Mexico - Medium-Size : Loan 1186 - Guarantee Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1186 ME Guarantee Agreement (Medium-Size Cities Water Supply and Sewerage Project) BETWEEN UNITED MEXICAN STATES AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED JANUARY 13, 1976 CONFORMED COPY LOAN NUMBER 1186 ME Guarantee Agreement (Medium-Size Cities Water Supply and Sewerage Project) BETWEEN UNITED MEXICAN STATES AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED JANUARY 13, 1976 GUARANTEE AGREEMENT AGREEMENT, dated January 13, 1976, between UNITED MEXICAN STATES (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS by the Loan Agreement of even date herewith between the Bank and Banco Nacional de Obras y Servicios Pblicos, S.A. (hereinafter called the Borrower) the Bank has agreed to make to the Borrower a loan in various currencies equivalent to forty million dollars ($40,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as hereinafter provided; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to enter into this Guarantee Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties t0 this Agreement accept all the provisions of the General Conditions Appiicable to Loan and Guarantee Agreements of the Bank dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in Section 1.02 of the Loan Agreement have the respective meanings therein set forth. ARTICLE II Guarantee; Provision of Funds Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety me.ely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and 4 the premium, if any, on the prepayment of the Loan and the punctual performance of all the other obligations of the Borrower, all as set forth in the Loan Agreement. Section 2.02. Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guarantor specifically undertakes, whenever there is reasonable cause t,o believe that the resources available in the Fund will be inadequate to meet the estimated expenditures required for the carrying out of the Project, promptly to provide the Fund or cause the Fund to be provided with such funds as are needed to meet such expenditures. ARTICLE III Execution of the Project Section 3.01. The Guarantor, through SRH, shall: (i) construct the works included in Part A of the Project described in Schedule 2 to the Loan Agreement; (ii) procure the goods and services required therefor; (iii) supervise the technical and administrative operation of the facilities included therein, and provide adequate technical assistance therefor; and (iv) carry out Part B of the Project; all with due diligence and efficiency and in conformity with sound administrative, financial, engineering and public utility practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. (a) The Guarantor undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Guarantor to replace or repair such goods. (b) Except as the Bank may otherwise agree, the Guarantor shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.03. (a) The Guarantor shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Guarantor: (i) shall maintain or cause to be maintained records adequate to record the progress and cost of the Project and to identify the goods 5 and services financed out of the proceeds of the Loan, and to disclose the use thereof in the Project; (ii) shall enable the Bank's representatives, or cause them to be enabled, to visit the facilities and construction sites included in the Project and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. Section 3.04. Except as the Bank shall otherwise agree, the Guarantor shall: (i) within six months after the date of this Agreement prepare guidelines for project preparation, design and appraisal of water supply and sewerage systems in urban centers, in accordance with generally accepted principles; and (ii) after affording the Bank a reasonable opportunity to exchange views on such guidelines, put them into effect within 12 months after the date of this Agreement. Section 3.05. The Guarantor shall: (a) maintain in SRH a special unit in charge of carrying out feasibility studies and appraisals of the Investment Projects, to supervise their carrying out, and to monitor their operations; and (b) at all times, assign suitably qualified staff in adequate numbers to such unit, including sanitary engineers, financial analysts, economists, and other supporting staff. Section 3.06. The Guarantor shall carry out and furnish to the Bank within three years after the date of this Agreement, or such other period as the Guarantor and the Bank shall agree, a complete ..entory of all water supply and sewerage systems in Mexico urban communities with more than 2,500 inhabitants. Section 3.07. The Guarantor shall formulate and furnish to the Bank, by December 3 1, 1977 or such other date as the Guarantor and the Bank shall agree, a nationwide training program based on the experience obtained in carrying out Part B of the Project, and shall exchange views with the Bank on such program and the plans for its implementation. Section 3.08. The Guarantor shall, in accordance with its laws, appoint independent and qualified auditors for the purposes of Section 5.02 of the Loan Agreement. Section 3.09. The Guarantor shall promptly inform the Bank of the occurrence of the event described in Section 6.01(a) of the Loan Agreement and of the occurrence of any event directly leading to the occurrence of such event. 6 Section 3.10. The Guarantor shall use its best efforts to cause the industrial and other entities that distribute water to some of the residents of urban communities, without having this as their main purpose, to transfer such distribution to the corresponding municipal authorities or their agencies or concessionaires. Section 3.11. The Guarantor shall: (i) carry out feasibility studies for the control of pollution in areas to be determined by the Guarantor in agreement with the Bank; (ii) within 42 months of the date of this Agreement, carry out studies on water metering with a view to controlling leaks and losses and reducing the quantity of unaccounted water in the water supply systems operated by SRH; and (iii) afford the Bank a reasonable opportunity for exchanging views on the terms of reference for such studies and on the conclusions and recommendations thereof. ARTICLE IV Other Covenants Section 4.0 1. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any governmental assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Guarantor, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Guarantor shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other governmental assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. 7 As used in this Section, the term "governmental assets" means assets of the Guarantor, of any of its political subdivisions, or of any agency; and the term "tagency" means any agency or instrumentality of the Guarantor or of any political subdivision of the Guarantor and shall include any institution or organization which is owned or controlled directly or indirectly by the Guarantor or by any political subdivision of the Guarantor or the operations of which are conducted primarily in the interest of or for account of the Guarantor or any political subdivision of the Guarantor. ARTICLE V Representative of the Guarantor Section 5.01. Banco Nacional de Obras y Servicios P6blicos, S.A. is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 5.02. The Guarantor hereby agrees that all notices and requests given or made by the Bank to the Borrower shall be deemed to have been given or made also to the Guarantor. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. UNITED MEXICAN STATES By: BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS, S.A. By /s/ Leandro Rovirosa Wade Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s / Enrique Lerdau Acting Regional Vice President Latin America and the Caribbean