Mexico - Rainfed Agricultural Development Project : Loan 1945 - Guarantee Agreement - Conformed

LOAN NUMBER 1945 ME Guarantee Agreement (Rainfed Agricultural Development Project) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1981 LOAN NUMBER 1945 ME GUARANTEE AGREEMENT AGREEMENT, dated 1981, between UNITED MEXICAN STATES (hereinafter called the Guarantor) and INTERNATIONAL EANK 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 Bank has agreed to make to the Borrower a loan in various currencies equivalent to two hundred eighty million dollars ($280,000,000), 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: 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 October 27, 1980, with the same force and effect as if they were fully set forth herein subject, however, to the modifications thereof set forth in Schedule 3 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. 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, acting through SARH, shall carry out Parts A, D and E of the Project described in Schedule 1 to this Agreement and, acting through SARH and SAHOP, as the case may be, shall carry out Part B of such Project with due diligence and efficiency and in conformity with sound engineering, agricul- tural, 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. Without limitation or restriction upon the provisions of Section 3.01 of this Agreement, the Guarantor specifically undertakes: (a) to cause Banxico and Banrural, respectively, to carry out Parts C (1) and (2) of the Project with due di'.igence and efficiency and in conformity with sound agricultural, industrial, administrative and financial policies and practices, all in accordance with the provisions of the First Project Agreement and the Second Project Agreement; (b) whenever there is reasonable cause to believe that the funds available to Banxico or to Banrural for purposes of Parts C (1) and (2) of the Project will be inadequate to meet the estimated expenditures required for carrying out Parts C (1) and (2) of the Project, to make arrangements, satisfactory to the Bank, promptly to provide Banxico or Banrural or cause Banxico or Banrural to be provided with such funds as are needed to meet such expenditures; (c) to pay into the Fondo Especial de Asistencia Tecnica y Garantla para Crditos Agropecuarios, such amounts as shall be required by Banxico to carry out Part C (1) of the Project; and (d) with regard to the portion of the Loan allocated to carry out Parts C (1) and (2) of the Project, to pay to the -3- Borrower such amounts as the Borrower shall require: (i) to repay to the Bank such portion of the Loan; and (ii) to pay to the Bank any interest and other charges due thereon. Section 3.03. The Guarantor shall make contractual arrange- ments with the Borrower, satisfactory to the Bank, providing, inter alia, (a) for the transfer from the Borrower to the Guarantor of the proceeds of the Loan for the purpose of carrying out Parts A, B, D and E of the Project, and (b) for the transfer by the Guarantor to the Borrower of such funds as the Borrower shall be required to pay to the Bank on account of principal, interest and other charges on the Loan. Except as the Bank may otherwise agree, the Guarantor shall not change or fail to enforce any provision of such arrangements. Section 3.04. Except as the Guarantor and the Bank may otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Loan othe than those under Part C of the Project shall be governed by the provisions of Schedule 2 to this Agreement. Section 3.05. 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, to identify the goods and ser- vices financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) 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) furnish or cause to be furnished to the Bank such other information 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 -4- execution and initial operation of the Project, its cost and benefits and on the accomplishment of the purposes of the Loan. Section 3.06. (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 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 3.07. 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 3.08. The Guarantor shall take such measures as shall be necessary or advisable to ensure that the Beneficiaries of the Project will be provided with such credit, as and when required, to utilize adequately the facilities and services included in the Project. Section 3.09. Except as the Bank may otherwise agree, any irrigation Sub-project shall have an average investment cost not exceeding the equivalent of $10,000 per family. 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 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, -5- 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 subdivisionb, 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 equivalt-nt 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 sub- divisions, or of any agency; and the term "agency" 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. Section 4.02. The Guarantor covenants that it will not take, or cause or permit any of its political subdivisions or any of its agencies or any agency of any such political subdivisions to take, any action which would prevent or interfere with the performance by the Borrower or Banxico or Banrural of its respective obligations contained in the Loan Agreement, the First Project Agreement or the Second Project Agreement and will take or cause to be taken all reasonable action necessary or appropriate to enable the Borrower or Banrural and Banxico, as the case may be, to perform such obligations. Section 4.03. The Guarantor shall take all action which shall be necessary or advisable: (a) upon the recommendation of FONDO or FICAR to that effect, to cause such import permits as shall be needed for the -6- importation of goods required to carry out the Project to be issued as promptly as possible, in compliance with the legislation and administrative procedures of the Guarantor; and (b) to enable Banxico and Banrural, as the case may be, to apply or cause to be applied the policies set forth in Schedule 1 to the First Project Agreement and Schedule 1 to the Second Project Agreement. Section 4.04. The Guarantor shall, in accordance with its laws, appoint independent and qualified auditors for the purposes of Sections 2.09 of the Project Agreements. S ection 4.05. 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) have the accounts referred to in paragraph (a) of this Section verified in accordance with the Guarantor's ordinary procedures; (c) annually, furnish to the Bank a summary statement of such accounts; and (d) furnish to the Bank such other pertinent information concerning such accounts as the Bank shall reasonably request from time to time. Section 4.06. 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; Addresses Section 5.01. The Direcci6n General de Credito Pfblico of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. -7- Section 5.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Secretaria de Hacienda y Credito PG5blico Moneda 4 Mexico 1, D.F. Mexico Cable address: 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 Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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 Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Latin America and the Caribbean -8- SCHEDULE 1 Description of the Project The Project is the first phase of the Guarantor's National Plan for Assistance to Rainfed Areas (PLANAT), an agricultural development program for Mexico's rainfed areas. The Project's main objective is to increase agricultural production in nine of the Guarantor's 124 rainfed districts through the implementation of a development program in each of the nine districts over a five year period. In addition, the Project is to assist the Guarantor's training, extension and research activities aimed at developing subsequent phases of such program in other rainfed districts. The Project consists of the following: I. District Level (within the Project Area) Part A: Technical Services (1) Provision of extension services and facilities for the promotion of improved cultivation and animal husbandry methods. (2) Carrying out of production systems research and on-farm testing of new technologies. (3) Carrying out of soil and water conservation programs, including various types of terraces, contour furrows and small water storage reservoirs, covering approximately 65,000 ha. (4) Carrying out of forestry programs covering approximately 13,400 ha. Part B: Infrastructure Carrying out of rural works programs, including the construc- tion or improvement of approximately 2,880 km of farm to market roads, approximately 7,000 ha of small irrigation schemes, and drainage works covering approximately 30,000 ha. Part C: Credit (1) Provision by Banxico of credit to beneficiaries. -9- (2) Provision by Banrural of credit to beneficiaries. II. National Level (outside the Project Area) Part D: Training Post graduate study and training in rainfed agriculture related matters. Part E: Extension and Research Establishment and operation of regional centers for SARH's extension services and research. The Project is expected to be completed by December 31, 1985. - 10 - SCHEDULE 2 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods 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 to be procured on the basis of international competitive bidding, and in addition to the requirements of paragraph 1.2 of the Guidelines, the Guarantor shall prepare and furnish 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 thereto, 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 in question. The Guarantor shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of international competitive bidding. 3. Goods shall be grouped so as to permit such bulk procurement as shall be consistent with appropriate technical and procurement practices. 4. Account shall be taken of the availability of spare parts and services for imported goods. 5. 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 the imported goods, or the ex-factory price or off-the-shelf price of domestically manufactured or supplied goods, offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods - 11 - shall not be taken into account in the evaluation of the bids; and (iii) the cost to the Guarantor of inland freight and other expenditures incidental to the delivery of goods to the place of 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 domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall be first compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. 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 - 12 - 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% 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. Other Procurement Procedures 1. Not less than 60% of the civil works under the Project shall be performed pursuant to contracts of a value not less than $350,000 and awarded on the basis of local competitive bidding in accordance with the Guarantor's ordinary procurement procedures. 2. Contracts for civil works not included in paragraph 1 of this Part may be awarded on the basis of price quotations from not less than three independent contractors in Mexico or carried out by force account. 3. Contracts for good-.: may be awarded on the basis of the Guarantor's ordinary procurement procedures; provided, however, that, unless the Bank otherwise agrees, such contracts - other than those for items for on-farm development financed in part by credit under Part C of the Project - shall not individually exceed $350,000 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 goods 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 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 - 13 - 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 furnish to the Bank, promptly after its execution and prior to the delivery to the Bank of the the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective 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. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this " day of J,Aw, 198 L. FOR SECRETARY