Colombia - Second Small-Scale Industry Project : Loan 1451 - Guarantee Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1451 CO Guarantee Agreement (Second Small-Scale Industry Project) between REPUBLIC OF COLOMBIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated September 27, 1977 LOAN NUMBER 1451 CO GUARANTEE AGREEMENT AGREEMENT, dated September 27, 1977, between REPUBLIC OF COLOMBIA (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 de la Repiblica (hereinafter called the Borrower) the Bank has agreed to make to the Borrower a loan in various currencies equivalent to fifteen million dollars ($15,000,000), 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 so to guarantee such obligations of the Borrower; NOW THEREFORE the parties hereto hereby agree as follows: - 2 - ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable 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, subject, however, to the modifications thereof set forth in Schedule 2 to the Loan Agreement (said General Conditions Applicable to Loan and Guarantee Agreements, as so modified, 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. -3- 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 merely, the duce and punctual payment of the principal of, and interest and other charges on, the Loan, and 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. (a) Except as the Bank shall otherwise agree, without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guarantor shall: (i) take or cause to be taken all action to obtain that CFP receive not less than (1) Col. $75,000,000 in the year 1977; (2) Col. $30,000,000 in the year 1978; and (3) Col. $60,000,000 in each of the years 1979 and 1980, as contribution to its paid-in capi- tal (excluding capitalization of retained earnings and other reserves); and (ii) take or cause to be taken all steps as shall be necessary to enable CFP to obtain from sources with- in Colombia, in addition to those used by CFP during the year 1976, each year during the period 1977 through 1980, not less than Col. $50,000,000 on terms and conditions compatible with CFP's operat- ing requirements, taking into due account account the Guarantor's monetary policies, the aggregate of such financing for the years 1977 through 1980 to result in a net increase of not less than Col. $200,000,000 over and above CFP's borrowing from sources in Colombia in the year 1976; provided however, that if in any of the years 1977 through 1980 CFP shall obtain such additional paid-in capItal or borrowing from such sources in excess of the aforementioned amounts, such excess shall be taken into consideration in calculating the amount of paid-in capital or such borrowing, as the case may be, required to be obtained by CFP in the following year or years in accordance with the provisions of this Section. (b) The Guarantor, the Bank and CFP shall annually review the amount of additional resources obtained by CFP and the terms on which CFP has been able to borrow funds, in the light of CFP's objectives. - 5 - ARTICLE III Other Covenants Section 3.01. (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, specific 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 public 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 adminis- trative subdivisions, 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, the Guarantor shall promptly and at no cost to the Bank secure the principal of, - 6 - and interest and other charges on, the Loan by an equivalent lien on other public 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. (c) As used in this Section, the term "public assets" means assets of the Guarantor, of any political or administrative subdivision thereof and of any entity owned o controlled by, or operating for the account or benefit of, the Guarantor or any such subdivision, including gold and other foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Guarantor. Section 3.02. The Guarantor shall: (i) review, jointly with the Borrower, the financial situation of FFI; and (ii) take or cause to be taken all action, by December 31, 1977 or such later date as the Guarantor and the Bank shall agree, in order to en- large FFI's resource base and take such measures as shall be necessary to (1) increase access of industrial enterprises with total assets not exceeding the equivalent of $300,000 each to -7- FFI's financing, and (2) increase the financial intermediaries' incentives for providing credit to such industrial enterprises, primarily those located in less developed regions in Colombia. Section 3.03. The Guarantor shall take all action, including the granting of all necessary authorizations, import licenses, foreign exchange permits and all other approvals required under the laws of the Guarantor, to ensure the timely procurement of the goods and serv-ces required for the Project. -8- ARTICLE IV Representative of the Guarantor; Addresses Section 4.01. The Ministro de Hacienda y Cr6dito PGblico of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Ministerio de Hacienda y Crfdito PGblico Palacio de los Ministerios Plaza San Agustin Bogota, Colombia Cable address: MINHACIENDA Bogot. For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. -9- 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. REPUBLIC OF COLOMBIA By Is/ Abd6n Espinosa Valderrama Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Adalbert Krieger Regional Vice President Latin America and the Caribbean