Conformed Copy - L3207 - Road Transport and Telecommunications Sector Adjustment Loan - Guarantee Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3207 ME (Road Transport and Telecommunications Sector Adjustment Loan) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated June 5, 1990 LOAN NUMBER 3207 ME GUARANTEE AGREEMENT AGREEMENT, dated June 5, 1990, between UNITED MEXICAN STATES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Bank has received a letter dated May 4, 1990 from the Guarantor describing a program of actions, objectives and policies designed to achieve structural adjustment of the Guarantor's road transport and telecommunications sectors (herein- after called the "Program"), declaring the Guarantor's commitment to the execution of the Program and requesting assistance from the Bank in the financing of imports required during such execution; (B) by an agreement of even date herewith (the Loan Agree- ment) between the Bank and Banco Nacional de Obras y Servicios Publicos, S.N.C. (the Borrower), the Bank has agreed to extend to the Borrower a loan in various currencies equivalent to three hundred eighty million dollars ($380,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition Page 2 that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as provided in this Agreement and to undertake the obligations set forth in this Agreement; (C) on the basis, inter alia, of the foregoing, the Bank has decided, in support of the Program, to provide such assistance to the Guarantor by making the Loan in two tranches to the Borrower on the terms and conditions set forth in the Loan 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, (the General Conditions), with the modifications set forth in Section 1.01 of the Loan Agreement 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 and Section 1.02 of the Loan Agreement have the respective meanings therein set forth. ARTICLE II Guarantee; Transfer of Funds Section 2.01. (a) Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, 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, all as set forth in the Loan Agreement. (b) The Guarantor shall enter into the contractual arrangements referred to in Section 3.01 of the Loan Agreement and, except as the Bank may otherwise agree, shall not change or fail to enforce any provision of such contractual arrangements. ARTICLE III Other Covenants Section 3.01. (a) The Guarantor and the Bank, and the Borrower pursuant to Section 3.02 (a) of the Loan Agreement, shall, on a quarterly basis and the request of any party, exchange views on the progress achieved in carrying out the Program and the actions specified in the Schedule to this Agreement. (b) Prior to each such exchange of views, the Guarantor, and the Borrower pursuant to Section 3.02 (b) of the Loan Agree-ment, shall furnish to the Bank, for its review and comment, a report in such detail as the Bank shall reasonably request, on the matters specified in paragraph (a) of this Section. Section 3.02. Except as the Bank may otherwise agree, pro- curement of the goods to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 3 to the Loan Agreement. Section 3.03. The Guarantor shall provide, or cause to be provided, to the Borrower all documents and records in respect of the expenditures financed out of the proceeds of the Loan required to enable the Borrower to comply with the provisions of Section 4.01 of the Loan Agreement. ARTICLE IV Page 3 Representative of the Guarantor; Addresses Section 4.01. The Director General de Captacion de Credito Externo of Secretaria de Hacienda y Credito Publico of the Gua- rantor 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 Captacion de Credito Externo Secretaria de Hacienda y Credito Publico Palacio Nacional, Patio Central, Oficina 4025 06066 Mexico, D.F., Mexico Telex: 1777313-SHDCME 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 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/ Gustavo Petricioli Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Shahid Husain Regional Vice President Latin America and the Caribbean SCHEDULE I Actions Referred to in Paragraph 4 (c) of Schedule 1 to the Loan Agreement 1. That the Guarantor shall have raised the price of diesel fuel by not less than 10% (in real terms) over the level prevailing on Page 4 March 30, 1990, so as to improve the level of cost recovery for the maintenance and improvement costs associated with the use of the highway network by truckers. 2. That the Guarantor shall have completed a study to determine the long-run variable costs associated with the transportation of cargo by FERRONALES and shall have approved an increase, effective not later than January 1, 1991, of the rates charged by FERRONALES for the transportation of selected commodities which together account for at least 70 percent of its total cargo traffic revenues to a level equal in real terms to 125% of the rates for each of such commodities prevailing on March 30, 1990, or to the long-run variable costs associated with the transportation of each of such commodities, whichever shall be lower. 3. That the Guarantor shall have caused SCT to submit to SPP, and subsequently the Guarantor shall have submitted to its Congress, a proposed Fiscal Year 1991 budget in which there is allocated for highway maintenance expenditures (reconstruction and routine maintenance) an amount equal at least to 475 thousand million Pesos in real terms, of which at least 40% shall be allocated for routine maintenance. 4. That the Guarantor shall have issued regulations requiring mandatory periodic inspection of trucks to monitor compliance with federal emission standards. 5. That the Guarantor shall have taken the following actions to improve road safety: (a) presented to the Bank a plan of action to improve road safety; and (b) completed the first phase of a study under terms of reference agreed to with the Bank on the size of vehicles and cargo loading practices of truckers and initiated phase two and phase three of such study under terms of reference agreed to with the Bank for the purpose of recommending measures to enforce size and weight regulations for truckers; 6. That the Guarantor shall have made progress in implementing the TELMEX Privatization Plan. 7. That the Guarantor shall have furnished to the Bank a program for the business development of TELECOMM, including financial and investment programs through the Fiscal Year 1994. 8. That the Guarantor shall have engaged consultants under terms of reference satisfactory to the Bank to provide technical assistance to SCT in developing its regulatory capacity in the telecommunications sector and shall have enacted regulations governing the licensing of telecommunications networks and services. 9. That the Guarantor shall have furnished to the Bank a program of action to strengthen SCT's regulatory capabilities in telecommunications.