Conformed Copy - L2793 - Small- and Medium-Scale Industry Credit Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2793 AR (Small- and Medium-Scale Industry Credit Project) between THE ARGENTINE REPUBLIC and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated December 21, 1987 LOAN NUMBER 2793 AR LOAN AGREEMENT AGREEMENT, dated December 21, 1987, between THE ARGENTINE REPUBLIC (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; (B) Parts A and B (1) of the Project will be carried out by Banco Nacional de Desarrollo (BANADE) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to BANADE the portion of the proceeds of the Loan required for the execution of such Parts of the Project, as provided in this Agreement; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Bank and BANADE; NOW THEREFORE the parties hereto hereby agree as follows: Page 2 ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth in Schedule 5 to this Agreement (the General Conditions) constitute an integral part of this Agreement. Section 1.O2. 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 additional terms have the following meanings: (a) "Austral" means the currency unit of the Borrower; (b) "Banco Central" means Banco Central de la Republica Argentina, the Borrower's Central Bank; (c) "FOPYME" means the fund for the financing of small- and medium-scale industries established by BANADE by the Effective Date, and the term includes the technical and administrative organization, resources, staff and facilities of BANADE to be used for the management and operation of such fund; (d) "free-limit Sub-loan" means a Sub-loan which qualifies as a free-limit Sub-loan pursuant to the provisions of paragraph 9 (b) of the Schedule to the Project Agreement; (e) "Index" means the percentage rate of variations of the combined wholesale and consumer prices in the Argentine Republic during any given month, as calculated and published by Banco Central during the first 15 days of each month; (f) "Industrial Enterprise" means a Small or Medium Enterprise to which a Participating Bank proposes to make or has made a Sub-loan; (g) "INTI" means Instituto Nacional de Tecnologia Industrial, the Borrower's National Institute of Industrial Technology; (h) "Investment Sub-loan" means a Sub-loan for a Sub-project under Part A (1) of the Project; (i) "Medium Enterprise" means any industrial enterprise with fixed assets of more than the equivalent of $350,000, but not exceeding the equivalent of $3,000,000, excluding land and buildings; (j) "Operating Regulations" means the policies, rules and operating procedures for FOPYME, approved by BANADE's board of directors by the Effective Date; (k) "Participating Agreement" means the agreement to be entered into by BANADE and each Participating Bank other than BANADE, pursuant to Section 2.05 of the Project Agreement, as each such agreement may be amended from time to time; (l) "Participating Bank" means BANADE, when making Sub-loans directly to Industrial Enterprises, and any credit institution which: (i) has been approved by BANADE to participate in the execution of Part A of the Project on the basis of a creditworthiness analysis carried out pursuant to methods and criteria acceptable to the Bank; and (ii) has entered or proposes to enter into a Participating Agreement with BANADE on terms and conditions satisfactory to the Bank; (m) "Participating Loan" means the loan made or proposed to be made by BANADE to a Participating Bank, partly financed out of the proceeds of the Loan, provided under a Participating Agreement; (n) "Project Agreement" means the agreement between the Bank and BANADE of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (o) "Small Enterprise" means any industrial enterprise with fixed assets not exceeding the equivalent of $350,000, excluding land and buildings; (p) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; Page 3 (q) "SSME" means Sub-Secretaria de Pequena y Mediana Empresa, the Subsecretariat for Small and Medium Enterprises of the Ministry of Industry and Commerce of the Borrower; (r) "Sub-loan" means a loan made or proposed to be made by a Participating Bank to an Industrial Enterprise for a Sub-project pursuant to the provisions of the Project Agreement, and to be financed out of the proceeds of a Participating Loan; (s) "Sub-project" means a specific project carried out or to be carried out by an Industrial Enterprise utilizing the proceeds of a Sub-loan; (t) "Subsidiary Loan" means the loan provided to BANADE under the Subsidiary Loan Agreement; (u) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower, Banco Central and BANADE pursuant to Section 3.02 of this Agreement, as the same may be amended from time to time; (v) "Technical Assistance Sub-loan" means a Sub-loan for a Sub-project under Part A (3) of the Project; and (w) "Working Capital Sub-loan" means a Sub-loan for a Sub-project under Part A (2) of the Project. ARTICLE II The Loan Section 2.O1. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount in various currencies equivalent to one hundred and twenty-five million dollars ($125,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for: (i) amounts paid (or, if the Bank shall so agree, to be paid) by BANADE on account of withdrawals made by an Industrial Enterprise under a Sub-loan to meet the reasonable cost of goods and services required for the Sub-project in respect of which the withdrawal from the Loan Account is requested; and (ii) for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for Part B of the Project and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and maintain in Banco Central a special account in dollars on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1994 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (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 of one percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.06 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost of the outstanding borrowings of the Bank drawn down after June 30, 1982, expressed as a percentage per annum, as reasonably determined by the Bank. Page 4 (iii) "Semester" means the first six months or the second six months of a calendar year. Section 2.06. Interest and other charges shall be payable semiannually on May 15 and November 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and to this end, shall carry out Part B (2) (ii) of the Project through SSME and cause INTI to carry out Part B (2) (i) of the Project, all with due diligence and efficiency and in conformity with appropriate administrative, technical and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for such Parts of the Project. (b) Without any limitation or restriction upon any of its other obligations under this Agreement, the Borrower shall cause BANADE to perform in accordance with the provisions of the Project Agreement all the obligations of BANADE therein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable BANADE to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (c) The Borrower shall transfer to INTI, as grant, for purposes of Part B (2) (i) of the Project, the amount allocated from time to time to Category 2 (b) in the table in paragraph 1 of Schedule 1 to this Agreement, under contractual arrangements satisfactory to the Bank. The Borrower shall not change or fail to enforce any provision of such contractual arrangements. Section 3.02. (a) The Borrower shall make available the proceeds of the Loan allocated from time to time to Categories 1 and 2 (a) in the table in paragraph 1 of Schedule 1 to this Agreement to BANADE, through Banco Central, under a subsidiary loan agreement to be entered into between the Borrower, Banco Central and BANADE, under terms and conditions which shall have been approved by the Bank, which shall include, inter alia, the following: (i) the transfer of such proceeds to Banco Central under the same terms and conditions as those applicable to the Loan pursuant to the provisions of this Agreement; (ii) the relending of such proceeds by Banco Central to BANADE under the following terms and conditions: (A) the subsidiary loan shall be made and be repayable in Australes, adjusted for inflation on the basis of the Index; and (B) interest on the outstanding principal amount of the Subsidiary Loan as adjusted for inflation, shall be set at an initial rate of 7% per annum in respect of the portion of such subsidiary loan which will be used by BANADE for the purposes of Parts A (1) (ii) and (2) and B (1) of the Project, and an initial rate of 4% per annum in respect of the portion of such subsidiary loan which will be used by BANADE for the purposes of Part A (1) (i) and (3) of the Project, such rates to be reviewed semiannually as part of the review of the interest rates applicable to Sub-loans pursuant to Section 2.08 of the Project Agreement, and if necessary in the opinion of the Bank, revised in a manner satisfactory to the Bank. (b) The Borrower shall exercise its rights, and shall cause Banco Central to exercise its rights, under the Subsidiary Loan 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 and Banco Central shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.03. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out Page 5 of the proceeds of the Loan shall be governed by the provisions of Schedule 6 of this Agreement. Section 3.04. The Bank and the Borrower hereby agree that the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of Parts A and B (1) of the Project shall be carried out by BANADE pursuant to Section 2.03 of the Project Agreement. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained separate records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures of SSME and INTI in respect of Part B (2) of the Project. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section, including the Special Account, for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures for Part B (2) of the Project with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, or cause to be retained, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified: (a) BANADE shall have failed to perform any of its obligations under the Project Agreement. (b) As a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable Page 6 that BANADE will be able to perform its obligations under the Project Agreement. (c) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of BANADE or for the suspension of its operations. (d) The Operating Regulations shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the operations or the financial condition of BANADE or its ability to carry out Parts A or B (1) of the Project or to perform any of its obligations under this Agreement. (e) FOPYME shall have been suspended, liquidated or otherwise discontinued. (f) BANADE shall have failed to revise interest rates applicable to Sub-loans and Participating Loans if required under Section 2.08 of the Project Agreement, and such failure shall continue for a period of 60 days as from the date on which the corresponding revision is due. (g) The Borrower and Banco Central shall have failed to revise the interest rate applicable to the Subsidiary Loan, if required under Section 3.02 (a) (ii) of this Agreement and such failure shall have continued for a period of 60 days as from the date on which the corresponding revision is due. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following events are specified: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower; and (b) the events specified in paragraphs (c), (d) and (e) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Subsidiary Loan Agreement has been executed on behalf of the Borrower, Banco Central and BANADE; (b) BANADE's board of directors has established FOPYME, and approved its Operating Regulations on terms acceptable to the Bank; (c) FOPYME has approved Sub-project appraisal and supervision guidelines satisfactory to the Bank; (d) BANADE has entered into Participating Agreements with at least four Participating Banks, such Participating Banks to be authorized to make Sub-loans in an amount equivalent to at least 25% of the Loan; and (e) BANADE has: (i) revised in a manner satisfactory to the Bank its policies on, and the level of provisions for, bad debts; (ii) prepared a pilot plan, satisfactory to the Bank, for improving its resource mobilization; and (iii) revised, in a manner satisfactory to the Bank, the level of financial spreads on its foreign currency lending operations. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by BANADE, and is legally binding upon BANADE in accordance with its terms; Page 7 (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower, Banco Central and BANADE and is legally binding upon the parties thereto in accordance with its terms; and (c) that any action required on behalf of the Borrower in order to permit the procurement of goods and services to be financed out of the proceeds of the Loan in accordance with the provisions set forth or referred to in this Agreement has been taken. Section 6.03. The date March 22, 1988 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Economy of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministerio de Economia Hipolito Yrigoyen 250 Buenos Aires Argentina Telex: 121952-AR 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 64l45 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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. THE ARGENTINE REPUBLIC By /s/ Jorge Sakamoto Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S. Shahid Husain Regional Vice President Latin America and the Caribbean Page 8 SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Sub-loans 123,100,000 60% of expendi- tures for each Sub-project financed under Sub-loans ap- proved or authorized by the Bank, pursuant to paragraph 10 of the Schedule to the Project Agreement, before the date on which the aggregate amount of the portion of the Sub-loans so approved or authorized, financed out of the proceeds of the Loan, shall have reached the equivalent of $62,500,000; and 40% of expendi- tures for each Sub-project financed under Sub-loans ap- proved or autho- rized thereafter; all not to exceed the amount disbursed by BANADE for each such Sub- loan (2) Technical Assistance, including training and equipment for: (a) Part B (1) 1,100,000 ) of the ) Project ) ) (b) Part B (2) (i) 400,000 ) 100% of the Project ) ) (c) Part B (2) (ii) 400,000 ) of the Project ) TOTAL 125,000,000 2. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be Page 9 made: (a) in respect of a Sub-loan unless the Sub-loan has been made in accordance with the procedures and on the terms and conditions set forth or referred to in the Schedule to the Project Agreement; (b) in respect of a Working Capital Sub-loan if the portion of such Sub-loan financed out of the proceeds of the Loan, when added to all disbursements made from the Loan Account for Working Capital Sub-loans exceeds the equivalent of $30,775,000; and (c) in respect of Category 2 (b), unless the Bank shall have received evidence, satisfactory to the Bank: (i) that the Borrower has entered into the contractual arrangements with INTI referred to in Section 3.01 (c) of this Agreement; and (ii) that INTI's board of directors has approved plans of activities satisfactory to the Bank for its center for research of methods and techniques for Small- and Medium-Scale Enterprise and its Management Advisory Program. SCHEDULE 2 Description of the Project The objectives of the Project are: (i) to encourage modernization and increases in production and productivity of Small- and Medium-Scale Enterprises; (ii) to foster employment and help the development of Small- and Medium-Scale Enterprises outside the major urban areas; and (iii) to establish a second-tier term lending mechanism to finance Small- and Medium-Scale Enterprises. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Part A: (1) (i) Financing fixed assets; and (ii) related permanent working capital requirements of Small- and Medium-Scale Enterprises. (2) Financing of permanent incremental working capital requirements of Small- and Medium-Scale Enterprises. (3) Financing of technical assistance to Small- and Medium-Scale Enterprises. Part B: (1) Strengthening BANADE's capabilities to provide financial assistance to Small- and Medium-Scale Enterprises, including acquisition of equipment, training and studies. (2) (i) Strengthening INTI's institutional and technical capabilities to provide technical assistance to Small- and Medium-Scale Enterprises, including training, studies and acquisition of equipment; and (ii) strengthening SSME's technical capabilities to provide technical assistance to Small- and Medium-Scale Enterprises, including training, studies and provision of equipment. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (Expressed in dollars)* On each May 15 and November 15 beginning November 15, 1990 through November 15, 2001 5,210,000 On May 15, 2002 5,170,000 Page 10 _______________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment The following premiums are specified for the purposes of Section 3.O4 (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 0.20 before maturity More than three years but 0.40 not more than six years before maturity More than six years but 0.73 not more than 11 years before maturity More than 11 years but not 0.87 more than 13 years before maturity More than 13 years 1.00 before maturity SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means the Categories set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and Page 11 (c) the term "Authorized Allocation" means an amount equivalent to $8,000,000 to be withdrawn from the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Bank shall otherwise agree, payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Bank requests for replenishment of the Special Account at such intervals as the Bank shall specify. On the basis of such requests, the Bank shall withdraw from the Loan Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Bank, prior to or at the time of such request, such documents and other evidence as the Bank shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Bank when either of the following situations first arises: (i) the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Loan allocated to the eligible Categories minus the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Bank, deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Bank into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount for crediting to the Loan Account and immediate cancellation. Page 12 SCHEDULE 5 Modifications of the General Conditions For the purposes of this Agreement, the provisions of the General Conditions are modified as follows: (1) The last sentence of Section 3.02 is deleted. (2) The words "the Bank may, by notice to the Borrower and the Guarantor, terminate the right of the Borrower to make withdrawals with respect to such amount. Upon the giving of such notice, such amount of the Loan shall be cancelled" set forth at the end of Section 6.03 are deleted and the following is substituted therefor: "or (f) by the date specified in sub-paragraph 10 (c) of the Schedule to the Project Agreement, the Bank shall, in respect of any portion of the Loan: (i) have received no applications or requests under subparagraphs (a) or (b) of said paragraph 10; or (ii) have denied any such applications or requests, the Bank may, by notice to the Borrower and the Guarantor, terminate the right of the Borrower to submit such applications or requests or to make withdrawals from the Loan Account, as the case may be, with respect to such amount or portion of the Loan. Upon the giving of such notice, such amount or portion of the Loan shall be cancelled." SCHEDULE 6 Procurement and Consultants' Services Section I. Procurement of Goods Part A: International Competitive Bidding Except as provided in Part C hereof, goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in the Argentine Republic may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: 1. Goods for Part B of the Project estimated to cost less than the equivalent of $200,000 may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Bank. 2. Goods and services for Sub-projects under Part A of the Project shall be obtained at a reasonable price, account being taken also of other factors such as time of delivery and efficiency and reliability of the goods and vailability of maintenance facilities and spare parts therefor and, in the case of services, of their quality and the competence of the parties rendering them, provided, however, that in the case of contracts estimated to cost more than the equivalent of $300,000, such contracts shall be awarded on the basis of comparison of quotations solicited from a list of at least three suppliers eligible under the Guidelines in accordance with procedures acceptable to the Bank, and provided, further, that in the case of equipment, at least one supplier shall be from a country other than the Borrower. Part D: 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract procured pursuant to Part C.1 hereof, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall Page 13 be furnished to the Bank prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, said procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to this Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agreement. 2. The figure of 20% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants In order to assist in the execution of Part B of the Project, the Borrower shall employ or cause to be employed consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures 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.