Honduras - Second Agricultural Credit Project : Credit 1005 - Credit Agreement - Conformed

OCT , CREDIT NUMBER (805-HO Development Credit Agreement (Second Agricultural Credit Project) between REPUBLIC OF HONDURAS and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1980 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated Afw 1 , 1980, between REPUBLIC OF HONDURAS (hereinafter called the Borrower) and INTER- NATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Associa- tion). WHEREAS (A) the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by making available the Credit as hereinafter provided; (B) the Borrower has also requested the International Bank for Reconstruction and Development (hereinafter called the Bank) to provide additional assistance toward the financing of the Project and by an agreement of even date herewith between the Borrower and the Bank (hereinafter called the Loan Agreement) the Bank is agreeing to provide such assistance in an amount equiva- lent to twenty million dollars ($20,000,000) (hereinafter called the Loan); (C) the Project will be partly carried out by Banco Central de Honduras (hereinafter called Banco Central), with the Bor- rower's assistance and, as part of such assistance, the Borrower will make available to Banco Central the proceeds of the Credit as hereinafter provided; (D) the Borrower and the Association intend that, to the extent practicable, the proceeds of the Credit be disbursed before disbursements of the Loan be commenced; and (E) by an agreement of even date herewith between the Association and the Bank and Banco Central (hereinafter called the Project Agreement), Banco Central has undertaken certain obliga- tions regarding its participation in the carrying out of the Project; WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association 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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Subsidiary Agreement" means the agreement to be entered into between the Borrower and Banco Central pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Agreement; and "Subsidiary Loan" means the Loan provided for in such Agreement; (b) "BANAFOM" means the Banco Nacional de Fomento, esLab- lished by the Borrower's Decree No. 71, dated February 16, 1950, and includes any successor to BANAFOM; (c) "Ministerio" means Ministerio de Recursos Naturales, the Borrower's Ministry of Natural Resources, and any adminis- trative subdivision or agency thereof, and any successor thereto; (d) "Instituto" means the Borrower's Instituto Nacional Agrario established by the Borrower's Decree No. 69, dated March 6, 1961, and includes any successor to Instituto; (e) "COHBANA" means Corporaci6n Hondurefa del Banano, a legal entity established by the Borrower's Decree No. 270, dated October 3, 1975, as such Decree may be amended from time to time, and includes any successor to COHBANA; (f) "COHDEFOR" means Corporaci6n Hondurefia de Desarrollo Forestal, and such term includes any successor thereto; -3- (g) "Project Executive Committee" means the committee referred to in Section 3.02 of this Agreement; (h) "Participating Intermediary" means COHBANA or any banking institution authorized to operate as such in the Republic of Honduras, including BANAFOM, which has entered or will enter into a Project Administration Contract; (i) "Project Entities" means COHDEFOR, Ministerio, Instituto and the Participating Intermediaries referred to collectively; (j) "Project Administration Contract" means each of the contracts to be entered into between Banco Central and a Project Entity as required by Section 2.06 (b) of the Project Agreement, and any amendment thereto; and "Project Administration Loan" means a loan provided for in a Project Administration Contract; (k) "Regulations" means Acuerdo No. 865 of the Borrower, dated December 18, 1969, issued by the Secretarla de Estado en los Despachos de Economia y Hacienda of the Borrower, as amended by Acuerdo No. 883 dated December 21, 1973, issued by the Secretaria de Estado en los Despachos de Hacienda y Cr6dito PGblico and by Acuerdo No. 494-A dated November 10, 1976, issued by the Secretarfa de Estado en los Despachos de Hacienda y Cr6dito Pfblico, as they may be further amended from time to time; (1) "Investment Plan" means a detailed proposal for invest- ments to be financed under the Project, such Investment Plan to include, inter alia, Beneficiaries' contributions in family labor and in kind; (m) "Sub-loan" means a loan made or proposed to be made under a Sub-loan Contract by a Participating Intermediary out of the proceeds of the Credit or the Loan to a Beneficiary for an Investment Plan; (n) "Sub-loan Contract" means a contract providing for a Sub-loan; (o) "Municipal Sub-loan" means a loan made or proposed to be made by Banco Central under a Municipality Sub-loan Contract out of the proceeds of the Credit or the Loan for building or improv- ing a municipal abattoir; -4- (p) "Municipal Sub-loan Contract" means a contract pro- viding for a Municipal Sub-loan; (q) "Beneficiary" means any individual, corporation, cooperativa, including a cooperativa de campesinos (as defined in the Agrarian Reform Law), empresas asociativas de campesinos (as defined in the Agrarian Reform Law), or any legal entity, other than a Participating Intermediary, that has entered or will enter, a Sub-loan Contract; (r) "Small Scale Farmer" means a Beneficiary who is in any of the two cases set forth in paragraph 4 of Schedule 1 to the Project Agreement; (s) "Agrarian Reform Law" means the Borrower's Decree Law No. 170, dated December 30, 1974 and published in La Gaceta No. 21.482 of January 28, 1975 and any regulation thereunder, as such Agrarian Reform Law may be amended from time to time; (t) "Project Unit" means the unit within Banco Central established pursuant to Section 3.01 (a) of the Prior Project Agreement; and "Project Director" means the head of the Project Unit charged with the functions referred to in Schedule 2 to the Project Agreement; (u) "Project Account" and "sub-Project Account", mean, respectively, the account and sub-accounts referred to in Section 2.06 (f) of the Project Agreement; (v) "Prior Project Agreement" means the Project Agreement (628-PO) (Agricultural Credit Project), dated July 2, 1976, between the Association and Banco Central; (w) "Lempiras" means the currency of the Borrower; (x) "Prodero Region" means the area covered by the Depart- ments of Copfn, Ocotepeque and Lempira; (y) "Prior Credit Agreements" means the Development Credit Agreement No. 179-HO (First Livestock Project) dated March 2, 1970, the Development Credit Agreement No. 434-HO (Second Live- stock Project) dated October 29, 1973 and the Development Credit Agreement No. 628-HO dated July 2, 1976, entered into between the Association and the Borrower, referred to collectively; -5- (z) "Guayape Valley Project Area" means the area of about 93,000 hectares in the Department of Olancho of the Borrower where the Guayape Regional Development Project is being carried out, partially financed under Loan Agreement No. 1576-HO entered into between the Borrower and the Bank on June 16, 1978; (aa) "Ministerio de Hacienda" means Ministerio de Hacienda y Cr6dito PGblico, the Borrower's Ministry of Finance and any administrative subdivision or agency thereof, and any successor thereto; and (bb) "Guidelines" means "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equiva- lent to five million dollars ($5,000,000). Section 2.02. The amount of the Credit may be iithdrawn from the Credit 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 Association and the Bank, for expenditures made (or, if the Association 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 Credit. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1985 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent -6- (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semiannually on February 15 and August 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each Febru- ary 15 and August 15 commencing August 15, 1990, and ending February 15, 2030, each installment to and including the install- ment payable on February 15, 2000, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of The United States of America is hereby specified for the purposes of Section 4.02 of the Geaeral Conditions. Section 2.09. Banco Central is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall: (i) cause Banco Central to perform in accordance with the provisions of the Project Agreement and the Subsidiary Agreement and each Project Administration Contract all the obligations therein set forth; (ii) cause COHDEFOR and COHBANA to enter into Project Administration Contracts with Banco Central, satisfactory to the Association, for the purpose of carrying out, respectively, Parts B and D.2 and A.1, A.2, A.3, C.2, C.3 and D.1 of the Project, and shall cause COHDEFOR and COHBANA to perform, in accordance with such Contracts, all the obligations therein set forth; (iii) enter, through Ministerio, into a Project Administration Contract with Banco Central, satis- factory to the Association, for the purpose of carrying out Parts C.1 and D.3 of the Project and shall perform, in accordance with such contract, all the obligations therein set forth; and (iv) take and cause to be taken all action, including the provision of -7- funds, facilities, services and other resources, necessary or appropriate to enable the Borrower, Banco Central, COHDEFOR and COHBANA to perform the obligations referred to in sub-paragraphs (i), (ii) and (ii) hereof, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Credit and the Loan to Banco Central under a Subsidiary Agreement to be entered into between the Borrower and Banco Central under terms and conditions which shall have been approved by the Association and the Bank, and which shall include the terms and conditions established in Schedule 4 to this Agreement. (c) The Borrower shall exercise its rights under the Subsidiary Agreement in such manner as to protect the interests of the Borrower, the Association and the Bank and to accomplish the purposes of the Credit and the Loan, and except as the Association and the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Agreement or any provision thereof. Section 3.02. The Borrower shall: (a) not later than September 1, 1980 establish and there- after maintain a Project Executive Committee, satisfactory to the Bank; such Committee to be chaired by a senior representative of Banco Central, and to include as permanent members senior representatives of Ministerio de Hacienda, Ministerio, Instituto, COHBANA, COHDEFOR, BANAFOM and the Bankers' Association of Honduras and the Project Director will act as its secretary; and (b) cause the Project Executive Committee to be responsible for, inter alia: (i) coordinating the activities of the Project Entities under the Project; (ii) reviewing the programs, budgets and progress reports of the Project Entities with regard to the Project; and (iii) reviewing and making recommendations to the Project Director regarding the audit reports referred to in -8- Section 4.02 of the Project Agreement and the progress, annual evaluation and project completion reports made by the Project Unit with regard to the Project. Section 3.03. Not later than September 1, 1980, the Borrower shall establish policies and methods for marketing plantains, satisfactory to the Association. Section 3.04. The Borrower shall: (a) keep the Association informed of the progress of the proposed reorganization of BANAFOM, especially with regard to: (i) the reorganization of the management of loan portfolios; (ii) the writing-off of related loan losses; (iii) the proposed new regional organization and manage- ment; (iv) the policy coordinating mechanisms to be estab- lished between BANAFOM, Ministerio and Instituto; (v) the proposed systems to be introduced in the future unit of trusteeship funds; (vi) the proposed new statement: of farm-loan policy; and (b) give the Association a reasonable opportunity to comment on such measures. Section 3.05. (a) Not later than September 1, 1980, the Borrower shall establish and thereafter maintain within COHBANA a Banana and Plantain Development Administration Unit to be in charge of the coordination of the development, operation and maintenance of the facilities and services of the banana and plantain plantations in the Ulda Valley, such unit to have such staff, functions and responsibilities as shall be satisfactory to the Association. (b) (i) The Borrower shall cause COHBANA, BANAFOM, Banco Central, Ministerio, Instituto and Ministerio de -9- Hacienda to enter into an agreement, satisfactory to the Association, to coordinate their participa- tion in the carrying out of Part A of the Project and to define the functions and responsibilities of the Banana and Plantain Development Administration Unit; and (ii) such agreement shall, inter alia: (A) define in detail the responsiblities (including financial responsibilities), functions and administrative procedures of the Project Entities and such Administration Unit; (B) establish criteria and procedures, satis- factory to the Association, for coordinating their actions under the Project and to solve any disputes on problems that may arise among them in relation to the carrying out of the Project; and (C) establish methods for recuperating the costs of the works and services provided by COHBANA under the Project. Section 3.06. In order to assist COHDEFOR in carrying out Part B of the Project, the Borrower shall cause COHDEFOR to employ consultants whose qualifications, experience and terms of employ- ment shall be satisfactory to the Association. Section 3.07. The Borrower shall: (a) carry out the studies included in Part C of the Project under terms of reference satis- factory to the Association; and (b) not later than September 1, 1980, present to the Association, for its aproval, a detailed proposal for the studies included under Part C of the Project. Section 3.08. The Borrower shall take all necessary action to establish and maintain thereafter, or cause Banco Central to establish and maintain thereafter, a mechanism adequate to restore the liquidity of each Participant Intermediary if land held under any title by a Beneficiary be expropriated as a result of the enforcement of the Agrarian Reform Law and such Participating Intermediary shall have become a holder of Agrarian Reform Londs in substitution for such Participating Intermediary credit against such Beneficiary under the respective Sub-loan Contract. - 10 - ARTICLE IV Remedies of the Association Section 4.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) a default shall occur in the performance of any obliga- tion on the part of Banco Central under the Project Agreement or under any Prior Agreement; (b) an extraordinary situation shall have arisen which shall make it improbable that Banco Central will be able to parform its obligations under the Project Agreement or under any previous Agreement or that any Participating Intermediary will be able to perform its obligations under the respective Project Administration Contract; (c) the Borrower shall have taken (i) any action for the dissolution or disestablishment of Banco Central or any Project Entity or for the suspension of its operations or. (1i) any other action which may materially and adversely affect the ability of Banco Central or any Project Entity to carry out the covenants, agreements and obligations set forth in any agreement entered into by Banco Central or such Project Entity for purposes of the Project; and (d) the Regulations or any provision thereof shall have been materially amended, suspended, abrogated, repealed or waived so as to affect the Project adversely. Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) any events specified in paragraphs (a), (b), (c) (ii) and (d) of Section 4.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower and Banco Central; (b) any events specified in paragraph (c) (i) of Section 4.01 of this Agreement shall occur; and (c) a default shall occur in the performance of any obliga- tion (other than the obligation to pay monies) on the part of the - 11 - Borrower under the Loan Agreement, and such default shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) that the execution and delivery of the Project Agreement on behalf of Banco Central have been duly authorized or ratified by all necessary corporate and governmental action; (b) that the execution and delivery of the Subsidiary Agree- ment on behalf of the Borrower and Banco Central, respectively, have been duly authorized or ratified by all necessary corporate and governmental action; (c) that the execution and delivery of at least one Project Administration Contract on behalf of Banco Central and any Parti- cipating Intermediary, respectively, has been duly authorized or ratified by all necessary corporate action; (d) that the Association has approved a program to carry out Part D of the Project; (e) that the Borrower has taken all measures satisfactory to the Association to establish the legal framework that shall transform BANAFOM into an agricultural development bank, with functions and responsibilities that will, inter alia, enable BANAFOM to take all measures referred to in Section 3.04 of this Agreement; and (f) that all conditions precedent to the effectiveness of the Loan Agreement have been fulfilled, subject only to the effectiveness of this Agreement. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by Banco Central, and is legally binding upon Banco Central in accordance with its terms; and - 12 - (b) that the Subsidiary Agreement has been duly authorized or ratified by the Borrower and Banco Central and is legally binding upon the Borrower and Banco Central in accordance with its terms. Section 5.03. The date is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 5.04. The obligations of the Borrower under Sections 3.02 and 3.04 of this Agreement and the provisions of Section 4.01 of this Agreement shall cease and terminate on the date on which the Development Credit Agreement shall terminate or on a date 20 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Ministro de Hacienda y Credito P'blico of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministerio de Hacienda y Credito PGblico Tegucigalpa, D.C. Honduras Cable address: HACIENDA Tegucigalpa, D.C. Honduras For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America - 13 - Cable address: Telex: INDEVAS 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 HONDURAS By /s/!el (--A( k LUvc Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By IS/ H.:.ijw Sa Regional Vice President Latin merica and the Caribbean - 14 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit and of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit and of the Loan, the allocation of amounts of such proceeds to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit and of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Sub-loans to 4,000,000 77% of amounts Small-Scale disbursed by Farmers for Participating banana and Intermediaries plantain for purposes development of the Project (2) Sub-loans to 5,500,000 77% of amounts Small-Scale disbursed by Farmers for Participating other agri- Intermediaries cultural de- for purposes velopment of the Project (3) Sub-loans to Bene- 7,500,000 70% of amounts ficiaries other disbursed by than Small-Scale Participating Farmers Intermediaries for purposes of the Project (4) Civil works and 1,500,000 77% Engineering and Common Services for Part A.3 of the Project - 15 - Amount of the Credit and of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (5) Vehicles and equip- 167,000 100% of foreign ment for Parts B expenditures and E of the Proj- and 67% of lo- ect cal expendi- tures (6) Materials and services, 1,241,000 100% of foreign including salaries expenditures for Parts B and E of and 67% of lo- the Project cal expendi- tures (7) Consultant services 460,000 100% under Parts B and E of the Project (8) Training under 200,000 100% of foreign Part D of the expenditures the Project and 67% of lo- cal expendi- tures (9) Studies under Part C 1,800,000 100% of foreign of the Project expenditures and 67% of local expendi- tures (10) Unallocated 2,632,000 TOTAL 25,000,000 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 - 16 - 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 and the Association 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 or the Credit decreases or increases, the Bank or the Association 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 and the Association. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of payments made for expendi- tures: (a) prior to the date of this Agreement except that with- drawals, in an aggregate amount not exceeding the equivalent of $100,000 may be made in respect of Categories (5) and (6) under Part B.1 of the Project on account of payments made for such expenditures before that date but after January 1, 1980; (b) made by a Project Entity until such Project Entity has entered into a Project Administration Contract with Banco Central, satisfactory to the Association; (c) under Category (4) until the Association has received: (i) a program, satisfactory to the Association, for cost recovery from the ultimate Beneficiaries of the works included under Part A.3 of the Project; (ii) final engineering studies, satisfactory to the Association, for the first year of investment under Part A.3 of the Project; and (iii) a program, satisfactory to the Association, for organizing the Beneficiaries and regulari- zing the land tenure situation in the Banana and Plantain Develop- ment areas included in the Project. - 17 - In addition, except as the Borrower, the Bank and the Asso- ciation shall otherwise agree, and until all amounts of the Credit shall have been withdrawn or committed, no withdrawals shall be made from the Loan Account except under commitments entefed into by the Bank pursuant to Section 5.02 of the General Conditions referred to in Section 1.01 of the Loan Agreement. 5. Notwithstanding the allocation of an amount of the Loan or of the Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank or the Association has reason- ably estimated that the amount of the Loan or of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank or the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan or of the Credit, as the case may be, which are then allocated to another Category and which in the opinion of the Bank or the Association 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 with- drawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Association or the Bank shall have reasonably deter- mined that the procurement of any item in any Category is incon- sistent 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 or of the Credit and the Bank or the Association may, without in any way restricting or limiting any other right, power or remedy of the Bank or of the Association under the Loan Agreement or the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Loan or of the Credit as, in the Bank's or the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan or of the Credit. - 18 - SCHEDULE 2 Description of the Project The Project will assist the Borrower's national programs of agricultural development and agrarian reform, principally by: (a) expanding the area under food crops and for livestock production to provide more adequate nutrition for the national population; (b) improving the contributions of the agricultural sector to export earnings and import substitution; (c) increasing employment opportunities and improving family incomes on farms and in industries associated with the transform- ation of agricultural products; and (d) supporting selected institutions for further planning and development of the agricultural sector and for the con- servation of natural resources. The Project consists of: Part A: A program in Honduras of: 1. financing of approved crop and livestock Investment Plans; 2. financing the acquisition of machinery to be used for agricultural development; 3. civil works, including final engineering studies for flood protection and land drainage for about 2,400 hectares of banana and plantain development along the Ulda river; and 4. financing the building or improvement of municipal abattoirs. Part B: A pilot forestry program in western Honduras, including: 1. The establishment of: (i) a nursery for the annual production of about 1,800,000 pine seedlings for a reforestation program; and - 19 - (ii) two nurseri-s for the annual production of about 800,000 broadleaf seedlings for firewood. 2. A reforestation program of about 3,500 hectares of pine for timber production on state-owned land. 3. The development of a forest fire protection system to cover the Prodero Region, the development of such system to include the acquisition and utilization of fire- fighting equipment. 4. The formation and operation of a forest management unit for the existing forests in the Prodero Region. Part C: Studies 1. Studies of the water resources and appropriate develop- ment strategy for a valley or valleys of high agricul- tural potential to be selected by the Borrower in consultation with the Bank. 2. Studies on the use for animal feeding of rejected and surplus fr .'ts, and leaves and pseudostems of bananas and plant,,I. 3. Studies for future improvement of COHBANA's organiza- tional structure, including, inter alia, management, administrative, accounting, financial and technical aspects. Part D: Training 1. About 24 man-months of training for COHBANA staff in management, accounting, financial and technical matters. 2. About 24 man-months of training for COHDEFOR staff in forest management matters. 3. A program of in-service training for the staff of Ministerio, Instituto and Participating Intermediaries. 4. About 8 man-months of foreign training for Project Unit staff in management, cropping and animal husbandry matters. - 20 - Part E: Stengthening of the activities and staffing of, and acquisi- tion and utilization of equipment and vehicles for, the Project Unit. The Project is expected to be completed by December 31, 1984. - 21 - SCHEDULE 3 Procurement A. General Procedures 1. Except as provided for in paragraph A.2 of this Sche- dule, contracts for goods, works and services under Part A of the Project shall be procured by the Beneficiaries through regular commercial channels from responsible suppliers, provided, however, that contracts (other than contracts for consultant services) expected to exceed the equivalent of $50,000 shall not be procured by the respective Beneficiary before obtaining: (i) price quotations from at least three suppliers; and (ii) prior approval from the respective Participating Intermediary. 2. Contracts for civil works under Part A.3 of the Project shall be procured through local competitive bidding procedures acceptable to the Bank, unless such works are carried out directly by COHBANA or Ministerio through force account. 3. Contracts for civil works under Part B of the Project shall be procured through local competitive bidding procedures acceptable to the Bank, unless such works are carried out directly by COHDEFOR through force account. 4. Unless the Bank shall otherwise agree, contracts for vehicles and equipment under Parts B and E of the Project shall be procured through local competitive bidding procedures, acceptable to the Bank. B. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts under Parts A.3, B and E of the Project: With respect to all contracts for goods or civil works estimated to cost the equivalent of $75,000 or more: (a) Before bids are invited, Banco Central shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, to- gether 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 Association shall reasonably request. Any further modification to the bidding documents shall - 22 - require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, Banco Central shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and shall furnish to the Associa- tion, in sufficient time for its review, a detailed report by the Project Director on the evaluation and comparison of the bids received, together with the recommendations for award of the said Project Director and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with Part B, Annex 3 and other applicable provisions of the Guidelines, or this Sche- dule, promptly inform Banco Central and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association'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 Association promptly after its execution and before deliv- ery to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract to be financed out of the proceeds of the Credit and not governed by the preceding paragraph, Banco Central shall furnish to the Association, promptly after its execution and before delivery to the Associa- tion of the first application for withdrawal of funds from the Credit 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 Association shall reasonably request. The Association shall, if it deterrines that the award of the contract was not consistent with Part B, Annex 3 and the applicable provisions of the Guidelines, or this Schedule, promptly inform Banco Central and state the reasons for such determination. - 23 - SCHEDULE 4 Terms and Conditions of the Subsidiary Agreement A. The Borrower shall make available to Banco Central the proceeds of the Credit and Loan under terms and conditions satis- factory to the Association and the Bank, including inter alia, the following: (i) an amount of not less than the equivalent to the proceeds of the Credit and the Loan allocated to Categories (5) to (8) of Schedule 1 to this Agreement for the carrying out of Parts B and D.2 of the Project (to be made available to COHDEFOR for carrying out such Parts of the Project) shall be relent for 30 years, including a 10-year grace period, under the same terms of the Credit; (ii) an amount not less than the equivalent to the proceeds of the Credit and Loan allocated to Category (9) of Schedule 1 to this Agreement for the carrying out of Parts C.2 and C.3 of the Project (to be made available to COHBANA for carrying out such Parts of the Project) shall be relent for 30 years, including a 10-year grace period, under the same terms of the Credit; (iii) an amount of not less than the equivalent to the proceeds of the Credit and the Loan allocated to Category (9) of Schedule 1 to this Agreement for the carrying out of Part C.1 of the Project as a grant (to be made available to Ministerio, on the same terms, for carrying out such Part of the Project); (iv) the remainder of the proceeds of the Credit shall be relent to Banco Central for 20 years, including a 10-year grace period, at an interest rate of 2% per annum; and (v) the remainder of the proceeds of the Loan shall be relent to Banco Central under the same terms and conditions of the Loan. B. The foreign exchange risk on the servicing of the Credit and the Loan shall be borne by Banco Central with regard to the proceeds of the Credit and the Loan withdrawn from the Credit and Loan Accounts for financing the carrying out of Parts A, D.1, D.3, D.4 and E of the Project, and by the Borrower with regard to the proceeds of the Credit and the Loan withdrawn from the Credit and the Loan Accounts for financing the carrying out of Parts B, C and D.2 of the Project. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have sigr)ed this Certifi- cate and affixed the Seal of the Association thereunto the /L7fLday of I91. FOR SECRETARY