Peru - Sixth Agricultural Credit Project : Loan 2302 - Loan Agreement - Conformed

OFFICIAL DOCUMIENTS LOAN NUMBER 2302 PE Loan Agreement (Sixth Agricultural Credit Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO AGRARIO DEL PERU Dated i3A.A , 1983 LOAN NUMBER 2302 PE LOAN AGREEMENT AGREEMENT, dated , 1983, between INTERNATIONAL BANK FOR CONSTRUCTION AND DEVELOPMENT (herein- after called the Bank) and BANCO AGRARIO DEL PERU (hereinafter called the Borrower). WHEREAS (A) the Borrower has requested the Bank to assist in .the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) part of the Project will be carried out by the Republic of Peru (hereinafter called the Guarantor) and therefore the Borrower will make available to the Guarantor part of the pro- ceeds of the Loan as hereinafter provided; and WHEREAS the Bank is willing, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as followsi 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 (said General Conditions Applicable to Loan'and Guarantee Agree- ments of the Bank being hereinafter called the General Condi- tions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following addi- tional terms have the following meanings: (a) "Investment Project" means a specific medium or long term investment project included in the Project, to be carried out by a Beneficiary and to be financed in part by means of a Sub-loan; -2- (b) "Beneficiary" means an individual farmer or a company or a production or service cooperative to which the Borrower pro- poses to make or has made a Sub-loan or a Short-term Sub-loan; (c) "Sub-loan" means a loan made or proposed to be made by the Borrower to a Beneficiary for an Investment Project, and to be financed out of the proceeds of the Loan; and "Short-term Sub-loan" means a loan made or proposed to be made to a Benefi- ciary and to be financed out of the proceeds of the Loan, the repayment of which does not extend beyond 24 months, and which is intended for the financing of working capital of such farmer; (d) "Sol" and the symbol "S/. mean the currency of the Guarantor; (e) "Ministerio de Agricultura" means Ministerio de Agricultura, the Guarantor's Ministry of Agriculture; and "Ministerio de Economia" means aisterio de Economia, Finanzas y Comercio, the Guarantor's Miu, ry of Economy, Finance and Com- merce; (f) "Preferential Interest Rates" means the rates which, in accordance with the decision made by the Borrower's Board of Directors during its meeting No. 3032, dated February 23, 1983, are applicable to Sub-loans and Short-term Sub-loans not exceed- ing the amount limit of S/. 20,000,000, excluding Short-term Sub-loans intended to finance the production of hard-maize for livestock consumption and rice as such rates and limit may be adjusted from time to time pursuant to the provisions of Section 4.03 of this Agreement; (g) "Subsidiary Agreement" means the agreement to be en- t--ed into between the Borrower and the Guarantor pursuant to Section 3.06 (a) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Agreement; (h) "INIPA" means Instituto Nacional de Investigacion y Promocion Agropecuaria, the Guarantor's National Institute for Agricultural and Livestock Research and Extensioni and (i) "Credito Publico" means "Direccion General de Cr&dito Publico, the General Directorate of Public Credit of the Guaran- tor's Ministry of Economy, Finance and Commerce. -3- ARTICLE II The Loa2 Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Loan Agreement, an amount in various currencies equivalent to one hundred thirty million dollars ($130,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expendi- tures made (or, if the Bank shall so agree, to be made) in res- pect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, pro- curement of the goods and civil works required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1988 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.05. (a) The Borrower shall pay to the Bank a fee equivalent to three -hundred twenty four thousand one hundred ninety dollars ($324,190). (b) On or promptly, after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of the said fee in such currency or currencies as the Bank shall determine. Section 2.06. The Borrower shall pay to the Bank a c:ommit- ment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.07. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one half percent per annum above the Cost of Qualified Borrowings for -4- the last Semester ending prior to the commencement of such Inter- est Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower and the Guarantor of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period com- mencing on each date specified in Section 2.08 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost" of Qualified Borrowings means the cost, expressed as a percentage per annum, as reasonably determined by the Bank, provided that the amount of $8,520.5 million referred to in (iii) (B) here- under shall be reckoned at a cost of 10.93% per annum. (iii) "Qualified Borrowings" means (A) outstanding borrowings of the Bank drawn down after June 30, 1982; and (B) until July 1, 1985, the amount of $8,520.5 million (representing borrowings of the Bank between July 1, 1981 and June 30, 1982) less any part thereof repaid earlier than July 1, 1985. (iv) "Semester" means the first six months or the second six months of a calendar year. Section 2.08. Interest and other charges shall be payable semiannually on February 15 and AuAgust 15 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. Section 2.10. The Minister of Economy, Finance and Commerce of the Guarantor is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions in respect of the proceeds of the Loan allocated from time to time to Category 5 (b) of the table set forth in paragraph 1 of Schedule 1 to this Agreement. -5- ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out Parts A, B, C, D and E of the Project with due diligence and efficiency and in conformity with appropriate financial and agricultural 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) In order to assist the Borrower in carry- ing out Parts C, D and E of the Project, the Borrower shall employ training, information, financial, management an d legal c.onsultants whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Bank, such con- sultants to be selected in accordance with principles and proce- dures satisfactory to the Bank, on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981 and the provisions of Part D of Schedule 4 t'o this Agree- ment. (b) Notwithstanding the provisions of paragraph (a) of this Section, the Borrower shall employ the consultants for Part C of the Project not later than March 31, 1984. Section 3.03. In carrying out Parts A and B of the Project, the Borrower shall relend the proceeds of the Loan to Beneficia- ries under Sub-loans and Short-term Sub-loans on terms and condi- tions satisfactory to the Bank and, except as the Bank shall otherwise agree, in accordance with the operating policies and procedures set forth in Schedule 5 to this Agreement. Section 3.04. (a) 'The Borrower undertakes that, unless the Bank shall otherwise agree', each Sub-loan and each Short-term Sub-loan, will be made on terms whereby the Borrower shall ob- tain, by written contract with the Beneficiary or by other appro- priate legal means, rights adequate to protect the interests of the Bank and the Borrower, including, in the case of any such Sub-loan, the right of the Borrower to: (i) require' the Benefi- ciary to carry out and operate the Investment Project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (ii) require that (1) the goods and services to be -6- financed out of the proceeds of the Loan be procured in accor- dance with the provisions c Schedule 4 to this Agreement; and (2) such goods and services be used exclusively in the carrying out of the Investment Project; (iii) inspect, by itself or joint- ly with representatives of the Bank if the Bank shall so request, such goods and the sites, works, plants and construction included in the Investment Project, the operation thereof, and any rele- vant records and documents; (iv) require that (1) the Beneficiary take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice, and (2) without any limitation upon the foregoing, such insurance shall Zover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Loan to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the Beneficiary to replace or repair such goods; (v) obtain all such information as the Bank or the Borrower shall reasonably request relating to the foregoing and to the adminis- tration, operations and financial condition of the Beneficiary; and (vi) suspend or terminate the right of the Beneficiary to the use of the proceeds of the Loan upon failure of such Beneficiary to perform its obligations under its aforesaid contract with the Borrower. (b) The Borrower shall exercise its rights under Sub-loan and Short-term Sub-loan contracts in such manner as to: (i) pro- tect the interests of the Bank and the Borrower, (ii) comply with its obligations under this Agreement, and (iii) achieve the pur- poses of the Projects Section 3.05. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods for Part D of the Project 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 free- ly usable by the Borrower to replace or repair such goods. (b) The Borrower shall cause all goods and services fi- nanced out of the proceeds of the Loan to be used exclusively for the purposes of the Project. Section 3.06. (a) The Borrower shall make available to the Guarantor the proceeds of the Loan allocated from time to time to Category 5 (b) of the table set forth in paragraph 1 of Schedule - 7 - 1 to this Agreement under a subsidiary agreement to be entered into between the Borrower and the Guarantor, under terms and con- ditions which shall have been approved by the Bank and which, inter alia, shall provide that withdrawals from the Loan Account under the aforesaid Category 5 (b) pursuant to Section 2.10 of this Agreement shall be deemed disbursements under the Subsidiary Agreement and that the financial terms and conditions under this Agreement in respect of repayment of the Loan ahd payments of interests, fees and charges herein, shall be deemed proportion- ally applicable to the portion of the Loan made available under the Subsidiary Agreement. (b) The Borrower shall exercise its rights under the Subsi- diary Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall. not assign, amend, abrogate or waive the Subsidiary Agreement or auy provision thereof. Section 3.07. The Borrower shall appoint and thereafter maintain a project coordinator, whose qualifications and expe- rience and terms and conditions of employment shall be satis- factory to the Bank, to be in charge of, inter alia, coordinating the collection of data on and analysis of, results of Investment Projects and to be responsible for, inter alia, supervising the application of the Project Operating Policies and Procedures specified in Schedule 5 to this Agreement and' to act as liaison officer between the Borrower and the Bank. Section 3.08. The Borrower shall: (a) by September 30 of each year until the Project has been completed, prepare and furnish to the Bank: (i) an annual lending program for the following year and a medium-term plan for its lending operations, such program to,include an identification of the funds and their sources necessary to carry out such program; and (ii) an estimate of short-and long-term credit requirements of the Guarantor's agricultural sector for the following year; such program, plan and estimate to be prepared in accordance with a methodology satisfactory to the Bank; (b) afford the Bank a reasonable time to review and comment on the plan and program referred to in paragraph (a) of this Section; and -8- (c) have the program referred to in paragraph (a) of this Section commented on by Ministerio de Agricultura and approved by Ministerio de Economia by December 31 of each year until the Project has been completed. Section 3.09. The Borrower shall, by December 31 of each year until Part B of the Project has been completed to the satis- faction of the Bank, determine a yearly limit to be applied by the Borrower during the following year, satisfactory to the Bank, for the aggregate amount of withdrawals of the proceeds of the Loan to be made under Category (3) of Schedule I to this Agr,xe- ment, such limit to be determined on the basis of the program referred to in paragraph (a)(i) of Section 3.08 of this Agree- ment. The foregoing limit being subject to change from time to time, as determined by the Bank, as such change shall be necessary to achieve the purposes of Part B of the Project. Section 3.10. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for the Project, and any material modifications thereof or addi- tions thereto, in such detail as the Bank shall reasonably re- quest. (b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of Parts A, B, C, D and E of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in such Parts of the Project; (ii) shall enable the Bank's representa- tives to visit the facilities and construction sit-s 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 at regular intervals all such informa- tion as the Bank shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of the proceeds. (c) Upon the award by the Borrower of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. -9- (d) The Borrower shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, pro- perty and equipment of the Borrower and any relevant records and documents. (e) Promptly after completion of the Project, but in any event not later than eighteen months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be de- rived from it, the performance by the Borrower and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. ARTICLE IV Management and Operations of the Borrower Section 4.01. The Borrower shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and agricultural practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 4.02. The Borrower shail take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 4.03. The Borrower shall: (i) each January 15 and July 15, beginning on January 15, 1984, review its lending rates and shall, promptly thereafter, furnish to the Bank the results of each such review; and (ii) not later than March 31 and Septem- ber 30, respectively, adjust such rates, in accordance with a methodology satisfactory to the Bank, as necessary to substan- tially reflect changes in the interest rates prevailing in the territory of the Guarantor whenever the changes in such rates exceed three percentage points or five percent, whichever is higher, during the semester immediately preceding each such re- view.* Section 4.04. The Borrower, at all times, shall not increase the amount limits for Sub-loans or Short-term Sub-loans referred - 10 - to in paragraph (f) of Section 1.02 of this Agreement on which it charges Preferential Interest Rates by more than the increase of the inflation rate prevailing in the territory of the Guarantor in the period beginning on the date on which such amount limits were last adjusted. ARTICLE V Financial Covenants Section 5.01. (a) The Borrower shall maintain records and separate accounts in respect of the Project, adequate to reflect, in accordance with consistently maintained appropriate accounting practices, its operations and financial condition, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure. (b) The Borrower shall retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure, and shall enable the Bank's representatives to examine such records. Section 5.02. The Borrower shall: (a) have the accounts referred to in paragraph (a) of Sec- tion 5.01 of this Agreement and its financial statements (balance sheets, statements of ir,ome and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (b) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year: (i) certified copies of its financial statements for such year as so audited; (ii) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested, including, without limitation to the foregoing, sepa- rate opinions by said auditors in respect of the expenditures and records referred to in Section 5.01 (b) of this Agreement, as to whether the proceeds of the Loan withdrawn from the Loan Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and - 11 - (c) furnish to the Bank such other information concerning said accounts, financial statements, records and expenditures, as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 5.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt. (b) The Borrower undertakes that, except as the Bank shall otherwiae agree (i) if the Borrower shall create any lien on any of its assets as security for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on, tha Loan, and in the creation of any such lien express provision will be made to that effect, at no cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower as security for any debt, the Borrower shall grant, at no cost to the Bank, an equivalent lien satis- factory to the Bank to secure the payment of the principal of, and interest and other charges on, the Loan; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such prope,:ty or as security for the payment of debt incurred for the purpose of financing the purchase of such property; or (B) any lien arising in the ordinary course of banking transac- tions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 5.04. Except as the Bank shall otherwise agree, the Borrower shall not incur any debt, if after the incurrence of such debt the aggregate principal amount of debt of the Borrower then incurred and outstanding would be greater than five times the equity of the Borrower. For purposes of this Section: (a) The term "debt" means any indebtedness of the Borrower maturing by its terms more than one year after the date on which it is originally incurred. (b) Debt shall be deemed to be incurred: (i) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment, on the date, and to the extent, the amount of such debt has become outstanding pursuant to such contract, agreement or instrument; and (ii). under a guarantee agreement, on the date the agreement providing - 12 - f or such guarantee has been entered into but only to the extent that the guaranteed debt is outstanding. (c) The term "equity of the Borrower" means the sum of the total unimpaired paid-up capital, retained earnings and reserves of the Borrower not allocated to cover specific liabilities. (d) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Guarantor, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or in the absence of such rate, on the basis of a rate of exchange acceptable to the Bank. ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are speci- fied pursuant to paragraph (k) thereof: (a) that the average interest rate being charged by the Borrower on its loans is 10% below the inflation rate prevailing in the territory of the Guarantor during three consecutive months, provided, however, that the Preferential Interest Rates shall not be taken into account for the purposes of this Sec- tion;* (b) any part of the principal amount of any loan to the Borrower having an original maturity of one year or more shall, in accordance with its terms, have become due and payable in advance of maturity as provided in the relative contractual instruments, or any security for any such loan shall have become enforceable; (c) a change shall have been made in the Guarantor's Legis- lative Decree No. 201, dated June 12, 1981 or Supreme Decree No. 098-82-EFC, dated April 2, 1982, as amended to the date of this Agreement which would materially and adversely affect the opera- tions or the financial condition of the Borrower; and - 13 - (d) a subsidiary or any other entity shall have been created or acquired or taken over by the Borrower, if such crea- tion, acquisition or taking over would adversely affect the con- duct of the Borrower's business or the Borrower's financial con- dition or the efficiency of the Borrower's management and person- nel or the carrying out of the Project. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) the event specified in paragraph (b) or paragraph (c) of Section 6.01 shall occur; (b) the event specified in paragraph (a) of Section 6.01 of this Agreement shall occur and shall continue for a period of 45 days after notice thereof shall have been given by the Bank to the Borrower; and (c) the event specified in paragraph (d) of Section 6.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Condi- tions: (a) that the Project Coordinator referred to in Section 3.07 of this Agreement has been appointed; and (b) that this Agreement has been duly registered by Credito Publico. Section 7.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be fur- nished to the Bank, namely, that this Agreement has been regis- tered by Cr6dito Publico. - 14 - Section 7.03. The date, is hereby spe- cified for the purpose of Section 12.04 of the General Condi- tions. ARTICLE VIII Addresses Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: 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) For the Borrower: Banco Agrario del Peru Carabaya 543 Lima Peru Cable address: Telex: AGROBAN 2460 PE Lima - 15 - 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. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Latin America and the Caribbean BANCO AGRARIO DEL PERU By RAsti 'Authorized Representative - 16 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of imported items to be financed out of the proceeds of the Loan and the allocation of amounts of the Loan to each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Sub-loans under 17,142,000 45% of the amount Part A.1 of the disbursed under Project the Sub-loans (2) Sub-loans under 31,707,000 90% of the amount Part A.2 of the disbursed under Project the Sub-loans (3) Short-term 45,893,000 50% of the amount Sub-loans under disbursed under Part B of the the Short-term Project Sub-loans (4) Equipment under 1,640,000 100% of foreign Part D of the expenditures and Project 80% of local expenditures (5) Consultants Services: (a) under Parts C, D 1,300,000 100% and E of the Project (b) under Part F of 300,000 100% the Project (6) Fee 324,190 Amount due under Section 2.05 of this Agreement (7) Unallocated 31,693,810 TOTAL 130,000,000 - 17 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the curreny of any country other than the Borrower for goods or services supplied from the territory of any country other than the Guarantor; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures made prior to the date of this Agreement; (b) any expenditure under Category (3) unless: (i) the sum of the aggregate amount already disbursed under such Category during the year in question plus the amount to be disbursed in respect to such expenditure does not exceed the yearly limit referred to in Section 3.09 of this Agreement; and (ii) in addi- tion to the foregoing, after Part D of the Project shall have been completed and the Borrower's improved information system thereunder shall be fully operative, both in a manner satisfac- tory to the Bank, short-term Sub-loans not complying with para- graph B (5) (b) of Schedule 5 to this Agreement; (c) any expenditure under Category (4) before the Bank has been furnished with a study, satisfactory to the Bank, on the investments needed for Part D of the Project; and (d) any expenditure under Category (5) (b) before the Bank has been furnished with evidence, satisfactory to the Bank that - 18 - the Subsidiary Agreement has been executed on behalf of the Borrower and the Guarantor and is legally binding upon them. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estiiaated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disburse- ment percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expen- ditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in arv way r-stricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eli- gible for financing out of the proceeds of the Loan. - 19 - SCHEDULE 2 Description of the Project The main purpose of the Project is to promote the develop- ment of the Guarantor's agricultural sector through the provision of credit to finance crop and livestock production and agro- industries development and the improvement and expansion of the Borrower's banking activities. The Project consists of the fol- lowing Parts: Part A: Provision of credit to finance Investment Projects aiming primarily at improving irrigation infrastructure, intensifying cropping, increasing livestock production, and developing agro- industries through Sub-loans for: 1. The carrying out of civil works, establishing and main- taining perennial crops and the acquisition and main- tenance of livestock. 2. The acquisition of machinery, vehicles and equipment. Part B: Expansion of the Borrower's short-term credit program through the financing of working capital needs of Beneficiaries through Short-term Sub-loans. Part C: Training of the Borrower's and the Ministerio de Agricul- tura's and INIPA's staff in the areas of investment project for- mulation and evaluation, accounting and banking techniques, and operation and management of agricultural credit; and training of Beneficiaries and prospective Beneficiaries in respect of the Borrower's organization, policies, functions and services. Part D: Improvement of the Borrower's information system through the upgrading of the Borrower's information procedures and computer system, and the acquisition and utilization of related equipment. - 20 - Part E: Design of a rediscount facility within the Borrower's struc- ture to enable other commercial banks to participate in medium- and long-term financing of agricultural projects. Part F: Completion of a feasibility study on rehabilitation of the Peruvian sugar industry. The Project is expected to be completed by December 31, 1987. - 21 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 15 and August 15 beginning February 15, 1988 through August 15, 2000 5,000,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawals; see General Conditions, Section 3.04. J - 22 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (ex- pressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years before maturity .18 More than three years but not more than six years before maturity .35 More than six years but not more than eleven years before maturity .65 More than eleven years but not more than fifteen years before maturity .88 More than fifteen years before maturity 1.00 - 23 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Equipment for Part D of the Project shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of 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 Borrower 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 thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publica- tion 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 Borrower 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. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international com- petitive 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 other goods offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and simi- lar taxes levied in connection with the sale or delivery, pur- suant to the bid, of the goods shall not be taken into account in the evaluation of the bids; and (iii) the cost of inland freight and other expenditures incidental to the delivery of the goods to the place of their use or installation shall be included. - 24 - B. Preference for Domestic and Regional Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in Peru or in a country which is a party to the Cartagena Agreement or to any other regional Agreement acceptable to the Bank and the Borrower (any such Agreement hereinafter collectively and sever- ally called the "Regional Agreement") may be granted a margin of preference in accordance with, and subject to, the following pro- visions, 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 four groups: (1) Group A: bids offering goods manufactured in Peru if the bidder shall have established to the satis- faction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Peru 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 goods manufactured in a country other than Peru which is a party to the Regional Agreement. (4) Group D: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be 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 eva- luated 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. - 25 - 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C or group D, all group D 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 or group D 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 and group D 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 or the group C bid in such further comparison is the lowest, it shall be se- lected for the award. 5. If, as a result of the further comparison under paragraph 4 above, a bid from group D is the lowest, and provided there are taxes actually payable for the importation of goods offered in the lowest evaluated bid from group C, as determined under para- graph (3) above, all group D bids shall be finally compared with such lowest evaluated bid from group C, after adding to the c.i.f. bid price of goods to be imported offered in each group D bid, for the purpose of this final comparison only, an amount equal to the smaller of (i) the positive difference, if any, between the amount of customs duties and other import taxes which would actually be payable for the importation of goods offered in such group D bid and for the importation of goods offered in the group C bid, or (ii) 15% of the c.i.f. price of goods to be imported offered in such group D bid. If the lowest bid in such comparison is the group C bid, it shall be selected for the award; if not, the lowest evaluated bid from group D, as deter- mined under paragraph (3) above, shall be selected for the award. C. Other Procurement Procedures Contracts for goods, works and services under Parts A and B of the Project shall be procured by the Beneficiaries through regular commercial channels from responsible suppliers, provided, however, that, whenever feasible, contracts for farm machinery and equipment will not be awarded (i) before price quotations from at least three suppliers are obtained and (ii) for a price higher than the lowest evaluated price so quoted. The Borrower shall furnish to the Beneficiaries a catalog of suppliers of agro-industrial machinery which shall include suppliers from member countries of the Bank, Switzerland and Taiwan, and, as the case may be, their agents or representatives in Peru. - 26 - D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid or to submit price quotations and of proposed awards and final contracts: With respect to all contracts for Part D of the Project: (a) Before bids are invited or price quotations solicited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid or the solicitations to quote prices and the specifications and other bidding documents, toge- ther with a description of the advertising procedures to be fol- lowed for the bidding or for obtaining the price quotations, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders or price quoters. (b) After bids or price quotations have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Bank of the name of the bidder or price quoter to which it intends to award the contract and shall fur- nish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids or price quotations received, and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or price quotations solicited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such con- tract, together with the analysis of the respective bids or price - 27 quotations, 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 Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issu- ing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 20% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. E. Procurement of Consultants or Expert Services 1. Extended lists (concurso abierto de meritos) will not be used for inviting proposals from consultants or experts whose services are to be employed for purposes of Section 3.02 of this Agreement and the Guarantee Agreement. 2. Such consultants or experts shall be selected after inviting proposals from a short list of firms or individuals. Such short list will be sent to the Bank for approval and the invitations to be issued will, in each case, set forth the criteria to be taken into account for the selection of the individual or firm to which the contract will be awarded. Such criteria will be determined from time to time by agreement between the Bank and the Guarantor or the Borrower, as the case may be, and will take price into account in accordance with methods and procedures satisfactory to the Bank. 3. Notwithstanding the provisions of paragraph 2 above, the Bank may under certain circumstances, as described in the Guide- lines referred to in Section 3.02 of this Agreement, sympathe- tically consider the possibility of asking proposals from a sin- gle firm or individual. - 28 - SCHEDULE 5 Operating Policies and Procedures A. Beneficiaries Sub-loans shall be made only to Beneficiaries whose own financial resources are inadequate to develop their agricultural potential. B. Sub-loan Processing 1. Each Investment Project shall be appraised in accordance with guidelines satisfactory to the Bank and shall be based on: (a) detailed development plans, including a farm budget, an income and operating expense statement, and a financial cash- flow; or (b) a financial cash-flow and representative models when- ever the size of such Investment Project or its similarity to other Investment Projects so justifies. The Borrower shall assist the Beneficiaries in the prepara- tion of the Investment Projects. 2. In appraising each Investment Project the Borrower shall take into account whether: (a) the corresponding development plan, if any, is techni- cally feasible, financially viable and economically justified or, if such is the case, the application of the corresponding repre- sentative model to the Investment Project in question is econo- mically justified; and (b) the respective Beneficiary has satisfactory management and credit standing. 3. Approval of Sub-loans by the Borrower shall be based on the technical and financial viability of the proposed Investment Pro- jects. To this effect, the Borrower shall only approve Sub-loans to finance Investment Projects, the rate of return of which is equal to at least the opportunity cost of the capital which would be made available to the respective Beneficiaries. - 29 - 4. Approval of a Sub-loan by the Bank shall be required when- ever such Sub-loan would result in: (a) the Beneficiary assuming an outstanding aggregate debt in respect to Sub-loans and Short-term Sub-loans which would exceed $200,000 equivalent, in the case of individual farmers; or (b) the Beneficiary assuming an outstanding aggregate debt in respect to Sub-loans which would exceed $1,000,000 equivalent, in the case of cooperatives or companies. 5. The Borrower shall provide Short-term Sub-loans to Benefi- ciaries whenever the cash flow of the corresponding development plan or representative model indicates such need, provided that: (a) the sum of the aggregate amount of Short-term Sub-loans already made by the Borrower during the year in question plus the amount of the Short-term Sub-loan under consideration does not exceed the yearly limit referred to in Section 3.09 of this Agreement; and (b) after Part D of the Project has been completed and the Borrower's information system thereunder is fully operatione' both in a manner satisfactory to the Bank: (a) the Borrower L- not previously made a Short-term Sub-loan to the Beneficiar in question; or (b) the Borrower has made or will make a long- c medium-term Sub-loan to the Beneficiary in question; or (c) t* Short-term Sub-loan meets short-term capital needs due to changes of cropping pattern or production technology. C. Terms of Sub-loans 1. Interest Rates - the interest rates which 3hall be applied to each Sub-loan and each Short-term Sub-loans shall be the in- terest rates specified in the decision taken by Borrower's Board of Directors during its meeting No. 3032, dated February 23, 1983, as such resolution may be amended from time to time for the purposes of Section 4.03 of this Agreement. 2. Repayment Period - the repayment and grace periods of Sub- loans shall be determined on the basis of cash flow projection of Beneficiaries provided that: (a) any repayment period shall not be less than three and more than fifteen years; and - 30 - (b) any grace period shall not be less than one and more than four years. 3. Beneficiaries' Contribution - each Beneficiary shall bear the costs of his Investment Project in proportion to the size of the farm which would benefit from such Investment Project, in the case of individual farmers, or the size of the aggregate culti- vated area, in the case of companies or cooperatives, such pro- portion of the investment costs being: (a) for farms or aggregate cultivated areas measuring up to 5 hectares in the Costa region or 10 hectares, when irrigation is available, or 150 hectares, when irrigation is not available, in the Sierra and Selva regions - 5%; (b) for farmers or aggregate cultivated areas measuring from 5 to 50 hectares in the Costa region or 10 to 100 hectares, when irrigation is available, or 50 to 150 hectares, when irriga- tion is not available, in the Sierra and Selva regions - 10%; (c) for farms or aggregate cultivated areas measuring over 50 hectares in the Costa region or 100 hectares, when irrigation is available, or 150 hectares, when irrigation is not available, in the Sierra and Selva regions - 20%; For the purposes of this paragraph, any contribution made or to be made by a Beneficiary in connection with the respective Investment Project, including cash, labor and inputs but exclud- ing land, may be considered towards the bearing by such Benefi- ciary of the respective proportion of the investment cost of the respective Investment Project. 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 3 day of D6 12, 198 . FOR SECRETARY