Mexico - Second Primary Education Project : Loan 3722 - Loan Agreement - Conformed

么 LOAN NUMBER 3722 HE LOAN AMR R AGREEMENT, dated 1994, between IN MIRRATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and NACIONAL FIRANCIERAy S.N.C. (the Borrower). WHEREAS: (A) the Bank - has received from the United Kaz4 can States (the Guarantor) a 1Letter -,dated Har-A 49 1994, vhich letter describes the Guarantor9s policies and strategies (the Program) with respect to the public primary education sector in Mexico; (B) the Guarantor and the Borrower, having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to this Agreement,, have requested the Bank, to assist in the ---financing of the Project; (C) by an agreement (the Guarantee Agreement) of even date herewith between the Guarautor and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower in respect of the Loan and to undertake such other obligations as set forth in the Guarantee 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; 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 Banks dated January lip 19859 with the modifications set forth below (the General Conditions) constitute an integral part of this Agreement: (a) The last sentence of Section 3.02 is deleted. (b) In Section 6.029 subparagraph (k) in relettered as sulhparagraph, (1) and a new subparagraph (k) is added to read: (k) An extraordinary situation *hall have arisen under which any further vithdravals under the Loan would be inconsistent with the provisions of Article 1119 Section 3 of the Bank9s Articles of Agreement." -2- Section 1.02. Unless the context otherwise requires, the several terms defined in the Genairal Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms h%ve the following meanings: (a) "CAPFCE" means the Guarantor's Administrative Committee for the Federal School Construction Program (Comit6 Administrador del Programa Federal de Construcci6n de Escuelas); (b) "CONAFE" means the Guarantor's National Council for Educational Development (Conselo Nacional de Fomento Educativo); (c) "COPLADE" means the State Committee for Planning and Development (Comit6 de Planificaci6n y Desarrollo Estatal) of each of the Project States; (d) "CTG" means a SEP Central Technical Group (Grupo T6cnico a Nivel Central) staffed on a full-time basis by technical staff members of SEP's General Directorate for Indigenous Education (Direcci6n General de Educaci6n Indigena) and General Directorate for Primary Education (Direcei6n General de Educaci6n Primaria); (e) "Implementation Letter" means the letter of even date herewith from the Guarantor to the Bank, containing the Annexes referred to throughout this Agreement and the Guarantee Agreement; (f) "Infrastructure Operational Manual" means the manual (Manual de Procedimientos pAra la Construcci6n, Rehabilitaci6n y Mantenimiento de Espacios Educiativos), prepared by CONAFE in consultation with CAPFCE, containing, inter alia, the criteria pursuant to which Project Schools shall be selected for purposes of Part B.6 (a) and (b) of the Project; (g) "Maintenance Handbook" means the handbook (Manual de Mantenimiento), prepared by CONAFE, to assist Project State municipalities in carrying out maintenance under Part 3.6 (b) of the Project; (h) "PARE Project" means the Primary Education Project partially financed with the proceeds of Bank loan 3417-HE pursuant to the October 14, 1991 loan and guarantee agreements between the Bank and the Borrower and between the Bank and the Guarantor, respectively; -3- (i) "Participation Agreement" means an agreement (Convenio de Coordinaci6n) entered into between the Guarantor and a State pursuant to Sections 3.06 or 3.07 of the Guarantee Agreement (in the case of a Participation Agreement with the State of Chiapas, Oaxaca, Guerrero or Hidalgo, such Participation Agreement may take the form of an annex to an already existing agreement between such State and the Guarantor); (j) "PCU" means CORAFE's Project Coordination Unit (Unidad Coordinadora Central) referred to in Section 3.09 of the Guarantee Agreement; (k) "Project School" means a public primary (grades 1-6) school existing (or to be constructed under Part B.6 of the Project) in a Project State municipality listed in Annex A of the imple- mentation Letter, which school may not be one administered by CONAFE; (1) "Project State" means one of the following States: Campeche, Durango, Guanajuato, Jalisco, Michoaca, Puebla, San Luis Potosi, Tabasco, Veracruz and Yucatan; (a) "Reading Corner Program" means SEP's program for designing, preparing and distributing library books to public schools (Proarama de Rincones de Lectura); (n) "School Council" means any one of the Social Participation School Councils (Conseios Escolares de Participacifn Social), established under the Guarantor's 1993 General Education Law (Le General de Educaci6n, published in the Guarantor's Diario Oficial de Ja Lederaci6n (Official Gazette) on July 13, 1993) for a particular Project School; (o) "SEE" means a State's Education Secretariat (Secretaria Estatal de Educaci6n) or equivalent; (p) "Self-Help Construction Handbook" means the handbook (Manual de Construcci6n Comunitaria), prepared by CONApE, to assist Project State municipalities in carrying out construction, expansion or rehabilitation activities under Part B.6 (b) of the Project; (q) "SEP" means the Guarantor's Public Education Secretariat (Secretaria de Educaci6n ffilica); -4- (r) "SBCP" means the Guarantor's Finance and Public Credit Secretariat (Secretaria de Hacienda y Cr6dito P blico); (a) "SOPE" means a Project State's Public Works Secretariat (SAcretaria de Obras Pfblicas del Estado) or equivalent; (t) "SPCU" means an SEE's State Project Coordivation Unit (Unidad Coordinadora Estatal) referred to in Section 3.06 (h) of the Guarantee Agreement; (u) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (v) "State" means any one of the states that constitute the United Mexican States; (W) "STG" means a Project State SEE State Technical Group (Gr T6cnico a Nivel Estatal) staffed on a full-time basis by technical staff members of such SEE's General Directorate for Indigenous Education (Direcck4n General do Educaci6n Indigena), or equivalent and General Directorate for Primary Education (Direcci6n General de Educacifn Primaria) or equivalent; and (x) "T&C" means a technical advisory committee referred to in Sections 3.06 (h) or 3.09 of the Guarantee Agreement. 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 four hundred twelve million Dollars ($412,000,000), 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, works and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. -5- (b) The Borrower shall, for the purposes of the Project, open and maintain in Dollars a special deposit account in Banco de Mexico on terms and conditions ratisfactory 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, 1999 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor 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 (314 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 and of each Semester, the Bank shall notify tha Borrower and the Guarantor 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 iamediately 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 -6- 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 mouths 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 (112 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 and the Guarantor of the Cost of Qualified Borrowings determined in respect of such Quarter." 0(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 eachi year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance vith the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Transfer of Loan Proceeds; Other Covenants Section 3.01. The Borrower shall enter into, and comply vith the terms of, contractual arrangements with the Guarantor, satis- factory to the Bank, providing, inter alia, for: (a) the transfer to the Guarantor of the proceeds of the Loan for use by the Guarantor, -7- CONAFE, CAPFCE and the Project States; and (b) the transfer by the Guarantor to the Borrower of such funds as the Borrower shall be required to pay to the Bank on account of principal, interest and other charges on the Loan. Except as the Bank may otherwise agree, the Borrower shall not amend or fail to enforce any provision of such contractual arrangements. The Borrower shall exercise its rights under such contractual arrangements in such a manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan. Section 3.02. 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 respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) shall be carried out, or caused to be carried out, by the Guarantor pursuant to Section 3.04 of the Guarantee Agreement. Section 3.03. The Borrower shall participate in the annual and midterm reviews referred to in Section 3.19 (b) and (c) of the Guarantee Agreement. ARTICLE IV Financial Covertants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and separate accounts adequate to reflect, in accordance with sound accounting practices, the resources and expenditures in connection with the execution of the Project. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section, and the records and accounts for the Special Account for each fiscal year audited, in accordance with generally accepted auditing standards and procedures consistently applied, by independent and qualified auditors; (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 -8- said auditors, of such scope and in such detail as the Bank shall have reasonably requested; (iii) furnish to the Bank each month certified statements of the Special Account; and (iv) furnish to the Bank such other information concerning said records and accounts 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 vere made on the basis of statements of expenditure, the Borrower shall provide to the Guarantor any information that may be required by the Guarantor to comply with the Guarantor's obligations under Section 3.05 of the Guarantee Agreement. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (1) of the General Conditions, the following additional events are specified: (a) that the Guarantor's General Education Law, referred to in Section 1.02 (n) of this Agreement, as amended to the date of this Agreement, shall have been amended, suspended, abrogated, repealed or waived so as to, in the opinion of the Bank, affect materially and adversely the carrying out of the Project; and (b) that any State has failed to perform any of its obligations under a Participation Agreement to which it is a party, in which case the Bank may, after consultation with and by notice to the Borrower and the Guarantor, only suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account for expenditures incurred either: (i) by the State in question or any municipality thereof; and/or (ii) for purposes of benefitting the public primary education sector of that State specifically. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) that the suspension referred to in Section 5.01 (b) of this Agreement shall have been in effect for all Project States and -9- the States of Chiapas, Oaxaca, Hidalgo and Guerrero simultaneously for a continuous period of 90 days; and (b) that any event specified in Section 5.01 (a) of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addLtional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) that CONAFE shall have completed the Infrastructure Operational Manual, the Self-Help Construction Handbook and the Maintenance Handbook, all satisfactory to the Bank; (b) that the PCU and four SPCUs (one for each of the Project States referred to in paragraph (c) of this Section) are fully operational and staffed as sec forth in Sections 3.06 (h) (i) and 3.09 (a) of the Guarantee Agreement; (c) that fully executed Participation Agreements, one for each of four different Project States and all satisfactory to the Bank, shall have been presented to the Bank; and (d) that the contractual arrangements referred to in Section 3.01 of this Agreement shall have been entered into. 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, on behalf of each of the parties to the contractual arrangements referred to in Section 3.01 of this Agreement, such contractual arrangements have been duly authorized or ratified by, and executed and delivered by each such party and are legally binding upon each such party in accordance with their terms; and (b) that, on behalf of each of the parties to each Participation Agreement referred to in Section 6.01 (c) of this Agreement, such Pa*ticipation Agreement has been duly authorized or - 10 - ratified by, and executed and delivered by each such party and is legally binding upon each such party in accordance with its terms. Section 6.03. The date is hereby specified for the p,, rposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Director Ir-ternacional 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 Bank: International Bank for Reconstruction and Development 1818 0 Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TIRT) For the Borrower: Nacional Financiera, Z.N.C. Direcei6n Internacional Torre IV, piso 8 Plaza Inn, Insurgentes Sur 1971 01020 HMxico, D.F. HXico - 11 - Cable address: Telex: NAFIN NAFIME 383-1775765 Mexico City Mexico City 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 Regional Vice President Latin America and the Caribbean NACIONAL FINANCIERA, S.N.C. By Authorized Representative - 12 - 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 I of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works under 32,000,000 50% Parts B.6 (a), C.7 and C.9 of the Project (2) Civil works under 24,000,000 50% Part B.6 (b) of the Project (except as covered under Category (11) below) (3) Equipment and fwr- 8,000,000 100% of foreign niture (excluding expenditures and vehicles and except 90% of local as covered under expenditures Categories (4), (5) and (8) below) (4) Didactic materials 70,000,000 90% (durable goods and books) under Parts B.1, B.2, B.4 and B.5 of the Project - 13 - Amount of the Loan Allocated I of (Expressed in Expenditures Category Dollar -Euivalent) to be Financed (5) Student educational 50,000,000 75% until packages (non- withdrawal* under durable goods) under this Category Part 1.3 of the have reached an Project aggregate amount equivalent to $25,000,000; 50% until withdrawals under this Cate- gory have reached an aggregate amount equivalent to $45,000,000; and 25% thereafter (6) Teacher training 95,000,000 1002 under Part A.1 of the Project (7) Management training 1,800,000 100% under Part C.1 of the Project (8) Training materials 1,700,000 100% under Part A.2 of the Project (9) Technical 6,700,000 100% assistance and studies - 14 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (10) Teacher incentives 55,300,000 75% until with- and supervisor drawals under support payments this Category under Parts C.6 have reached an and C.8 (a) of aggregate amount the Project equivalent to $20,000,000; 50% until withdrawals under this Cate- gory have reached an aggregate amount equivalent to $50,000,000; and 25Z thereafter (11) Incremental 27,500,000 751 until operating costs withdrawale under this Category have reached an aggregate amount equivalent to $15,000,000; 50% until withdrawals under this Cate- gory have reached an aggregate amoumt equivalent to $25,000,000; and 25% thereafter (12) Unallocated 40,000,000 TOTAL 412,000,000 - 15 - 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 Guarantor f or goods or services supplied from the territory of any country other than that of the Guarantor; (b) the term "local expenditures" means expenditures in the currency of the Guarantor or for goods or services supplied from the territory of the Guarantor; (c) the terms "teacher training" and "management training" include, inter alia, ver diems for trainees and trainers; and (d) the term "incremental operating costs" means PCU and SPCU operational, maintenance, travel and er diem costs, that would not have been incurred absent the Project, and includes salaries only: (i) for services provided by PCU staff over and above those already being provided for the PARE Project; and (ii) for SPCU staff at or above the Director level referred to in Section 3.06 (h) (i) of the Guarantee Agreement. 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 to exceed $6,000,000, may be made in respect of Categories (1) through (11) on account of payments made for expenditures before that date but after October 31, 1993; (b) payments made for expenditures made by or for the benefit of a Project State, the State of Chiapas, the State of Oaxaca, the State of Guerrero, the State of Hidalgo or any municipality or School Council within any such State, if: (i) such State has not entered into a Participation Agreement satisfactory to the Bank and accompanied by legal opinions meeting the same requirements as set forth for the legal opinions referred to in Section 6.02 (b) of this Agreement; and (ii) such State (in the case of a Project State) does not have a fully operational SPCU and TAC (staffed as set forth in Section 3.06 (h) (i) and (ii) of the Guarantee Agreement); and (c) payments made for expenditures under Categories (1) and (2) until terms of reference, satisfactory to the Bank, have been prepared for technical supervision of works under the Project. 4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures not - 16 - subject to contract (such as incentives under Category (10)) and for expenditures (other than for vorks contracts exceeding $2,000,000 equivalent per contract, for goods contracts exceeding $350,000 equivalent per contract, for contracts with individual consultants exceeding or equal to $50,000 equivalent per contract and for contracts with consulting firms exceeding or equal to $100,000 equivalent per contract) under such terms and conditions as the Bank shall specify by notice to the Borrower. - 17 - SCHEDULE 2 Description of the Project The principal objective of the Project is to assist in improving the quality and efficiency of public primary education in the Project States so as to raise such quality and efficiency to levels closer to the Mexican national average. A subsidiary objective of the Project is to reinforce management capacity within the public primary education sector of four other States (Chiapas, Oaxaca, Guerrero and Hidalgo). 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: Human Resources Development 1. Provision, to school administrators (principals, supervisors and assistant supervisors) and primary school teachers serving the Project Schools, of in-service training with respect to pedagogical counseling, educational resource use, educational problem pre- vention, remedial education, multigrade class teaching techniques, written language, mathematics, bilingualism in indigenous education, use of indigenous language texts and materials, Spanish as a second language and selected Project State-specific topics. 2. Development, printing, distribution and use of training materials (study guides, trainer's manuals, bibliographies, evaluation instruments, anthologies of selected readings) and promotional materials (such as posters) in support of the training provided under Part A.1 of the Project. Part B: Educational Material Resources 1. Distribution to each Project School of a teaching materials package consisting of durable goods, serving a pedagogical purpose, such as maps, charts, posters, anatomic models and, additionally for Project Schools with electricity, a radio, a tape recorder, audio cassettes and an overhead projector or other piece of audiovisual equipment. 2. Distribution to each classroom of each Project School of a grade-specific (or multigrade-specific if a classroom i3 used simultaneously by students from more than one grade) teaching - 18 - materials package consisting of durable goods, serving a pedagogical purpose, such as rulers, dictionaries, games, geometric solids and chalkboards. 3. Distribution to each student of each Project School of an educational materials package (one per student per year) consisting of non-durable goods such as notebooks, pencils and crayons. 4. Production and distribution, to each Project School, of a package of library books in support of the Reading Corner Program (such package to: (a) consist of at least 200 books for Project Schools with five or less classrooms; (b) consist of at least 350 books for Project Schools with six or more classrooms; and (c) include indigenous language books in the case of Project Schools that serve indigenous language speakers), as well as of a supple- mentary package of at least 15 educational reference books for teacher self-training and at least 30 region-specific content books for student use. 5. Design and production of indigenous language textbooks for each of the six primary school grades (and related student workbooks and teacher guidebooks), written in the 17 indigenous languages (Mays and one of its variants, Huasteco and one of its variants, Totonaco and one of its variants, NAhuatl and three of its variants, Tepehuano, Huichol, Pur6pecha, Mazahus, Mexicanero, Chontal and Chol) spoken by the major ethnic groups in the Project States, and provision of these iieas to Project Schools that serve the corresponding ethnic groups. 6. (a) Construction, rehabilitation and/or expansion of Project Schools by federal authorities; (b) construction, rehabilitation, expansion and/or maintenance of Project Schools by Project State municipal authorities (including Project Sch6ol furniture maintenance); (c) provision of furniture for such newly constructed, rehabilitated or expanded Project Schools; and (d) provision of adequate staff for such newly constructed, rehabilitated or expanded Project Schools. Part C: Institutional Strenathenini 1. Provision of local and/or overseas management training to high-level officials in the public primary education sector of the Project States and the States of Chiapas, Oaxaca, Guerrero and Hidalgo, particularly with respect to the following topics: - 19 - education quality and efficiency; methodologies for policy analysis and sector performance assessment; education sector reform options; the relationship among education, work and employment; education financing; resource allocation modelling; strategic use of data collected from education management information systems; evaluation and measurement of educational achievement; decentralization of education administration; curriculum reform; and non-Spanish language instruction. 2. Strengthening of CONAFE's institutional capacity through: (a) establishment and operation of an integrated management information system to be used at both federal and State levels; and (b) esta- blishment and operation of a process evaluation system to assess the quality and short-term effects of Project components. 3. Testing of the cognitive achievement of a sample of public primary education students from the Project States. 4. Carrying out of the following studies: (a) a preschool education study to assess the relevance, efficiery and effec- tiveness of public preschool education programs in Mexico and recommend strategies for their improvement; (b) a secondary education study to examine: (i) major issues facing secondary education; (ii) the causes of secondary education dropout rates; (iii) the working conditions of professionals in the sector; (iv) the characteristics that make a secondary school effective; and (v) the financial implications of extending mandatory basic education from six grades to nine grades; (c) an environmental education study to devise strategies on how to systematize environmental education in Mexico so as to make it more relevant for current needs; and (d) a science education study to test different science education models implemented on a pilot basis in a sample of 270 Project Schools (of which 90 would serve as a control group). 5. Implementation of a mass-media campaign to promote Project activities and benefits among the public. 6 . Provision of monthly work incentives, equal to and in additton to their base salary, to teachers working in Project Schools in extremely poor and isolated rural areas so as to promote improvement in their profesr.onal performance. 7. Construction, furnishing and equipping of at least 600 offices for public primary school supervisors (and their sector chiefs), to 20 - be located within easy access of the Project Schools to be supervised. 8. (a) Provision of quarterly travel incentives (equivalent to approximately $350 per supervisor per quarter and approximately $190 per sector chief per quarter) to at least 926 supervisors and 160 sector chiefs to defray travel expenses incurred by such personnel in carrying out a regular program of Project School supervision visits; and (b) provision of at least 80 vehicles to be used exclusively by such supervisors and sector chiefs to carry out said supervision visits. 9. Construction of at least 61 regional warehouses, and provision of vehicles, in support of the improvement of the existing system for the distribution to public primary schools of textbooks, educational materials and other goods (such as furniture and equipment). 10. Provision of technical assistance, vehicles, equipment and incremental operating cost financing to support the Project administration activities of the PCU and the SPCUs. The Project is expected to be completed by June 30, 1999. - 21 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each April 1 and October 1 beginning October 1, 1999 through April 1, 2009 20,600,000 * 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. - 22 - 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 belotf: 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 0.20 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 yeawrt before maturity More than 13 years before 1.00 maturity - 23 - SCHEDULE 4 Procurement and ConsultantsO Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part C of this Section, goods and works shall be procured under contracts awarded in accordance with procedures consistent vith 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 1992 (the Guidelines). For fixed-price contracts, the invitation to bid referred to in paragraph 2.13 of the Guidelines shall provide that, when contract award is delayed beyond the original bid validity period, the successful bidder's bid price will be increased for each week of delay by a predisclosed correction factor acceptable to the Bank. Such an increase shall not be taken into account in the bid evaluation. 2. In the procurement of works in accordance with Part A of this Section, bidding documents prepared by the Guarantor, if consistent with the Guidelines and otherwise satisfactory to the Bank, shall be used until the Bank issues relevant standard bidding documents for Mexico acceptable to the Guarantor. At the time of such issuance and thereafter, only said relevant standard bidding documents (with such modifications thereto as the Bank shall have agreed to be necessary for the purposes of the Project) shall be used. 3. In the procurement of goods in accordance with Part A of this Section, the relevant standard bidding documents issued by the Bank, with such modifications thereto as the Bank shall have agreed to be necessary for the purposes of the Project, shall be used; provided, however, that for any such procurement for which the invitation to bid ("convocatoria") is dated prior to February 1, 1994, standard bidding documents based on the so-called "Cuernavaca Documents" with such changes as may be agreed by the Bank and the Guarantor for each contract shall be used. 4. To the extent practicable, contracts for goods shall be grouped in bid packages estimated to cost the equivalent of $350,000 or more each, and contracts for works shall be grouped in bid packages estimated to cost the equivalent of $10,000,000 or more each. - 24 - Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 of this Section, goods manufactured in Mexico 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. Works estimated to cost the equivalent of less than $10,000,000 equivalent per contract or per bid package, up to an aggregate amount equivalent to $43,000,000, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Bank. Such procurement shall take place using standard bidding documents satisfactory to the Bank. 2. Goods estimated to cost less than the equivalent of $350,000 per contract or per bid package, up to an aggregate amount equivalent to $23,800,000, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Bank. Such procurement shall take place using standard bidding documents satisfactory to the Bank. 3. Works estimated to cost less than the equivalent of $300,000 per contract or per bid package, up to an aggregate amount equivalent to $30,000,000, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three contractors eligible under the Guidelines, in accordance with procedures acceptable to the Bank. 4. Goods estimated to cost less than the equivalent of $150,000 per contract or per bid package, up to an aggregate amount equivalent to $22,900,000, may be procured under contracts awarded on the bacis of comparison of price quotations solicited from a list of at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Bank. 5. Works estimated to cost less than the equivalent of $50,000 per contract or per bid package, up to an aggregate amount equivalent to $68,100,000, may be procured under contracts awarded after direct negotiations with contractor&, in accordance with procedures acceptable to the Bank and only to the extent allowed by - 25 - paragraph 3.5 of the Guidelines. Such procedures shall, inter alia, require that contract prices be consistent with the regionalized reference prices determined by the Guarantor pursuant to Section 3.03 (b) of the Guarantee Agreement. If such contractors are School Councils, the Bank shall not finance the labor costs of the works undertaken by such contractors. 6. Books and printed materials estimated to cost less than the equivalent of $10,000 per contract or per bid package, up to an aggregate amount equivalent to $6,100,000, may be procured under contracts awarded after direct negotiations with suppliers, in accordance with procedures acceptable to the Bank and only to the extent allowed by paragraph 3.5 of the Guidelines. Part D: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) The procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply with respect to: (i) each contract covered by Part A of this Section; (ii) the first three contracts, each for a separate Project State, covered by Part C.1 of this Section; (iii) the first contract covered by Part C.2 of this Section and procured pursuant to either Part B.6 (c), C.7 or C.10 of the Project; (iv) the first contract covered by Part C.2 of this Section and procured pursuant to either Part B.1, B.2, B.4 or B.5 of the Project; (v) the first contract covered by Part C.2 of this Section and procured pursuant to Part B.3 of the Project; (vi) the first three contracts (valued at or above $50,000 equivalent), each for a separate Project State, covered by Part C.3 of this Section and procured pursuant to Part B.6 (a) of the Project; (vii) the first three contracts (valued at or above $50,000 equivalent), each for a separate Project State, covered by Part C.3 of this Section and procured pursuant to Part B.6 (b) of the Project; (viii) the first contract (valued at or above $50,000 equivalent) covered by Part C.4 of this Section and procured rsuant to either Part B.6 (c), C.7 or C.10 of the Project; (ix) the first contract covered by Part C.4 of this Section and procured pursuant to either Part B.1, B.2, B.4 or B.5 of the Project; and (x) the first contract covered by Part C.4 of this Section and procured pursuant to Part B.3 of the Project. Where payments for any 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 be - 26 - 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 paragrAphe 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 5 to this Agreement. (a) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals are to be made on the basis of statements of expenditure. 2. The figure of 15Z is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Emploment of Consultants 1. In order to assist the Guarantor and/or CONAFE in carrying out the Project, the Guarantor shall employ and/or cause CONAPE to 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 (the Consultant Guidelines). For complex, time-based assignments, such consultants shall be employed under contracts using the standard form of contract for consultants' services issued by the Bank, with such modifications as shall have been agreed by the Bank. Where no relevant standard contract documents have been issued by the Bank, other standard forms agreed with the Bank shall be used. 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Bank review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts shall not apply to contracts for consulting firms estimated to cost less than $100,000 equivalent each, or to contracts for individual consultants estimated to cost less than $50,000 equivalent each. However, this exception to prior Bank review shall not apply to: (a) 27 - the terms of reference for such contracts; (b) single source selection of consulting firms; (c) assignments of a critical nature as reasonably determined by the Bank; (d) amendments of contracts for consulting firms estimated to cost $100,000 equivalent or above or for individual consultants estimated to cost $50,000 equivalent or above; or (e) umendments of contracts for consaulting firms raising the contract value to $100j,000 equivalent or above or for individual consultants raising the contract value to $50,000 equivalent or above. - 28 - SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (11) 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 $25,000,000 to be withdrawn from the Loan Account and deposited in 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 - 29 - 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 Seetion 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 - 30 - of such notice vill 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 this Schedule; 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. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Bank for Reconstruction and Development. FOR SECRETARY