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What is a Public Credit Transaction?
Taking into account the Decree 2681 of 1993, Public Credit Transactions are all the acts or contracts that have the objective to supply of resources, goods or services, to a state entity, with a maturity date for its payment or those in witch the state entity acts as a solidary debtor or as a guarantor of payment obligations.
Among these operations could be, among others the execution of loans, the issuance, subscription and placement of bonds and securities, credits of suppliers and the grant of guarantees for payment obligations of a state entity.
As a consequence of what the Decree 2681 stipulates, the public credit transactions can be local or external. The local credit transactions are, in compliance with the exchange regulations, celebrated among residents of the national territory to be paid in the national lawful currency of Colombia . The external credit transactions are the rest of them. The residents are defined in the article 2 of the Decree 1735 of 1993 and all other norms related.
Which ones are the assimilate acts to the Public Credit Transaction?
The acts or the contracts analogous to public credit transaction, by means of which there is an assumption of an obligation with a maturity date for its payment, are assimilated to public credit transaction.
Among the assimilate acts or contracts to public credit transactions are the documentary credits, when the bank that submits the letter of the credit grants the term to use it, and the novation or modification of obligations, when the new obligation implies the grant of a term for the payment.
To the assimilate operations of a public credit transactions with a maturity that exceed one year, they will be to them applicable the dispositions of public credit transactions, taking into account if they are local or external transactions and the entity that celebrates it. As a consequence, the assimilate operations to public credit transactions that have a term equal or smaller to one year are authorized by general rule and they will not required the mentioned concepts in the second paragraph of the article 41 of the Law 80 of 1993.
What are the short term credits?
The Article 15 of the Decree 2681 of 1993 establishes that the short term credits are the loans that the state entities celebrate with a maturity of one year or less. It also says that they can be transitory or of treasury.
Transitory credits: Are the ones that are going to be repaid with a long term facility. These credits have a firm commitment offer.
Treasury loans: the ones that are going to be repaid with resources not coming from credit.
This article also establish that, with exception of the domestic credits of short term of the territorial entities and its decentralized, the celebration of short term credits of the state entities different than the Nation will require the authorization of the Ministry of Finance and Public Credit.
For the treasury loans, the authorization could be ask for the hole legal period or for some determine loans. The amount of the loans or the principal amount can not exceed 10% of the current earnings of the entity not including capital resources of each legal period.
The article also indicates that, when is going to be funded projects of social interest or investment in priority sectors or exist urgently demand of obtaining credit resources, the Ministry of Finance and Public Credit could authorize higher percentages than the 10%, only if it counts with the concept of the National Council of Economic and Social Policy - CONPES.
Furthermore, the article advice that the treasury loans can not be transform in a source of funding alternate budget expenses.
Finally, this article is in conformity with the second paragraph of the article 41 of the 80 Law of 1993 in respect that, the treasury loans that the Nation hires are authorized by general law and they don't required the documents here mentioned.
Is the authorization of the Ministry of Finance and Public Credit required for the celebration of a treasury loan? What is top amount that could be hiring on each period?
In compliance with the article 15 of the Decree 2681 of 1993, the State Entities of the National Order, the State Entities where the Nation has a higher participation than the 50% and less than the 90% of its equity, the National Autonomous Corporations, the universities, the National Commission of TV, the Domiciliary Public Services Enterprises official or mix, required the authorization for the celebration of domestic Treasury Loans.
The territorial entities and it's decentralized don't required the authorization of the Ministry of Finance and Public Credit for the celebration of domestic treasury loans.
All the public entities, Independent of its nature required the authorization of the Ministry of Finance and Public Credit for the celebration of external treasury loans.
The top amount that can be authorized and hire in a legal period can not overcome the 10% of the current revenues of each entity.
For a territorial entity, in compliance with the article 15 of the Law 819 of 2003, its treasury loan can not exceed its 1/12 of its current revenues of the fiscal year and they have to be paid before the December 20 of the same year of it's hired.
The treasury loans can not be transformed in a source of funding alternate budget expenses.
Is necessary to register the treasury loan on the data base of the Ministry of Finance and Public Credit?
In compliance with the article 16 of the Law 533 of 1999, the treasury loans do not require the filing in the data base of the Ministry of Finance and Public Credit.
The cancellation of treasury loan liberates the assigned quota?
The internal and/or external treasury loans are not revolving credits. In that order of ideas, the understanding is that the grant authorizations are used at the moment that the loan is hire and they could not exceed the 10% of the current budget revenues of the entity for the rolling period. However, only the treasury loans of the territorial entities could not exceed the 1/12 part of the current revenues of the entity of that legal period.
Is the financial lease considered as an assimilate operation of Public Credit transaction?
In order to be able to frame the lease contract as an assimilated operation of public credit, it is necessary to take into account the article 2 of the Decree 913 of 1993 that stipulates that it is understood for an operation of financial lease as ¨ the delivery of a lease title of acquired asset for that purpose, financing its use and its possession in exchange of the lease payments during certain period, that establish the option to purchase for the lessee at the maturity
As consequence, the asset should be of the company's property (leaser), right that is going to be maintained until the lessee exercise the purchase option. Also, it has to be understood that the cost of the asset given by lease is going to be amortized along the duration of the contract, generating the profit.
The financial lease contract is considerate as a assimilate operation of public credit transactions, to arise from the same, obligations of payment in a determinate period (articles 3° and 4° of the Decree 2681 of 1993), aspect that is materialized with the lease payments that are going to be received by the leaser from the lessee for the use of the asset during the period. (2° Article of the Decree 913 of 1993).
¨The leasing operations should be considered as an assimilate to a public credit transaction as long as its celebration is under the following conditions:”
Act as a party to the contract a state entity defined in the first numeral of the second article of Law 80 of 1993.
That for effects of the leasing contract, this on should be framed under the general postulates established in the article 2 of the Decree 913 of 1993 like is the funding the use and the possession of the given leasing goods in exchange of the lease payments during a certain term, and with a purchase option over the good at the end of the period.
That under the purpose of that contract that the state entity acquired lease payment obligations with a maturity period of payment.
In the other hand, the real-sate financial lease contract is considered as an assimilate operation of a Public Credit Transaction, only when the goods are being leased, funding its use and its possession in exchange of the lease payments for a certain period, establishing at the end of the term the purchase option.
What do the Territorial State Entities need to consider for the execution of a financial lease?
Because the financial characteristics, the financial leasing operations are considered as an assimilate operation to a public credit transaction and they have to be registry as a debt. As a consequence, the leasing contracts have to be approved by the political control organizations (Assemblies and Councils), and they are submitted to the regulations that are establish for the territorial debt execution.
In this order of ideas, the execution of this type of operations affects the payment ability and as a result the acquire goods by this modality have to not exceed the indebtedness capacity of the territorial entity, taking into account the present and future maintenance costs, payments and disbursements.
On that matter it is good to clarify, that although a public credit transaction does not required of a licitation process and neither the compromise of future obligations, when the purpose of the sector expense exceeds the minimum amounts establish in the Law 80 of 1993, its execution should be by licitation. Also, when the acquisition of a certain good affects the budget of investment expenses for more than one period, this type of expense requires the authorization of future obligations.
When a Territorial State Entity requires the authorization of the Ministry of Finance and Public Credit celebrate a domestic credit agreement?
A territorial state entity must request authorization to the Ministry of Finance and Public Credit, when it's debt condition is critical, in others words, when its indicators of the law 358 of 1997, the indicator of solvency (interests / operational saving) exceeds 40% or the indicator of sustainability (balance of the debt / current incomes) exceeds 80%. For these cases the territorial entity must comply with the requirements and formalities established in the law 358 of 1997 and in the decree 696 de 1998.
Also, when a territorial entity is not complying with the spending limits set out in the law 617 of 2000 and the fulfillment of the law 819 of 2003, it requires authorization of the Ministry of Finance and Public Credit and the subscription of a performance plan within the terms established in the law 358 of 1997 and its complementary provisions.
When a decentralized entity of the territorial order is going to hire a domestic credit it should have its qualification of payment credit rating issued by a risk qualification?
In accordance with the law 358 de 1997, all decentralized entities of territorial order in order to contract public credit transactions with a maturity higher to one year require the qualification of payment capacity established in the decree 610 of 2002.
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