Ecuador - Guayaquil Urban Development Project : Loan 1776 - Loan Agreement - Conformed

LOAN NUMBER 1776 EC Loan Agreement (Guayaquil Urban Development Project) between REPUBLIC OF ECUADOR and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated 6 , 1980 LOAN NUMBER 1776 EC LOAN AGREEMENT AGREEMENT, dated / , 1980, between REPUBLIC OF ECUADOR (hereinaft called the Borrower) and INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). 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 meani.ngs therein set forth and the following additional terms have the follnwing meanings: (a) "Central Bank" means Banco Central del Ecuador; (b) "Municipality" means Municipalidad de Guayaquil; (c) "BEV" means Banco Ecuatoriano de la Vivienda, the Ecuadorean Housing Bank; (d) "JNV" means Junta Nacional de la Vivienda, the National Housing Board; (e) "CENAPIA" means Centro Nacional de Peque?1a Industria y Artesania, the National Small-Scale Enterprise and Artisan Center; (f) "Small-Scale Enterprise" means an industrial, commercial or service enterprise with no more than six workers, and fixed assets of less than one hundred and twenty-five thousand Sucres (S/125,000); (g) "Participating Bank" means any bank legally established in Ecuador, acceptable to the Bank and Central Bank, which has a credit program for Small-Scale Enterprises in Guayaquil and has entered into a Subsidiary Loan Agreement; -2- (h) "Participating Entity" means Central Bank, Municipality, CENAPIA, BEV, JNV and the Ministries and other agencies of the Borrower responsible for carrying out the Project; (i) "Project Entities" means the Participating Entities and Participating Banks referred to collectively; (j) "Subsidiary Loan Agreement" means any of the agreements to be entered into between Central Bank and each of the Partici- pating Banks, in accordance with Section 3.01 (b) (i) (B) of this Agreement, and "Subsidiary Loan" means the loan provided for in each such Subsidiary Loan Agreement; (k) "Supplementary Agreement" means the agreement or agree- ments to be entered into between Central Bank and each of the other Participating Entities in accordance with Section 3.01 (c) of this Agreement; (1) "Sub-loan" means a loan made or proposed to be made by a Participating Bank under Part A.1 of the Project, subject to the lending terms and conditions set forth in Schedule 5 to this Agreement; (m) "Housing Loan" means a loan made or proposed to be made by BEV under Part C.1 of the Project subject to the lending terms and conditions set forth in Schedule 5 to this Agreement; (n) "Sucres" and "S/" mean the currency of the Borrower; (o) "Project Unit" means the Project Unit established in the Municipality by a Municipal Resolution on December 5, 1978 for purposes of the Project; (p) "Lotizaci6n Mapasingue" means an existing settlement partially serviced, of about 150 hectares along the Daule Highway, about 6 kilometers from the center of Guayaquil; (q) "Guasmo North" means an existing settlement of 60 hectares, about 8 kilometers to the south of the center of Guayaquil; (r) "Alegria" means a new area of about 70 hectares desig- nated for sites and services development by Municipality, along the Daule Highway north of Guayaquil; -3- (s) "Floresta Pilot" means an area of about 500 new units to be developed within BEV's Floresta property, to the south of the center of Guayaquil; (t) "Suburbio" means the existing settlement of about 450,000 persons, located towards the southwest of Guayaquil and limited by the Estero Salado; (u) "Project Areas" means Lotizaci6n Mapasingue, Alegria, Guasmo North, Floresta Pilot and Suburbio referred to collec- tively; and (v) "Beneficiaries" means the owners or occupants of the residential or industrial sites benefitting from the improvements made or to be made to the Project Areas under the Project. 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 thirty-one million dollars ('31,000,000). 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 from 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. 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 Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1985 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 commitment 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. -4- Section 2.06. The Borrower shall pay interest at the rate of seven and ninety-five hundredths per cent (7.95%) 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. Central Bank is designated as representative of the Borrower for the purpose 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) (i) The Borrower shall carry out the Project with the participation of the Project Entities, with due diligence and efficiency and in conformity with appropriate urban, health, educational, adminis- trative, engineering and financial practices, and shall provide, or cause the Participating Entities to provide, prnmptly as needed, the funds, facili- ties, services and other resources required for the purpose (the funds to be provided by the Borrower and the Participating Entities, in addition to the proceeds of the Loan, being on the date hereof estimated to aggregate the equivalent of not less than fourteen million four hundred thousand dollars ($14,400,000)). The Project Entities shall partici- pate in the carrying out of the Project as provided in the Annex to Schedule 2 to this Agreement, as such Annex may be amended by agreement between the Borrower and the Bank. (ii) Unless the Bank shall otherwise agree, and as part of the foregoing, the Borrower shall: -5- (A) each year until the year in which the Project will be completed, allocate in its Annual Budget sufficient funds to enable the Borrower and Participating Entities to carry out the Project; and (B) notify the approval of such budgetary alloca- tions to the Bank not later than 30 days after the date of approval of such budget. (iii) In addition to the foregoing, the Borrower shall, for each Sub-loan made by a Participating Bank, contribute to CENAPIA an amount equivalent to 1.5% of the amount of such Sub-loan. (b) The Borrower shall: (i) make with Central Bank all necessary contractual arrangements, under terms and conditions satis- factory to the Bank, providing for: (A) the withdrawal by Central Bank of the proceeds of the Loan from the Loan Account in accor- dance with Section 2.02 of this Agreement, and for the disbursement of the amounts so with- drawn for purposes of the Project in accor- dance with the provisions of such contractual arrangement; (B) the relending to Participating Banks of the proceeds of the Loan allocated from time to time to Category (1) of Schedule 1 to this Agreement, such proceeds to be provided to Participating Banks for the carrying out of Part A.1 of the Project under Subsidiary Loan Agreements on terms and conditions satisfactory to the Bank, including those established in Schedule 5 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank; (C) the establishment of a position of Project Coordinator with functions and responsibili- ties satisfactory to the Bank, such Project - 6 - Coordinator to be in charge of the overall coordination of the carrying out of the Project and to have experience and qualifica- tions satisfactory to the Bank; (ii) exercise its rights pursuant to such contractual arrangements in such a manner as to protect the interests of the Borrower and the Bank; and (iii) except as the Bank shall otherwise agree, not change such contractual arrangements or fail to enforce any provision thereof. (c) The Borrower shall, through Central Bank, make available to each Participating Entity the proceeds of the Loan required by each such Participating Entity for the carrying out of the Pro- ject, under a Supplementary Agreement to be entered into by Central Bank acting on behalf of the Borrower and each of the other Participating Entity under terms and conditions satisfactory to the Bank, each such Supplementary Agreement to provide, inter alia, for: (i) the procedures for disbursement and repayment of that part of the proceeds of the Loan loaned to it thereunder and other funds required for carrying out the respective Part of the Project; (ii) the definition of responsibilities of each such Participating Entity in respect of the carrying out of the Project; (iii) the organizational arrangements and provision of adequate staff, resources and facilities to be made by the Participating Entity for carrying out the respective Part of the Project to be carried out by it; and (iv) the foreign exchange risk to be borne by the Borrower at all times, such risk not to be passed on to the ultimate Beneficiary for any reason whatsoever. (d) The Borrower shall exercise and shall cause Central Bank to exercise its rights under the Subsidiary Loan Agreements and the Supplementary Agreements in such a manner so as to protect the -7- interests of the Borrower, the Bank and Central Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, nor amend, abro- gate or waive any Subsidiary Loan Agreement or any Supplementary Agreement or any provision thereof nor permit Central Bank to assign nor amend, abrogate or waive any Subsidiary Loan Agreement or any Supplementary Agreement or any provision thereof. (e) In order to ensure the timely execution of the Project, the Borrower shall, not later than January 31, 1980: (i) establish in Central Bank and maintain until the completion of the Project: (A) a revolving fund of not less than $300,000 equivalent for carrying out Part A.1 of the Project; and (B) a revolving fund of not less than the equivalent of $1,000,000 for carrying out Parts B.1, B.2 (i), B.2 (iii), B.3, B.4 (iii), B.6 and B.7 of the Project; and (ii) replenish from time to time, and operate such revolving funds in accordance with rules and procedures satis- factory to the Bank. Section 3.02. The Borrower, under the respective Supple- mentary Agreement, shall, in-er alia, cause Municipality: (a) to maintain and operate the Project Unit with an ade- quate number of qualified staff, and functions, responsibilities and organization satisfactory to the Bank; (b) to provide the Project Unit with all such resources and facilities as shall be necessary for the efficient and timely participation of such Unit in the execution of the Project; (c) (i) to apply and collect such charges as shall be necessary to recover, at an annual interest rate of 12% and over a period of 15 years, all allocable capital costs (including administration, design, physical contingencies, and interest during con- struction) of the improvements made by Municipality in the Project Areas under the Project; and (ii) to cause the Project Unit to monitor the collection of such charges; (d) to carry out by June 30, 1980, under terms satisfactory to the Bank, a study on the ways of improving Municipality's financial management and, based on the recommendations of such study: (i) prepare a program for improving its financial management; -8- (ii) afford the Bank a reasonable.opportunity to comment on such study and program; and (iii) taking into consideration the Bank's comments thereon, carry out such program according to a timetable satisfactory to the Bank; (e) to undertake a review of the Municipality's current urban development regulations, to furnish to the Bank for its comment, not later than March 31, 1981, the results of such review together with proposed amendments in order to facilitate and promote slum upgrading and further sites and services development in Guayaquil, and to amend such regulations, taking into account Bank comments, thereon; (f) to operate and maintain, through competent autho- rities, the public services (markets, water and sewerage infra- structure, streetlights and roads) provided to the Project Areas under the Project; (g) to provide, through the Project Unit, land titling assistance where required by the Beneficiaries in the Project Areas; (h) to repay to the Borrower the proceeds of the Loan made available to Municipality for carrying out the Project, on the same terms of the Loan, provided, however, that the Borrower shall not charge to or collect from Municipality the commitment charges and interests accrued during the Loan's grace period; and (i) to sell serviced lots in AlegrIa directly to individual applicants when such applicants do not intend to apply for Housing Loans, such sales to be made under the terms established in paragraph (c) (i) above. Section 3.03. The Borrower, under the respective Supple- mentary Agreement, shall, inter alia, cause BEV: (a) to establish and operate a project unit with an adequate number of qualified staff, and functions, responsibilities and organization satisfactory to the Bank; (b) to maintain its current national interest rate structure at a range of from at least seven per cent (7%) to at least twelve per cent (12%) per annum; (c) to recover Housing Loans and its costs for land, infra- structure and housing units over a period of 15 years at an annual -9- rate of interest of at least ten per cent (10%), and to apply the lending terms and conditions set forth in Schedule 5 to this Agreement to Housing Loans; and (d) to repay to the Borrower the proceeds of the Loan made available to BEV for carrying out Parts B.2 (ii) and C of the Project under terms satisfactory to the Bank. Section 3.04. (a) The Borrower shall cause Municipality and BEV and JNV to enter into an agreement, satisfactory to the Bank, to coordinate the participation of Municipality and that of BEV and JNV in the carrying out of Parts B and C of the Project; (b) Such agreement shall, inter alia: (i) define in detail the responsibilities (including financial responsibilities), functions, and administrative procedures of Municipality, BEV and JNV in carrying out such Parts of the Project; and (ii) establish criteria and procedures, satisfacto:y to the Bank, for selection of Beneficiaries for Alegria. Section 3.05. In order to assist the Borrower and the Parti- cipating Entities in carrying out their obligations under th:. Project, the Borrower shall employ, or cause the Participating Entities to employ, consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Section 3.06. The Borrower shall, through its Ministries of Health and Education, respectively, adequately staff, operate and maintain the health centers and primary schools constructed under Part B.4 of the Project. Section 3.07. By April 1, 1981, the Borrower, through Central Bank and CENAPIA, the Participating Banks and the Federaci6n Artesanal de la Provincia del Guayas, shall review with the Bank the progress and results of the execution of Part A of the Project. Section 3.08. The Borrower shall take or cause to be taken, according to timetables satisfactory to the Bank, all such - 10 - measures as shall be required to regulate the land tenure situa- tion in the Project Areas in order to provide secure tenure to residents in the Project Are'as. Section 3.09. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan 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 the Borrower to replace or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.10. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work 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) shall maintain and cause each Project Entity to maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and ser- vices financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable and cause each Project Entity to enable the Bank's accredited 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 and cause each Project Entity to furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the pro- ceeds 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 six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reason- ably request, on the execution and initial operation of the - 11 - Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower, the Project Entities and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. Section 3.11. The Borrower 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 the construction and operation of the facilities included in the Project and shall furnish to the Bank, promptly after such acquisition, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. 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 ciri.amstances, 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 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 - 12 - 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 political 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. Section 4.02. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consis- tently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. Section 4.03. The Borrower shall include in the Supplementary and Subsidiary Loan Agreements such provisions as shall be neces- sary to ensure that each Project Entity shall: (a) establish and maintain separate accounts on its records to be used exclusively for the Project and to register in such accounts all its receipts and payments for or in connection with the Project, in accordance with sound accounting principles and procedures consistently applied; and (b) (i) have the accounts referred to in paragraph (a) above and related statements for each fiscal year of the Project Entity audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Borrower and the Bank as soon as available, but in any case not later than four months after the end of each such year, (A) certi- fied copies of such accounts and related statements for such year as so audited and (B) the report of such audit by said aud7.tors, of such scope and in such detail as the Bank shall have reasonably requested; and - 13 - (iii) furnish to the Bank such other information con- cerning such accounts and related statements of such Project Entity and the audit thereof as the Bank shall from time to time reasonably request. Section 4.04. The Borrower shall cause each of the Project Entities to take out and maintain with responsible insurers insurance against such risks and in such amounts as shall be consistent with appropriate practice. 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) any of the Project Entities shall have failed to perform any of its obligations under the respective Supplementary Agree- ment or Subsidiary Loan Agreement; (b) an extraordinary situation shall have arisen which shall make it improbable that any of the Project Entities will be able to perform any of its obligations under the respective Supplementary Agreement or Subsidiary Loan Agreement; (c) unless the Bank shall otherwise agree, the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Project Unit or any of the Project Entities or for the suspension of its operations related to the execution of the Project; and (d) unless the Bank shall otherwise agree, the Borrower or any other authority having jurisdiction shall divest the Project Unit or any of the Project Entities of any of the functions or powers vested in aay of them as of the date of this Agreement, which are necessary for the efficient carrying out of the Project. 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, namely, any of the events specified in paragraphs (a), (c) and (d) 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. - 14 - ARTICLE VI Termination Section 6.01. The date a - / , is hereby specified for purposes ofoSection 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Ministro de Finanzas of the Borrower is designated as 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: For the Borrower: Ministerio de Finanzas Avenida 10 de Agosto No 1655 Quito, Ecuador Cable address: Telex: MINFINANZAS 2358 Quito, Ecuador and for the purposes of any notice or request required or per- mitted to be given or made under Section 10.04 (1) of the General Conditions, copies shall also be sent to: Procurador General del Estado Avenida Colombia 248 Oficina 904 Quito, Ecuador For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America - 15 - 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 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. REPUBLIC OF ECUADOR By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Latin America and the Caribbean - 16 - 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) Sub-loans under Part 3,300,000 70% of amounts A.1 of the Project disbursed by Participating Banks for pur- poses of the Project (2) Civil Works: (a) under Parts B.2 4,410,000 70% (i), B.2 (iii), B.3 and B.4 of of the Project (b) under Parts B.2 980,000 70% (ii) and C.2 of the Project (c) under Part B.1 3,500,000 70% (i) of the Proj- ect (d) under Part B.1 980,000 70% (ii) of the Proj- ect - 17 - Amount of the Loan Allocated % of (Expressed in Expenditures Categgry Dollar Equivalent) to be Financed (3) Vehicles and equipment: (a) under Part B.4 of 520,000 ) 70% of local the Project ) expenditures ) if domestic- (b) under Part B.6 of 140,000 ) ally procured the Project ) or 100% of ) foreign expen- ) ditures if ) directly im- ) ported (4) Services, office materials and other administrative expenses: (a) under Part A.2 (i) 240,000 40% of local of the Project expenditures (b) under Part B.6 of 560,000 70% of local the Project expenditures (5) Credits and grants 280,000 70% of amounts made under Part B.5 disbursed by of the Project Central Bank for purposes of the Project (6) Housing Loans under 8,510,000 67% of amounts Part C.1 of the Project disbursed for purposes of the Project - 18 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (7) Technical assistance: (a) under Part A.2 (ii) 200,000 ) 100% of foreign of the Project ) expenditures ) for foreign (b) under Part B.7 of 500,000 ) consultants the Project ) and 60% of lo- ) cal expendi- (c) under Part C.3 of 100,000 ) tures for local the Project ) consultants (8) Unallocated 6,780,000 TOTAL 312000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" 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; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 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 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 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. - 19 - 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for: (a) expenditures prior to the date of this Agreement, except that withdrawals: (i) in an aggregate amount not exceeding the equivalent of $120,000 may be made in respect of Categories (3) (b), (4) (b) and (7) (b) on account of payments made for such expenditures before that date but after May 1, 1979; and (ii) in an aggregate amount not exceeding the equivalent of $350,000 in respect of Category (2) (b) on account of payments made for such expenditures before that date bttt after October 9, 1979; (b) expenditures of any Project Entity until: (i) evidence satisfactory to the Bank has been fur- nished to the Bank that the Supplementary Agreement or Subsidiary Loan Agreement, as the case may be, between Central Bank on behalf of the Borrower and such Project Entity has been duly executed and delivered; (ii) as part of such evidence, there has been furnished to the Bank an opinion or opinions satisfactory to the Bank of counsel acceptable to the Bank that such Supplementary Agreement or Subsidiary Loan Agreement, as the case may be, has been duly authorized or ratified by, and executed and deli- vered on behalf of the Borrower and the respective Project Entity and is legally binding upon the Borrower and such Project Entity; and (iii) with the respect to Municipality and BEV, in addition to the foregoing, evidence satisfactory to the Bank has been furnished to the Bank that Muncipality, BEV and JNV have entered into the agreement referred to in Section 3.04 (a) of this Agreement; (c) expenditures under Category (2) (d) until the Borrower has furnished to the Bank the timetable referred to in Section 3.08 of this Agreement with respect to Guasmo North; and (d) expenditures under Category (2) (c) until the Borrower has furnished to the Bank the timetable referred to in Section 3.08 of this Agreement with respect to Lotizaci6n Mapasingue. - 20 - 5. Notwithstanding the allocation of an amount of the Loan or the disbursement 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, 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 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 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 shali have been made. 6. If the Bank shall have reasonably determined that the procurement of any item in any 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 reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 21 - SCHEDULE 2 Description of the Project The Project consists of: Part A: Assistance to Small-Scale Enterprises in Guayaquil 1. A credit program consisting of Sub-loans to Small-Scale Enterprises in Guayaquil, to finance fixed assets, working capital requirements and workshop construction. 2. Technical Assistance, including: (i) expansion of CENAPIA's existing program of tech- nical and managerial assistance to Small-Scale Enterprises in Guaylquil; and (ii) consultants' services to CENAPIA for: (a) improving its technical assistance programs; (b) carrying out a feasibility study for a pro- posed artisan market in Guayaquil; and (c) evaluating Part A of the Project. Part B: Development of Low-Income Residential Areas 1. Upgrading of existing settlements, including pro- vision of landfill, basic infrastructure, legal titling and an orderly densification in (i) Lotizaci6n Mapasingue and (ii) Guasmo North. 2. Development of new plots, including: (i) about 3,200 new serviced plots in Alegrfa; (ii) about 500 new serviced plots in Floresta Pilot; and (iii) about 9 hectares of serviced industrial land in Alegria. - 22 - 3. Construction of off-site infrastructure for the Project Areas. 4. Construction and equipment of community facilities in the Project Areas, including: (1) 5 primary schools; (ii) 3 health centers; and (iii) 5 community markets. 5. A community development program aimed at encouraging community participation in development and use of appropriate technologies for housing, neighborhood improvement, skills training and other related activities in low income areas of Guayaquil, including credits and grants to be made by Central Bank for such purposes. 6. Project administration, including the acquisition and utilization of vehicles and equipment for the Project Unit and of services and equipment for the provision of land titling assis- tance. 7. Technical assistance to Municipality, including consul- tants' services, inter alia, for: (i) a study to improve the Municipality's financial management; (ii) Project monitoring and evaluation; and (iii) preparation of future projects. Part C: Credit Program for Low-Cost Housing 1. A credit program consisting of mortgage loans to finance the construction or improvement of low-cost houses in the Project Areas, excluding Floresta Pilot, and in other low-income areas of Guayaquil. 2. Construction of basic housing units in Floresta Pilot Area. - 23 - 3. Technical assistance to BEV and JNV for long-term financial planning, project preparation and land titling assis- tance. The Project is expected to be completed by December 31, 1984. - 24 - ANNEX TO SCHEDULE 2 Participation in Entity the Project Ministry of Education Part B.4 (i) Ministry of Health Part B.4 (ii) Central Bank Part B.5 and overall coordination of the carrying out of the Project Municipality Parts B.1, B.2 (i) and (iii), B.3, B.4 (iii), B.6 and B.7 BEV Parts B.2 (ii) and C CENAPIA Part A.2 Participating Banks Part A.1 - 25 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 15 and August 15 beginning August 15, 1984 through August 15, 1996 1,190,000 On February 15, 1997 1,250,000 * 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 equivalents determined as for purposes of withdrawal. - 26 - 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 1.40% More than three years but not more than six years before maturity 2.80% More than six years but not more than eleven years before maturity 5.15% More than eleven years but not more than fifteen years before maturity 7.00% More than fifteen years before maturity 7.95% - 27 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures 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 goods and works to be procured on the basis of inter- national competitive bidding, 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 shall reasonably request; 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 goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. (i) For bidding purposes, goods to be procured in accordance with the provisions of paragraph 1 above shall be grouped, to the extent practicable, in such a manner as to permit bulk procurement; and (ii) bidders for the works included in Part B of the Project shall be prequalified as described in paragraph 1.3 of Part A of the Guidelines. 4. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (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 goods evaluated on - 28 - a c.i.f. basis, and sales and similar taxes (applicable to finished domestic products) on goods evaluated on an ex-factory basis, 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. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in Ecuador may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility o, a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (i) Group A: bids offering goods manufactured in Ecuador 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 Ecuador equal to at least 20% of the ex-factory bid price of such goods. (ii) Group B: all other domestic bids. (iii) Group C: bids offering any other goods. 3. 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. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids - 29 - shall be further compared with the lowest evaluated bid from group A after adding to the evaluated 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 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures 1. Contracts for goods, works or services under Part A.1 of the Project shall be procured by the borrowers of Sub-loans through regular commercial channels from responsible suppliers. 2. Subject to the Bank's prior approval, works under Part B.2 (ii) and C.2 of the Project may be carried out by the Borrower through force accourr... 3. Contracts for goods not procured directly by BEV and services under Part C.1 of the Project shall be procured by the borrowers of Housing Loans through regular commercial channels from respon- sible suppliers. 4. Contracts for civil works for Part B of the Project or goods for Part C.1 of the Project which are estimated to cost less than the equivalent of $250,000 may be procured on the basis of com- petitive bidding, advertised locally, in accordance with proce- dures satisfactory to the Bank, provided, however, that the contracts so awarded do not exceed in the aggregate the equivalent of $6,000,000. 5. Purchases of vehicles and equipment estimated to cost less than the equivalent of $7,500 for Part B.6 of the Project, may be procured in accordance with local procurement procedures, satisfactory to the Bank, provided, however, that the contracts so awarded do not exceed in the aggregate the equivalent of $100,000. D. Review of Procurement Decisions by the Bank 1. Review of prequalification. The Borrower shall, before qualification is invited, inform the Bank in detail of the - 30 - procedure to be followed, and shall introduce such modifications in said procedure as the Bank shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any appli- cant for prequalification shall be furnished by the Borrower to the Bank for its comments before the applicants are notified of the Borrower's decision, and the Borrower shall make such addi- tions to, deletions from, or modifications in, the said list as the Bank shall reasonably request. 2. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for equipment estimated to cost the equivalent of $50,000 or more or for civil works estimated to cost the equivalent of $500,000 or more: (a) Before bids are invited, the Borrower 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 procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract qnd shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) 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. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the delivery to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. - 31 - 3. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the delivery 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 con- tract, together with the analysis of the respective bids, recom- mendations 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. 4. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an exten- sion of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. - 32 - SCHEDULE 5 Lending Terms and Conditions Regarding the Credit Programs Under Part A and Part C of the Project I. Sub-loans under Part A of the Project Types of Sub-loans, terms and sizes: Maximum term Maximum size Working capital 2 years S/50,000 Fixed assets 5 years S/60,000 Workshop construction 12 years S/80,000 Eligibility: Restricted to Small Scale Enterprises. Terms for Participating Banks: rediscounting of individual Sub-loans at about seven and ninety-five hundredths per cent (7.95%) per annum. On-lending interest rates to be charged by Participating Banks: 12%, or 11% plus commissions of 2-4% for longer-term lending II. Credit Program under Part C of the Project Maximum term Range of sizes (a) Housing Loans for 15 years S/6,000 to 57,000 residents of Loti- zaci6n Mapasingue, Guasmo North, Suburbio and other low-income areas of Guayaquil (excluding project improvements pro-iided by the Municipality) - 33 - Maximum term Range of sizes (b) Housing Loans for 15 years S/14,000 to 57,000 residents of Alegrfa (excluding land and infrastructure) (c) Housing Loans for 15 years S/60,000 to 100,000 residents of Floresta Pilot (including land and infrastructure) Eligibility: For Loans described in (a), (b) and (c) above: (i) monthly family income below S/6,000; and (ii) at least two years of residence in Guayaquil; In Addition: For Loans under (a) above: monthly family income above S/2,500. For Loans under (b) and (c) above: monthly family income above S/3,000. All amounts expressed in Sucres in this Schedule shall be amended from time to time by the Bank in consultation with the Borrower. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this JLday of WA 19T. FOR SECRETARY