Conformed Copy - L2898 - Second National Low-Income Housing Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2898 EC (Second National Low-Income Housing Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO ECUATORIANO DE LA VIVIENDA Dated May 24, 1988 PROJECT AGREEMENT AGREEMENT, dated May 24, 1988, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and BANCO ECUATORIANO DE LA VIVIENDA (BEV). WHEREAS (A) by the Loan Agreement of even date herewith between the Republic of Ecuador (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to sixty million dollars ($60,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that BEV agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and BEV, the proceeds of the loan provided for under the Loan Agreement will be made available to BEV on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS BEV, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the Page 2 obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. BEV declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, either directly or, for Part A.1 (i) of the Pro- ject, with the assistance of JNV and Private Developers as set forth, respectively, in Sections 2.08 and 2.09 of this Agreement, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering, public housing, and banking practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. Except as the Bank shall otherwise agree, pro- curement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 5 to the Loan Agreement. Section 2.03. BEV shall carry out or cause to be carried out 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 the Project. Section 2.04. BEV shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, BEV shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiv- ing the Subsidiary Loan Agreement or any provision thereof. Section 2.05. (a) BEV shall, at the request of the Bank, exchange views with the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relat- ing to the purposes of the Loan. (b) BEV shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by BEV of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.06. No later than September 30 of each year until completion of the Project, BEV shall carry out and furnish to the Bank a survey, in form and substance satisfactory to the Bank, of consumer demand for Housing Units, covering the quantity, quality and type of such Housing Units, to serve as the basis for BEV's investment program during the immediately following calendar year. Section 2.07. BEV shall enter into an agreement, satisfactory to the Bank, with JNV and GTZ, providing for GTZ's assistance to BEV and JNV in strengthening (i) their administrative and implementation capacity; (ii) their carrying out of basic studies and their procedures for programming, execution and evaluation in the establishment of norms, standards and operating systems for Page 3 site selection, land acquisition, design, contracting, supervision, reporting, beneficiary selection and titling; and (iii) their programming, coordination and utilization of the resources provided for technical assistance under the Project. Section 2.08. (a) BEV shall enter into an agreement with JNV, satisfactory to the Bank, providing for JNV's assistance to BEV in carrying out Part A.1 (i) of the Project, providing for BEV's transferring a portion of the Subsidiary Loan to JNV, and containing, inter alia, the terms and conditions set forth in Schedule 1 to this Agreement. (b) BEV shall cause JNV, with respect to any portion of Part A.1 (i) of the Project to be carried out by JNV with the assistance of Private Contractors, to enter into contracts, satisfactory to the Bank, with such Private Contractors, providing for the obligations of such Private Contractors to construct Housing Units and related infrastructure, if any, to be financed under Part A.1 (i) of the Project and setting forth the corresponding financing arrangements. Section 2.09. With respect to any portion of Part A.1 (i) of the Project being carried out by BEV without the assistance of JNV, BEV shall enter into contracts, satisfactory to the Bank, with Private Developers, providing for the obligations of such Private Developers to develop and construct Housing Units and related infrastructure, if any, to be financed under Part A.1 (i) of the Project and setting forth the corresponding financing arrangements. Section 2.10. (a) No later than September 30 of each year until completion of the Project, BEV shall furnish to the Bank an action plan, satisfactory to the Bank, setting forth in reasonable detail a program of actions and policies, to be implemented during the next succeeding calendar year, for the purpose of: (i) achiev- ing the then applicable Operational and Financial Performance Targets; and (ii) improving its management and operations in the areas of financial management and accountability, housing produc- tion capacity, operational efficiency, employee relations, public relations and commercial practices. (b) BEV and the Bank shall, starting on June 30, 1988, review at the request of either party, but not less frequently than annually, the Operational and Financial Performance Targets. Based on such review, the Bank may, by notice to BEV, adjust or modify the Operational and Financial Performance targets applicable for the next succeeding calendar year. Section 2.11. BEV shall carry out Part A.1 (ii) of the Pro- ject by extending loans for home improvement projects to Beneficiaries selected in accordance with criteria satisfactory to the Bank, such loans to be made on the terms and conditions set forth in Schedule 3 to this Agreement and otherwise satisfactory to the Bank. Section 2.12. BEV shall cause JNV, Private Developers, and Private Contractors, as the case may be, to carry out all construction and other works, including infrastructure works, under Part A.1 (i) of the Project, which they may undertake to carry out pursuant to the JNV Agreement or any Development Contracts or any Contruction Contracts, as the case may be, in accordance with design guidelines, engineering criteria and other norms and standards satisfactory to the Bank. Section 2.13. BEV shall, no later than June 30, 1989, select and acquire title to land appropriate and adequate for the devel- opment of Housing Unit sites under Part A.1 (i) of the Project, all in accordance with a schedule and site selection criteria satisfactory to the Bank. Section 2.14. BEV shall set, and shall cause JNV and Private Developers, as the case may be, to set the sales prices for any Page 4 Housing Units constructed by them and financed out of the proceeds of the Loan so that such prices are comprised of the price of the underlying land, the cost of site preparation, a prorated portion of urbanization and infrastructure costs, including design and supervision, all superstructure costs, and the cost of capital during construction. Section 2.15. BEV shall take, and shall cause JNV, Private Developers, and Private Contractors, as the case may be, participating in the carrying out of Part A.1 (i) of the Project, to take, all reasonable measures to ensure that the execution of Part A.1 (i) of the Project is effected with due regard to ecological, environmental, geological and sociological factors, including (i) taking into account, as appropriate, the results of any relevant environmental impact studies coming to their attention; (ii) incorporating construction standards designed to improve the ability of structures to withstand earthquakes or other geological instability; and (iii) locating new structures, to the extent practicable, so as to minimize earthquake-related risks affecting such structures. Section 2.16. (a) Unless the Bank shall otherwise agree, BEV shall at all times, in all loans, including Sub-loans, made by BEV from and after October 30, 1988 to any person, including any Beneficiary, to finance or refinance any Housing Units or any home-improvement projects, charge a rate of interest which exceeds the Reference Rate by a margin of no less than one and one-half (1.5) percentage points. (b) BEV and the Bank shall, annually starting on October 1, 1988, and at such other times as either party may request, review: (i) the results and effectiveness of BEV's utilization of the Lending Instrument; (ii) the results and effectiveness of BEV's implementation of the Variable Interest Rate System; and (iii) the adequacy of the levels of interest rates charged pursuant to clause (a) of this Section 2.16 and, as part of reviewing the levels of such interest rates, the adequacy of BEV's mobilization of resources under the indicators set forth in Schedule 2 to this Agreement. Towards these ends, BEV shall furnish to the Bank all such information as the Bank shall reasonably request. (c) BEV shall take, in a timely fashion, and thereafter maintain, all remedial measures agreed with the Bank as a result of any of the reviews referred to in paragraph (b) of this Section 2.16. If BEV and the Bank fail to reach agreement on any remedial measures by the December 1 or June 1 immediately following such review, or within sixty (60) days after the commencement of such review, whichever is earlier, the Bank may, by notice to the Borrower and BEV, suspend its disbursements under the Loan pursuant to Section 6.02 of the General Conditions. Section 2.17. (a) BEV shall develop and implement the Lending Instrument and the Variable Interest Rate System according to the program and schedule set forth in the letter, of even date herewith, from BEV to the Bank. (b) Not later than October 30, 1988, BEV shall begin utilization of the Lending Instrument and the Variable Interest Rate System, on an exclusive basis, in all of its lending operations, including those referred to in Section 2.16 (a) of this Agreement. ARTICLE III Management and Operations of BEV Section 3.01. BEV shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, banking, engineering and public housing practices under the super- vision of qualified and experienced management assisted by com- petent staff in adequate numbers. Page 5 Section 3.02. BEV shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and public housing practices. Section 3.03. BEV shall take out and maintain with respon- sible 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. ARTICLE IV Financial Covenants Section 4.01. (a) BEV shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition, including separate records and accounts to reflect the resources and expenditures related to the Project. (b) BEV shall: (i) have such records, accounts and financial statements (balance sheets, statements of income 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; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) 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 concern- ing said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, BEV shall: (i) maintain, or cause to be maintained, in accordance with paragraph (a) of this Section, separate 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 separate 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 expenditures 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. Section 4.02. BEV shall complete, no later than December 31, Page 6 1988, the implementation of a program to improve and upgrade its accounting procedures and financial management systems in a manner satisfactory to the Bank. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of BEV thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify BEV thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have desig- nated by notice to the party giving such notice or making such request. The addresses so specified are: 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 BEV: Banco Ecuatoriano de la Vivienda Ave. 10 de Agosto y Cordero Quito, Ecuador Telex: 2399-BEV-ED Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of BEV may be taken or executed by the Gerente General or such other person or persons as BEV shall designate in writing, and BEV shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. Page 7 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. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S. Shahid Husain Regional Vice President Latin America and the Caribbean BANCO ECUATORIANO DE LA VIVIENDA By /s/ Mario Ribadeneira Authorized Representative SCHEDULE 1 Terms and Conditions of JNV Agreement The JNV Agreement shall include, inter alia, the following terms and conditions in a form satisfactory to the Bank: 1. The JNV Loan shall be made and shall be denominated in Sucres. 2. The JNV Loan shall bear interest on the outstanding balance thereunder from time to time at the same rate as the Subsidiary Loan. 3. Payments of principal and finance charges on the JNV Loan shall be made in accordance with the current practice of BEV and JNV, whereby BEV transfers funds to JNV on a short-term basis. 4. JNV shall be obligated, either directly or through Private Contractors, to construct Housing Units and related infrastruc- ture, if any, under Part A.1 (i) of the Project, in accordance with engineering criteria, construction standards and design guidelines satisfactory to BEV and the Bank, and in accordance with the environmental, ecological and earthquake-safety considerations set forth in Section 2.15 of this Agreement. 5. To the extent JNV elects to construct Housing Units under the JNV Agreement through Private Contractors, JNV shall enter into Construction Contracts, satisfactory to BEV and the Bank, with such Private Developments, as provided in Section 2.08 (b) of this Agreement. 6. JNV shall enter into the GTZ Agreement with BEV and GTZ and carry out its obligations thereunder. 7. JNV shall develop and implement a program for the improvement and upgrading of its accounting procedures and financial manage- ment systems. 8. Procurement of goods, works and consultants' services required for Housing Units and related infrastructure constructed by JNV and to be financed out of the proceeds of the JNV Loan shall be governed by the provisions of Schedule 5 to the Loan Agreement. Page 8 9. To the extent that JNV provides any financing to purchasers of Housing Units, such financing shall be provided on terms and conditions acceptable to BEV and the Bank, including utilizing legal documentation equivalent to the Lending Instrument and selecting Beneficiaries in accordance with criteria satisfactory to BEV and the Bank. 10. JNV shall comply in all respects, mutatis mutandi, with Section 4.01 of this Agreement in respect of those portions of the Project being carried out by JNV, including giving access to its records to representatives of the Bank. SCHEDULE 3 Terms and Conditions of Sub-loans 1. Sub-loans shall be made and denominated in Sucres. 2. Sub-loans shall bear interest at rate which exceeds the Reference Rate by at least one and one-half (1.5) percentage points, unless otherwise agreed by the Bank and subject to adjustment in accordance with Section 2.16 (b) and (c) of this Agreement. 3. Sub-loans shall be made on the basis of legal documentation utilizing the Variable Interest Rate System and on instrument substantially equivalent to the Mortgage Instrument. 4. BEV shall have the right to suspend disbursements or to accelerate repayment upon the occurrence of specified events of default.