Argentina - Provincial Bank Privatization Loan : Loan 3878 - Loan Agreement - Conformed

LOAN NUMBER 391-AR Loan Agreement (Provincial Bank Privatization Loan) between ARGENTINE REPUBLIC and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENr Dated Ma 5' , 1995 LOAN NUMBER3918-AR LOAN AGREEMENT AGREEMENT, dated Ay 5 L, 1995, between ARGENTINE REPUBLIC (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Bank has received a letter dated April 19, 1995, from the Borrower describing a program of actions, objectives and policies designed to achieve structural adjustment of the financial sector of the provinces of the Borrower (hereinafter called the Program), declaring the Borrower's commitment to the execution of the Program, and requesting assistance from the Bank in the financing of urgently needed imports required during such execution; and (B) on the basis, inter alia, of the foregoing, the Bank has decided in support of the Program to provide such assistance to the Borrower by making the Loan in three tranches as hereinafter provided; 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, datad January 1 1985, with the modifications thereof set forth below (the General Conditions) constitute an integral part of this Agreement: (a) Section 2.01, paragraph 11, shall be modified to read: "11. 'Project' means the imports and other activities that may be financed out of the proceeds of the Loan pursuant to the provisions of Schedule I to the Loan Agreement."; (b) Section 9.07 (c) shall be modified to read: "(c) Not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the -2- execution of the program referred to in the Preamble to the Loan Agreement, the performance by the Borrower and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan."; (c) The last sentence of Section 3.02 is deleted. (d) The second sentence of Section 5.01 is modified to read: "Except as the Bank and the Borrower shall otherwise agree, no withdrawals shall be made: (a) on account of expenditures in the territories of any country which is not a member of the Bank or for goods produced in, or services supplied from, such territories; or (b) for the purpose of any payment to persons or entities, or for any import of goods, if such payment or import, to the knowleJge of the Bank, is prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations."; and (e) In Section 6.02, subparagraph (k) is relettered as subparagraph (1) and a new subparagraph (k) is added to read: "(k) An extraordinary situation shall have arisen under which any further withdrawals under the Loan w: uld be inconsistent with the provisions of Article III, Section 3 of the Bank's Articles of 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) "BCRA" means Banco Central de la Repiblica Argentina. the Borrower's Central Bank; (b) "First Tranche" means the portion of the Loan not exceeding the equivalent of $167,000,000 to be released by the Bank on or after the Effective Date; (c) "Municipal Banks" means banks owned or controlled by Municipalities (as hereinafter defined); (d) "Municipalities"means municipalities in Provinces (as hereinafter defined) and the Municipality of Buenos Aires; -3- (e) "Privatization Trust Fund" means the sub-account for privatization of Provincial Banks (as hereinafter defined) and Municipal Banks of the Provincial Development Trust Fund ("Fondo Fiduciario pa El Desarrollo Provincial") established by Decree No. 286 of February 27, 1995 of the Borrower, as amended by Decree No. 445 of March 28, 1995 of the Borrower; (f) "Privatization Trust Fund Documents" means: (i) the Decrees referred to in paragraph (e) of this Section; (ii) the operating guidelines (instrucciones) referred to in paragraph 2 of Decree No. 286 of the Borrower and to be issued by the Secretariat of Finance, Banking and Insurance of the Borrower's Ministry of Economy and Public Works and Services; (iii) the trust deed entered into between the Borrower and Banco de la Naci6n for the administration of the Provincial Development Trust Fund referred to in paragraph (e) of this Section; (iv) the financing agreements to be entered into between Banco de la Naion as administrator of the Provincial Development Trust Fund, on the one hand, and, on the other, the Provinces (as hereinafter defined) and the Provincial Banks (as hereinafter defined) or the Municipalities and the Municipal Banks for the purpose of allowing such Provinces and such Provincial Banks and such Municipalities and Municipal Banks to draw upon the Privatization Trust Fund; and (v) the laws of the Provinces authorizing participation by such Provinces and such Provincial Banks in the Program and the ordinances of the Municipalities authorizing participation of such Municipalities and such Municipal Banks in the Program; (g) "Provinces" means the provinces of the Borrower; (h) "Provincial Banks" means banks owned or controlled by the Provinces; (i) "Second Tranche" means the portion of the Loan not exceeding the equivalent of $167,000,000 to be released by the Bank upon fulfillment of the conditions set forth or referred to in paragraph 4 (a) of Schedule I to this Agreement; (j) "SITC" means the Standard International Trade Classification, Revision 3 (SITC, Rev. 3), published by the United Nations in Statistical Papers, Series M, No. 343 (1986); (k) "Superintendency of Banks" means BCRA's Superintendencia de Entidades Financieras; and (1) "Third Tranche" means the portion of the Loan not exceeding the equivalent of $166,000,000 to be released by the Bank upon fulfillment of the conditions set forth or referred to in paragraph 4 (b) of Schedule 1 to this Agreement. -4- 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 five hundred million dollars ($500,000,000), 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. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement. Section 2.03. The Closing Date shall be April 30, 1997 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Forrower shall pay to the Bank a commitment charge at the rate of three-fourths of onf 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 end of each Semesfer, 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 -5 - 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 I in a calendar year." Section 2.06. Interest and other charges shall be payable semiannually on February I and August 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 2 to this Agreement. Section 2.08. (a) BCRA is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. (b) Without limitation or restriction to the foregoing, the Borrower hereby entrusts BCRA with responsibility for the preparation of withdrawal applications under the Loan and for the collection of the documents and other evidence to be furnished to -6- the Bank in support of such applications; such withdrawal applications shall to the extent practicable be consolidated so as to apply for withdrawal of aggregate amounts of not less than $1,000,000 equivalent. ARTICLE M Particular Covenants Section 3.01. (a) The Borrower and the Bank shall from time to time, at the request of either party, exchange views on the progress achieved in carrying out the Program and the actions specified in Schedule 4 to this Agreement. (b) Prior to each such exchange of views, the Borrower shall furnish to the Bank for its review and comment a report on the progress achieved in carrying out the Program, in such detail as the Bank shall reasonably request. (c) Without limitation upon the provisions of paragraph (a) of this Section, the Borrower shall exchange views with the Bank on any proposed action to be taken after the disbursement of the Third Tranche which would have the effect of materially reversing the objectives of the Program or any action taken under the Program, including any action specified in paragraph 4 of Schedule I and in Schedule 4 to this Agreement. Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. (a) The Borrower shall maintain or cause to be maintained records and separate accounts adequate to reflect ir. accordance with consistently maintained sound accounting practices the expenditures financed out of the proceeds of the Loan. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section in respect of expenditures under each of the First Tranche, Second Tranche and Third Tranche 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 two months after the last withdrawal from the Loan Account has been made under each of the First Tranche, Second Tranche and Third Tranche, a certified copy of the -7- report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be iaintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report in respect of the expenditures under the Third Tranche, all records (contracts, orders, invoices, bills, receipts and other documents, or customs certificates, as appropriate) evidencing such expenditures; (iii) enable the Bank's representatives to examine records; and (iv) ensure that such records and accounts are included in the audits referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted, together with the p'cedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. (d) The Borrower shall appoint the auditors referred to in paragraph (b) (i) above not later than 30 days after the respective dates on which final disbursement of the proceeds of the First Tranche, Second Tranche and Third Tranche have been made. Section 3.04. (a) The Borrower shall, promptly after the respective dates on which disbursement of the proceeds of the First Tranche, Second Tranche and Third Tranche have been made, deposit into the Privatization Trust Fund counterpart funds equivalent to the respective amounts disbursed under the First Tranche, Second Tranche and Third Tranche. (b) The Borrower shall cause the Privatization Trust Fund to be operated in accordance with the Privatization Trust Fund Documents. -8- ARTICLE IV Additional Events of Suspension Section 4.01. Pursuant to Section 6.02 (1) of the General Conditions, the following additional events are specified: (a) a situation has arisen which shall make it improbable that the Program, or a significant part thereof, will be carried out; and (b) any of the Privatization Trust Fund Documents has been amended, repealed, abrogated, terminated or waived, in whole or in part, by any of the parties thereto, or any new rules or agreements that affect the operation of the Privatization Trust Fund are adopted or entered into by any said party or by any other entity, so as to affect, in the opinion of the Bank, materially and adversely the execution of the Program. ARTICLE V Effective Date; Termination Section 5.01. 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 macroeconomic policy framework of the Borrower is consistent with the objectives of the Program; (b) the operating guidelines referred to in Section 1.02 (f) (ii) of this Agreement have been issued in form and substance acceptable to the Bank, containing guidelines on the governing policies of the Privatization Trust Fund, bank privatization, management of residual assets, bank holding policies prior to privatization including intervention, and bank closure. Such guidelines shall also include provisions that will allow the utilization of proceeds of the Privatization Trust Fund for the benefit of a Provincial Bank only: (i) when such Provincial Bank has not benefitted from proceeds of the Transformation Fund (as such term is defined in the Loan Agreement, dated March 24, 1995, between the Borrower and the Bank for Loan No. 3836-AR); or (ii) if such Provincial Bank has benefitted from proceeds of the Transformation Fund, Privatization Trust Fund loan amounts shall be determined by deducting the amounts allocated by the Transformation Fund for the same purpose; -9- (c) at least three financing agreements as referred to in Section 1.02 (f) (iv) of this Agreement have been signed by the parties thereto and each of these agreements is in accordance with the terms and conditions for such agreements approved by the Bank; and (d) BCRA, through the Superintendency of Banks, has appointed supervisors ("veedores") in numbers and with qualifications acceptable to the Bank for the start-up of the Program. Section 5.02. The date A Aulus-+ i4-, Iq5 i is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representatives of the Borrower; Addresses Section 6.01. Except as provided in Section 2.08 (a) of this Agreement, the Minister of Economy and Public Works and Services of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministerio de Economia y Obras y Servicios Publicos Hip6lito Yrigoyen 250, 5to piso 1310 Buenos Aires Argentina Cable address: Telex: MINISTERIO ECONOMIA 121950 AR Baires The date 90 days after the date of this Agreement will be inserted here. - 10 - 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 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) - 11 - 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. ARGENTINE REPUBLIC By/S Alr,he Pe Ir, Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By S 4aA IJJrdTveWd Burki* Regional Vice President Latin America and the Caribbean - 12 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. Subject to the provisions set forth or referred to in this Schedule, the proceeds of the Loan may be withdrawn from the Loan Account for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods required during the execution of the Program and to be financed out of such proceeds. 2. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures for goods included in the following SITC groups or subgroups, or any successor groups or subgroups under future revisions to the SITC, as designated by the Bank by notice to the Borrower: Grou Subgroup Description of Items 112 -- Alcoholic beverages 121 -- Tobacco, unmanufactured, tobacco refuse 122 -- Tobacco, manufactured (whether or not containing tobacco substitutes) 525 -- Radioactive and associated materials 667 -- Pearls, precious and semiprecious stones, unworked or worked 718 718.1 Nuclear reactors, and parts thereof, fuel elements (cartridges), nonirradiated for nuclear reactors 728 728.43 Tobacco processing machinery - 13 - 897 897.3 Jewelry of gold, silver or platinum group metals (except watches and watch cases) and goldsmiths' or silversmiths' wares (including set gems) 971 -- Gold, nonmonetary (excluding gold ores and concentrates) (b) expenditures in the currency of the Borrower or for goods supplied from the territory of the Borrower; (c) payments made for goods imported prior to the date of this Agreement, except that withdrawals in an aggregate amount not exceeding the equivalent of $100,000,000 may be made on account of payments made for such goods imported before that date but after February 16, 1995; (d) expenditures for goods procured under contracts costing less than $10,000 equivalent; (e) expenditures for goods supplied under a contract which any national or international financing institution or agency other than the Bank shall have financed or agreed to finance; (f) expenditures for goods intended for a military or paramilitary purpose or for luxury consumption; and (g) expenditures in excess of an aggregate amount equivalent to $25,000,000 for petroleum products and foodstuffs. 3. Withdrawals for expenditures under contracts for the procurement of goods estimated to cost less than $10,000,000 equivalent may be required by the Bank upon the basis of statements of expenditure under such terms and conditions as the Bank shall specify. 4. No withdrawal shall be made and no commitment shall be entered into to pay amounts to or on the order of the Borrower in respect of expenditures to be financed out of the proceeds of the Loan after the aggregate of the proceeds of the Loan withdrawn from the Loan Account and the total amount of such commitments shall have reached: - 14 - (a) the equivalent of $167,000,000, unless the Bank shall be satisfied, after an exchange of views as described in Section 3.01 of this Agreement based on evidence satisfactory to the Bank: (i) with the progress achieved by the Borrower in the carrying out of the Program; (ii) that the macroeconomic policy framework of the Borrower is consistent with the objectives of the Program; and (iii) that the actions described in Part A of Schedule 4 to this Agreement have been taken in form and substance satisfactory to the Bank (b) the equivalent of $334,000,000, unless the Bank shall be satisfied, after an exchange of views as described in Section 3.01 of this Agreement based on evidence satisfactory to the Bank: (i) with the progress achieved by the Borrower in the carrying out of the Program; (ii) that the macroeconomic policy framework of the Borrower is consistent with the objectives of the Program; and (iii) that the actions described in Part B of Schedule 4 to this Agreement have been taken in form and substance satisfactory to the Bank. 5. If, after any of the exchanges of views described in paragraph 4 above, the Bank shall have given notice to the Borrower that the applicable conditions referred to in such paragraph have not been fulfilled and, within 90 days after such notice, such conditions continue to be unfulfilled, then the Bank may, by notice to the Borrower, cancel the unwithdrawn amount of the Loan or any part thereof. - 15 - SCHEDULE 2 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 1 and August 1 beginning February 1, 2001 25,000,000 through August 1, 2010 25,000,000 *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. - 16- 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 Prepavment 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 years before maturity More than 13 years before 1.00 maturity - 17 - SCHEDULE 3 Procurement Section I. Procurement of Goods Part A: General Goods shall be procured in accordance with the provisions of Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 (the Guidelines) and the following provisions of this Section, as applicable. Part B: International Competitive Bidding Except as otherwise provided in Part C of this Section, goods shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines, subject to the provisions of paragraphs 2.63, 2.64 and 2.65 thereof. Part C: Other Procurement Procedures Goods estimated to cost less than $5,000,000 equivalent per contract may be procured: 1. by purchasers required to follow the Borrower's public procurement procedures for the importation of goods, under contracts awarded in accordance with such procedures, provided that such procedures shall have been found acceptable by the Bank; and 2. by other purchasers: (a) under contracts awarded on the basis of international shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines; or (b) in the circumstances described in paragraph 3.7 of the Guidelines, under direct contracting procedures in accordance with the provisions of said paragraph of the Guidelines. - 18 - Part D: Review by the Bank of Procurement Decisions 1. Prior Review With respect to each contract estimated to cost more than $10,000,000 equivalent, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 2. Post Review With respect to each contract not governed by paragraph 1 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. - 19 - SCHEDULE 4 Actions Referred to in Paragraph 4 of Schedule 1 to this Agreement Part A: Actions Referred to in ParagRh 4 (a) of Schedule 1 1. The amount equivalent to the First Tranche amount deposited by the Borrower in the Privatization Trust Fund in accordance with the provisions of Section 3.04 (a) of this Agreement has been fully disbursed by the Privatization Trust Fund. 2. The Bank has received a certified copy of an audit report by external auditors acceptable to the Bank of the records and accounts of the Privatization Trust Fund after full disbursement of the amount referred to in paragraph I above. 3. A certified copy of the audit referred to in Section 3.03 (b) (ii) of this Agreement in respect of expenditures financed out of the First Tranche has been furnished to the Bank. 4. BCRA, through the Superintendency of Banks, has appointed supervisors ("veedores") in numbers and with qualifications acceptable to the Bank for the carrying out of the Program. Part B: Actions Referred to in Paragraph 4 (b) of Schedule 1 1. The amount equivalent to the Second Tranche amount deposited by the Borrower in the Privatization Trust Fund in accordance with the provisions of Section 3.04 (a) of this Agreement has been fully disbursed by the Privatization Trust Fund. 2. The Bank has received a certified copy of an audit report by external auditors acceptable to the Bank of the records and accounts of the Privatization Trust Fund after full disbursement of the amount referred to in paragraph I above. 3. A certified copy of the audit referred to in Section 3.03 (b) (ii) of this Agreement in respect of expenditures financed out of the Second Tranche has been furnished to the Bank. 4. BCRA, through the Superintendency of Banks, has appointed supervisors ("veedores") in numbers and with qualifications acceptable to the Bank for the carrying out of the Program. 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