Prior to the enactment of the Municipal Code, by Law No. 7794 of April 30th, 1998, its predecessor Code silent on this possibility. Before this it was decided to consider that according to the “Principle of Legality” if there was no express authorization for such an act, you could not do it. This raises the possibility of a comprehensive reform of the Municipal Code (CM), seeking to strengthen the autonomy, so that the former Article 4 is removed and the door opens to each Municipal Government to establish its financial possibilities to seek solutions to the considered priority areas.

With this intention there are incorporated into the CM, a number of provisions that ensure the availability of using financial instruments that provide the deftness to give financial support to their development projects, of infrastructure formedium and long term.

The Article 87 of the valid CM establishes:

“The municipalities may issue certificates to finance themselves. These securities are subject to the rules of the National Securities Commission and shall be exempt from all Taxation”
The estate of the semiautonomous and autonomous agencies, the estatal Enterprise estructures as corporations and municipalities are empowered to intervene in municipal certificates.

Meanwhile, the articles 88 to 90 established in their order the following:

“Article 88. – Through institutional agreements, state support and some other ways to collaborate, it could be created a fund endorsement guarantee of the municipal emissions, with the rules and conditions estatuidas in the regulations that every municipality creates for effect.

“Article 89. – The obtained funds with bonds only could be use to the purposes stated in the emission.”

“Article 90.- The municipalities must design payment plans and attention ones appropriate to their duties. For this, they must include, in their budget, in their regular estimate, enough parties to fulfill the commitments.

Then, from the transcribed provisions we can clearly draw the following:


o The provisions were concerned not only to regulate the offer, but also the demand, when in Article 87, authorizes “THE STATE, THE AUTONOMOUS BODIES, (…)” to invest in municipal bonds.

o The legislation marked the possibility to create, either through institutional agreements (between Municipalities and other entities, between the Municipalities and the State) a GUARANTEE WARRANTY FUND OF MUNICIPAL SECURITIES, for the purpose of placing on the organized securities market, fund that as we understand, has not yet been created, but it would not hurt to try to propel the chance to give more presence and appeal to their emissions.

o The legislator, foreseeing rules to avoid mismanagement (detour to other projects) in funds raised, forces in his Article 89 that “the proceeds from bonds may only be used for the purposes indicated in the issue” that to maintain the spirit of “bond issue to finance specific infrastructure projects.”

o It also grants an interesting tax incentive, where Article 87 states that the bonds “SHALL BE EXEMPT FROM PAYMENT OF ALL TYPES OF TAXES“, whereby the payment of income tax is abolished, on interest and discounts referred in Article 23 of the Law on Income Tax and gross income. This notwithstanding subsequent analysis of the effect it may have on the creation -for instance – of a Municipal Investment Fund (MIF) in relation to the arrangements that exist in Article 100 of the current LRMV.

o It also requires municipalities to “program” payments of obligations and budget them in due form, otherwise the Comptroller General of the Republic not to approve their budgets.

We observe then the provisions, an obvious intention of the legislature to promote and facilitate the issuance and placement of “municipal bonds”.