Mexico - Lazaro Cardenas Conurbation Development Project : Loan 1554 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1554 ME Loan Agreement (Lzaro Cirdenas Conurbation Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS, S.A. Dated September 27, 1978 LOAN NUMBER 1554 ME LOAN AGREEMENT AGREEMENT, dated September 27, 1978, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS, S.A. (hereinafter called the Borrower). 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 General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "FIDELAC" means Fideicomiso Ciudad Lizaro Cardenas, established by the Guarantor, of which the Borrower is the trustee pursuant to a Contrato de Fideicomiso dated January 31, 1973, as modified on November 4, 1975; and such term includes the technical and administrative organization, resources, staff and facilities used or to be used by the Borrower to operate FIDELAC. (b) "SAHOP" means Secretarla de Asentamientos Humanos ] Obras Pfblicas, an agency of the Guarantor. (c) "SARH" means the Secretarla de Agricultura y Recursos Hidraulicos, an agency of the Guarantor. (d) "Comisi6n" means the Comisi6n de Conurbaci6n de la Desembocadura del Balsas, an autonomous entity established by decree of the Guarantor dated October 5, 1976. (e) "Executing Agencies" means the agencies referred to in paragraphs (b) and (c) of this Section. -2- (f) "Sub-loans" means the sub-loans to be made under Part C and Part D of the Project, in accordance with the lending terms and policies set forth in Schedule 5 to this Agreement. (g) "artisan" means a beneficiary under Part D of the Project for which the sub-loan, or total of sub-loans, granted thereunder does not exceed $5,000 equivalent. (h) "small-scale enterprise" means a ber-,iciary under Part D of the Project for which the sub-loan, or total of sub-loans, granted thereunder exceeds $5,000 but does not exceed $100,000 equivalent. (i) "medium-scale enterprise" means a beneficiary under Part D of the Project for which the sub-loan, or total of sub- loans, granted thereunder exceeds $100,000 but does not exceed $400,000 equivalent. (j) "Fiscal year" means the fiscal year of the Borrower, which begins on January 1 and ends on December 31. 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 sixteen million five hundred thousand ($16,500,000). 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 from time to time by agreement between the Borrower and the Bank, for expendi- tures 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 described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. Section 2.03. (a) Notwithstanding the provisions of Section 2.02 of this Agreement, no withdrawal shall be made in respect of a sub-loan under Part D of the Project unless (i) the sub-loan shall have been approved by the Bank, or (ii) the sub-loan shall be a free-limit sub-loan. -3- (b) & free-limit sub-loan shall be a sub-loan to a benefi- ciary in an amount which shall not exceed the sum of $5,000 equivalent, when added to any other outstanding amounts financed or proposed to be financed for the same beneficiary; provided, however, that the foregoing amount shall be increased to the sum of $100,000 equivalent after the Bank shall have approved the initial five sub-loans larger than $5,000 equivalent but less than $100,000 equivalent. (c) When presenting a sub-loan (other than a free-limit sub-loan) to the Bank for approval, the Borrower, as trustee of FIDELAC, shall furnish to the Bank an application, in form satis- factory to the Bank, together with (i) a description and an appraisal of the proposed beneficiary, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) the proposed terms and conditions of the sub-loan, including the schedule of amortization of the sub-loan; and (iii) such other information as the Bank shall reasonably request. (d) Each request by the Borrower for authorization to make withdrawals from the Loan Account in respect of a free-limit sub- loan shall contain: (i) a summary description and appraisal of the proposed beneficiary and a summary description of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) the proposed terms and conditions of the sub-loan; and (iii) such other information as the Bank shall reasonably request. (e) Sub-loans which shall have been submitted to the Bank for approval in accordance with paragraphs (a) and (c) hereof shall be deemed approved if, within 30 days of the receipt of the information referred to in paragraph (c) hereof, the Bank shall not have provided notice to the contrary. Section 2.04. 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 Schedule 4 to this Agreement. Section 2.05. The Closing Date shall be June 30, 1982 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.06. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) -4- per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.07. 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 2.08. Interest and other charges shall be payable semiannually on May 15 and November 15 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower, as trustee of FIDELAC, shall: (i) carry out Parts A, B, C, D, E and F of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices; (ii) make appropriate arrangements, satisfactory to the Bank, with SAHOP and SARH for the carrying out of Parts G and I (i) and of Part H of the Project, respectively; and (iii) enter into contractual arrangements, satisfactory to the Bank, with the Comisi6n for the carrying out of Part I (2) of the Project, and except as the Bank shall otherwise agree, the Borrower, as trustee of FIDELAC, shall not amend or fail to enforce any provision of such arrangements. (b) In carrying out Part C and D of the Project, the Bor- rower, as trustee of FIDELAC, shall apply the lending terms and policies set forth in Schedule 5 to this Agreement. Section 3.02. (a) The Borrower, as trustee of FIDELAC, shall open and maintain a Project Account and shall record therein all receipts and payments for or in connection with the Project. -5- (b) The Borrower, as trustee of FIDELAC, shall credit to the Project Account the funds provided under Section 2.02 of the Guarantee Agreement and the proceeds of the Loan withdrawn from the Loan Account for expenditures made in respect of the Project. (c) The Borrower, as trustee of FIDELAC, shall: (i) credit to separate special accounts to be estab- lished and maintained solely for such purpose, all payments received by the Borrower, as trustee of FIDELAC, from beneficiaries of programs included in Parts A, 8, C and D of the Project, and shall, as trustee of FIDELAC, use the funds in these accounts exclusively to finance similar programs, under terms and conditions similar to those which have been applied under the Project; and (ii) furnish to the Bank, no later than December 31, 1978, a detailed investment plan of the Borrower, as trustee of FIDELAC, for the four-year period succeeding such date, and shall allow the Bank a reasonable opportunity to comment thereon. Section 3.03. The Borrower, as trustee of FIDELAC, shall furnish to the Bank for its approval the terms of reference, terms and conditions of employment of consultants, and contracting and supervision procedures, for the studies included in Part I of the Project. Section 3.04. (a) The Borrower, as trustee of FIDELAC, undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan credited to FIDELAC, against hazards incident to the acquisi- tion, 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, as trustee of FIDELAC to replace or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower, as trustee of FIDELAC, shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.05. (a) The Borrower, as trustee of FIDELAC, shall furnish or cause to be furnished to the Bank, promptly upon their -6- preparation, the plans, specifications, reports, contract docu- ments and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) as trustee of FIDELAC, shall maintain or cause to be maint:ined records and procedures adequate to record and monitor the progress of the Project (including its cost and benefits) to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Proj- ect; (ii) as trustee of FIDELAC, shall enable the Bank's accred- ited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank at regular inter- vals all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than December 31, 1982 or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower, as trustee of FIDELAC, shall prepare, and the Borrower shall furnish to the Bank, a report, of such scope and in such detail as the Bank shall reasonably rcquest, on the execution and operation of the Project, its cost and benefits, the perfor- mance by the Borrower, as trustee of FIDELAC, and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. Section 3.06. The Borrower, as trustee of FIDELAC, shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out the Parts of the Project to be carried out by the Borrower, as trustee of FIDELAC, and shall promptly furnish to the Bank evidence sufficient to show that such land and rights in respect of land are available for purposes related to the Project. Section 3.07. The Borrower, as trustee of FIDELAC, shall monitor and evaluate the carrying out of the Project, including changes in the levels of urban services and in the social and economic conditions of the beneficiaries of the Project. -7- Section 3.08. The Borrower, as trustee of FIDELAC, shall: (a) no later than December 31, 1978, furnish to the Bank for review the terms of reference, in such detail as the Bank shall reasonably request, of the programs to be carried out in the training centers included in Part E of the Project; (b) no later than March 31, 1979, make arrangements with at least one commercial bank for the purpose of carrying out Part D of the Project in accordance with lending terms and policies set forth in Schedule 5 to this Agreement; and (c) charge such rents for the use of industrial premises included in Part F of the Project at levels and on terms and conditions as shall be necessary to provide the Borrower, as trustee of FIDELAC, with revenue sufficient to cover all opera- tional and administrative expenses related to such premises, including adequate maintenance and depreciation, taking into account the general objective of attracting industrial enterprises to the Lazaro Cardenas region. Section 3.09. The Borrower, as trustee of FIDELAC, shall, no later than December 31, 1978, furnish to the Bank for its approval: (a) a statement of the lending terms and policies to be applied to beneficiaries in financing Parts A and B of the Project, such terms and policies to include, inter alia, criteria for the selection of beneficiaries, a repayment period between five and twenty years, interest at the rate of not less than fifteen per cent (15%) per annum on the outstanding principal, and an initial contribution by the beneficiary, where applicable, of not less than ten per cent (10%) of the principal amounts, and, except as the Bank shall otherwise agree, the Borrower, as trustee of FIDELAC, shall not amend or otherwise fail to apply such terms and policies; and (b) the proposed system for the selection of beneficiaries of Part C of the Project, and, except as th Bank shall otherwise agree, the Borrower, as trustee of FIDELAC, shall select beneficiaries in accordance with such plans. -8- ARTICLE IV Financial Covenants Section 4.01. The Borrower, as trustee of FIDELAC, shall maintain records adequate to reflect in accordance with consis- tently maintained appropriate accounting practices its operations and financial condition of FIDELAC. Section 4.02. The Borrower (i) as trustee of FIDELAC, shall make or cause to be made an annual audit satisfactory to the Bank of FIDELAC's accounts and financial statements (balance sheets, statements of income and expenses and related statements), for each fiscal year, in accordance with sound auditing principles consistently applied, by independent and qualified auditors; (ii) shall furnish to the Bank as soon as available, but in any case not later than five months after the end of each such year, (A) certified copies of such financial statements for such year as so audited and (B) the reports of such audits by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) shall furnish to the Bank such other informa- tion concerning the accounts and financial statements of FIDELAC, and the audit thereof, as the Bank shall from time to time reason- ably request. Section 4.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any external debt or on any assets of FIDELAC as security for any debt except as otherwise currently reported to the Bank or stated in writing. (b) The Borrower undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Borrower as security for any external debt, or on any assets of FIDELAC as security for any debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan, and in the creation of any such lien express provision will be made to that effect, at no cost to the Bank, provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. - 9 - ARTICLE V Management and Operations of FIDELAC Section 5.01. The Borrower, as trustee of FIDELAC, shall: (i) at all times manage the affairs, maintain the financial position, and carry on the operations of FIDELAC, all in accordance with appropriate business, financial, administrative and engineering practices and under the supervision of experienced and qualified management assisted by adequate, experienced and qualified staff; and (ii) recruit and employ, promptly as needed, an adequate number of experienced and qualified staff for the purpose of carrying out the Project. ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (k) thereof, namely, that any of the legal instru- ments under which FIDELAC has been established shall have been amended or waived so as to materially and adversely affect the carrying out of the Project or the financial condition of FIDELAC. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof, namely, that the event specified in Section 6.01 of this Agreement shall occur. ARTICLE VII Effective Date; Termination Section 7.01. 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 Conditions, namely, that the Guarantor shall have taken all necessary action to ensure payment to FIDELAC of all debts owed to FIDELAC by Sider6rgica Lazaro Cardenas - Las Truchas, S.A., which are outstanding at the date of this Agreement. Section 7.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be - 10 - furnished to the Bank, namely, that all necessary acts, consents and approvals to be performed or given by the Guarantor, 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 to perform all of the covenants, agreements and obli- gations of the Borrower in the Loan Agreement contained, together with all necessary powers and rights in connection therewith, have been duly and validly performed or given and no other such acts, consents and approvals are required to be performed or given for said purpose. Section 7.03. The date December 27, 1978, is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. ARTICLE VIII Addresses Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: 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) For the Borrower: Banco Nacional de Obras y Servicios Pfblicos, S.A. Insurgentes Norte 423 Mexico 3, D.F. Mexico - 11 - Cable address: Telex: BANTECARIO 01772619 Mexico City Mexico City 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 Cdlumb'ia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Is/ Nicolas Ardito-Barletta Regional Vice President Latin America and the Caribbean BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS, S.A. By /s/ E. Olivares Santana Authorized Representative - 12 - 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) Civil works (in- cluding engineer- ing and super- vision): (a) for Part A of 2,100,000 ) the Project ) (b) for Part B of 600,000 ) the Project ) (c) for Part E of 100,000 ) the Project ) 45% (d) for Part F of 400,000 ) the Project ) (e) for Part G of 1,800,000 ) the Project ) (f) for Part H of 2,200,000 ) the Project ) (2) Sub-loans under 800,000 40% of amounts Part C of the disbursed un- Project der Sub-loans (3) Sub-loans under 2,200,000 40% of amounts Part D of the disbursed un- Project der Sub-loans - 13 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (4) Equipment and vehicles (a) for Part E of 50,000 ) 100% of foreign the Project ) expenditures or ) 50% of local (b) for Part F of 50,000 ) expenditures the Project ) (5) (a) Consultants' 4,500,000 ) service for ) Part I of the ) Project ) (b) Promotional 300,000 ) 100% expenditures ) related to Parts ) A, B9 C, D, E ) and F of the ) Project ) (6) Unallocated 1,400,000 TOTAL 16,500,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Guarantor and for goods or services supplied from the territory of any country other than the Guarantor; and (b) the term "local expenditures" means expenditures in the currency of the Guarantor and for goods or services supplied from the territory of the Guarantor. - 14 - 3. The disbursement percentages have been calculated in com- pliance 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 Guarantor 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 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, except that withdrawals, in an aggre- gate amount not exceeding the equivalent of $350,000 may be made in respect of Categories (1) and (5) (a) on account of payments made for such expenditures before that date but after August 1, 1977; and (b) in respect of payments made for expenditures under Part A of the Project until the Borrower has furnished to the Bank evidence, in accordance with Section 3.06 of this Agreement, con- cerning the availability of land for Part A of the Project. 5. Notwithstanding the allocation of an amount of the Loan or the disbursemenit percentages set forth in the table in paragraph 1 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: (i) the Bank and the Borrower may agree to reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such reallocation is not agreed or cannot fully meet the estimated shortfall, the Bank may, by notice to the Borrower, 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, after consultation with the Borrower, shall have reasonably determined that the procurement of any item in any - 15 - Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures 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 reason- able opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 16 - SCHEDULE 2 Description of the Project The Project is part of a comprehensive urban development program in the Lazaro Cardenas region, and consists of the following Parts: Part A: Urban Upgrading Provision of basic infrastructure, other urban services and legal title for about 5,580 plots in low-income areas of Guacamayas, Playa Azul, La Mira and other towns adjacent to the Balsas River, and provision of legal title for about 1,180 additional plots in these towns. Part B: Sites and Services Development of about 1,800 serviced plots in Lazaro Cardenas and Guacamayas, each with water, sewerage, electrical connections, street lighting and access roads. Part C: Construction Materials Loans Sub-loans for construction materials and labor to be used in buildings of low-income dwellings in the Lazaro Cardenas region. Part D: Production Credits Sub-loans to artisans and small- and medium-scale enterprises in the Lazaro Cardenas region, such sub-loans to be made through commercial banks. Part E: Training Centers Construction and equipping of four '.raining centers, two in Guacamayas, one in Zacatula-Petacalco and one in La Mira-Playa Azul, to be used for self-help construction training programs, training programs to benefit artisans and small- and medium-scale enterprises, and other programs to benefit low-income groups. Part F: Industrial Premises Construction and equipping of: (1) three workshop halls con- taining ten workshops of 100-200 m2 each; and (2) two larger - 17 - industrial buildings of 800-1000 m2 each, all in the Lazaro Cardenas region. Part G: Regional Feeder Roads Construction or improvement of secondary and feeder roads, with a total length of about 198 km, in the Lazaro Cardenas region. Part H: River Control Construction of civil works to regulate the flow of water in the Balsas River, including construction of a large culvert on the right branch of the Balsas River and partial dredging of the river. Part I: Studies (1) Studies for the preparation of urban development proj- ects in high priority urban centers, including supervi- sion thereof. (2) Urban development studies in the Lazaro Cardenas region, including supervision thereof. 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 May 15 and November 15 beginning November 15, 1982 through November 15, 1994 635,000 On May 15, 1995 625,000 * 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 1.30% More than three years but not more than six years before maturity 2.65% More than six years but not more than eleven years before maturity 4.85% More than eleven years but not more than fifteen years before maturity 6.60% More than fifteen years before maturity 7.50% - 20 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part B hereof, contracts for the pur- chase of civil works shall be procured in accordance with pro- cedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For works to be procured on the basis of international com- petitive bidding and in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank and the Borower shall agree; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the vorks in question. The Borrower shall provide the necessary information to update such notice annually so long as any works remain to be procured on the basis of inter- national competitive bidding. B. Other Procurement Procedures 1. Contracts for goods and for civil works other than for Part H of the Project shall be awarded in accordance with the Guarantor's ordinary procedures. 2. Contracts for civil works under Part H of the Project which do not exceed the equivalent of $250,000 each may be awarded in accordance with the Guarantor's ordinary procedures, provided that the aggregate amount of all contracts so awarded shall not exceed the equivalent of $1,250,000. C. Bid Packages Whenever practicable, contracts for the purchase of goods or civil works shall be grouped to form economic bid packages. - 21 - D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiva- lent of $250,000 or more: (a) Before bids are invited, the Borrower, as trustee of FIDELAC, shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising pro- cedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request in consultation with the Borrower, as trustee of FIDELAC. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. 2. With respect to each contract to be financed out of the proceeds of the Loan, the Borrower, as trustee of FIDELAC, shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. - 22 - SCHEDULE 5 Lending Terms and Policies for Part C and Part D of the Project Part C: Sub-loans under Part C of the Project, to be made directly by the Borrower as trustee of FIDELAC, will consist of three types: Construction materials, to be provided in kind; Construction equipment, to be rented; and Labor, to be contracted. The principal of such sub-loans will be repaid in monthly installments over a period of up to fifteen years. An annual interest rate of not less than fifteen per cent (15%) will be charged on the amount of principal outstanding. Part D: Sub-loans under Part D of the Pioject will be made by com- mercial banks according to the following terms and conditions: 1. Sub-loans for artisans will not exceed 80% of the estimated cost of the new investment proposed by the appli- cant. Sub-loans for small- and medium-scale enterprises will not exceed 75% of the estimated cost of the new invest- ment proposed by the applicant. 2. The principal of such sub-loans will be repaid as follows: (a) sub-loans for construction will be repaid within 7 to 12 years (including grace periods of 9 to 12 months); (b) sub-loans for machinery and equipment will be repaid within 4 to 7 years (including grace periods of 6 to 9 months); and (c) sub-loans for working capital will be repaid within 1 to 2 years. - 23 - 3. The commercial banks will charge an annual interest rate of fifteen per cent (15%) on the amount of principal outstand- ing for each sub-loan. The Borrower, as trustee of FIDELAC, will rediscount 100 per cent (100%) of such sub-loans, at the following rates of interest to be charged to the commercial banks: 11.5% in the case of sub-loans to artisans; and 12.5% in the case of all other sub-loans. The interest and redis- count rates will be reviewed annually by the Borrower, as trustee of FIDELAC, and the Bank. 4. The Borrower, as trustee of FIDELAC, will establish a Guarantee Fund to cover the risk of bad debts in the case of sub-loans to artisans and small-scale enterprises, and will from time to time deposit in such Fund amounts equal to one per cent (1%) of the annual interest charges to beneficiaries under sub-loans.