El Salvador - Second Urban Development Project : Loan 1465 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 726 ES LOAN NUMBER 1465 ES Project Agreement (Second Urban Development Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and FUNDACION SALVADORENA DE DESARROLLO Y VIVIENDA MINIMA Dated July 28, 1977 PROJECT AGREEMENT AGREEMENT, dated July 28, 1977, between INTERNATIONAL DEVEL- OPMENT ASSOCIATION (hereinafter called the Association) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (herein- after called the Bank) and FUNDACION SALVADORENA DE DESARROLLO Y VIVIENDA MINIMA (hereinafter called FSDVM). WHEREAS (A) by the Development Credit Agreement of even date herewith between Republic of El Salvador (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the. Borrower an amount in various currencies equivalent to six million dollars ($6,000,000) (hereinafter called the Credit), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that FSDVM agree to undertake such obligations toward the Association as hereinafter set forth; (B) by the Loan Agreement of even date herewith between the Borrower and the Bank, the Bank has agreed to lend to the Borrower an amount in various currencies equivalent to six million seven hundred thousand dollars ($6,700,000) (hereinafter called the Loan), on the terms and conditions set forth in the Loan Agreement, but only on condition that FSDVM agree to under- take such obligations toward the Bank as hereinafter set forth; (C) by a subsidiary lending agreement to be entered into between the Borrower and FSDVM, part of the proceeds of the Credit and of the Loan will be made available to FSDVM for purposes of the carrying cut of Parts A.1 through A.4, A.7, D.1 and D.2 of the Project described in Schedule 2 to the said Development Credit Agreement (hereinafter called the Project); and WHEREAS FSDVM, in consideration of the foregoing 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 -2- the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. FSDVM shall, subject to the availability of the funds that the Borrower has undertaken to make available to FSDVM for this purpose pursuant to the Development Credit Agreement and the Loan Agreement, carcy out Parts A.1 through A.4, A.7, D.1 and D.2 of the Project with due diligence and efficiency and in conformity with sound administrative, financial and engineering practices, in accordance with the Policies set forth in the Schedule to this Agreement, as such Schedule may be amended from time to time by the Association, the Bank and FSDVM. Section 2.02. (a) FSDVM shall construct the trunk water and sewerage systems and the water supply facilities included in Part A of the Project. (b) FSDVM shall obtain the approval of ANDA regarding the designs and tender specifications for the facilities referred to in (a) above; and (c) FSDVM shall transfer the facilities referred to in (a) above, upon completion, to ANDA. Section 2.03. For purposes of assigning the lots included in Part A of the Project, FSDVM shall establish and maintain a Selection Committee composed of its Executive Director and four members of FSDVM staff. Section 2.04. Unless the Association and the Bank agree otherwise, loans under Part A of the Project shall include the following terms: repayment within 20 years, including 6 months of grace; and interest at a rate of not less than 6.4% per annum on outstanding amounts, provided, however, that if Fondo Social para la Vivienda or IVU increase their existing minimum rates of interest on loans secured by mortgages, FSDVM shall increase the above mentioned rate to at least the same rate. Section 2.05. Except as the Association and the Bank shall otherwise agree, contracts for the purchase of goods or for civil works for Part A of the Project and to be financed out of - 3- the proceeds of the Credit or the Loan, shall be procured in accordance with the provisions of Schedule 4 to the Development Credit Agreement. Section 2.06. (a) FSDVM undertakes to insure, or make adequate provision for the insurance of, the imported goods for the Parts of the Project it shall carry out to be financed out of the proceeds of the Credit or of the Loan relent to it 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 FSDVM to replace or repair such goods. (b) Except as the Association may otherwise agree, FSDVM shall.cause all goods and services financed out of the proceeds of the Credit or the Loan made available to it by the Borrower to be used exclusively for the Project. Section 2.07. (a) FSDVM shall furnish to the Association and the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for Part A of the Project, and any material modification thereof or additions thereto, in such detail as the Association and the Bank shall reasonably request. (b) FSDVM: (i) shall maintain records adequate to reflect the progress and cost of the Parts of the Project it shall carry out and to identify the goods and services for said Parts of the Project financed out of the proceeds of the Credit or the Loan relent to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the representatives of the Association and the Bank to visit the facilities and construction sites included in the Project and to examine the said goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association and the Bank all such information as the Association and the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit or Loan so relent to it and the said goods and services financed out of such proceeds. (c) FSDVM shall enable the representatives of the Associa- tion and the Bank to examine all installations, sites, works, buildings, property and equipment of FSDVM and any relevant records and documents. -4- Section 2.08. (a) FSDVM shall, at the request of the Association and the Bank, exchange views with the Association and the Bank with regard to the progress of Parts A, D.1 and D.2 of the Project, the performance of its obligations under this Agreement and under the Subsidiary Lending Agreement, and other matters relating to the purposes of the Credit and the Loan. (b) FSDVM shall promptly inform the Association and the Bank of any condition which interferes or threatens to interfere with the progress of Parts A, D.1 and D.2 of the Project, the accomplishment of the purposes of the Credit and Loan, or the performance by FSDVM of its obligations under this Agreement and under the Subsidiary Lending Agreement. Section 2.09. FSDVM shall acquire, as and when needed, all such land and rights in respect of land as shall be required for the carrying out of Part A of the Project, and, upon request, shall furnish to the Association and the Bank evidence satisfac- tory to them regarding such acquisition. Section 2.10. FSDVM shall prepare quarterly reports on the progress of the Parts of the Project it has undertaken to carry out, and shall submit them within 3 weeks of the end of the reporting period simultaneously to the Borrower, through the Project Coordinating Committee, the Association and the Bank. ARTICLE III Management and Operations of FSDVM Section 3.01. FSDVM shall at all times continue to conduct its operations and affairs under competent and efficient management. Section 3.02. FSDVM shall take all steps necessary to acquire, maintain and renew all rights, powers and franchises which are necessary or useful for carrying out its obligations hereunder. Section 3.03. Except as the Association and the Bank shall otherwise agree, FSDVM shall not undertake, before the completion of Part A of the Project, any serviced site or improvement project ith. ggregate of the prijects under execution (other than the Project and the project described in the First Credit Ag:eemen') would at any time include more than 1,000 urban lots. -5- ARTICLE IV Financial Covenants Section 4.01. FSDVM shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition, and, separately, its operations, resources and expenditures in respect of the Project. Section 4.02. FSDVM shall: (i) have its accounts and financial statements (balance sheets, statements of incom and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association and the Bank; (ii) furnish to the Association and the Bank as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of sorh audit by said auditors, of such scope and in such detail as ,ae Association and the Bank shall have reasonably requested; and (iii) furnish to the Association and the Bank such other information concerning the accounts and financial statements of FSDVM and the audit thereof as the Association and the Bank shall from time to time reasonably request. 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 Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of the Bank and of FSDVK thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; u: (ii) a date 30 years after the date of this Agreement. -6- (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association and the Bank shall promptly notify FSDVM of this event. Section 5.03. All the provisions of this Agroement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement or 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 Association and the Bank: International Development Association and International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) INTBAFRAD 248423 (RCA) or Washington, D.C. 64145 (WUI) -7- For FSDVM: Fundaci6n Salvadorefia de Desarrollo y Vivienda Minima 18 Avenida Norte 633 San Salvador El Salvador Cable address: FUNDASAL San Salvador 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 FSDVM may be taken or executed by its President or such other person or persons as FSDVM shall designate in writing. Section 6.03. FSDVM shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of FSDVM, take any action or execute any documents required or permitted to be taken or executed by FSDVM pursuant to any of the provisions of this Agreement. Section 6.04. All action taken by, and any notice given to either the Association or the Bank pursuant to this Agreement shall, unless the agreement shall require otherwise, be deemed to be taken by or given to both the Bank and the Association. Section 6.05. 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 -8- of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Enrique Lerdau Acting Regional Vice President Latin America and the Caribbean INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Enrique Lerdau Acting Regional Vice President Latin America and the Caribbean FUNDACION SALVADORENA DE DESARROLLO Y VIVIENDA MINIMA By /s/ Francisco Bertrand Galindo Authorized Representative -9- SCHEDULE Part A of the Project: Policies A. Allocation of Lots 1. Information concerning the availability of lots shall be disseminated by FSDVM, prior to the completion of said lots, through the mass media, public meetings or other appropriate means. 2. FSDVM shall assign said lots, in accordance with the fol- lowing criteria: (a) residency in unserviced squatter settlements or inadequate housing conditions for two or more years; (b) a per capita monthly income of the household of not more than fifty colones (450) or household aggregate monthly income of not more than three hundred colones (4300) in 1977, and not more than seventy colones (470) and not more than four hundred colones (4400), respectively, in 1978 and thereafter, or such other amounts as the Association, the Bank and FSDVM shall agree from time to time; (c) intention to live in the assigned lot; and (d) willingness to participate in the Project, provided that (a) and (b) shall not apply to Units at Service Level D. If the households which meet the above criteria exceed the number of lots available by at least 25%, then the final selection shall be made by lottery in combination with additional screening of incomes. The final list of allottees shall be confirmed by the Selection Committee. 3. Not less than 95% of the lots shall be transferred to allottees through the following alternatives: (a) tenant purchase, or (b) freehold sale with mortgages, or (c) cooperative ownership. Allottees shall be required to make a minimum down payment of 10% of the price of the lots either in cash or through mutual help labor credits not later than four months after the date of the contract by which the transfer is made. For the purpose of this paragraph "mutual help labor credits" means credits given by FSDVM to allottees for work performed on site infrastructure or superstructure prior to the sale or lease of the lots. 4. Not more than 5% of the lots may be rented on the basis of renewable leases up to a maximum of 20 years. 5. Allottees shall start construction of extensions or partitions not later than twenty-four months after the date of lot occupancy. - 10 - 6. Whenever an allottee does not make the down payment or does not start construction of self-help extensions or partitions within the period of time specified in paragraph 5, FSDVM shall be entitled to reallot the lot of such allottee. B. Construction Credit or Loan Loans and credits (in cash or otherwise) in amounts of up to 0650, or such other amount as the Association, the Bank, and FSDVM shall agree from time to time, may be extended for construction, completion and expansion of construction. C. Pricing 1. Beneficiaries shall be charged at least the full costs of land, on-site infrastructure, core units, water meters and connections, materials loans (if any), administration, interim interest, insurance where applicable, maintenance, collection, and a surcharge to cover risk. Such charges may incorporate cross- subsidies between service levels. 2. FSDVM, upon transferring a mortgage to Fondo Social para la Vivienda or any other purchaser, will advise the Bank of such transfer and provide such detail as the Bank may require regarding the pricing of such mortgages. D. Other Sales FSDVM may sell the lots to Fondo Social para la Vivienda or Instituto Nacional de Previsi6n de los Empleados Pfiblicos, for the purpose of their selling said lots to contributors thereto who meet the requirements hereinabove set forth. The proceeds of all such sales, and of the sale of any mortgage on the lots included in the Project, will be subject to the provisions of Section 3.05 of the Development Credit Agreement.