Colombia - Railroad Extension Project : Loan 0119 - Guarantee Agreement - Conformed

LOAN NUMBER 119 CO Guarantee Agreement (Railroad Extension Project) BETWEEN * REPUBLIC OF COLOMBIA AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED JUNE 15, 1955 ($uaranter Agreement AGREEMENT, dated June 15, 1955, between REPUBLIC OF COLOMBIA (hereinafter called the Guarantor) and INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS by an agreement dated August 26, 1952 between the Guarantor and the Bank, the Bank agreed to lend to the Guarantor the sum of $25,000,000 or the equivalent thereof in currencies other than dollars to assist in financing the costs of a project included in a program of the Guaran- tor for the reorganization of the railway system of Colombia and for the expansion, rehabilitation and improvement of the lines operated by the Consejo Administrativo de los Ferrocarriles Nacionales or its successor organization; and WHEREAS, as contemplated by such Loan Agreement, Ferrocarriles Nacionales de Colombia (hereinafter called the Borrower) was organized by Decree No. 3129 of 1954 as an autonomous non-political organization to administer the railway system of Colombia on a financially self-sup- porting basis; and WHEREAS by an agreement of even date herewith between the Bank and the Borrower, which agreement and the sched- ules therein referred to are hereinafter called the Loan Agreement, the Bank has agreed to make to the Borrower a loan in various currencies in an aggregate principal amount equivalent to fifteen million nine hundred thousand dollars ($15,900,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the-payment of the principal, interest and other charges on such loan and the obligations of the Borrower in respect thereof and to undertake to carry out an additional program of public works supple- mental to the Project; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has 4 agreed to guarantee the payment of the principal, interest and other charges on such loan and the obligations of the Borrower in respect thereof and to undertake to carry out the additional program of public works; Now THEREFORE, the parties hereto hereby agree as follows: ARTICLE I SECTION 1.01. The parties to this Guarantee Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated February 15, 1955 (said Loan Regulations No. 4 being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein. SECTION 1.02. Except where the context otherwise re- quires, wherever used in this Guarantee Agreement the terms defined in Section 1.02 of the Loan Agreement shall have the respective meanings therein set forth. ARTICLE II SECTION 2.01. Without limitation or restriction upon any of the other covenants on its part in this Agreement con- tained, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and the interest and other charges on, the Loan, the principal of and interest on the Bonds, the premium, if any, on the prepayment of the Loan or the redemption of the Bonds, and the punctual performance of all the covenants and agreements of the Borrower, all as set forth in the Loan Agreement and in the Bonds. SECTION 2.02. Without limitation or restriction upon the provisionso f Section 2.01 of this Agreement, the Guarantor 5pecifically undertakes, whenever there is reasonable cause to believe that the funds available to the Borrower will be inadequate to neet the estimated expenditures required for carrying out the Project, to make arrangements, satisfac- 5 tory to the Bank, promptly to provide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. Any funds supplied to the Borrower by the Guarantor pursuant to this Section will be supplied in such manner as to be recoverable only out of net earnings of the Borrower. ARTICLE III SECTION 3.01. (a) The Guarantor shall cause the Public Works Program to be carried out with due diligence and efficiency. (b) The Guarantor shall cause the Public Works Pro- gram to be carried out in conformity with sound engineer- ing and financial practices. (c) The Guarantor shall retain consultants satisfactory to the Bank upon terms and conditions satisfactory to the Bank to supervise the execution of the portions of the Public Works Program described in paragraph (b) of Schedule 1 to this Guarantee Agreement. (d) The Guarantor shall cause to be furnished to the Bank, in such detail as the Bank shall from time to time request, and promptly upon their preparation, the plans and specifications for the Public Works Program and any material modifications subsequently made therein. (e) The Guarantor shall maintain or cause to be main- tained records adequate to record the progress of the Public Works Program (including the cost thereof) and to reflect in accordance with consistently maintained sound account- ing practices the financial condition and operations of the agency or agencies of the Guarantor responsible for the con- struction or operation of the Public Works Program or any part thereof; shall enable the Bank's representatives to in- spect the Public Works Program and any relevant records and documents; and shall furnish to the Bank all such in- formation as the Bank shall reasonably request concerning the Public Works Program and the financial condition and 6 operations of the agency or agencies of the Guarantor responsible for'the construction or operation of the Public Works Program or any part thereof. SECTION 3.02. It is the mutual intention of the Guaran- tor and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assets. To that end, the Guarantor undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Guarantor as security for any external 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. the Bonds, and that in the creation of any such lien express provision will be made to that effect; provided, however, that the foregoing provi- sions of this Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as secu- rity for the payment of the purchase price of such property; (ii) any lien on commercial goods to secure a debt maturing not more than one year after the date on which it is orig- inally incurred and to be paid out of the proceeds of sale of such commercial goods; or (iii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. As used in this Section (a) the term "assets of the Guarantor " includes assets of the Guarantor or of any of its political subdivisions or of any Agency including the Banco de la Republica, and (b) the term "Agency" means any agency or instrumentality of the Guarantor or of any political subdivision of the Guarantor and shall include any institution or organization which is owned or controlled directly or indirectly by the Guarantor or by any political subdivision of the Guarantor or the operations of which are conducted primarily in the interest of or for account of the Guarantor or any political subdivision of the Guarantor. 7 SECTION 3.03 (a) The Guarantor and the Bank shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reasonably request with regard to the general status of the Loan. On the part of the Guarantor, such information shall include information with respect to financial and economic condi- tions in the territories of the Guarantor and the interna- tional balance of payments position of the Guarantor. (b) The Guarantor and the Bank shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Guarantor shall promptly inform the Bank of any condition which inter- feres with, or threatens to interfere with, the accomplish- ment of the purposes of the Loan or the maintenance of the service thereof. (c) The Guarantor shall afford all reasonable oppor- tunity for accredited representatives of the Bank to visit any part of the territories of the Guarantor for purposes related to the Loan. SECTION 3.04. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid without deduction for, and free from, any taxes or fees imposed under the laws of the Guarantor or laws in effect in its territories; provided, however, that the provisions of this Section shall not apply to taxation of, or fees upon, pay- ments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of the Guarantor. SECTION 3.05. This Agreement, the Loan Agreement and the Bonds shall be free from any taxes or fees that shall be imposed under the laws of the Guarantor or laws in effect in its territories on or in connection with the execu- tion, issue, delivery or registration thereof. 8 SECTION 3.06. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid free from all restrictions imposed under the laws of the Guarantor or laws in effect in its territories. ARTICLE IV SECTION 4.01. The Guarantor shall endorse, in accord- ance with the provisions of the Loan Regulations, its guar- antee on the Bonds to be executed and delivered by the Borrower. The Minister of Finance and Public Credit of the Guarantor and such person or persons as he shall des- ignate in writing are designated as the authorized repre- sentatives of the Guarantor for the purposes of Section 6.12 (b) of the Loan Regulations. ARTICLE V SECTION 5.01. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Guarantor: Republic of Colombia Ministerio de Hacienda y Credito Puiblico Palacio de los Ministerios, Plaza San Agustin Bogota, Colombia For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 25, D. C. Tuited States of America SECTION 5.02. The Minister of Finance and Public Credit of the Guarantor is designated for the purposes of Section 8.03 of the Loan Regulations. 9 IN WITNESS WHEREOF, the parties hereto, acting throug1 their representatives thereunto duly authorized, have caused this Guarantee Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF COLOMBIA By EDUARDO ZULETA-ANGEL Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEV2LOPMENT By EUGENE R. BLACK President 10 SCHEDULE 1 Description of the Public Works Program The Public Works Program is supplementary to the Project and includes the following: (a) Completion of stage 1 of the program of the Ministry of Public Works of the Guarantor for ex- pansion of the facilities of the port of Santa Marta, including the construction of additional piers, sheds and storage space. (b) Construction of approximately 60 kilometers of paved highway to standards adequate for the use of the tractor-trailer units mentioned in paragraph 5 of Schedule 2 of the Loan Agreement. The highway will run from Cienaga on the railroad between Fundaci6n and Santa Marta to a point on the east bank of the Magdalena River opposite the port of Barranquilla, where it will connect with the ferry to be provided as part of the Project.