Ecuador - Interim Second Livestock Development Project : Credit 0173 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 173 EC Development Credit Agreement (Interim Second Livestock Development Project) BETWEEN REPUBLIC OF ECUADOR AND BANCO CENTRAL DEL ECUADOR AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JANUARY 20, 1970 CONFORMED COPY CREDIT NUMBER 173 EC Development Credit Agreement (Interim Second Livestock Development Project) BETWEEN REPUBLIC OF ECUADOR AND BANCO CENTRAL DEL ECUADOR AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED JANUARY 20, 1970 AGREEMENT, dated January 20, 1970, between REPUBLIC OF ECUADOR (hereinafter called the Borrower), BANCO CEN- TRAL DEL ECUADOR (hereii,after called Banco Central), and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS the International Bank for Reconstruction and Development has made a loan to the Borrower dated June 19, 1967 (Livestock Development Project), Loan 501-EC, for a livestock development project aimed at increasing beef production in selected areas in the territories of the Borrower (hereinafter called the "First Livestock Loan"); WHEREAS the Borrower has requested the Association to provide further financial assistance for the same livestock development project; WHEREAS the Banco Central is willing to continue to act as the fiscal agent of the Borrower in the carrying out of such livestock development project and to undertake in connection therewith certain ol-1-gations as hereinafter set forth; and WHEREAS the Association is willing to make a credit to the Borrower, on the terms and conditions hereinafter set forth; Now THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions SECTION 1.01. The parties to this Development Credit Agreement accept all the provisions of the General Con- ditions Applicable to Development Credit Agreements of the Association, dated January 31, 1969, with the same force and effect as if they were fully set forth herein, sub- 9 4 ject, however, to the following modification thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being here- inafter called the General Conditions) : The words "or Banco Central" are added after the words "the Borrower" wherever they occur in Section 6.02(b) and (d) and in Section 7.01(c). SECTION 1.02. Wherever used in this Development Credit Agreement, unless the context otherwise requires, the sev- eral terms defined in the General Conditions have the re- speetive meanings therein set forth, and the following addi- tional terms have the following meanings: (a) "the Project Commission" means the Special Com- mission established by Executive Decree No. 719 of July 14, 1967 to facilitate the execution of the First Livestock Loan and other similar projects; (b) "Special Interim Credit Account" means the account and sub-accounts referred to in Section 4.02 of this Agreement; (c) "Participating Bank" means any financial institu- tion, acceptable to the Association, which shall have become a party to a Second Project Subsidiary Loan Agreement; (d) "Second Project Subsidiary Loan Agreements" means the agreements to be entered into on terms and conditions satisfactory to the Association be- tween the Borrower, Banco Central and Participat- ing Banks for the purpose of carrying out the Pr oject and shall include any amendments thereto made with the approval of the Association; and (e) "Lending Program" means the part of the Project described in paragraph A of Schedule 1 to this De- velopment Credit Agreement. 5 ARTICLE II The Credit SECTION 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions in this Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to one million five hundred thousand dollars ($1,500,000). SECTION 2.02. (a) The A,,;ociation shall open a Credit Account on its books in the name of the Borrower and shall credit to such Account the amount of the Credit. (b) The amount of the Credit may be withdrawn from the Credit Account as provided in, and subject to the rights of cancellation and suspension set forth in, this Develop- ment Credit Agreement. SECTION 2.03. The Borrower shall be entitled to with- draw from the Credit Account in respect of the reasonable cost of goods or services required for the Project and to be financed under this Development Credit Agreement the equivalert of seventy-five per cent (75%), or such other percentage as may be agreed from time to time between the Borrower and the Association, of such amounts as shall have been paid (or, if the Association shall so agree, shall be required to meet payments to be made) for loans to farmers; provided that no withdrawals shall be made from the Credit Account in respect of any loan by a Participating Bank under the Lending Program exceeding one hundred thousand dollars ($100,000) equivalent unless the prior ap- proval of the Association to such loan shall have been obtained. SECTION 2.04. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. 6 SECTION 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (34 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. SECTION 2.06. Service charges shall be payable semi- annually on February 15 and August 15 in each year. SECTION 2.07. The Borrower shall repay the principal amount of the Credit withdrawn from the Credit Account in semi-annual installments payable on each February 15 and August 15 commencing February 15, 1980 and ending August 15, 2019, each installment to and including the installment payable on August 15, 1989 to be one-half of one per cent (1/ of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (112%) of such principal amount. ARTICLE III Use of Proceeds of the Credit SECTION 3.01. The Borrower shall cause the proceeds of the Credit to be applied in accordance with the provisions of this Development Credit Agreement to expenditures on Part A of the Project, described in Schedule 1 to this Agreement. SECTION 3.02. Except as the Association may otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclu- sively in carrying out the Project. ARTICLE IV Particular Covenants SECTION 4.01. (a) The Borrower shall cause the Project to be carried out with due diligence and efficiency and in 7 conformity with sound administrative, financial, economic and agricultural practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The operating policies and procedures in respect of the carrying out of the Project shall be the same as those which are or have been agreed from time to time between the Bank, the Borrower and Banco Central pursuant to Sections 5.01(a) and (c) of the First Livestock Loan. SECTION 4.02. Banco Central shall (i) establish and ad- minister a Special Interim Credit Account and the neces- sary sub-accounts, to be used exclusively for the purposes of the carrying out of the Project, and (ii) have the Special Interim Credit Account audited annually by auditors satis- factory to the Association and transmit to the Association promptly after the completion of such audit, and not later than three months after the close of Banco Central's finan- cial year, certified copies of the financial statements relating to the Special Interim Credit Account and a signed copy of the auditor's report relating thereto. SECTION 4.03. The Borrower shall enter into arrange- ments satisfactory to the Association with Banco Central providing for the management, administration and dis- bursement, by Banco Central, of the proceeds of the Credit, through the Special Interim Credit Account. The Borrower and Banco Central shall exercise their rights pursuant to such arrangements in such a manner as to protect the interests of the Association, the Borrower and Banco Ccn- tral. Except as the Association shall otherwise agree, the Borrower or Banco Central shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any provision of such arrangements. SECTION 4.04. The Borrower shall cause the Project Commission to oversee and administer the Project on the 8 same terms and conditions as such Commission oversees and administers the First Livestock Loan. The Borrower shall not take or concur in any action which would have the effect of amending, abrogating or otherwise altering Executive Decree No. 719 of July 14, 1967 without prior agreement between the Borrower and the Association. SECTION 4.05. The Borrower and Banco Central shall enter into Second Project Subsidiary Loan Agreements with the Participating Banks, on terms and conditions sat- isfactory to the Association, including those set forth in Schedule 2 to this Development Credit Agreement, provid- ing for the reimbursement by Banco Central, out of the proceeds of the Credit, of such percentage of loans made by any Participating Bank under the Lending Program as may be agreed to from time to time by the Association under Section 2.03 of this Development Credit Agreement. Except as the Association shall otherwise agree, the Borrower and Banco Central shall not take or concur in any action which would have the effect of amending, assigning, abrogating or waiving any provision of any Second Project Subsidiary Loan Agreement. SECTIoN 4.06. The Borrower and Banco Central shall cause the Participating Banks to operate, in respect of the Project, in accordance with sound business, agricultural, administrative, economic and financial practices under the supervision of experienced and competent management. The Borrower and Banco Central shall exercise their rights and fulfill their obligations under the Second Project Subsidiary Loan Agreements in such a manner as to protect the inter- ests of the Association, the Borrower and Banco Central. SECTION 4.07. (a) The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, each of them 9 9 shall furnish to the other all such information as it shall reasonably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borrower and the inter- national balance of payments position of the Borrower. (b) The Association, the Borrower and Banco Central, as the case may be, shall from time to time exchange views through their representatives with regard to: the perform- ance by the Borrower and Banco Central of their respective obligations under or pursuant to this Development Credit Agreement, the expenditure of the proceeds of the Credit, the Project, the Second Project Subsidiary Loan Agree- ments, the Project Commission, the Special Interim Credit Account, the financial condition of Banco Central, the ad- ministration and operations of Banco Central in respect of the Project, and of any agency or agencies of the Borrower assisting the Borrower in the carrying out of the Project or any part thereof, and other matters relating to the pur- poses of the Credit and the maintenance of the service thereof. The Borrower and Banco Central, as the case may be, shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit or the main- tenance of the service thereof or the performance by the Borrower or by Banco Central of their obligations under or pursuant to this Development Credit Agreement or the Second Project Subsidiary Loan Agreements. (c) The Borrower shall afford all reasonable opportu- nity for representatives of the Association to inspect the Project and any documents and records relating thereto and to visit any part of the territories of the Borrower for purposes related to the Credit. SECTION 4.08. The Borrower shall cause Banco Central to maintain or cause to be maintained records adequate to 10 identify the goods financed out of the proceeds of the Credit, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect in accordance with consisten y maintained sound accounting practices the administration and financial condition of the Special Interim Credit Account; shall enable the Association's representatives to inspect the Project, the goods and any relevant records and docu- ments in respect of the Project; and shall furnish to the Association all such information as the Association shall reasonably request concerning the expenditure of the pro- ceeds of the Credit, the goods financed out of such proceeds, the performance by Banco Central of its obligations under or pursuant to this Development Credit Agreement, the Second Project Subsidiary Loan Agreements, the Project, the Special Interim Credit Account and the administration, operations and financial condition of Banco Central insofar as they may be pertinent to the execution of the Project. SECTION 4.09. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes, and free from all restrictions, imposed under the laws of the Borrower or laws in effect in its territories. SECTION 4.10. The Development Credit Agreement shall be free from any taxes that shall be imposed under the laws of the Borrower or laws in effect in its territories on or in connection with the execution, delivery or registration thereof. SECTION 4.11. The Borrower and the Association agree that Section 5.10 of the First Livestock Loan Agreement shall be a part of this Development Credit Agreement, ex- cept that the word "Association" shall be substituted for the word "Bank" when such Se,tion 5.10 is treated as a part of this Development Credit Agreement. 11 SECTION 4.12. Except as the Borrower and the Associa- tion shall otherwise agree, the Borrower shall cause the Participating Banks (i) to use the proceeds of payments which they receive from farmers on account of loans granted under this Credit and which are not currently re- quired by the Participating Banks to service loans under the Second Project Subsidiary Loan Agreements and to recover the portion of loans to farmers not reimbursed by Banco Central, for the purpose of continuing the financing of livestock development in the territories of the Borrower for the life of the Second Project Subsidiary Loan Agree- ments, and (ii) to provide to farmers who have been granted loans under the Lending Program the short term credits necessary to complement said loans if not otherwise available to them. SECTION 4.13. Except as the Association shall otherwise agree, the Borrower undertakes to insure or cause to be insured the imported goods to be financed out of the pro- ceeds of the Credit against marine, transit and other haz- ards incident to acquisition, transportation and delivery thereof to the place of use or installation and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. ARTIOLE V Remedies of the Association SECTION 5.01. If any event specified in Section 7.01 of the General Conditions or in Section 5.02 of this Develop- ment Credit Agreement shall occur and shall continue f>r the period, if any, therein set forth, then at any subsequent time during the continuance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable imme- diately together with the service charges thereon and upon 9 12 any such declaration such principal, together with such charges, shall become due and payable immediately, any- thing in this Development Credit Agreement to the contrary notwithstanding. SECTION 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is speci- fled: Banco Central shall not have performed one or more of its covenants under the Second Project Subsidiary Loan Agreements and such non-performance shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower and Banco Central. ARTICLE VI Effective Date; Termination SEcTIOioN 6.01. The following events are specified as addi- tional conditions to the effectiveness of this Development Credit Agreement within the meaning of Section 10.01(b) of the General Conditions: (a) the execution and delivery of this Development Credit Agreement on behalf of Banco Central have been duly authorized or ratified by all necessary corporate and governmental action; (b) the arrangements with Banco Central provided for in Section 4.03 of this Development Credit Agree- ment shall have been made; and (c) at least two Second Project Subsidiary Loan Agree- ments satisfactory to the Association shall have been duly signed and shall have become effective. SECTION 6.02. The following are specified as additional matters, within the meaning of Section 10.02(b) of the 13 General Conditions, to be included in the opinion or opin- ions to be furnishe( to the Association: (a) that the undertakings by Banco Central in this De- velopment Credit Agreement contained have been duly authorized or ratified by, and executed and de- livered on behalf of, Banco Central and constitute valid and binding obligations of Banco Central in accordance with their terms; (b) that the arrangements provided for in Section 4.03 of this Development Credit Agreement have been duly and validly executed by the Borrower and Banco Central and shall have become effective in accordance with their terms; and (c) that the Second Project Subsidiary Loan Agreements referred to in Section 6.01(c) of this Development Credit Agreement have been duly and validly exe- cuted by the parties thereto and shall have become effective in accordance with their terms. SECTION 6.03. The date of April 30, 1970 is hereby spec- ified for the purposes of Section 10.04 of the General Con- ditions. SECTION 6.04. The obligations of the Borrower under Sections 4.01, 4.04, 4.05 and 4.06 of this Development Credit Agreement shall terminate on the date on which this De- velopment Credit Agreement shall terminate or on a date twenty years after the date of this Development Credit Agreement, whichever shall be the earlier. ARTICLE VII Miscellaneous SECTION 7.01. The Closing Date shall be December 31, 1973 or such other date as shall be agreed between the Bor- rower and the Association. 14 SECTION 7.02. The Ministro de Agricultura y Ganaderia of the Borrower is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions. SECTION 7.03. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: Ministereo de Agricultura y Ganaderia Quito, Ecuador Cable address: Minagricultura Quito For Banco Central: Banco Central Quito, Ecuador Cable address: Bancentral Quito For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Indevas Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have 15 caused this Development Credit Agreement to be signed in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF ECUADOR By /s/ CARLOS MANTILLA ORTEGA Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ MOHAMED SHOAIB Vice President BANCO CENTRAL DEL ECUADOR By /s/ CARLOS MANTILLA ORTEGA Authorized Representative 16 SCHEDULE 1 Description of Project The Project is a continuation of the first stage of a livestock development program of the Borrower and con- sists of : A. The granting of loans to farmers for beef cattle devel- opment in the Coastal Area. B. The provision of short-term loans for working capital exclusively from local resources. The Project is scheduled for completion in approximately four years. 17 SCIEDULE 2 Terms of the Second Project Subsidiary Loan Agreements The Second Project Subsidiary Loan Agreements will provide, except as otherwise agreed between the Borrower, the Association and Banco Central: A. Interest and Charges: that the interest on funds loaned by Banco Central to the Participating Banks out of the proceeds of the Credit shall be six per cent (6%) per annum on the outstanding principal amounts of such funds so loaned. In addition, Banco Central, on behalf of the Bor- rower, shall charge Participating Banks a service charge of one-half of one per cent (1/2o) per annum on such principal amounts for the purpose of meeting administra- tive expenses of the Banco Central in connection with the Project. This total six and one-half per cent (61/2%) per annum on the outstanding principal amounts due as interest and charges from Participating Banks to the Banco Central shall be payable in semi-annual installments commencing approximately six months after the first disbursements under the Second Project Subsidiary Loan Agreements. B. Amortization: that the principal amounts shall be amortized by payment of equal semi-annual installments commencing approximately at the end of the sixth year after first disbursements under the Second Project Sub- sidiary Loan Agreements and ending approximately eight- een (18) years after such first disbursements. C. Use of Principal and Interest Payments by Banco Central: that interest and amortization payments received by Banco Central from Participating Banks and not re- quired to service the Credit shall be made available to Par- ticipating Banks for relending to farmers for livestock development until the termination of the Second Project Subsidiary Loan Agreements.