Liable,

for Q1,399.0 million. Therefore, the estate of the institution to date was at Q3,037.4 million

(Annex 2).

It is important to indicate that of the Q18,132.8 million, registered in the Estate

Restorations for Uncollected Credit to the State, Q16,834.2 million, correspond to the cost of the

monetary, foreign exchange rate and credit policy in which the Central Bank incurred during the

1989-2001 period; and Q1,298.6 million correspond to the net deficiencies in the 2002 and 2006

fiscal year for Q905.3 million and for Q393.8 million, respectively

On the other hand, the balance of Q2,717.0 million registered in the Treasury Bonds

account of the Republic of Guatemala Received to cover Net Deficiencies, is integrated by the

net deficiencies of the 2003, 2004 and 2005 fiscal year for Q963.7 million and for Q1,159.5

million, and for Q593.8 million, respectively, which were restituted by the State, through the

delivery of Treasury Bonds to the Republic of Guatemala.

As to the balance of Q458.6 million, registered in the Treasury Bonds account of the

Republic of Guatemala Acquired from the Savings Protection Fund, according to resolution JM-

123-2006, corresponds to Treasury Bonds (Peace Bonds), acquired directly from said fund.

13.2 Results Status

During the period from January 1st to December 31st, 2007, the Results Status of the

Banco de Guatemala shows that the sector of financial products was of Q1,942.7 million, while

the financial expenditures were of Q110.3 million; whereas, the financial result was of Q1,832.4

million. While deducing from this amount Q495.3 million that correspond to administrative

expenses, and Q52.0 million for rectification of the results of previous years, shows an

operational result of Q1,285.1 million. On the other hand, the inspection quota of the Banks

Superintendence rose to Q87.3 million and the cost of the monetary, foreign exchange rate and

46


credit policy of Q988.2 million; therefore, the Banco de Guatemala at the end of the 2007 fiscal

year registered a net excess of Q209.6 million.

47


CHAPTER III

TRANSPARENCY AND ACCOUNT RENDERING

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48



1. Transparency and Account Rendering

1.1 Appearance of the President of the Banco de Guatemala before the Congress of the Republic

In fulfillment with the stipulated in article 60 of the Organic Law of the Banco de

Guatemala, in January and July, 2007, the President of the institution appeared before the

Congress of the Republic: in January, to render a detailed report regarding the acts and policies of

the Central Bank in 2006, as well as to explain the objectives and policies foreseen for 2007; and,

in July, to render account regarding the execution of the monetary, foreign exchange rate and

credit policy in the current fiscal year.

1.2 Publication of information

The main reports and publications of the Banco de Guatemala during 2007 were the

following:

REPORT OR PUBLICATION

MONTH OF PUBLICATION OR

PERIODICITY

Circumstantial summary of the actions of the Monetary Board regarding the issue of resolution JM-168-2006, for the determination of the Monetary, Foreign Exchange Rate and Credit policy for 2007.

January

Income and Expenditure Budget of the Banco de Guatemala that

correspond to 2007.

January

Information regarding the operations suspension of the Banco de Comercio, S. A.

January

Aide-memorie of the Banco de Guatemala 2006. May Press releases regarding the circulation of Q50.00 bills with new security characteristics.

May

Reports of the monetary, foreign exchange rate and credit policy,

• Report to March

• Report to June

May

August

Financial Statements in analytical form to December 31, 2006, verified by an independent auditor.

June

Press releases for the circulation of Q1.00 bills made with a polymer base substrate.

August

Study of the National Economy 2006 November

Press releases regarding the circulation of Q100.00 bills with new security November

49


characteristics. Evaluation of the Monetary, Foreign Exchange Rate and Credit Policy to November 2007.

December

Economic Perspectives for 2008-2009 and Proposal for the Monetary, Foreign Exchange Rate and Credit Policy for 2008.

December

Monetary, Foreign Exchange Rate and Credit Policy for 2008 determined by the Monetary Board in resolution JM-211-2007.

December

Acts of the Execution Committee of the Banco de Guatemala. Weekly Summary of the arguments that the Monetary Board takes into account in the determination of the level of the leading interest rate.

Monthly

Publication on the management of the international monetary reserves of the Banco de Guatemala.

Quarterly

Position of the reserve assets and the liable and foreign currency commitments.

Annual

OTHER REPORTS AND PUBLICATIONS

PERIODICITY

Statistics and macroeconomic indicators of the real, external, monetary, financial and fiscal sectors of the economy.

Daily, weekly and monthly

General Balance of the Banco de Guatemala. Monthly

2. Communication strategy

The Banco de Guatemala, as per the guidelines of the Institutional Strategic Plan 2003-

2007, continued with the Communication Strategy in order to facilitate the development, transfer

and use of information, taking into account the importance of said strategy in the conduction of

the monetary, foreign exchange rate and credit policy.

Based on the referred strategy, the Banco de Guatemala, on the one hand, during 2007

convened the communication media on several occasions to report on the execution of the

monetary, foreign exchange rate and credit policy; and, on the other hand, continued

implementing the following programs that are described as follows:

50

http://www2/Publica/doctos/propuesta_2007.pdf




PROGRAM OBJECTIVE MEANS

Macroeconomic Signs Orient the economic agents for decision making.

Press releases and comuniques.

Direct marketing Promote the approach of the Central Bank with important audiences for its management

Dialogues, interviews and informative meetings.

Training and publication Promote and strengthen the knowledge of the population in economic matters, as well as create clear understanding of the daily activities of the Central Bank.

Central Bank magazine, Monetary Notes, books of the BANGUAT and Economic Training booklets.

Information/communication Offer clear and timely information that supports the mission of the institution.

Information on macroeconomic variables on the Internet and in other Communication means.

Prevention and Crisis Administration.

Orient the communications aspects at the time of unexpected events to which the Central Bank may be exposed.

Contingency Plans.

Image and Institutional Identity.

Develop activities oriented to promoting the exchange of experiences, the strengthening of the institutional values and general knowledge of the Central Bank.

Library network and academia activities.

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CHAPTER IV

OTHER ACTIVITIES OF THE CENTRAL BANK

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OTHER ACTIVITIES OF THE CENTRAL BANK

1. Participation in international meetings

The Banco de Guatemala participated in April and October 2007 in the joint meetings of

the International Monetary Fund -IMF- and World Bank -WB-. Among the main topics that were

discussed is the behavior of the world economy, their perspectives, risks and economic policy

measures; the increase in the price of oil; the weakening of the US dollar, as well as the

challenges for the central banks in the management of the monetary policy.

The Banco de Guatemala, in its quality of alternate Governor of the Inter-American

Development Bank -IDB-, the president of the Banco de Guatemala participated in the

consultation meeting of that organism with the leaders from the Central American isthmus and

the Dominican Republic, which was held on February 8 and 9, 2007, in San José, Costa Rica. At

this time, the IDB covered aspects regarding the initiative called Opportunities for the Majority,

based on the fact that said institution will be reorganizing its activities in the region; and, to the

promotion of the private sector in the region, parting from a new business model for said

organisms.

The Central Bank also participated in the annual meetings of the Assembly of Governors of

the IBD and of the Inter-American Corporation of Investors –CII (for its acronym in Spanish)-,

celebrated in March 2007, in the city of Guatemala. For Guatemala, it was the third opportunity

to be the host of the Annual IBD Meetings and of the affiliated institution, the CII, came after a

thirty year period, after having hosted assemblies in 1969 and 1977. On this occasion they held

the XLVIII Assembly of Governors of said organism, as a forum for the exchange of ideas and

opinions among the governors of the member countries. Among the developed topics they talked

about the initiative of sustainable energy and climatic change, as well as drinking water and

health, economic growth with social inclusion, the participation of young people in the socio-

economic development of the region and, added to the administrative topics, they dealt with

conventions with the member governments of said organisms.

Regionally, in February, June and November 2007, the Banco de Guatemala participated in

the meetings of the Central American Monetary Council –CMCA (for its acronym in Spanish)-,

in which they covered, among other topics, the strengthening and harmonization of the payments

systems of Central America and the Dominican Republic; the consolidated-beyond-borders

supervision: advance and the following steps; and, the process of approval according to the

53


legislation of each one of the member countries of the Treaty on Payments Systems and the

Settlement of Values of Central America and the Dominican Republic.

In May, 2007, the Banco de Guatemala participated in the meeting of the Government

Board of the Center of Latin American Monetary Studies –CEMLA (for its acronym in Spanish)-

as well as in that of the Governors of the central banks of the American continent and in that of

the Governors of the central banks of Latin America and Spain. In said meetings they covered

topics on the international economic and financial perspectives; the payments system; and, the

implications of politics for central banks of the region derived from the high prices of raw

materials.

Finally, in April and in October 2007, the Banco de Guatemala participated in the meetings

of the Inter-governmental Group of the Twenty-four for International Monetary Affairs and of

Development –G24-, in which they discussed, among others, the following topics: review of the

dispositions oriented to improving the sub-representation of developing countries in the Bretton

Woods institutions; review of the supervision mechanism of exchange policies; analysis and

review of new mechanisms that offer liquidity to the Fund; increase of the official help within

the framework of the Millennium Goals; and, study the long term strategies for the performance

of the World Bank.

2. Economic Statistics Improvements

In 2007, the National Program of Improvement for Economic Statistics –PRONAME (for

its acronym in Spanish)-, which is developed together between the Banco de Guatemala and the

National Statistics Institute –INE (for its acronym in Spanish)-, and which main objective, on the

one hand, making annual economic surveys and quarterly surveys to collect the basic statistics

required for the write up of the national accounts of the country in the framework of the System

of National Accounts 1993 -SCN93-, and, on the other hand, updating the National Directory of

Businesses and Locations. –DINEL (for its acronym in Spanish)-. On the other hand, advances

continued to be had in the implementation processes of the Fifth Manual of the Payment Balance

and the Monetary and Financial Statistics Manual, 2000 edition, both from the IMF.

2.1 Economic Surveys In order to obtain economic-accounting information per branch of economic activity and

per institutional sector of the variables that constitute the accounts foreseen by the SCN93, in

2006 the Fourth Continuous Economic Survey was carried out in order to compile information

54


that corresponds to 2006. For that reason, according to the corresponding sample analysis, found

1,227 companies that integrate the DINEL were interviewed. They also carried out quarterly

surveys for the commercial, industrial and services activities, necessary for the evaluation of the

behavior of the economic activity, having surveyed an average of 627 businesses in 2007.

Also in 2007, a Third Survey of the External Sector was made, with a sample of 1,075

businesses and institutions that have relations with the exterior, the information obtained will be

used in the implementation process of the Fifth Manual of the Payment Balance of the IMF.

2.2 Updating of the DINEL

In 2007, the DINEL updating process ended. For the effect information was obtained

from businesses located in 71 municipiums of the urban area, that correspond to the territorial

divisions of Santa Rosa, Jutiapa, Jalapa, Chiquimula, Zacapa, Izabal, Petén, Alta Verapaz, Baja

Verapaz and El Progreso. In that sense, 45,351 businesses were surveyed, located in 609

cartographic sectors.

2.3 Advances in the implementation of the Fifth Manual of the Payments Balance of the IMF

The Banco de Guatemala, regarding the statistical treatment of the external sector is

found implementing the Fifth Manual of the Payment Balance of the IMF. In that sense, during

2007 they continued with concrete actions. First, between June 18 and August 31, the Banco de

Guatemala continued with the program of business and institutional surveys (Third Survey of the

External Sector -ENCSE2- [For its acronym in Spanish]), with the objective of gathering

economic and financial data corresponding to 2006 from the following entities: a) direct foreign

investment businesses; b) foreign and national international transportation businesses; c)

donations to institutions received from abroad; d) international organisms that operate in the

country; and, e) businesses that make transactions for other services abroad. Second, in the

context of making the registry of exchange statistics adequate, a project was prepared for the

creation of new forms regarding statistical income and expenditure of foreign currency and to the

daily movement of foreign currency, which will allow improving statistical registry of the

exchange nature.

Finally, it is worth indicating that the payments balance is forecast for the 2004-2006

period, based on guidelines of the V Manual, to be published in the first quarter of 2008, while

the payments balance for 2007 will be published in the second semester 2008.

55


2.4 Advances in the implementation of the Manual of Monetary and Financial

Statistics of the IMF

In 2007, they continued with the implementation of the Manual of Monetary and

Financial Statistics -MEMF- [Acronym in Spanish.], 2000 IMF edition, so that the monetary and

financial statistics of the country include the methodological framework that incorporates

international better practices in matter of compilation and publishing of said statistics on behalf

of several and diverse central banks.

In that sense, it is convenient to indicate that the efforts made during 2007 allowed

improving the statistical information, in coverage of financial institutions as well as in the quality

of the sectorization of the financial instruments. According to the manual, as to the coverage of

monetary and financial statistics, the same is divided into tow big groups: the first is made up of

deposit companies (financial institutions that can create money), like the Central Bank, the banks

of the system, financial stock companies and offshore entities) and the savings and credit

cooperatives, the general bonded warehouses, the stock exchanges, the credit cart issuing entities,

among others.

In the above context, it is convenient to indicate that the compiled statistical information

is available according to the MEMF for all the institutions that make up the deposit companies

sector. As to the information of the other financial entities counts on the insurance and bond

companies, that makes up 85% of the total assets of this group of institutions.

Regarding sectorization, it is convenient to highlight that during 2007, due to the inter-

institutional efforts between the Banco de Guatemala and the Superintendence of Banks; they

obtained detailed information of the credit portfolio, with which they can sectorize, in the first

term, the residence criteria and, later, the different resident sectors. The latter would allow the

Banco de Guatemala to compile the monetary and financial statistics of the country, according to

the international norms.

Additionally, during 2007 they made important agreements in matters of harmonization of

monetary and financial statistics in the Central American region, Dominican Republic and

Panama. In effect, due to the joint efforts between the International Monetary Fund, the

Executive Secretariat of the Central American Monetary Council and the respective countries of

the region, they were able to integrate a set of statistical harmonized tables that respond to the

56


classification criteria of financial instruments and of sectorization, according to the standards of

international statistics.

2.5 Implementation of the Quarterly National Accounts System

As part of the improvement process of the national economic statistics and within the

conceptual framework of the SCN93, in 2007, progress was made in the implementation of the

Manual of Quarterly National Accounts, that include the analysis and selection of value

indicators, volume and prices for the different economic activities, with the objective of making

estimations for the Gross Domestic Product –GDP-, every quarter, for production as well as

expenditure, at common prices and at constant prices, that in the first stage will include the 2001-

2006 period.

In that sense, in June 2007 the progress of the project referenced was presented to the

Monetary Board, which included preliminary results of the quarterly series of the GDP

corresponding to the 2001-2005 period. Added to this, in the second quarter of 2007 progress

was made in the integration of the quarterly estimations of the GDP corresponding to 2006.

2.7 2.6 Survey of Inflation Expectations of the Private Analysts Panel–EEI

[Acronym in Spanish.]

In the Monetary, Foreign Exchange Rate and Credit Policy for 2007 included the forecast

of the Inflation Expectations of the Panel of Private Analysts –EEI (For its acronym in Spanish)-

in order to obtain a measure of said expectations. In that context, the referred monthly survey

was made, with the objective of knowing opinion of national and international analysts of the

panel, knowledgeable of operative procedures of the monetary policy, regarding the inflation

expectations of inflation of the country and of the factors that could explain it.

In said survey, the opinion of the mentioned panel on the expected behavior of the

exchange rate; the growth expectations of the GDP and the factors that could explain said

behavior; as well as the trust level that is perceived of the economic activity in general was

obtained.

2.8 Survey of Business Opinion –EOE [Acronym in Spanish.]

The EOE obtains qualitative information regarding the variations in the production

volume, sales volume in the domestic and foreign markets, stock of finalized products, price of

the national and imported raw materials, salaries, investment in machinery, occupation rate and

use of the installed capacity.

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In the mentioned context, in 2007 two business opinion surveys were carried out

addressed to about 400 industrial institutions located in the territorial division of Guatemala. The

first survey was carried out in February and March, evaluating the performance of the industrial

activity in 2006 and the expectations for the first semester of 2007. The second survey was

carried out between July and August, evaluating the development of the industrial activity during

the first semester of 2007 and the expectations for the second semester of that same year.

3. Academic events

As to the academic activities regarding economic topics the Banco de Guatemala centered

its interest regarding the monetary, foreign exchange rate and credit policy. Particularly, the

following activities are highlighted:

3.1 “Doctor Manuel Noriega Morales” Contest

The Banco de Guatemala promotes the Permanent Investigation Contest on Topics of

Interest for the Central Bank “Doctor Manuel Noriega Morales”, which main purpose is to

stimulate and promote scientific investigation in areas regarding the competency ambit,

especially in monetary, exchange rate, credit, banking, administrative and juristic fields.

According to the bases of the contest, the Central Bank granted the prizes to the first three

places. Notwithstanding, given the demanding level the works must comply with, in 2007 the

first three places were declared deserted. However, when considering the quality as well as

scientific merit of investigations, the members of the judges7 agreed to give an honorable mention

to the work “Consolidación, Concentración y Clima de Competencia en la Industria Bancaria de

Guatemala durante 1996-2006”, (“Consolidation, Concentration and Competence Climate in the

Banking Industry of Guatemala during 1996-2006”), by Carlos Gerardo Acevedo Flores, from

Guatemala.

3.2 Economic Journeys

The Banco de Guatemala continues with its purpose of holding cycles of economic

journeys annually. For this purpose, said event is held especially for researchers, professionals

and academics involved in economical and financial areas, for which the Banco de Guatemala

invites distinguished internationally renowned academics, officers from international

organizations, public officials and persons from the financial and economic fields, who, not only

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share their experience in the economic and financial fields, they also develop important

conferences regarding topics of worldwide interest, in this manner contributing to increase the

amount of experience and knowledge of professionals, students and persons interested that

participate in said event.

Accordingly, on June 21st and 22nd, 2007 the XVI Cycle of Economic Journeys8 was held.

At that time, the central topics were: a) The role of the financial sector in economic growth and

development; and, b) Causes and effects in the mediation of country risk in a small and open

economy. The presentation of the topics mentioned was by important researchers and experts of

recognized international prestige. The first topic was covered by Jan Kregel, a scholar at Levy

Economics Institute from Bard College and distinguished professor of the Center for Research for

Full Employment and Stability of Prices from the University of Missouri; whereas for the second

topic, we counted on the presence of the following speakers: John Nugée, General Manager of

the Official Institutions of State Street Global Advisors Ltd. (SSgA) and Visiting Professor at the

Research Center of the Central Bank of England; Fergus McCormick, Sovereign Senior Analyst

and Vice-President of Sovereign Group Dominion Bond Rating Service (DBRS); Mauro Leos,

Vice-President of Credit for Latin America in the Sovereign Risk Unit of Moody’s Investors

Service; Francisco Suárez, Associate Director in Ratings for Standard & Poor’s Financial

Services in the city of Mexico; and Franco Ucceli, General Director for Emerging Markets

Sovereign Research for Bear Stearns & Co. Inc., for the Latin American markets of Chile, Costa

Rica, Dominican Republic, El Salvador, Guatemala and Uruguay.

3.3 Higher Studies Program

The Banco de Guatemala has been offering the Higher Studies Program, which objective

is to provide solid academic training on economical and financial topics of interest for the Central

Bank, in response to the need of specialization in this kind of topics and to help in the

professional development of the Banco de Guatemala, of employees of the Latin American

central banks and professionals in economic sciences and in other related professions, graduated

from the different universities of the country.

In 2007, the mentioned program was held under the following: a) “Applied Economy and

Finance”, which purpose is to give incentive for research and professional formation in the 7 The jury was made up by Paul Castillo, from the Central Bank of Peru; Harold Vladimir Zavarce, of the Central Bank of Venezuela; and

Mario Cuevas, from the National Economic Research Center - CIEN-. 8 The presentations of this event can be consulted on the web site of the Banco de Guatemala (www.banguat.gob.gt).

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matter; b) “Updating”, so that the personnel of the institution that have received high quality

training update their knowledge and receive analytical tools of recent development and of higher

application potential in institutional tasks; and, c) “English Language”, that follows the objective

of improving the knowledge of this language on behalf of the institution’s personnel.

3.4 Participation in the Research network of the Latin American Central Banks From November 5 to 7, 2007, the XII Meeting of the Research Network of the Latin

American Central Banks was held in the city of Madrid, Spain, organized by the Centro de

Estudios Monetarios Latinoamericanos-CEMLA- (Center for Latin American Monetary Studies)

and by the Central Bank of Spain. Said event has as its fundamental objective to provide a link

that facilitates the exchange of ideas among researchers of the region’s central banks that are

interested in the analysis of topics associated with the macroeconomic, monetary, banking and

financial sectors.

The Banco de Guatemala participated in said meeting with two research papers made by

bank officials from the Department of Economic Research, called: a) Emigrant Remittances and

the Real Exchange Rate in Guatemala: An Adjustment Costs Story; and b) Análisis de los

Mecanismos de Transmisión de la Política Monetaria en Guatemala, (Analysis Transmission

Mechanisms of the Monetary Policy in Guatemala.

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ANNEXES

Parque Nacional Yaxhá-Nakúm-Naranjo. Reserva de la Biosfera Maya, Petén. Consejo Nacional de Áreas Protegidas -CONAP- National Council for Protected Areas.

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Annex 1

FINANCIAL STATEMENTES OF THE BANCO DE GUATEMALA

Annex 2

A. General Balance

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B. State of Results

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Annex 3

MAIN RESOLUTIONS ISSUED BY THE MONETARY BOARD 1. Resolution JM-2-2007 dated January 3, 2007 Issued favorable opinion on the loan agreements to be subscribed by the Republic of Guatemala with

the International Agricultural Development Fund –FIDA [For its acronym in Spanish.] for up to DEG11,350,000.00, and with the OPEC Fund for International Development for up to US$11,000,000.00, both for partially Financing the “National Rural Development Program: Central, Northeast and Southeast regions”.

2. Resolution JM-7-2007 dated January 10, 2007

Determined the interest rate for tributary effects, referred to in article 58 of the Tributary Code that would be in effect in the first semester of 2007

3. Resolution JM-13-2007 dated January 12, 2007 Immediately suspended the operations of Banco de Comercio, Sociedad Anónima, and named an Assets and Liable Exclusion Board for said banking entity.

4. Resolution JM-15-2007 dated January 12, 2007 Authorized the Banco de Guatemala so that in its role and quality of administrator of resources for

the Savings Protection Fund, would make the operations that allow counting on resources of immediate availability in order to fulfill the objective for which said fund was created.


Authorized the Banco de Guatemala so that, by exception, it will redeem, anticipated, the Term Deposits constituted by the Fiduciary Trust Fund of Banking Capitalization in the Central Bank for the amount of Q590,168,500.00


Approved the printing of twelve (12) million fifty quetzal (Q50.00) bank bills; thirty (30) million ten quetzal (Q10.00) bank bills; and, forty (40) million five quetzal (Q5.00) bank bills


Approved complementary dispositions regarding the legal banking reserve contained in resolutions JM-177-2002 and JM-244-2002


Approved the financial statements of the Banco de Guatemala corresponding to the fiscal year understood between January 1 and December 31, 2006


Authorized the President of the Monetary Board so that, through the Ministerio de Finanzas Públicas [Roughly equivalent to the US Department of the Treasury], make the corresponding proceedings before the Executive Branch so that the net deficiency of the Banco de Guatemala corresponding to the 2006 fiscal year, for an amount of Q393,347,696.75, be included in the General Budget of Income and Expenditure of the State project for the 2008 fiscal year

10. Resolution JM-26-2007 dated January 24, 2007 Approved the printing of seventy five (75) million 100 quetzal (Q100.00) bank bills and thirty (30)

million twenty quetzal (Q20.00) bank bills

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11. Resolution JM-36-2007 dated February 7, 2007

Cancelled the authorization for operations as an exchange house of Monex, Sociedad Anónima


Modified the fee that the banks of the system must contribute monthly for the Savings Protection Fund, referred to in Article 88 of Decree Number 19-2002 of the Congress of the Republic, Law of Banks and Financial Groups

13. Resolution JM-38-2007 dated February 7, 2007 Approved the procedure to determine the inspection fee that must be contributed by bonded deposit

warehouses to the Superintendence of Banks 14. Resolution JM-43-2007 dated February 14, 2007

Decided that the National Financial Corporation –CORFINA [For its acronym in Spanish]-, in the sale of Banks and financial stock companies of the assets that make up part of the estate of the Administration Trust and Realization of Excluded Assets of the Banco del Café, Sociedad Anónima, apply the established in articles 7, number 14, of the Law of Value Added Tax; and, 11, numeral 20, of the Law of Fiscal Revenue Taxes and Special Sealed Paper for Legal Registry

15. Resolution JM-44-2007 dated February 14, 2007 Decided that the Financiera Industrial, Sociedad Anónima, in the sale to Banks and financial stock companies of the assets that make up part of the estate of the Administration Trust and Realization of Excluded Assets of the Banco de Comercio, Sociedad Anónima, apply the established in article 7, numeral 14, of the Law of Value Added Tax; and, 11, numeral 20, of the Law of Fiscal Revenue Taxes and Special Sealed Paper for Legal Registry


Authorized the Banco de Guatemala so that, in its quality of administrator of the resources for the Savings Protection Fund, it celebrates a convention of financial support for said Fund, of up to Q2,000.0 million with the Banks of the system


Issued favorable opinion for the issue of Treasury Bonds of the Republic of Guatemala for the 2007 Fiscal Year, for up to Q3,119,224,000.00 and the issue of Treasury Letters for the 2007 Fiscal Year, for up to 20% of the regular income estimated in the General Budget of Income and Expenditure of the State for the 2006 Fiscal Year.

18. Resolution JM-56-2007 dated February28, 2007

Cancelled the authorization for the operation as an exchange company for, Casa de Cambio Forex, Sociedad Anónima (Forex, Exchange Stock Company)

19. Resolution JM-61-2007 dated March 14, 2007

Closed operation and attributions of the Exclusion Board of Assets and Liable for the Banco Empresarial, Sociedad Anónima

20. Resolution JM-62-2007 dated March 14, 2007 Closed operation and attributions of the Exclusion Board of Assets and Liable for the Banco Metropolitano, Sociedad Anónima


Closed operation and attributions of the Exclusion Board of Assets and Liable for the Banco Promotor, Sociedad Anónima


Modified the Investment Policy of the Resources for the Savings Protection Fund

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Fixed the real fees that, for the sustenance of the Superintendence of Banks in 2007, the banks of the system, financial stock companies, general bonded warehouses, insurance companies and FHA, bond companies, exchange houses, offshore entities, other businesses that make up financial groups and the Banco de Guatemala must pay.

24. Resolution JM-79-2007 dated April 11, 2007

Issued favorable opinion on the Convention of Loan No 7417-GU that will be subscribed by the Republic of Guatemala and the International Reconstruction and Development Bank, for up to US$62.3 million, destined to partially finance the “Project of Land Administration, Second Phase, in support of the Land Administration Programs”

25. Resolution JM-80-2007 dated April 11, 2007

Issued favorable opinion on the Convention of Loan No 1820/OC-GU that will be subscribed by the Republic of Guatemala and the Inter-American Development Bank, for up to US$30.0 million, to finance the “Development Program of Peten for the Conservation of the Mayan Biosphere Reserve”

26. Resolution JM-86-2007 dated April 18, 2007 Issued the Regulation of Liquid Reserve for Offshore Entities

27. Resolution JM-95-2007 dated May 2, 2007

Issued favorable opinion on Contract Loan No 1852/OC-GU that will be subscribed by the Republic of Guatemala and the Inter-American Development Bank, for up to US$50.0 million, to finance the “Hospital Network Strengthening Program”

28. Resolution JM-97-2007 dated May 9, 2007 Issued the regulation for the operation of deposits and withdrawal of Numerary, in national currency

made by banks in the system in the Banco de Guatemala 29. Resolution JM-98-2007 dated May 9, 2007 Issued favorable decree to global investment plans of technical reserves and mathematics of

insurance and bond companies that operate in the country, accumulated to December 31, 2006. 30. Resolution JM-107-2007 dated May 29, 2007 Modified the Monetary and Fiscal Program for 2007, contained in annex to Resolution JM-168-2006,

dated December 28, 2006 31. Resolution JM-109-2007 dated May 30, 2007 Authorized the fusion by absorption of the Banco de Exportación, Sociedad Anónima, by Banco G &

T Continental, Sociedad Anónima 32. Resolution JM-113-2007 dated June 6, 2007

Issued favorable opinion on Convention of Loan No 7430-GU to be subscribed by the Republic of Guatemala and the International Reconstruction and Development Bank for up to US$80.0 million, for the Financing of the “Educational Quality and Broadening of Secondary Education Project”

33. Resolution JM-117-2007 dated June 13, 2007

Issued the regulation for Issuance of Paper Money and Coin; and, the regulation for the Exchange, Amortization and Destruction of Paper Money and Coins

34. Resolution JM-124-2007 dated July 4, 2007

Approved Agreement Number 6-2007 of the Superintendent of Banks, dated June 26, 2007, through which the Accounting Instructions Manual for Banks and Financial Stock Companies was modified.


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Determined the interest rate for tributary effects, referred to in article 58 of the Tributary Code, that will regulate the second half of 2007


Authorized the incorporation of Seguros Agromercantil, Sociedad Anónima (Insurance Company), to the Grupo Financiero Agromercantil


Authorized the fusion by absorption of the Banco SCI, Sociedad Anónima, by Banco Reformador, Sociedad Anónima


Issued the Regulation of Minimum Requirements that must be incorporated in the Hiring and Reach of External Auditing of Specialized Businesses in Financial Services, when they make up a financial group

39. Resolution JM-140-2007 dated August 1, 2007

Issued the Regulation of the Automated Clearing House 40. Resolution JM-143-2007 dated August 8, 2007 Authorized the fusion by absorption of Banco Corporativo, Sociedad Anónima, and Financiera

Corporativa, Sociedad Anónima, by Banco Agromercantil de Guatemala, Sociedad Anónima 41. Resolution JM-150-2007 dated August 29, 2007

Cancelled the authorization for operation as an exchange house of Corporación de Divisas, Sociedad Anónima

42. Resolution JM-154-2007 dated September 5, 2007 Approved the regulation for the reception of term deposits in national currency, to be constituted in the Banco de Guatemala

43. Resolution JM-159-2007 dated September 26, 2007 Issued favorable opinion on Convention Loan No 7482-GU to be subscribed by the Republic of

Guatemala and the International Reconstruction and Development Bank, for up to US$100.0 million, called “Third Loan for Broad Base Development Policies”

44. Resolution JM-163-2007 dated October 3, 2007

Issued favorable opinion on loans numbers 1900/BL-GU for up to US$61,000,000.00; and, 1901/OC-GU for up to US$39,000,000.00, to be subscribed by the Republic of Guatemala and the Inter-American Development Bank, both for financing “Reform Program of Public Finance Administration II”


Authorized the fusion by absorption of the Banco del Quetzal, Sociedad Anónima, by Banco Industrial, Sociedad Anónima

46. Resolution JM-166-2007 dated October 10, 2007 Issued favorable opinion for the issue of Treasury Bonds from the Republic of Guatemala for the

2008 Fiscal Year, for the amount of up to Q2,350,000,000.00 and the issue of Treasury Letters for the 2008 Fiscal Year, for up to 20% of the current income estimated in the General Budget of Income and Expenditure Project of the State for the 2008 Fiscal Year


Authorized the Banco de Guatemala to issue a commemorative coin highlighting the VII Latin American series “Latin American Countries and Olympic Sports”

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Issued General Regulation for the issue of Admissible Bonds for the Calculation of Computable Estate

49. Resolution JM-176-2007 dated November 7, 2007

Approved modification to the Regulation of the Banking Legal Reserve, due to the implementation of the Accounting Instructions Manual for Entities Subject to Surveillance and Inspection by the Superintendence of Banks

50. Resolution JM-181-2007 dated November 26, 2007 Revoked authorization for the operation of the Banco de Comercio, Sociedad Anónima

51. Resolution JM-182-2007 dated November 26, 2007 Instructed the Superintendence of Banks to request that the First Instance Civil Court, declare the Banco de Comercio, Sociedad Anónima in bankruptcy

52. Resolution JM-183-2007 dated November 28, 2007 Cancelled the authorization of the Grupo Financiero BANEX-FIGSA and its organizational structure; and, authorized the incorporation of the Financiera Guatemalteca, Sociedad Anónima, Banex Valores, Sociedad Anónima and Banex International Bank Corp., to the Grupo Financiero G&T Continental

53. Resolution JM-184-2007 dated November 28, 2007 Authorized the make up of Grupo Financiero BANRURAL

54. Resolution JM-189-2007 dated December 12, 2007 Modified the Regulation for the Banking Clearing House

55. Resolution JM-190-2007 dated December 12, 2007 Modified the Regulation for the application of sanctions contemplated in article 99 of Decree Number 19-2002 of the Congress of the Republic, Law of Banks and Financial Groups

56. Resolution JM-191-2007 dated December 12, 2007 Issued the Regulation of Limits for Financing for Offshore Entities

57. Resolution JM-199-2007 dated December 19, 2007 Issued the regulation of footing of operations of assets and liable in foreign currency of banks and private financial stock companies

58. Resolution JM-200-2007 dated December 19, 2007 Issued the Regulation on the adequating of capital for offshore entities, stock exchange houses, specialized businesses in financial services, general deposit warehouses and exchange houses that make up Financial Groups

59. Resolution JM-201-2007 dated December 19, 2007 Issued the Regulation to determine the consolidated estate position of financial groups

60. Resolution JM-210-2007 dated December 26, 2007 Cancelled the authorization of the conformation of the Grupo Financiero SCI, and its organizational structure; and, authorized the incorporation of Financiera de Capitales, Sociedad Anónima, and Sociedad de Corretaje de Inversiones en Valores, Sociedad Anónima, to the Grupo Financiero Reformador

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61. Resolution JM-211-2007 dated December 27, 2007

Resolved to have the Monetary, Foreign Exchange Rate and Credit Policy of 2007 as evaluated and determined the Monetary, Foreign Exchange Rate and Credit Policy for 2008.

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BANCO DE GUATEMALA

Address: 7a. avenida, 22-01, zona 1, Ciudad de Guatemala, Guatemala

P.O. Box: 365

Telephone: PBX (502) 2429 6000

(502) 2485 6000

BIC SWIFT: BAGUGTGC

Fax: (502) 2238 0500

(502) 2253 4035

Internet site: www.banguat.gob.gt

For questions please contact: [email protected]; [email protected]; [email protected]; o, [email protected].

The present Aide de Memorie of the Banco de Guatemala 2007 was approved by the Monetary Board in resolution JM-73-2008 dated July 3, 2008.

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http://www.banguat.gob.gt/

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