Conformed Copy - L2837 - Ninth Agricultural Credit Project - Guarantee Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2837 ME Guarantee Agreement (Ninth Agricultural Credit Project) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated July 31, 1987 LOAN NUMBER 2837 ME GUARANTEE AGREEMENT AGREEMENT, dated July 31, 1987, between UNITED MEXICAN STATES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Guarantor has undertaken to carry out the Financing Plan (as defined in the Loan Agreement), has declared its commitment to implement the Financing Plan and has requested the assistance of the Bank in support of the same; (B) the Guarantor and NACIONAL FINANCIERA, S.N.C. (the Borrower), having been satisfied as to the feasibility and priority of the Project described in Schedule 3 to the Loan Agreement, have requested the Bank to assist in the financing of the Project; Page 2 (C) by the Loan Agreement of even date herewith between the Bank and the Borrower, the Bank has agreed to extend to the Borrower a loan in various currencies equivalent to four hundred million dollars ($400,000,000), 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 provided in this Agreement; (D) by the Banxico Project Agreement, of even date herewith, between the Bank and Banco de Mexico (Banxico), the latter has agreed to undertake the obligations set forth in the Banxico Project Agreement; (E) by the Banrural Project Agreement of even date herewith, between the Bank and Banco Nacional de Credito Rural (Banrural), the latter has agreed to undertake the obligations set forth in the Banrural Project Agreement; 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 "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modification set forth in Section 1.01 of the Loan Agreement (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions, the Preamble to this Agreement and in Section 1.02 of the Loan Agreement have the respective meanings therein set forth. ARTICLE II Guarantee; Provision of Funds Section 2.01. The Guarantor declares its commitment to the objectives of the Project as set forth in Schedule 3 to the Loan Agreement, and to this end, without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not merely as surety, 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, and the punctual performance of all the other obligations of the Borrower, Banxico and Banrural as set forth in the Loan Agreement, the Banxico Project Agreement and the Banrural Project Agreement. Section 2.02. (a) The Guarantor shall: (i) enter into the contractual arrangements with the Borrower referred to in Section 3.01 of the Loan Agreement; (ii) enter into contractual arrangements with Banxico, under terms and conditions satisfactory to the Bank, which shall provide, inter alia, for the transfer to FIRA of such portion of the proceeds of the Loan as shall be Page 3 required by FIRA for the purpose of carrying out Parts A, C (i), D (i) and F of the Project; and (iii) enter into contractual arrangements with Banrural, under terms and conditions satisfactory to the Bank, which shall provide, inter alia, for the transfer to FICART of such portion of the proceeds of the Loan as shall be required by FICART for the purpose of carrying out Parts B, C (ii) and D (ii) of the Project. (b) Except as the Bank shall otherwise agree, the Guarantor shall not change or fail to enforce any provision of the contractual arrangements referred to in paragraph (a) of this Section. (c) Without limitation or restriction upon the provisions of Section 2.01 and paragraphs (a) and (b) of this Section of this Agreement, the Guarantor specifically undertakes, whenever there is reasonable cause to believe that the funds available to Banxico, Banrural, or both, will be inadequate to meet the estimated expenditures required for the carrying out of the Project, to make arrangements, satisfactory to the Bank, promptly to provide or cause to be provided to Banxico, Banrural, or both, with such funds as are needed to meet such expenditures. Section 2.03. Without limitation to the provisions of Section 2.02 (c) of this Agreement, the Guarantor shall, unless the Bank shall otherwise agree, take all necessary action to ensure that adequate funds are budgeted annually to FIRA and FICART so as to prevent any material capital erosion, in real terms, which FIRA or FICART may have incurred during the immediately preceeding year on account of all their lending operations after January 1, 1986. For the purpose of this Section the term "capital" means the sum of the total paid-in capital, retained earnings, and reserves of FIRA or FICART not specifically allocated to cover other liabilities. ARTICLE III Other Covenants Section 3.01. Without any limitation or restriction upon any of its obligations under this Agreement, the Guarantor shall not take, or permit to be taken, any action which would prevent or interfere with the performance by Banxico of its obligations under the Banxico Project Agreement, or with the performance of Banrural of its obligations under the Banrural Project Agreement. Section 3.02. The Guarantor shall: (i) by not later than January 31, 1988, carry out the study included in Part B of the Project, under terms of reference as agreed between the Guarantor and the Bank, and thereafter exchange views with the Bank on the conclusions and recommendations of such study; and (ii) starting on March 31, 1988, implement such recommendations within a time period acceptable to the Bank. Section 3.03. For purposes of Sections 6.02 (c) and (d) and 7.01 (e) of the General Conditions, the obligations of Mexico under the General Interest Rate Agreement are hereby incorporated as obligations of the Guarantor as if they were fully set forth herein. ARTICLE IV Page 4 Representative of the Guarantor; Addresses Section 4.01. The Director General de Credito Publico of the Secretaria de Hacienda y Credito Publico of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Direccion General de Credito Publico Secretaria de Hacienda y Credito Publico Palacio Nacional Edificio 10 PB 06066 Mexico D.F. Mexico Telex: 1777313-SHDCME or 01774300 Mexico City 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 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. UNITED MEXICAN STATES By /s/ Ernesto Marcos Giacoman Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S. Shahid Husain Regional Vice President Latin America and the Caribbean Page 5