Colombia - Caqueta Rural Settlement Project Phase II : Loan 1118 - Project Agreement - Conformed

CONFORMED COPY LOAN LUMBER 1118 CO Project Agreement (Caqueta Rural Settlement Project - Phase II) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INSTITUTO COLOMBIANO DE LA REFORMA AGRARIA DATED JUNE 2, 1975 * CONFORMED COPY LOAN LUMBER 1118 CO Project Agreement (Caqueta Rural Settlement Project - Phase II) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INSTITUTO COLOMBIANO DE LA REFORMA AGRARIA DATED JUNE 2, 1975 PROJECT AGREEMENT AGREEMENT, dated June 2, 1975, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and INSTITUTO COLOMBIANO DE LA REFORMA AGRARIA (hereinafter called INCORA). WHEREAS by the Loan Agreement of even date herewith between Republic of Colombia (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to nineteen million five hundred thousand dollars ($19,500,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that INCORA agree to undertake such obligations toward the Bank as hereinafter set forth; WHEREAS by an agreement to be entered into between the Borrower and INCORA, the proceeds of the loan and other funds will be made available to INCORA for the purpose of carrying out the Project; and WHEREAS INCORA, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE H Execution of the Project Section 2.01. INCORA shall carry out the Project described in Schedule 2 to the Loan Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, agricultural and engineering practices. 4 Section 2.02. INCORA shall lend to Banco Ganadero, under a legally binding agreement satisfactory to the Bank which shall include, inter alia, the terms and conditions set forth in paragraph 2 of Schedule 1 to this Agreement, as such Schedule may be amended from time to time, amounts necessary to finance long-term loans under Part A. 1 of the Project made by Banco Ganadero in accordance with paragraph 3 of such Schedule 1. Section 2.03. (a) INCORA shall lend to COOPERAGRO, under a legally binding agreement satisfactory to the Bank which shall include, inter alia, the terms and conditions set forth in paragraph 4 of Schedule I to this Agreement, as such Schedule may be amended from time to time, amounts necessary to finance medium-term loans under Part A.2 of the Project made by COOPERAGRO in accordance with paragraph 5 of such Schedule 1. INCORA shall use the funds repaid by COOPERAGRO, to the extent that it does not require such funds to repay the Borrower, to make further loans to COOPERAGRO for the same purpose and under the same terms. (b) Notwithstanding the provisions of paragraph (a) hereof, INCORA may, with the prior agreement of the Bank, make medium-term loans under Part A.2 of the Project directly to settlers. Section 2.04. INCORA shall enter into legally binding agreements satisfactory to the Bank with: (i) Fondo Nacional de Caminos Vecinales, for the carrying out of Part B.2 of the Project; (ii) INDERENA, for the carrying out of Part E of the Project; and (iii) ICA, for the carrying out of Part F of the Project. Section 2.05. INCORA shall exercise its rights under the agreements referred to in Sections 2.02, 2.03 and 2.04 of this Agreement in such manner as to protect the interests of the Bank and INCORA and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, INCORA shall not assign, nor amend, abrogate or waive such agreement or any provision thereof. Section 2.06. INCORA shall maintain records of all transfers of funds in connection with the Project, and shall open and maintain a separate account therefor, including one separate sub-account for each part of the Project. The transactions to be so recorded shall include: (i) transfers of funds from and to the Borrower as loan, including service thereof, grant or otherwise; (ii) transfers of funds to and from Banco Ganadero pursuant to Section 2.02 hereof; (iii) transfers of funds to and from COOPERAGRO pursuant to Section 2.03 hereof; (iv) transfers of funds made pursuant to the agreements referred to in Section 2.04 hereof; (v) payments by INCORA to other parties for purposes of carrying out the Project; and (vi) other expenditures incurred by INCORA, including administrative expenditures, for the carrying out of the Project. 5 Section 2.07. In order to assist INCORA in analyzing bids for road construction and supervising such construction, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Section 2.08. Except as the Bank shall otherwise agree, INCORA shall: (a) cause the roads included in the Project to be constructed in accordance with the standards and specifications set forth in Schedule 3 to this Agreement; and (b) furnish to the Bank for its approval, before October 1 of every year, the plans, specifications, and construction and work schedules for the roads included in the Project and to be constructed during the following calendar year, and any substantial modifications or additions thereto, in such detail as the Bank shall reasonably request. Section 2.09. INCORA shall: (i) furnish to the Bank, within one year after the date of this Agreement or such later date as the Bank shall determine, a draft agreement between INCORA and CECORA providing for the transfer of the stores included in Part G.1 of the Project to CECORA and their subsequent operation by CECORA; and (ii) promptly thereafter, enter into a legally binding agreement therefor with CECORA, under terms and conditions satisfactory to the Bank. Section 2.10. Except as the Bank shall otherwise agree, contracts for the purchase of goods or for the arrying out of works or services (other than consultants' services) for the Project to be financed out of the proceeds of the Loan, shall be awarded in accordance with the provisions of Schedule 2 to this Agreement. Section 2.11. (a) INCORA shall, or shall cause the Project Entities to, insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan made available to INCORA by the Borrower against hazards incident to the 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 INCORA or the Project Entities, to replace or repair such goods. (b) Except as the Bank may otherwise agree, INCORA shall cause all goods and services financed out of the proceeds of the Loan made available to INCORA by the Borrower to be used exclusively for the Project. Section 2.12. (a) INCORA: (i) shall maintain, or cause the Project Entities to maintain, records adequate to record the progress and cost of the Project and 6 to identify the goods and services financed out of the proceeds of the Loan made available to INCORA by the Borrower, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (b) of this Section, enable, or cause the Project Entities to enable, the Bank's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish, or cause the Project Entities to furnish, to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan so made available to it and the goods and services financed out of such proceeds. (b) INCORA shall enable the Bank's representatives to examine all installations, sites, works, buildings, property and equipment of INCORA and any relevant records and documents. Section 2.13. (a) INCORA shall establish and maintain a special unit for monitoring continuously the progress of the Project and evaluate the effects of the Project, by means, inter alia, of studies of farm budgets, rate and effect of settlement of population, deforestation and herd development, on the basis of a random sample of settlers. (b) INCORA shall use its best efforts to obtain the assistance of the Universidad Nacional de Colombia, or other institution satisfactory to the Bank, in the monitoring and evaluation referred to in paragraph (a) hereof. (c) INCORA shall assign adequate staff to such special unit and shall provide it with the funds, facilities and other resources required to fulfill its purpose. Section 2.14. (a) INCORA shall, at the request of the Bank: (i) exchange views with the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement, and other matters relating to the purposes of the Loan; and (ii) furnish to the Bank all such information as the Bank shall reasonably request in respect of the Project and the fulfillment of the obligations of the Project Entities. (b) INCORA shall promptly inform the Bank of any condition which interferes or threatens to interfere with, .the progress of the Project, the accomplishment of the purposes of the Loan, or the performance of its obligations under this Agreement. 7 Section 2.15. INCORA shall: (a) train or cause to be trained topographers who will work in the Project Area, and supply them with adequate equipment for the performance of their work; (b) maintain in the Project Area the administration of land title issuance for that area; and (c) cause about 1,500 land titles for the Project Area to be issued and registered each year until the completion of the Project. ARTICLE HI Management and Operations of INCORA Section 3.01. INCORA shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with sound business, financial and agricultural practices and under the supervision of experienced and competent management assisted by adequate, experienced and competent staff. Section 3.02. INCORA shall, with respect to the execution of the Project: (i) maintain an organization satisfactory to the Bank and afford the Bank a reasonable opportunity to comment on any proposed reorganization; (ii) inform the Bank before replacing its director responsible for the Project; (iii) exchange views with the Bank before changing the administrative relationships, as of the date of this Agreement, between its general manager and its director responsible for the Project; and (iv) delegate to the director responsible for the Project the necessary powers for the execution of the Project, and cause such director to be consulted on policy matters and on important assignments of staff to Project related matters. Section 3.03. INCORA shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. 8 ARTICLE IV Financial Covenants Section 4.01. (a) INCORA shall establish and maintain a separate account on its records to be used exclusively for the Project and shall register in such account all receipts and payments for or in connection with the Project, in accordance with appropriate accounting principles consistently applied. (b) INCORA shall: (i) have the account referred to in paragraph (a) hereof and related statements audited annually, 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 six months after the end of INCORA's fiscal year, (A) certified copies of such account and related statements for such year as so audited and (B) the 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 such account and related statements of INCORA and the audit thereof as the Bank shall from time to time reasonably request. Section 4.02. (a) INCORA shall cause each Project Entity to establish and maintain a separate account on its records to be used exclusively for the Project and to register in such account all its receipts and payments for or in connection with the Project, in accordance with appropriate accounting principles consistently applied. (b) INCORA shall: (A) cause each Project Entity to: (i) furnish to INCORA as soon as available, but in any case not later than five months after the end of such entity's fiscal year, (1) certified copies of the account referred to in paragraph (a) hereof and related statements for such year; and (ii) furnish to INCORA such other information concerning such account and related statements of such entity as the Bank shall from time to time reasonably request from INCORA; and (B) furnish to the Bank as soon as available, but in any case not later than one month after receipt from each such Project Entity, the certified copies and information referred to in (A) hereof. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. 9 Section 5.02. This Agreement and all obligations of the Bank and of INCORA thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Loan Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. For INCORA: Instituto Colombiano de la Reforma Agraria Centro Administrativo Nacional Bogota, D.E. Colombia 10 Cable address: INCORA Bogota Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of INCORA may be taken or executed by its General Manager or such other person or persons as INCORA shall designate in writing. Section 6.03. INCORA shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of INCORA, take any action or execute any documents required or permitted to be taken or executed by INCORA pursuant to any of the provisions of this Agreement or Section 2.09 of the Loan Agreement. Section 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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 /s/ Adalbert Krieger Regional Vice President Latin America and the Caribbean INSTITUTO COLOMBIANO DE LA REFORMA AGRARIA By /s/ Julio C6sar Turbay Authorized Representative 11 SCHEDULE 1 Lending Policies 1. From the Borrower to INCORA: (Section 3.01 (b) of Loan Agreement) (a) Funds required to carry out Part A of the Project will be lent by the Borrower to INCORA, as follows: For Part A. 1: Repayment term: 20 years including 4 years of grace. No interest. INCORA to bear no exchange risk. Amount: Up to the equivalent of $10,100,000 to be disbursed as required by INCORA to finance long-term loans made by Banco Ganadero or such other amounts as may be required as a result of a reallocation of funds in Schedule 1 to the Loan Agreement. For Part A. 2: Repayment term: 20 years including 7 years of grace. No interest. INCORA to bear no exchange risk. Amount: Up to the equivalent of $200,000 as required for cattle fattening or such other amounts as may be required as a result of a reallocation of funds in Schedule I to the Loan Agreement. (b) Funds required to carry out all other Parts of the Project will be transferred by the Borrower to INCORA as a grant. 2. From INCORA to Banco Ganadero (Section 2.02 of Project Agreement) 12 Repayment terms: Amortization reflecting substantially the aggregate of amortization schedules for long-term loans made by Banco Ganadero, including a three-year grace period for capital and interest. Rate of interest: 9% per annum on outstanding amounts. 3. From Banco Ganadero to settlers (Long-term loans under Part A.1 of the Project) Eligibility. Settlers who are deemed by INCORA and Banco Ganadero to meet the following conditions: (i) live on and operate a farm of about between 30 and 200 hectares; (ii) have at least 10 ha. of land cleared and under pasture; (iii) have a registered title over their farm or have a land assignment contract for it; (iv) have no access to other sources of credit on reasonable terms, and are creditworthy; (v) possess less than 25 head of cattle; and (vi) agree to accept INCORA's and Banco Ganadero's supervision of the development of their farm. Purposes and Amount. About three-fourths of the aggregate amount of such loans will finance the purchase of cattle and the remainder will be for fencing, pasture seeds, animal drugs, basic supplies for farm construction and, for hired labor for land clearing. To the extent practicable, loans will be in kind or disbursed against actual expenditures and will cover 100% of the cattle and supply costs. Cattle may be financed to the extent the number of head of cattle already owned by the settler plus that to be financed tinder the loan does not exceed 25. Not more than one bull and 10 to 1 5 breeding cows, according to farm size, will be financed under any loan to a settler who has 13 not received this type of loan; and not more than 10 head of cattle will be financed under any loan to a settler who has already received this type of loan. A detailed plan for the development of the farm, to be prepared by the applicant with the assistance of INCORA and Banco Ganadero's staff, will be required. Repayment terms. Up to 12 years, including 3 years of grace in which interest will accrue and be paid out of the proceeds of the loan. Rate of interest. 15% per annum on outstanding amounts. 4. From INCORA to COOPERAGRO (Section 2.03(a) of Project Agreement) Repayment terms: two equal installments, at the end of the 20th and 40th months. Rate of interest: between 18% and 20% per year on outstanding amounts. 5. From COOPERAGRO to settlers (Cattle-fattening loans under Part A.2 of this Project) The cattle will be sold after about 20 months under COOPERAGRO's supervision. Of the difference between the sale and purchase cost, 60% will be retained by the farmer, 5% will be used to increase his shareholding in COOPERAGRO, and 35% will be transferred to COOPERAGRO to cover its costs, including financial charges oin the medium-term loan. COOPERAGRO will use the funds received from the settlers hereunder, to the extent it does not need them to service the loan made to it by INCORA, for making further cattle-fattening short-term loans to its members. 6. From INCORA to settlers (Section 2.03(b) of Project Agreement) Repayment terms: one installment at the end of the 20th month. Rate of interest: 20% per year. 14 SCHEDULE 2 Procurement A. General Procedures 1. Contracts for road construction and for purchasing road maintenance equipment shall be let under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. Contracts for the schools included in Part C of the Project shall be awarded under the ordinary competitive bidding procedures used by INCORA or ICCE. 3. All contracts for construction, equipment and services other than those under paragraphs I and 2 hereof, shall be awarded under the ordinary bidding procedures used by INCORA. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in Colombia, procured under procedures set forth in Part A.] hereof, may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: 15 (1) Group A: bids offering goods manufactured in Colombia if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Colombia equal to at least 20% of the ex- factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Colombia. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid, or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. C. Review of Procurement Decisions by Bank With respect to' any contract under paragraph A.1 hereof: (a) Before bids are invited, the Bank shall be furnished, for its comments, with the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedure to be followed for the bidding, and there shall be made such modifications in the said documents or procedure as the Bank shall reasonably request. Any further modification or addition to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. Bid invitations for individual contracts may 17 SCHEDULE 3 Road Standards and Specifications 1. Design standards: Class of Road B B/C Right of Way (m) 40 40 Embankment Width (in) 6 5 Gravelled Surface (m) 4 4 Width of Structures Single Lane Design Speed (km/hr) 40 30 2. Specifications: (a) side slopes will not exceed the ratio of 1:1; (b) cuts over 2.5 m long will be designed in steps; (c) the number of culverts will average five per km; (d) the diameter of culverts over 8 m long will be at least 90 cm; (e) the length of side ditches on the top of hills will not exceed 50 m; (f) the longitudinal curvature in cuts at the top of hills will be about 500 m in radius; (g) the profile gradient in cuts will be at least 2.5%; (h) the cross-section gradient will be at least 2%; and (i) cuts, embankments and borrowings will be protected through appropriate measures.