Brazil - Agricultural Extension Project : Loan 1568 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1568 BR Loan Agreement (Agricultural Extension Project) between FEDERATIVE REPUBLIC OF BRAZIL and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated May 22, 1978 LOAN NUMBER 1568 BR LOAN AGREEMENT AGREEMENT, dated May 22, 1978, between FEDERATIVE REPUBLIC OF BRAZIL (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) the Project will be carried out by Empress Brasileira de AssistAncia T6cnica e Extenslo Rural (hereinafter called EMBRATER) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to EMBRATER the proceeds of the Loan as hereinafter provided; (C) each of the Borrower's States and Territories has designated or shall have designated an enterprise which will be the principal instrument of each such State or Territory for purposes of agricultural technical assistance and extension; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between the Bank and EMBRATER; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the -2- 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) "Project Agreement" means the agreement between the Bank and EMBLATER of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (b) "Act" means the Borrower's Law No. 6.126 dated November 6, 1974 authorizing, inter alia, the establishment of EMBRATER; (c) "Decree" means the Borrower's Decree No. 75.373 dated February 14, 1975, which regulates the Act and establishes EMBRATER; (d) "Estatutos" means EMBRATER's Estatutos as approved by Article 2 of the Decree; (e) "State" and "Territory" mean, respectively, each of the Borrower's States and Territories, these being political subdivisions of the Borrower; (f) "EMATER" means Empresa de Assistincia T6cnica e Extenslo Rural, an enterprise which shall have been established as one of the mechanisms referred to in paragraph III of Article 1 of the Act, and which fulfills the conditions set forth in Article 5 of the Act, particularly, such of being the principal instrument of the applicable State for agricultural extension purposes; (g) "ASTER" means AssociaClo de AssistPncia T4cnica e Extenslo Rural, a legal entity which shall have been established as one of the mechanisms referred to in paragraph III of Article 1 of the Act, and which fulfills the conditions set forth in Article 5 of the Act, particularly, such of being the principal instrument of the applicable Territory for agricultural extension purposes; (h) "Conv8nio" means a contract, between the Borrower's Ministry of Agriculture and the Government of a State or Terri- tory, as the case may be: (i) setting forth the terms and condi- tions on which EMBRATER shall be enabled to forward financial -3- assistance to the EMATER or ASTER, as the case may be, of such State or Territory, respectively, and (ii) which has been entered into pursuant to Article 6 of the Estatutos; (i) "Contrato" means a contract between EMBRATER and an EMATER or an ASTER: (i) implementing the ConvAnio to which the applicable State or Territory, as the case may be, is a party, and (ii) which has been entered into pursuant to Article 6 of the Estatutos; (j) "Supplementary contract" means a contract supplemental to a specific Contrato, entered into between the same parties thereto pursuant to Section 2.02 (c) of the Project Agreement; (k) "PROATER" means Programa Estadual (or Territorial, as the case may be) de Assist8ncia Tfcnica e Extenslo Rural, a one-year technical assistance and rural extension program for- mulated by the applicable EMATER or ASTER; and "Approved Proater" means a PROATER which has been approved by EMBRATER pursuant to the applicable Contrato; and (1) "Technical Support Unit" means the unit so designated under EMBRATER's Operation Department. The terms defined importing the singular number import the plural number and vice-verca. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to one hundred million dollars ($100,000,000). 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, as such Schedule may be amended irom time to time by agreement between the Borrower and the Bank, for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan. -4- Section 2.03. Except as the Bank shall otherwise agree, procurement-of the goods and civil works to be financed out of the proceeds of the Loan, shall be governed by the provisions of the Schedule to the Project Agreement. Section 2.04. The Closing Date shall be December 31, 1982 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Bank a commit- ment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of seven and one-half per cent (7.50%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semiannually on February 15 and August 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. Section 2.09. EMBRATER 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. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cause EMBRATER to perform in accordance with the provisions of the Project Agreement all the obligations therein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable EMBRATER to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. -5- (b) The Borrower shall make the proceeds of the Loan avail- able to EMBRATER for purposes of the Project, on a grant basis, under contractual arrangements satisfactory to the Bank. Section 3.02. (a) The Borrower shall, through its Ministry of Agriculture, enter into a Conv8nio, with the Government of each State or Territory where a portion of the Project shall be executed whereby, inter alia, and on terms and conditions satis- factory to the Bank: (i) the Borrower's Ministry of Agriculture shall determine the minimum annual funds that it shall make available to the applicable EMATER or ASTER, as the case may be, and the manner in which such funds shall be made available to each such EMATER or ASTER, as the case may be, for purposes of covering costs of the applicable Approved PROATER; (ii) the Government of the State or Territory in question, through its Secretary of Agriculture, shall determine the atniun annual funds, additionaY to the funds referred to in (i) above that, out of its budget, it shall make available to such EMATER or ASTER, as the case may be, for purposes of the annual operation to be conducted, in each fiscal year, by each such EMATER or ASTER, as the case may be, including, inter alia, the costs, for each such fiscal year, of the portion of the applicable Approved PROATER to be carried out during each such fiscal year; and (iii) the Bor- rower's Ministry of Agriculture and the Government of the State or Territory (as the case may be) in question shall undertake to cause, respectively, EMBRATER and each such EMATER or ASTER, as the case may be, to enter into a Contrato on terms and conditions satisfactory to the Bank. (b) The Borrower shall exercise its rights under each Conv8nio in such manner as to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive any such Conv8nio or any provision thereof. ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit - 6 - of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any polit1-;-". or administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and other foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) EMBRATER shall have failed to perform any covenant, agreement or obligation of EMBRATER under the Project Agreement; -7- (b) the Estatutos shall have been changed so as to affect materially and adversely the ability of EMBRATER to carry out the covenants, agreements and obligations set forth in the Project Agreement; (c) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of EMBRATER or for the suspension of its operations; and (d) any of the States or Territories or any other authority having jurisdiction shall have taken any action for the dissolu- tion or disestablishment of the applicable EMATER or ASTER, as the case may be, or for the suspension of the operation of any such EMATER or ASTER; provided, however, that if any event referred to in paragraph (d) of this Section shall have occurred, the Bank may at its option suspend the right of the Borrower to make withdrawals from the Loan Account only in respect of expenditures incurred by, or on behalf or for the benefit of, each EMATER or ASTER in respect of which such event has occurred. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) any event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower and EMBRATER; and (b) any of the events specified in paragraph (b) or in paragraph (c) or in paragraph (d) of Section 5.01 of this Agree- ment shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an addi- tional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Condi- tions, namely, that the Project Agreement has been executed and delivered. -8- Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, EMBRATER, and is legally binding upon EMBRATER in accordance with its terms; (b) that the Loan Agreement has been duly registered by the Borrower's Central Bank; (c) that all necessary acts, consents and approvals (includ- ing such acts, consents and approvals as are required for the purpose of making available the proceeds of the Loan to EMBRATER by means of the contractual arrangements referred to in Section 3.01 (b) of this Agreement) to be performed by the Borrower, its political subdivisions or agencies or by any agency of any poli- tical subdivision or otherwise to be performed or given in order to authorize the carrying out of the Project and to enable the Borrower and EMBRATER, respectively, to perform all of the cove- nants, agreements and obligations, of the Borrower in the Loan Agreement, and of EMBRATER in the Project Agreement, contained, together with all necessary powers and rights in connection therewith, have been performed or given. Section 6.03. The date of August 22, 1978, is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is the representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: -9- For the Borrower: Ministerio da Fazenda Esplanada dos Ministerios, Bloco 5 Brasilia, D.F., Brazil Cable address: Telex: MINIFAZ 611506 Brasilia, Brazil With copies to: EMBRATER Av. W3-Norte Q 515 Bloco C 70,000 Brasilia, D.F., Brazil Cable address: Telex: EMBRATER 0611337 Brasilia, Brazil 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 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this - 10 - 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. FEDERATIVE REPUBLIC OF BRAZIL By /s/ Mario Henrique Simonson Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Humayun Mirza Authorized Representative - 11 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Incremental salaries 46,700,000 35% for additional staff under Part C of the Project (2) Fellowships, short 6,950,000 courses and training (a) Outside Brazil 100% of foreign expenditures (b) In Brazil 35% (3) Consultants' services 5,370,000 (a) Internationally 100% of foreign recruited expenditures (b) Locally recruited 35% (4) Vehicles 6,860,000 (a) Imported 100% of foreign expenditures (b) Locally manufactured 35% - 12 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (5) Office equipment 13,340,000 and furniture; printing and audio- visual aid equip- ment; library, documentation and communications equip- ment; and farm and fisheries equipment (a) Imported 100% of foreign expenditures (b) locally manu- 35% factured (6) Civil works and 7,350,000 35% detailed engineering and architectural design work therefor (7) Unallocated 13,430,000 TOTAL 100,000,000 2. For the purposes of this Schedule, the term "foreign expen- ditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan - 13 - decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made: (a) in respect of payments made for expenditures prior to the date of this Agreement; (b) in respect of payments made for expenditures incurred (or if the Bank shall so agree, to be incurred) by, or on behalf or for the benefit of, an EMATER or ASTER, as the case may be, unless the Bank has been furnished with evidence satisfactory to the Bank that: (i) said expenditures are for the purpose of the applicable Approved PROATER; (ii) the ConvOnio to which the State or Territory is a party, as the case may be, where such Approved PROATER will be carried out, has been executed and delivered to the satisfaction of the Bank; (iii) the Contrato to which the EMATER or ASTER is a party, as the case may be, that will carry out the Approved PROATER in question, has been executed and delivered to the satisfaction of the Bank; and (iv) the Supplementary Contract, if any, to which the EMATER or ASTER in question is a party, has been executed and delivered to the satisfaction of the Bank; and (c) in respect of payments made for expenditures incurred for civil works under Category 6 unless the Bank has been fur- nished with evidence satisfactory to the Bank that: (i) the engineering and architectural consultants referred to in Section 2.04 (a) (i) of the Project Agreement have been hired; and (ii) EMBRATER or the applicable EMATER or ASTER owns, or has other rights satisfactory to the Bank in and to, the land required for the Project facility to be built under the civil works in question. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph I above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which ace then allocated to - 14 - another Category and which in the opinion of the Bank are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expen- ditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 15 - SCHEDULE 2 Description of the Project The purpose of the Project is to strengthen the Borrower's agricultural extension services with a view to raising the produc- tivity and income levels of agricultural producers in general and small farmers in particular, with special emphasis on the priority regions of the Northeast, North and Center-West. The Project consists of the following Parts: Part A: Capital Investments (1) Construction of 8 training centers for EMATERs, to be located in the following States: Amazonas, Parl, Piaui, Cear4, Pernambuco, Bahia, Goias and Hato Grosso. (2) Construction of a central office for each of ten selected EMATERs or ASTERs. (3) Construction of base-operation complexes for about 20 artisanal fishing communities. (4) Construction of offices and cold storage facilities for fisheries cooperatives to be formed in about 10 of the fishing communities referred in Part A (3) of the Project. (5) Acquisition for, and utilization by, EMBRATER or selected EMATERs or ASTERs of an aggregate of about 4,260 field vehicles, trucks and small buses. (6) Equipping and furnishing the 10 EMATER offices to be constructed under Part A (2) of the Project and about 24 libraries. (7) Acquisition of printing and communications equipment for, and utilization of such equipment by, about 600 communication terminals for about 24 documentation centers to be operated by EMBRATER and the EMATERs and ASTERs. (8) Acquisition of farm and fisheries equipment for, and utilization of such equipment by, the 8 training centers - 16 - to be constructed under Part A (1) of the Project, 10 production systems implementation units, and the artisanal fishing communities referred to in Part A (3) of the Project. Part B: Training and Technical Assistance (1) Annual in-service training courses for substantially all of the permanent technical staff of EMBRATER and the EMATERs and ASTERs. (2) Pre-service training courses for about 4,700 new appoin- tees to the staff of EMBRATER and the EMATERs and ASTERs. (3) About 380 specialized short courses for technical and administrative staff of EMBRATER and the EMATERs and ASTERs. (4) Granting of about 210 fellowships for subject matter specialists to be selected by EMBRATER from the staff of EMBRATER and of the EMATERs and ASTERs. (5) Provision to, and utilization by, EMBRATER and the EMATERs and ASTERs of an aggregate of about 75 man-years of consulting services in the fields of, inter alia, administration, monitoring and evaluation, training and human resource development, architecture and engineer- ing, extension methodology research, communications, fiscal management and data processing. (6) Execution under terms of reference to be approved by the Bank of 12 extension methodology studies in three States or Territories to be selected by EMBRATER. Part C: Strengthening of EMBRATER, EMATERs and ASTERs Provision to, and utilization by, EMBRATER and each EMATER and ASTER involved in the execution of the Project of such staff, materials and supplies as shall be required, in addition to the staff, materials and supplies which were available in the aggregate to EMBRATER and such EMATERs and ASTERs as of December 31, 1977, for the execution of Parts A, B and D of the Project. (The additional staff referred to - 17 - above will, in the aggregate, amount to about 2,690 program technicians, about 670 administrative and clerical support staff and about 370 technical support staff). Part D: Execution of Agricultural Extension Programs (1) Execution of new programs in the area of, inter alia, data processing, communications and audio-visual aids. (2) Execution of specific operational programs with special emphasis on assistance to small farmers and fishermen including programs to develop production systems, field demonstration plots, and programs to assist farm coopera- tives (including about 220 new farm cooperatives to be established) and artisanal fisheries colonies. The above description is subject to the changes the Bank shall reasonably request in accordance with Section 2.12 of the Project Agreement. The Project is expected to be completed by December 31, 1981. - 18 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 15 and August 15 beginning February 15, 1982 through February 15, 1993 4,165,000 On August 15, 1993 4,205,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equiva- lents determined as for purposes of withdrawal. - 19 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.50% More than three years but not more than six years before maturity 3.00% More than six years but not more than eleven years before maturity 5.50% More than eleven years but not more than thirteen years before maturity 6.50% More than thirteen years before maturity 7.50%