Conformed Copy - L3692 - Natural Resource Management Program - Amendment

Page 1 June 28, 1996 Dr. Jose Antonio Ocampo Minister of Finance and Public Credit Ministerio de Hacienda y Credito Publico Carrera 7 A-N 6-45 Santafe de Bogota, Colombia Dear Dr. Ocampo: Subject: COLOMBIA - Natural Resources Management Project (Loan. 3692-CO and Grant TF 020818) This is in connection with the Loan Agreement for the above between the Republic of Colombia (the Borrower) and the Bank, dated August 9, 1994, as amended to the date herewith (hereinafter 'the Loan Agreement'). As you know, it is necessary to formalize the proposal of the Minister for Development Cooperation of the Netherlands (hereinafter referred to as 'the Minister') to commit a part of the proceeds of the above Grant for the completion of the first phase of Part C of the Project (i.e. through August 31. 1996). Such completion will enable the Minister to determine, in consultation with the Borrower, whether additional grant funds would be available for financing by the Netherlands of the carrying out of said Part of the Project. Thus, we propose reaching the following understanding: (a) it is hereby accepted that the proceeds of the Loan withdrawn by you on October 3, 1995 under withdrawal application No. 5 for an amount of Dollars 330,000 be imputed, exceptionally, to the financing of Project Expenditures for Part C of the Project for 1995 under Category 1 of the table in paragraph 1 of Schedule 1 to the Loan Agreement; (b) with the execution of the activities to be financed with said Loan proceeds, the Borrower will be deemed to have carried out Part C of the Project in connection with 1995 in conformity with Section 3.01 of the Loan Agreement; (c) the Borrower hereby accepts, exclusively for purposes of financing the carrying out of the activities currently included under Part C of the Project in the Annual Work Program for 1996 approved by the Bank by notice sent on December 10, 1995, to be entitled to utilize part of the proceeds of the grant TF 20818 in an amount that shall have the aggregate value of US$2 million (two million United States Dollars) (hereinafter 'the First Grant'), and that has been made available to the Borrower by the Minister out of grant funds provided by the Minister and currently administered by the Bank pursuant to an agreement dated May 24, 1995 (hereinafter referred to as 'the General Arrangement') between the Minister and the Bank (the Bank, in its role as Administrator, hereinafter referred to as 'the Administrator'); (d) the amount of the First Grant may be withdrawn from the Grant Account, as referred to in paragraph (h) (iii) below, in accordance with the provisions of Schedule 1 to the Loan Agreement which are applicable to Category 1 of the table in paragraph 1 of such Schedule (such Category hereinafter referred to as 'the Eligible Category') for Project Expenditures incurred (or if the Administrator shall so agree, to be incurred) in with respect to the reasonable cost of goods, works and services required for the activities described in Part C of the Project and to be financed out of the proceeds of the First Grant; (e) the Borrower shall, for purposes of Part C of the Project, open and maintain in Dollars a special deposit account (the Dutch Special Account) in its Central Bank on terms and conditions satisfactory to the Administrator. Deposits into, and payments out, of the Dutch Special Account shall be made, mutatis mutandis, in accordance with the provisions of Schedule 5 to the Loan Agreement, except that the term 'Eligible Category' shall have the meaning defined in (d) above, and the amount related to the term 'Authorized Allocation' shall be deemed to be the amount of Dollars 700,000. Page 2 (f) the Administrator shall be obligated to disburse the proceeds of the First Grant only to the extent it shall have received funds for this purpose from the Minister; (g) if on or before October 31, 1996 the Minister will have given to the Bank notice of such Minister's determination on the commitment to make available to the Borrower grant funds available under the General Arrangement (TF 20818) and additional to the First Grant to finance the yearly execution of the remainder of Part C of the Project, as approved for each year of Project execution (commencing with the year of 1997) under the provisions of Section 3.04 of the Loan Agreement, and the Bank shall have informed the Borrower of such notice, then the Borrower and the Administrator shall promptly enter into a Dutch Grant Agreement substantially on the terms and conditions provided for in the attached draft; (h) the provisions of this letter shall be an integral part of the Loan Agreement and, exclusively for purposes of the administration by the Bank of the First Grant, the General Conditions, as defined in Section 1.01 of the Loan Agreement shall be deemed modified as follows: (i) the term "Bank", wherever used in the General Conditions, also means the International Bank for Reconstruction and Development acting as Administrator of the Grant pursuant to the General Arrangement between the Minister for Development Cooperation of the Netherlands and the Bank, in its role as Administrator of Netherlands Trust Funds, dated May 24, 1995; (ii) the term "Loan", wherever used in the General Conditions, means also the First Grant; (iii) the term "Loan Account", wherever used in the General Conditions, means the Grant Account, an account opened by the Administrator on its books in the name of the Recipient to which the proceeds of the Grant TF 020818 are credited [beginning with the proceeds of the First Grant and including, to the extent they are made available, the additional Grant proceeds referred to in paragraph (g) above]; and (iv) Section 4.01 of the General Conditions shall be deemed modified to read: "Withdrawals from the Grant Account shall be made in US Dollars; provided, however, that if the expenditures to be financed out of the proceeds of the Grant have been paid or are payable in another currency, the Bank, in its role of Administrator, shall, at the request of the Borrower, purchase such currency with the proceeds of such withdrawal." Please signify your agreement, on behalf of the Borrower with all of the aforesaid by dating and signing both copies of this letter, and by returning to us one copy so duly signed. This agreement will come in effect on the date on which the Bank receives such copy. Because of his interest in this matter, we are sending copy of this letter to Mr. Jose Vincente Mogollon, Minister of Environment. Sincerely, By /s/ Krishna Challa Acting Director Office of the Director Country Department III Latin American and the Caribbean AGREED Page 3 REPUBLIC OF COLOMBIA By /s/ Leonardo Villar Authorized Representative Minister of Finance and Public Credit (Acting) Date: July 10, 1996