Mexico - Rio Fuerte And Rio Sinaloa Irrigation : Loan 1706 - Guarantee Agreement - Conformed

5I CONFORMED COPY LOAN NUMBER 1706 ME Guarantee Agreement (Rio Fucrte and Rio Sinaloa Irrigation Project) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated July 30, 1979 LOAN NUMBER 1706 ME GUARANTEE AGREEMENT AGREEMENT, dated July 30, 1979, 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 Nacional Financiera, S.A. (hereinafter called the Borrower) the Ban& has agreed to make to the Borrower a loan in various currencies equivalent to ninety-two million dollars ($92,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Gi:arantor 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: 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 modification thereof set forth in Sec- tion 1.01 of the Loan Agreement (said General Conditions Appli- cable to Loan and Guarantee Agreements, as so modified, being hereinafter call Ad the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the sevLzal terms defined in the General Conditions have the respective meanings therein set forth. ARTICLE II Guarantee Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the -2- Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due 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 all as set forth in the Loan Agreement. ARTICLE III Execution of the Project Section 3.01..The Guarantor shall carry out the Project described in Schedule 1 to this Agreement, acting by its Secre- taria de Agricultura y Recursos Hidrafilicos, with due dili- gence and efficiency and in conformity with sound engineering, agricultural, economic, administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. The Guarantor shall enter into the contractual arrangements with the Borrower referred to in Section 3.01 of the Loan Agreement. Except as the Bank may otherwise agree, the Guarantor shall not change or fail to enforce any provision of such arrangements. Section 3.03. Except as the Guarantor and the Bank shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Loan, shall be governed by the provisions of Schedule 2 to this Agreement. Section 3.04. The Guarantor shall: (a) at the Bank's request, furnish to the Bank the plans, specifications, contract documents and work schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request; (b) (i) maintain or cause to be maintained records adequate to record the progress of the Project (including its cost), the results achieved by the Project, and the extent to which the investment, operation and maintenance costs of the facilities provided under the Project have been recovered as required by the provisions of this Agreement, to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) enable the Bank's accredited representa- tives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds -3- of the Loan and any relevant records and documents; and (iii) furnish or cause to be furnished to the Bank such other informa- tion as the Bank shall reasonably request concerning the Project, the expenditure of such proceeds and the goods and services financed out of such proceeds; and (c) promptly after completion of the Project, but in any event not later than one year after the Closing Date or such later date as may be agreed for this purpose between the Guarantor and the Bank, prepare and furnish to the Bank a report on the execu- tion and initial operation of the Project, its cost and benefits and on the accomplishment of the purposes of the Loan. Section 3.05. (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 3.06. The Guarantor shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out the Project. Section 3.07. The Guarantor shall continue to take such measures as shall be necessary or advisable to ensure that the beneficiaries of the Project will be provided with such short-, medium- and long-term credit, as and when required, to utilize adequately the facilities included in the Project. Section 3.08. (a) The Guarantor shall charge and collect such water charges, on the basis of the ability of water users to pay and the need to maintain an incentive for them to make best use of the land and water available to them, as shall be necessary to recover all the operation and maintenance costs of the irri- gation facilities included in the Project and as much as practi- cable of their investment cost. (b) The Guarantor shall: (i) not later than December 1, 1984, carry out a socio-economic study in the area of the Project A I F.-II to determine, inter alia, the ability of water users to pay for the cost of irrigation; and (ii) periodically, review such study with a view to revising such charges, if appropriate. (c) The Guarantor shall, promptly after each of the studies referred to in paragraph (b) hereof is completed, afford the Bank a reasonable opportunity to comment on its conclusions and recommendations. ARTICLE IV Other Covenants Section 4.01. (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 con- cerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distri- bution 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, ips> 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 Guar- antor, 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 thp 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. (c) As used in this Section, the term "governmental assets" means assets of the Guarantor, of any of its political subdivi- sions or of any agency; and the term "agency" means any agency --5 - or instrumentality of the Guarantor or of any political sub- division 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. Section 4.02. The Guarantor shall: (a) maintain or cause to be maintained separate accounts adequate to reflect in accordance with consistently maintained sound accounting practices the resources and expenditures in respect of the Project of the departments or agencies of the Guarantor responsible for carrying out the Project or any part thereof; (b) annually, furnish to the Bank a summary statement of such accounts; and (c) furnish to the Bank such other pertinent information concerning such accounts as the Bank shall reasonably request from time to time. Section 4.03. The Guarantor shall cause the facilities included in the Project to be operated, maintained and repaired in accordance with sound engineering, technical, financial and administrative practices. ARTICLE V Representative of the Guarantor Section 5.01. Nacional Financiera, 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 agrees that all notices and requests given or made 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 /s/ Jesus Silva-Herzog Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Nicolfs Ardito Barletta Regional Vice President Latin America and the Caribbean -7- SCHEDULE 1 Description of the Project The purpose of the Project is to provide irrigation faci- lities and technical assistance benefitting approximately 120,000 hectares in the Rio Fuerte Irrigation District and approximately 76,000 hectares in the Rio Sinaloa Irrigation District in the north of the State of Sinaloa. The Project consists of: Part A: Rio Fuerte District 1. Rehabilitation of: about 1.7 kilometers of lined main irrigation canal, about 130 kilometers of unlined main irrigation canals, about 600 kilometers of unlined lateral irrigation canals and about 154 kilometers of open drains. 2. Construction of: about 375 kilometers of lined lateral irrigation canals, about 171 kilometers of open drains, and about 48 kilometers of roads. 3. Reclamation of about 60,000 hectares of saline and saline-sodic soils. Part B: Rio Sinaloa District Construction of: about 16 kilometers of lined main irrigation canals, about 313 kilometers of lined and about 280 kilometers of unlined lateral irrigation canals, about 510 kilometers of open drains, and about 170 kilometers of feeder roads. Part C: Land clearing and leveling. Part D: Installation of a telephone system, construction of buildings and houses for supporting services, and acquisition and utiliza- tion of equipment to operate and maintain the facilities included in the Project. -8- Part E: Agricultural extension and research programs, and studies on drainage and irrigation related matters within the Sinaloa River and Fuerte River basins. * * * The Project is .expected to be completed by December 31, 1985. II -9- SCHEDULE 2 Procurement A. In'ernational Competitive Bidding 1. Except as provided in Part C hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, and in addition to the requirements of paragraph 1.2 of the Guidelines, the Guarantor shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating there- to, as the case may be, a general procurement notice, in such form and detail and containing such information as the Guarantor and the Bank shall agree; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Guarantor shall proviae the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. Contracts for civil works shall be grouped in packages of not less than $2,000,000 equivalent. 4. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding, (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically supplied goods, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 5* Account shall be taken of the availability of maintenance facilities and spare parts for imported goods. - 10 - B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in Mexico may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Mexico if the bidder shall have established to the satisfaction of the Guarantor and the Bank that the manufacturing cost of such goods includes a value added in Mexico equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Mexico. (3) Group C: bids offering any other goods. 3. All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% - 11 - of the c.i.f. bid price of such goods if said customs duties and taxes excee" 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures On-farm civil works, and certain minor civil works and equipment items may be procured through competitive bidding on the basis of local advertising or through negotiated contracts on the basis of the Guarantor's ordinary procedures, provided, however, that: (a) each contract for such minor civil works shall not exceed $220,000 equivalent; and (b) the aggregate amount of the contracts for such equipment shall not exceed $2,800,000 equivalent. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for the purchase of goods and equipment not covered by the provisions of Part C of this Schedule: (a) Before bids are invited, the Guarantor shall furnish to the Bank, for its comments, the tekt of the invitations to bid and the specifications and other bi'dding documents, together with a description of the advertising procedures to be followed for the bidding, and .-hall make such modifications in the said documents or procedure- as the Bank shall reasonably request in consultation with the Guarantor. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. 2. With respect to each contract to be financed out of the proceeds of the Loan, the Guarantor shall, promptly after the execution of each contract and prior to sending to the Bank the first application for withdrawal of funds from the Loan Account in respect thereof, furnish to the Bank two conformed - 12 copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award 'of the contract was not consistent with the Guidelines. or this, Schedule, promptly inform the Guarantor and state the reasons for such determination. r