Mexico - Highway Sector Project : Loan 1671 - Guarantee Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1671 ME Guarantee Agreement (Highway Sector Project) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated August 23, 1979 IDAN NUMBER 1671 ME GUARANTEE AGREEMENT AGREEMENT, dated August 23, 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 Banco Nacional de Obras y Servicios Pfiblicos S.A. (hereinafter called the Borrower) the Bank has agreed to make to the Borrower a loan in various currencies equivalent to one hundred and twenty million dollars ($120,000,000), 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; WHEREAS the purpose of the Loan is to assist the Guarantor in: (a) improving coordination among the various agencies operating its highway system; (b) carrying out its policy of increasing reconstruction, rehabilitation and maintenance of existing highways; (c) assessing the regional development impact of specific highway investments; and (d) developing and carrying out adequate policies relating to highway use; 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, -II -2- subject, however, to the modifications thereof set forth in Section 1.01 of 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. ARTICLE II Guarantee 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 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 with due diligence and efficiency and in conformity with appro- priate administrative, financial, economic and highway engineering 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 referred to in Section 3.01 of the Loan Agreement with the Borrower. Except as the Bank shall otherwise agree, the Guarantor shall not change or fail to enforce any provision of such arrangements. Section 3.03. (a) In order to assist the Guarantor in carry- ing out Part D of the Project, the Guarantor shall employ con- sultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Guarantor and the Bank. (b) The Guarantor shall: (i) not later than December 31, 1979, furnish to the Bank the draft terms of reference for the -3- studies included in Part D.2 and Part D.3 of the Project; and (ii) not later than December 31, 1980, furnish to the Bank the final drafts of such studies, and afford the Bank a reasonable opportunity to comment thereon. Section 3.04. Except as the Guarantor and the Bank shall otherwise agree, any Sub-project to be included in Part A of the Project shall meet the following criteria: (a) have an economic rate of return of at least twelve per cent (12%), calculated in accordance with a method satisfactory to the Bank; and (b) conform to the design standards set forth in Schedule 4 to this Agreement. Section 3.05. (a) The Guarantor shall prepare and furnish to the Bank the following documentation in respect of Sub-projects presented to the Bank for financing out of the proceeds of the Loan: (i) Sub-projects under Part A of the Project: a basic data sheet for each Sub-project substantially in the form of the sample included in Schedule 3 to this Agreement; (ii) Sub-projects under Part B of the Project: a program for the renewal of highway maintenance equipment and vehicles, including an analysis of future capacity requirements and of availability of existing equipment and vehicles; (iii) Sub-projects under Part C of the Project: an analy- sis of functional requirements of the Secretaria de Asentamientos Humanos y Obras PGblicas of the Guarantor in the area where the Sub-project is located, justification of the Sub-project location, and layout of the facilities included in the Sub-project; and (iv) such other information as the Bank shall reasonably request. (b) Except as the Guarantor and the Bank may otherwise agree, all Sub-project proposals shall be furnished to the Bank not later than June 30, 1981. Section 3.06. The Guarantor shall: (a) not later than September 30 in each year, starting not later than September 30, 1979, prepare and furnish to the Bank: (i) the proposed program for highway construction, reconstruction, rehabilitation and routine mainte- nance for each of the next four fiscal years, and the corresponding proposed budget for the next fiscal year; (ii) the proposed program for acquisition and operation of highway maintenance equipment and vehicles for each of the next four fiscal years and the corresponding proposed budget for the next fiscal year; and (iii) a schedule, presented on a quarterly basis, of the estimated withdrawals of the proceeds of the Loan for the following fiscal years until the Closing Date, such estimate to be calculated on the basis of contracts already awarded and con- tracts proposed to be procured for purposes of the Project; (b) not later than January 31 in each year, starting not later than January 31, 1980, furnish to the Bank: (i) the approved budget for highway construction, reconstruction, rehabilitation and maintenance for the current fiscal year and the schedule referred to in paragraph (a) (iii) above adjusted on the basis of said budget; and (ii) reports on axle weight control, road user charges, road transport regulations and the development of the coordinated use of highway transport with other transport modes; and (c) exchange views with the Bank on the program, budgets, reports and schedules referred to in paragraphs (a) and (b) above. Section 3.07. (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. - 5-i -5- (b) Except as the Bank shall otherwise agree, all goods and services financed out of the proceeds of the Loan shall be used exclusively for the Project until its completion. Section 3.08. Except as 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 3.09. (a) The Guarantor: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (including its cost), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable the Bank's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank, from time to time, all such information as the Bank shall reasonably request concerning the Project, the Sub-projects, their cost and the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (b) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Guarantor and the Bank, the Guarantor shall prepare and furnish to the Bank a report on the execution of the Sub-projects, their cost and benefits and on the accomplishment of the purposes of the Loan. Section 3.10. 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. 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 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 -6- 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. (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 or instrumentality of the Guarantor or of any political subdivi- sion 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 maintain or cause to be maintained records adequate to reflect in accordance with consistently maintained sound accounting practices the operations, 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. Section 4.03. The Guarantor shall: (a) cause all the roads and bridges of its highway system, its highway maintenance equip- ment and vehicles, and the facilities included in Sub-projects -7- under Part C of the Project to be adequately maintained, and all necessary repairs thereof to be promptly made, all in accordance with sound appropriate practices; and (b) take all reasonable ateps necessary to ensure the proper use of such roads, bridges, equipment, vehicles and facilities. ARTICLE V Representative of the Guarantor; Addresses Section 5.01. The Director General de Cr6dito Piblico of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 5.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Direcci6n General de Cr6dito Pfiblico Secretaria de Hacienda y Cr6dito Pfiblico Moneda 4 Mexico 1, D.F. Mexico Telex: HDA-01777 HDA-01313 For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Telex: 440098 (ITT) 248423 (RCA) or 64145 (WUI) -8- 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 Is/ Octavio Hernfndez Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Is! Eugenio F. Lari Acting Regional Vice President Latin America and the Caribbean - 9 - '9- SCHR)ULE 1 Description of the Project The Project consists of financing technically and economi- cally feasible Sub-projects which have a high priority for the economic and social development of the Guarantor and which consist of: Part A: Construction, reconstruction or rehabilitation of a particular highway, or a portion thereof, or a partic- ular bridge. Part B: Acquisition and utilization of vehicles and highway maintenance equipment. Part C: Construction, equipping and furnishing of workshops, warehouses and office buildings for the Secretaria de Asentamientos Humanos y Obras PGblicas of the Guar- antor. Part D: Studies: 1. to ascertain future requirements of the road transport infrastructure in Mexico; 2. to quantify the regional development impact of highway projects; and 3. to: (i) define the need for increasing the capacity of the highway network and for strengthening highway pavements; and (ii) investigate the frequency distribu- tion of axle weights of trucks. The Project is expected to be completed by December 31, 1983. 171 - 10 - SCHEDULE 2 Procurement A. International Competitive Bidding 1. 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, 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 a general procurement notice, a draft of such 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 provide 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. (a) Bidders for the civil works shall be prequalified as described in paragraph 1.3 of Part A of the Guidelines. (b) Each invitation to bid will be sent to at least eight prequalified local firms and all, up to a total of eight, pre- qualified foreign firms which have shown interest in being invited. If thiAre are more than eight such prequalified foreign firms, they may be invited on a rotational basis. 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 Guarantor of inland freight - 11 - and other expenditures incidental to the delivery of goods to the place oL their use or installation shall be included. 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 manufac- tured 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 - 12 - 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% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 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. Review of Procurement Decisions by the Bank 1. Prequalification. The Guarantor shall furnish to the Bank: (a) the list of prequalified foreign bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalification; and (b) the list of prequalified foreign bidders which have shown interest to be invited to specific tenders. 2. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for goods: (a) Before bids are invited, the Guarantor shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures 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. 3. 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 copies of such contract, together with the analysis of bids, recommendatic, for award, the updated Basic Data Sheet and such other information as - 13 - the Bank shall reasonably request. The Bank shall, if it deter- mines 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, -14- SCHEDULE 3 Sub-projects under Part A of the Project Basic Data Sheet (Sample) 1. Basic Data Road: Queretero-San Luis Potasi Section: Queretero-San Jose Iturbide Length: 46 km Cross-section present: 1.80 + 7.30 + 1.80 = 10.90 m Cross-section proposed: Two 11 m carriage ways Pavement proposed: 5 cm asphalt carpet Design Class: four-lane special 2. Traffic AADT 1976: 3,586 cars, 538 buses, 4,840 trucks, total 8,964 v.p.d. Growth rate traffic: 7% per annum Estimated 1982 traffic: 13,452 v.p.d. 3. Bridges 7 bridges for a total length of 180 m 4. Cost Estimate Mex$ 267 million 5. Economic Justification ERR 62%, FYB 69% 6. Tenders and Construction Tender dates: one each 1979 and 1980 Completion time: three years Tentative budget allocation Mex$ 1979 45 million 1980 124 million 1981 107 million - 15 - 7. Technical Description The basic proposal is to construct a second two-lane car- riageway parallel to the existing road, which is already built to adequate standards, lacking only sufficient capacity for present traffic volumes. 8. Economic Description The 201 km Queretaro-San Luis Potosi road is an extension of the Mexico City-Queretaro road, which is already four lanes. This is one of the most heavily traveled corridors in Mexico for both rail and highway, carrying north-south traffic in the Mexico City-Monterrey corridor. While the entire 201 km of four- lane construction can be easily justified, this first section of 46 km outside Queretaro is particularly congested, carrying approximately 5,000 trucks per day; it is the scene of numerous traffic accidents whose costs are not estimated herein. It is one of the highest priority road projects in the country. 9. Alternatives Considered (a) Four lanes with no median. (b) Reconstruction of the existing two lanes from 7.50 m of pavement to 10.9 m (a three-lane highway). (c) Four-lane limited access expressway with overpasses. (d) Four-lane with median and at-grade intersections (the alternative selected). 10. Date of Feasibility Study August 22, 1978. 116 - 16 - SCHEDULE 4 Design Standards Flat Medium Heavy Geometric and Hilly Moun- Moun- Standard Design Unit Rolling Country tainous tainous Special Design Speed km/h 110 100-90 80-70 70-60 A " " 90-110 90-80 70-60 60-50 B " " 80 70 50 30 C " 70 60 40 25 D " " 60 50 30 20 Special 2 Embankment Width m 9-13.5 9-13.5 9-13.5 9-13.5 Special 4 " " 22.5 or 22.5 or 22.5 or 22.5 or 2x12 2x12 2x12 2x12 A " " 9 9 8.5 8 B " 8 8 7.5 7 C " " 7 7 7 7 D " " 6.5 6.5 6.5 6.5 Special Medium Radius m 380 250 150 95 A " " 380 210 95 64 B "o 210 150 64 18 C " 150 95 38 16 D 95 64 18 16 Special Minimum Gradient % 4 4.5 5 6 A " " 4 5 6 7 B " 4.5 6 7 8 C " 5 7 8 10 D 6 9 12 14