Colombia - Rural Development Investment Project : Loan Agreement for Loan 3250

CONFORMED COPY LOAN NUMBER 3250-CO (Rural Development Investment Project) between REPUBLIC OF COLOMBIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated September 14, 1990 LOAN NUMBER 3250-CO LOAN AGREEMENT AGREEMENT, dated September 14, 1990, between REPUBLIC OF COLOMBIA (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) the Borrower intends to contract from the Inter-American Development Bank (IDB) a loan (the IDB Loan) in an amount of seventy five million dollars ($75,000,000) to assist in financing the Project on the terms and conditions set forth in an agreement (the IDB Loan Agreement) to be entered into between the Borrower and IDB; and (C) the Project will be carried out by Fondo de Desarrollo Rural Integrado (DRI) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to DRI the proceeds of the Loan 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 DRI; 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 last sentence of Section 3.02 deleted (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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Annual Operating Plan" means an annual plan to be prepared by DRI for purposes of the Project pursuant to Part 1 (a) of Schedule 2 to the Project Agreement; (b) "CESCOS" means Centros Regionales de Servicios para la Comercializacion, Regional Marketing Service Centers; (c) "Central Bank" means the Borrower's Banco de la Republica; (d) "CESPAS" means Centros de Servicios a la Pesca Artesanal, Small-Scale Fishery Centers; (e) "Contrato de Cofinanciacion" means any of the agreements referred to in Section 2.01 (b) of the Project Agreement, and "Contratos de Cofinanciacion" means all such agreements; (f) "CRECED's" means the Centros Regionales de Capacitacion, Extension y Difusion de Tecnologia, the Regional Centers for Training, Extension and Diffusion of Technology of ICA; (g) "disbursement procedures" means the Borrower's internal procedures for disbursements as described in the Borrower's letters to the Bank dated May 4, 1990 and May 8, 1990; (h) "DNP" means the Departamento Nacional de Planeacion, the Borrower's National Planning Department; (i) "DRI Municipality" means each of the 602 Municipalities included in the Borrower's documento DNP-2362-UDA dated April 12, 1988, and such other Municipalities as may be agreed between DRI and the Bank and "DRI Municipalities" means all of such Municipalities; (j) "Estatutos" means the By-laws of DRI as approved by the Borrower's decreto 2004 dated October 23, 1987, as amended to the date of this Agreement; (k) "ICA" means the Instituto Colombiano Agropecuario, the Colombian Agricultural Institute; (1) "ICA Agreement" means the agreement entered into between ICA (as hereinafter defined) and DRI dated January 24, 1990, providing for the obligations of each party in the carrying out of Subprojects under Parts A.1 and A.2 and training under Part A.3 of the Project, and such term includes all schedules and supplemental agreements thereto; (m) "Implementing Entity" means any public or private entity, duly established under the laws of the Borrower, which entity meets the eligibility criteria set forth in the Operational Manual (as hereinafter defined) for its participation in the cofinancing and/or execution of Subprojects in accordance with the provisions set forth in the Operational Manual (as hereinafter defined); (n) "Legislation" means the Borrower's Ley 12 of 1986; Ley 78 of 1986; decreto 1333 of 1986; decreto 77 of 1987; decreto 78 of 1987; decreto 80 of 1987; Resolucion 61 issued by the Borrower's Departamento Nacional de Planeacion in 1987 as published in the Borrower's Diario Oficial on January 17, 1986, December 31, 1986, May 14, 1986, January 15, 1987, January 15, 1987, January 15, 1987, January 15, 1987, respectively, and the corresponding regulations of each the referred leyes, decretos, and resoluciones, all as amended to this date; (o) "Monitoring System" means an information and management system, satisfactory to the Bank, to be established by DRI to monitor the progress of each Subproject including its identification, appraisal, execution and supervision; (p) "Operational Manual" means the manual of operating policies and procedures issued by DRI by Acuerdos 0011 and 0013 dated June 5, 1990 for purposes of the execution of the Project containing, inter alia, the eligibility criteria for Subprojects and Implementing Entities, DRI's cofinancing ratio for each Subproject, cost recovery measures and the terms and conditions of the Contrato de Cofinanciacion; (q) "Program" means the Programa de Desarrollo Integral Campesino, the Rural Development Investment Program of the Borrower for the period 1988-1994 as established in the Borrower's documento DNP-2362-UDA dated April 12, 1988 as such Program may be revised from time to time by agreement between the Borrower and the Bank; (r) "Project Area" means the area of the DRI Municipalities and in respect of Subprojects under Part A.5 and A.6 of the Project it also includes such areas in the territory of the Borrower as described in the Operational Manual; (s) "Project Agreement" means the agreement between the Bank and DRI 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; (t) "Small farmer" means a farmer in the Project Area who (1) has, as a family group, an amount of gross assets, including land, not exceeding the value of the equivalent of three hundred (300) applicable monthly minimum salaries and (2) derives at least 70% of his or her income from rural activities; (u) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (v) "Subproject" means a specific agricultural development project which: (i) is to be carried out under the Project in the Project Area; (ii) consists of infrastructure investments and/or acquisitions of goods and/or technical assistance and/or training as described in Part A of the Project; (iii) meets the eligibility criteria set forth in the Operational Manual; and (iv) is included in an Annual Operating Plan; (w) "Eligible Subproject" means a Subproject, as so defined, which meets the requirements set forth or referred to in paragraph 3 of Schedule 2 to the Project Agreement; (x) "Subsidiary Agreement" means the agreement to be entered into between the Borrower and DRI pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Agreement; and (y) "Acta de Acuerdos" means the agreement dated February 6, 1990, between the Borrower's Fondo Financiero de Desarrollo Urbano and DRI providing for technical and economic criteria, and institutional arrangements to be followed in respect of Subprojects under Part A.9 of the Project. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, various currencies that shall have an aggregate value equivalent to the amount of seventy five million dollars ($75,000,000), being the sum of withdrawals of the proceeds of the Loan, with each withdrawal valued by the Bank as of the date of such withdrawal. 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 expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement 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 dollars the Special Account in the Central Bank 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 5 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1995 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 per cent (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 for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during 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 determined in respect of such Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and expressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings or portions thereof as the Bank has allocated to fund: (A) the Bank's investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. (iii) "Semester" means the first six months or the second six months of a calendar year. (d) On such date as the Bank may specify by no less than six months' notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respect of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) 'Quarter' means a three-month period commencing on January 1, April 1, July 1 or October 1 in a calendar year." Section 2.06. Interest and other charges shall be payable semiannually on April 1 and October 1 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, without any limitation or restriction upon any of its other obligations under the Loan Agreement, shall (i) cause DRI to perform in accordance with the provisions of the Project Agreement all the obligations of DRI therein set forth, (ii) take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable DRI, to perform its obligations under the Project Agreement and the Contratos de Cofinanciacion, and (iv) not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall make the proceeds of the Loan available to DRI, by means of a budgetary allocation, under a Subsidiary Agreement to be entered into between the Borrower and DRI, under terms and conditions which shall have been approved by the Bank including the disbursement procedures. (c) The Borrower shall exercise its rights under the Subsidiary 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, repeal, suspend or waive the Subsidiary Agreement or any provision thereof. Section 3.02. Except as the Bank shall otherwise agree, procurement 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 4 to this Agreement. Section 3.03. 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) shall be carried out by DRI pursuant to Section 2.06 of the Project Agreement. Section 3.04. The Borrower shall, through DNP: (a) not later than August 31, 1992, employ consultants, with qualifications, experience and under terms of reference satisfactory to the Bank, to undertake an in depth review of the planning, management and implementation of the Project and prepare a report, of such scope and detail as the Bank shall reasonably request, including, inter alia, (i) effectiveness of the policies and procedures in the Operational Manual, (ii) utilization by DRI of the eligibility criteria set forth in the Operational Manual for the screening and appraisal of Subprojects, (iii) adequacy of DRI's staff and its distribution between central and regional offices, and (iv) effectiveness of DRI's Regional Offices in the approval and monitoring of Subprojects and procurement procedures; (b) not later than October 15, 1992 furnish to the Bank, for its review and comment, the report referred to in (a) above; (c) not later than November 30, 1992, based on the report referred to in (a) above and the Bank's comments thereon, furnish to the Bank, after consultation with DRI, an action plan, satisfactory to the Bank, to improve the performance of DRI and resolve any outstanding deficiencies, problems or issues; and (d) ensure that DRI shall implement such action plan in a manner and under a timetable satisfactory to the Bank. Section 3.05. The Borrower shall, through DNP: (a) not later than August 31, 1991 carry out a study, under terms of reference agreed with the Bank, to develop a graduation policy and criteria for the phasing out of DRI's financial contribution to the DRI Municipalities for the execution of Subprojects; (b) not later than January 31, 1992, furnish to the Bank the results of such study; and (c) not later than September 30, 1992, ensure that DRI shall implement the graduation policy and criteria developed by the study taking into account the Bank's comments thereon. Section 3.06. The Borrower shall: (a) cause ICA, under contractual or administrative arrangements satisfactory to the Bank, to prepare and furnish to the Bank, not later than September 30, 1990, an action plan, satisfactory to the Bank, for the establishment and operation of nineteen additional CRECED's, including, inter alia, staffing and financial resources for such CRECED's; (b) furnish to the Bank, not later than September 30, 1991, an action plan, satisfactory to the Bank providing for (i) ICA's discontinuation in the provision of extension services to small farmers and (ii) alternative arrangements for providing such extension services as a result of ICA's discontinuation in the provision of such services; (c) afford the Bank a reasonable opportunity to comment on the action plans referred to in (a) and (b) above; and (d) thereafter, implement such action plans taking into account the Bank's comments and recommendations. Section 3.07. The Borrower shall ensure that the criteria, arrangements and all other provisions included or referred to in the Acta de Acuerdos shall be maintained by the appropriate legal means, in a manner satisfactory to the Bank, during the imple- mentation of the Project. ARTICLE IV Financial Covenants Section 4.01. (a) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall or shall cause DRI to: (i) maintain or cause to be maintained in accordance with sound accounting practices, records and accounts reflecting such expenditures; (ii) ensure or cause to ensure that all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures are 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; and (iii) enable or cause to enable the Bank's representatives to examine such records. (b) The Borrower shall or shall cause DRI to: (i) have the records and accounts referred to in paragraph (a) (i) of this Section and those for 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, including 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; 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. 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) DRI 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 that DRI will be able to perform its obligations under the Project Agreement; (c) that the Estatutos or DRI's organizational structure, functions or operations shall have been amended, suspended, abrogated, repealed or waived in a manner that would, in the Bank's opinion, affect materially and adversely the ability of DRI to perform any of its obligations under the Project Agreement; (d) any party to a Contrato de Cofinanciacion shall have failed to perform any of its obligations thereunder; (e) that the Legislation or any provision thereof shall have been amended, suspended or abrogated in a manner that would, in the Bank's opinion, adversely and materially affect the carrying out of the Project; and (f) that the Bank and DRI shall have failed to agree on any actions and measures pursuant to Section 2.08 (b) of the Project Agreement. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (a) or (d) 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) any of the events specified in paragraphs (c) or (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 Agreement has been executed on behalf of the Borrower and DRI; (b) the Monitoring System has been established and made operational by DRI in a manner and under conditions satisfactory to the Bank; (c) DRI and the Bank shall have agreed on the methodology to be utilized for the impact evaluation of the Project and the base line surveys referred to in Section 2.04 of the Project Agreement; and (e) DRI shall have employed consultants, with qualifications, experience and under terms of reference, satisfactory to the Bank, to assist DRI in carrying out the base line survey referred to in Section 2.04 (a) of the Project Agreement. 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) on behalf of DRI, that the Project Agreement has been duly authorized or ratified by DRI, and is legally binding upon DRI in accordance with its terms; (b) on behalf of the Borrower and DRI, that the Subsidiary Agreement has been duly authorized or ratified by the Borrower and DRI and is legally binding upon the Borrower and DRI in accordance with its terms; and (c) on behalf of DRI, that DRI has formally issued the Operational Manual in accordance with the Estatutos. Section 6.03. The date December 14, 1990 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 Ministro de Hacienda y Credito Publico 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 Hacienda y Credito Publico Palacio de las Ministerios Plaza San Agustin Bogota, D.E. Colombia Cable address: Telex: MINHACIENDA 43289 MHAC CO Bogota 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 197688 (TRT) Washington, D.C. 248423 (RCA) 64145 (WUI) or 82987 (FTCC) 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. REPUBLIC OF COLOMBIA By /s/ Victor Mosquera Chaux Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Rainer B. Steckhan Acting Regional Vice President Latin America and the Caribbean 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) Works, Goods, 67,000,000 85% of amounts Consultants' disbursed by services and DRI under the Training under Contratos de Part A of the Cofinanciacion Project (2) Goods, Consul- 7,000,000 70% of local tants' services expenditures and and Training 100% of foreign under Part B expenditures of the Project (3) Unallocated 1,000,000 TOTAL 75,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; 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. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $7,500,000, may be made in respect of Categories 1 and 2 on account of payments made for expenditures before that date but after January 1, 1990; and (b) any expenditures incurred under a Subproject unless such Subproject is an Eligible Subproject approved by the Bank for financing under the Loan and a Contrato de Cofinanciacion has been entered into with respect to or including such Subproject. SCHEDULE 2 Description of the Project The Project comprises the Borrower's Rural Development Investment Program and its main objectives are to: (a) improve the standard of living of small farmers and fishermen in the Project Area, (b) promote grassroot involvement of rural communities in identifying investment needs and maintenance thereof, and (c) strengthen the capabilities of DRI and the DRI municipalities in the implementation of development projects in support of the Borrower's decentralization reforms. 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: Carrying out of Subprojects including, inter alia: 1. Technology Adaptation Provision of technology adaptation services including field demonstration and on-farm trials. 2. Extension Provision of extension services to about two hundred and eighty thousand (280,000) beneficiaries. 3. Training (a) Training activities to: (i) promote the organization and involvement of the rural communities in the execution and administration of subprojects; (ii) assist small farmers, fishermen and producer's associations in increasing their rural production; and (iii) assist in the preparation of socioeconomic profiles of the Project Area. (b) Training courses in specific agricultural development areas including, inter alia, technology adaptation, extension, watershed management and environmental protection, fishery, marketing, rural women, rural roads and water supply and sanitation. 4. Watershed Management and Environmental Protection Management and environmental protection of watershed areas including conservation works, training, technology development and adaptation, extension services and studies related thereto. 5. Fishery (a) Development of aquacultures including upgrading and equipping hatcheries, training, technology development, research and technical assistance related thereto. (b) Establishment and management of CESPAS including construction of facilities, acquisition and installation of equipment, and technical assistance. 6. Marketing (a) Establishment of CESCOS including works, acquisition and installation of equipment and technical assistance. (b) Technical assistance to assist food producers in reducing post harvest losses and improving product quality. 7. Rural Women (a) Promotion and establishment of rural women's groups for undertaking development activities. (b) Technical assistance and training to rural women's groups established under the Project to assist them in establishing and managing small enterprises. 8. Rural Roads Construction, rehabilitation and improvement of rural roads to connect agricultural production centers with marketing and consumption centers. 9. Water Supply and Sanitation Construction, rehabilitation and expansion of water supply systems and sanitation facilities. Part B: Institutional Strengthening (a) Assistance to DRI and DRI Municipalities on the implementation and supervision of the Project including promotional activities, technical assistance, training and acquisition of equipment and vehicles. (b) Assistance to DRI and DRI Municipalities on the preparation of Subprojects including prefeasibility, feasibility and design studies. * * * * The Project is expected to be completed by December 31, 1994. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (Expressed in dollars)* On each April 1 and October 1 beginning April 1, 1996 through October 1, 2007 3,125,000 * 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 Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.18 before maturity More than three years but 0.35 not more than six years before maturity More than six years but 0.65 not more than eleven years before maturity More than eleven years but not 0.88 more than fifteen years before maturity More than fifteen years but not 1.00 more than eighteen years before maturity SCHEDULE 4 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods and works 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 Colombia 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: Other Procurement Procedures 1. Contracts for civil works estimated to cost $50,000 equivalent or more but less than $1,000,000 equivalent, up to an aggregate amount not to exceed $61,000,000, and contracts for goods estimated to cost $25,000 equivalent or more but less than $200,000 equivalent up to an aggregate amount not to exceed $700,000 may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Bank. 2. Contracts for civil works estimated to cost less than $50,000 equivalent, up to an aggregate amount not to exceed $5,800,000, and contracts for goods estimated to cost less than $25,000 equivalent, up to an aggregate amount not to exceed $200,000, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three qualified contractors or suppliers, as the case may be, eligible under the guidelines, in accordance with procedures acceptable to the Bank. Part D: Without limitation upon the provision of the Guidelines, in respect of procurement of goods and works: 1. Pursuant to Part A of this Schedule: (a) No requirement of local agents for foreign bidders shall be made. (b) No prior registration of foreign bidders shall be required. (c) No provision regarding minimum number of bidders shall be applied. (d) Bids for goods shall be evaluated on a C.I.F. basis. (e) Freight costs quoted freely by each bidder shall be used for purposes of bid evaluation. 2. Pursuant to Part A or Part C of this Schedule: (a) Awards shall be made to the bid with the lowest evaluated cost. Part E: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to the first two contracts for goods and civil works procured under the procedures referred to in Part C.1 of this Schedule and each contract for civil works estimated to cost the equivalent of $500,000 or more and each contract for goods estimated to cost the equivalent of $200,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contracts 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 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, such 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 5 to the Loan Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which the Bank has authorized withdrawals on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 of this Agreement. 2. The figure of 10% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist the Borrower and DRI in carrying out the Project, the Borrower and DRI shall employ 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. SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories 1 and 2 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 (c) the term "Authorized Allocation" means an amount equivalent to $5,000,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. 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 shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, 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) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid 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 said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, 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 (b) once the total unwithdrawn amount of the Loan allocated to the eligible Categories less 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 equal the equivalent of twice the amount of the Authorized Allocation. 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 an expenditure or in an amount not eligible pursuant to paragraph 2 of thisSchedule or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) 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. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (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. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.