Uruguay - Agricultural Development Project : Loan 1831 - Loan Agreement - Conformed

LOAN NUMBER 1831 UR Loan Agreement (Agricultural Development Project) between REPUBLICA ORIENTAL DEL URUGUAY and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated Apry . , 1980 LOAN NUMBER 1831 UR LOAN AGREEMENT AGREEMENT, dated AA r.- , 1980, between REPUBLICA ORIENTAL DEL URUGUAY (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called The Bank). ARTICLE 1 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). SeLtion 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms dei!ned in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Banco Central" means Banco Central del Uruguay; (b) "Banco Republica" means Banco de la Repu5blica Oriental del Uruguay; (c) "Comisi6n" means Comisi6n Honoraria del Plan Agro- pecuario, an agency of the Ministerio de Agricultura y Pesca of the Borrower, created under Law No. 12394, of July 2, 1957, of the Borrower; (d) "INC" means Instituto Nacional de Colonizaci6n; (e) "Intendencias" means the Intendencias Municipales of the departments of Paysandu and Salto; (f) "Subsidiary Loan Agreement" means the agreement to be entered into, pursuant to Section 3.02 (c) of this Agreement, between Banco Central and Banco Repu-blica; (g) "Subsidiary Loan" means a loan provided for in the Sub- sidiary Loan Agreement; - 2 - (h) "Livestock Fund" means the fund referred to in Section 3.02 (a)(i) of this Agreement; (i) "INC settler" means a farmer who is part of a rural settlement established by INC in any of the following colonies: Las Delicias, Dr. Luis Citraro, Dr. Baltasar Brum, Dr. Horacio Ros de Oger and Dr. Antonio Rubio; (j) "Investment Plan" means a plan of investment to be carried out by a livestock, crop-livestock or dairy farmer for improving farm facilities, infrastructure and pastures, including the establishment of pasture-crop rotation, and for expanding livestock herds and/or increasing their productivity, or by an INC settler for converting from traditional crops to dairy or mixed dairy-crop farming; (k) "Sub-loan" means a medium-, or long-term loan made by Banco Republica to a farmer or INC settler under Part A of the Project for the carrying out of an Investment Plan, in accordance with the lending and operating policies and procedures set forth in Part A of Schedule 5 to this Agreement, as such Schedule may be amended from time to time; (1) "Sub-loan Contract" means the agreement for any Sub-loan; (m) "Beneficiary" means a farmer or INC settler to whom Banco Republica proposes to make or has made a Sub-loan; (n) "Basic Agricultural Regulations" means Law of the Borrower No. 14.810, of August 11, 1978 and Decrees of the Borrower Nos. 458, 459, 460, 461, 462, 463, 464 (as amended by Decree of the Borrower No. 597, of October 25, 1978) and 465, all of August 11, 1978; (o) "Statement of Indexing Principles and Procedures" means the statement of indexing principles and procedures appli- cable to Sub-loans as set forth in Circular of Banco Republica No. 2624, dated December 27, 1979, approved by the Directorio of Banco Rep6blica on December 26, 1979; (p) "hectare" means an hectarea de producci6n basica media del pals as defined by Comisi6n Nacional de Estudio Agroecon6mico de la Tierra of the Borrower, in accordance with L2y No. 13.695, dated October 24, 1968, of the Borrower, as amended, and its regulations; and -3- (q) the symbol N$ and the term "nuevo peso" mean the unit of the currency of the Borrower. 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 twenty-four million dollars ($24,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance wich 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 described in Schedule 2 to this Agreement 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 September 30, 1986 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. Section 2.06. The Borrower shall pay interest at the rate of eight and twenty-five hundreths per cent (8.25%) 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 JLne 1. and December 1 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. The Borrower hereby designates Comisi6n for the purposes of taking any action required or permitted to be taken in respect of the Project 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) The Borrower, with the participation of Banco Central, Banco Republica, Comisi6n and INC, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, agricul- tural and engineering practices, and shall provide, or cause Banco Central, Banco Republica, Comisi6n and INC to be provided with, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall make, or cause to be made, all arrangements (including contractual arrangements) with Banco Central, Banco Rep6blica, Comisi6n and INC as shall be necessary to: (i) establish the responsibilities, functions and administrative procedures of Banco Central, Banco Rep6blica, Comisi6n and INC, respectively, in respect of the carrying out of the Project; and (ii) where applicable, make available to the agencies or entities in (i) hereof the equivalent in nuevos pesos of such portions of the proceeds of the Loan and other funds in nuevos pesos as shall be necessary for the carrying out of the Project. Section 3.02. The Borrower shall cause Banco Central to: (a) (i) maintain, upon terms and conditions satisfactory to the Bank, its existing Livestock Fund, with authority to hold, manage and reinvest all funds made available for, or accru- ing to Banco Central from, the carrying out of the Project, and (ii) keep within such Livestock Fund separate records and accounts for purposes of the Project; (b) pursuant to the provisions of the preceding paragraph (a), credit the Livestock Fund, immediately upon withdrawal from the Loan Account, with such amounts in nuevos pesos as shall be equivalent to the amounts withdrawn by the Borrower from time to time from the Loan Account on account of expenditures under Category 1 of Schedule 1 to this Agreement, the conversion into - 5 - nuevos pesos of the amounts withdrawn from the Loan Account to be made in accordance with the rate of exchange referred to in paragraph 7 of Schedule 1 to this Agreement; (c) enter into a Subsidiary Loan Agreement with Banco Repu'blica on the terms and conditions set forth in Part B of Schedule 5 to this Agreement and on such other terms and conditions as shall be satisfactory to the Bank, for the purpose of lending to Banco Repu5blica, out of the Livestock Fund, such amounts as shall have been transferred to the Livestock Fund in nuevos pesos pursuant to the preceding paragraph (b); (d) exercise its rights in relation to the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Bank and not to take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any provision of such Subsidiary Loan Agreement; (e) take all such action as shall be necessary from time to time to ensure that Sub-loans under Part A of the Pre. ?ect are made in accordance with lending and operating policie and procedures set forth in Part A of Schedule 5 to this Agreement, as such Schedule may be amended from time to time; and (f) establish and maintain: (i) in the Livestock Fund separate accounts in respect of amounts made available to Banco RepGblica under Part A of the Project; and (ii) separate accounts in respect of any other amounts disbursed for the purpose of carrying out the Project. Section 3.03. The Borrower shall cause Banco Rep'blica to maintain a separate department for the purpose of participating in the carrying out of Part A of the Project, under the direction of a full-time manager assisted by qualified credit technicians, and to entrust such department with the carrying out of Banco Repulblica's obligations under its Subsidiary Loan Agreement with Banco Central. Section 3.04. (a) The Borrower shall cause INC to enter into contractual arrangements, satisfactory to the Bank and Comisi6n, with Intendencias to establish in detail the respon- sibilities (including financial responsibilities), functions and administrative procedures of INC and Intendencias in respect of the carrying out of Part D of the Project. - 6 - (b) The Borrower shall cause INC to: (i) establish and maintain, to the satisfaction of the Bank and Comisi6n, a special unit for the carrying out of the Project; (ii) employ in such unit: (1) a coordinator whose qualifications and experience shall be satisfactory to the Bank and Comisi6n; and (2) seven qualified and experienced technicians; and (iii) provide such unit, promptly as needed, with such facilities, funds, resources, and qualified and experienced supporting staff as shall be re- quired for the efficient operation thereof. (c) The Borrower shall cause INC to: (i) establish and maintain, to the satisfaction of the Bank and Comisi6n, a special unit for monitoring and evaluating continuously the carrying out of the pertinent parts of the Project; and (ii) provide such unit, promptly as needed, with such facilities, funds, resources and qualified and experienced supporting staff as shall be required for the efficient operation thereof. Section 3.05. Any consultants employed by the Borrower for the carrying out of Part C of the Project shall have quali- fications and experience satisfactory to the Bank and shall be employed under terms and conditions satisfactory to the Bank. Section 3.06. The Borrower shall: (i) ensure the availability to farmers of an adequate supply of officially tested foot-and- mouth vaccines; and (ii) take all necessary action to ensure that all livestock belonging to farmers participating in the Project is periodically vaccinated against foot-and-mouth disease in accordance with the technical standards recommended by the Borrower's official veterinary service. Section 3.07. (a) The Borrower undertakes to insure or cause to be insured, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan or out of the proceeds of Sub-loans made under Part A of the Project against hazards incident to the acquisition, transporta- tion and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a cur- rency freely usable by the insured party 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. - 7 - Section 3.08. (a) The Borrower shall furnish, or cause to be furnished, to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for the Project, and any material modifica- tions thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain or cause to be main- tained records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it) and to identify the goods and services financed out of the proceeds of the Loan and out of the proceeds of Sub- loans made under Part A of the Project, and to disclose their use in the Project; (ii) shall 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 out of the proceeds of Sub-loans made under Part A of the Project and any relevant records and docu- ments; and (iii) shall furnish, or cause to be furnished, 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 proceeds of the Loan and the goods and services financed out of such proceeds and out of the proceeds of Sub-loans made under Part A of the Project. Section 3.09. (a) The Borrower shall cause Comisi6n and INC to: (i) prepare semi-annual progress reports on the carrying out of the Project; (ii) furnish to the Borrower and the Bank such progress reports within two months from the end of each semester; (iii) prepare annual evaluation reports on the carrying out of the Project; and (iv) furnish to the Borrower and the Bank such evaluation reports within four months from the end of each year. (b) 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 cause Comisi6n and INC to prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance of the obliga- tions under this Agreement and the accomplishment of the purposes of the Loan. - 8 - Section 3.10. 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 carrying out Part D of the Project. Section 3.11. (a) The Borrower shall cause Banco Central, Banco Republica, Comisi6n and INC to exchange views with the Bank with regard to the carrying out of the Project and other matters relating to the purposes of the Loan. (b) The Borrower shall cause Banco Central, Banco Republica, Comisi6n and INC to inform the Bank of any condition which interferes or threatens to interfere with the carrying out of the Project and the accomplishment of the purposes of the Loan. Section 3.12. The Borrower shall take all such action as shall be necessary to provide Comisi6n and INC, as and when required, with all funds and resources necessary to cover its operating and administrative costs, and with the adequate facilities for the carrying out of its operations under the Project. Section 3.13. The Borrower shall take and shall cause its agencies and entities to take all action which shall be necessary on their part to enable Banco Central, Banco Republica, Comisi6n and INC to carry out the activities required from them in accor- dance with this Agreement, and shall not take or permit to be taken any action which might interfere with the performance of such obligations. ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member con- cerned but to ensure that no other external debt shall h-ve priority over its loans in the allocation, realization or distri- bution 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 credicor of such external debt in the alloca- tion, realization or distribution of foreign exchange, such lien -9- 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 r press provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any 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 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 take or cause to be taken all action, including the provision of funds and resources, to ensure that the roads constructed under Part D of the Project are adequately operated, maintained, renewed and repaired. Section 4.03. The Borrower shall cause, Banco Central, Banco Repu5blica, Comisi6n and INC to: (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 which are satisfactory to the Bank. (b) (i) have the accounts referred to in paragraph (a) above and related statements for each fiscal year audited, in - 10 - accordance with sound 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 such entity's fiscal year, (A) certified copies of such accounts and related statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested, and (iii) furnish to the Bank such other information concerning such accounts and related statements of such entity and the audit thereof as the Bank shall from time to time reasonably request. Section 4.04. (a) The Borrower shall take or cause to be taken all such action as shall be necessary to: (i) ensure that the accounts referred to in Section 3.02 (a) (ii) of this Agree- ment and the statements referred to in paragraph (b) of this Section for each fiscal year of the Livestock Fund be audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish or cause to be furnished to the Bank as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of such accounts and statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish or cause to be furnished to the Bank such other information concerning such accounts and statements and the audit thereof as the Bank shall from time to time reasonably request. (b) The Borrower shall cause Banco Central to prepare quarterly statements of source and application of funds of the Livestock Fund and to furnish to the Bank as soon as available, but in any case not later than thirty days after the end of each such quarter, copy of such statements. Section 4.05. The Borrower shall: (i) at all times, maintain such policies and adopt such measures consistent therewith as shall be necessary or advisable to provide for an adequate agricul- tural development and to ensure the carrying out of the Project; (ii) in accordance with the provisions in (i) hereof, maintain the agricultural policies and measures - 11 - contained in the Basic Agricultural Regulations; and (iii) afford the Bank a reasonable opportunity to ex- change views with the Borrower on any new policies or measures which shall have the effect of amend- ing, suspending or abrogating the Basic Agricul- tural Regulations or any provision thereof. Section 4.06. The Borrower shall take all action, including the granting of all necessary authorizations, import licenses, foreign exchange permits and all other approvals required under the laws of the Borrower, to ensure the timely procurement of the goods and services required for the Project. Section 4.07. The Borrower shall compensate Banco Republica for twenty-five per cent (25%) of any loss of income incurred due to a default of any borrower under a Sub-loan in the payment of principal, as adjusted in accordance with the provisions of paragraph A.2 (a) of Schedule 5 to this Agreement, or interest. If any such loss originates in a default by a borrower who is an INC settler, the Borrower shall compensate Banco Republica for thirty-one per cent (31%) of such loss. 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) Banco Central, Banco Republica, Comisi6n or INC shall have failed to perform any of its respective obligations, responsibilities and functions with regard to the carrying out of the Project; (b) an extraordinary situation shall have arisen which shall make it improbable that Banco Central, Banco Repu"blica, Comisi6n or INC will be able to perform any of its respective obligations, responsibilities and functions with regard to the carrying out of the Project; (c) the Borrower or any other authority having jurisdic- tion shall have taken any action for the dissolution or dis- establishment of Banco Central, Banco Repiblica, Comisi6n - 12 - or INC or for the suspension of its operations related to the carrying out of the Project; (d) the Borrower or any other authority having jurisdic- tion shall divest Banco Central, Banco Repu"blica, Comisi6n or INC of any of the functions or powers vested in any of them which are necessary for the efficient carrying out of the Project; (e) the Statement of Indexing Principles and Procedures shall have been amended, suspended or abrogated, without the prior agreement of the Bank; (f) any provision of the Subsidiary Loan Agreement shall have been amended, terminated, assigned or waived or Banco Central shall have failed to enforce any provision of the Subsid- iary Loan Agreement, without the prior agreement of the Bank; and (g) Banco Rep6blica shall have become unable to pay its debts as they mature or any action or proceeding shall have been taken by Banco Repu'blica or by others whereby any of the property of Banco Republica shall or may be distributed among its creditors. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are spe- cified pursuant to paragraph (h) thereof, namely, that any of the events specified in paragraphs (a), (c), (d), (e), (f) and (g) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an addi- tional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that Banco Central has entered into a Subsidiary Loan Agreement with Banco Repu'blica pursuant to Section 3.02 (c) of this Agreement. Section 6.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General - 13 - Conditions, to be included in the opinion or opinions to be furnished to the Bank, namely, that the indexing principles and procedures established in the Statement of Indexing Principles and Procedures are legally binding and enforceable in accordance with the laws of the Borrower. Section 6.03. The date - 0 , is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Ministro de Agricultura y Pesca 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 Agricultura y Pesca Constituyente 1476 Montevideo Uruguay Cable address: Telex: MINISTERIO DE AGRICULTURA MAP-UY-6059 Y PESCA Montevideo For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) - 14 - 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 city of Montevideo, Repfiblica Oriental del Uruguay, as of the day and year first above written. REPUBLICA ORIENTAL DEL URUGUAY Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Y - 15 - 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) Subloans under Part A of the Project (a) Sub-loans 2,800,000 31% of amounts to INC disbursed by settlers Banco RepG'blica for the Project (b) Sub-loans 16,800,000 25% of amounts to other disbursed by farmers Banco Repu'blica for the Project (2) Technical advisory 1,100,000 100% services, training and studies (Part C of the Project) (3) Machinery, vehicles 800,000 100% of foreign and equipment expenditures (Part B of the Project) (4) Civil works 500,000 60% (Part D of the Project) (5) Unallocated 2,000,000 TOTAL 24,000,000 - 16 - 2. For the purposes of this Schedule, the term "foreign expen- ditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for: (a) expenditures prior to the date of this Agreement; (b) Sub- loans to INC settlers under Part A of the Project and expendi- tures of INC under Parts B, C and D of the Project until evidence satisfactory to the Bank has been furnished to the Bank that INC has fulfilled its obligations under Section 3.04 (b) (i) and (ii) (1) of this Agreement; and (c) in addition to the condition in (b) hereof, expenditures under Part D of the Project until evidence satisfactory to the Bank has been furnished -o the Bank that the contractual arrangements between INC and the Intendencias provided for in Section 3.04 (a) of this Agreement has been duly executed and delivered. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in para- graph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insuffi- cient 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 realloca- tion cannot fully meet the estimated shortfall, reduce the dis- bursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. - 17 - 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. 7. Withdrawals from the Loan Account in respect of Category 1 of paragraph 1 of this Schedule shall be made by the Borrower in the dollar equivalents of the nuevos pesos disbursed by Banco Rep'blica, the conversion of the nuevos pesos disbursed into dollars to be made at the Banco Central rate of exchange pre- vailing on the fifteenth day of the month on which the corres- ponding disbursement was made by Banco Rep5blica. 8. Applications for withdrawal of the proceeds of the Loan under Category (1) of the table set forth in paragraph 1 of this Schedule shall be made by Comisi6n on behalf of the Borrower in accordance with Section 2.09 of this Agreement and shall be certified by Banco Central. - 18 - SCHEDULE 2 Description of the Project The Project is part of a program of the Borrower to develop livestock and crop production in Uruguay by providing credit and technical services, and carrying out investments in infra- structure. The Project consists of the following Parts: PART A: Agricultural Credit Provision of medium- and long-term credit to livestock, crop-livestock and dairy farmers for pasture and associated crop improvement and other on-farm investments and to INC settlers for converting from traditional crops to dairy or mixed dairy- crop farming. PART B: Technical Assistance Provision of technical assistance to beneficiaries of credit under Part A of the Project, including assistance in the preparation of Investment Plans and in the supervision of the carrying out of such Investment Plans. PART C: Technical Advisory Services, Training and Studies (a) Technical advisory services and training for staff of Comisi6n and INC technicians engaged in services related to the carrying out of the Project, under programs satisfactory to the Bank. (b) Carrying out of studies and surveys designed to facili- tate the preparation of a future agricultural development project in Uruguay, the list and scope of such studies and surveys to be determined by agreement between the Borrower and the Bank. PART D: Infrastructure Construction of about 60 kilometers of farm-to-market roads to serve INC settlements included in the Project. Part D of the Project is expected to be completed by Decem- ber 31, 1983. - 19 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each June 1 and December 1 beginning December 1, 1983 through June 1, 1995 1,000,000 * 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. - 20 - 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 1.65% before maturity More than three years but not 3.30% more than six years before maturity More than six years but not 6.00% more than eleven years before maturity More than eleven years but not 7.15% more than thirteen years before maturity More than thirteen years 8.25% before maturity - 21 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part B hereof, goods included in Category (3) of the table set forth in paragraph 1 of Schedule 1 to this Agreement estimated to cost the equivalent of more than $100,000 shall be procured under contracts awarded in accord- ance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Cred- its" 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 to be procured on the basis of international competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Boirower shall prepare and forward to the Bank as soon as possible, and in any event not later than sixty days prior to the date of availability to the public of the first tender documents relating thereto, 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 in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of international competitive bidding. 3. 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 the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. 4. Machinery, vehicles and equipment shall be grouped, to the extent practicable, in such manner as shall be agreed between the Borrower and the Bank, prior to issuing the invitation to bid, so as to permit such bulk procurement as shall be consistent with appropriate technical and procurement practices. - 22 - B. Other Procurement Procedures 1. Contracts for the purchase of machinery, vehicles and equip- ment under Category (3) of the table set forth in paragraph 1 of Schedule 1 to this Agreement which cannot be grouped in groups costing more than $100,000 equivalent shall be procured ii. accordance with local competitive bidding procedures satisfactory to the Bank. 2. Contracts for goods and civil works under Category (1) of the table set forth in palagraph 1 of Schedule 1 to this Agree- ment shall be procured by recipients of Sub-loans through regular commercial channels, in Uruguay or abroad, on the basis of price quotations from responsible suppliers, all in accordance with procedures satisfactory to the Bank. 3. Civil works under Part D of the Project may be carried out by force account. C. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in Uruguay 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 of 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: (1) Group A: bids offering goods manufactured in Uruguay if the bidder shall have established to --he satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a values added in Uruguay equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. - 23 - 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similiar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. 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 comparision under paragraph 3 above, the lowest bid is a bid from group C, all group C bids 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. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts referred to in Part A.1 of this Schedule estimated to cost the equivalent of more than $100,000: (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 - 24 - the Bank of the name of the bidder to which it intends to award the contract and 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. (d) Evidence of the corresponding contractual arrangements shall be furnished to the Bank prior to the delivery to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to all contracts referred to in Part B.1 and 3 of this Schedule, 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 contracts, evidence of the correspond- ing contractual arrangements, together with the analysis of the respective bids, recommendations for award and such other informa- tion as the Bank shall reasonably request. The Bank shall, if it determines that the award of any contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension 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. - 25 - SCHEDULE 5 Lending and Operating Policies and Procedures A. Sub-loans 1. Eligibility and Procedures Sub-loans will be made by Banco Repdblica only to those Beneficiaries who show to the satisfaction of Banco Repuiblica that they meet all such creditworthiness criteria as will be reasonably established by Banco Repu'blica. Sub-loans will be based on detailed Investment Plans which will include cash flow projections, required Beneficiaries' contributions, and the need for short- medium- or long-term credit. Purchase of breeding bulls, heifers, rams and maiden ewes may be included in an Investment Plan provided the following conditions are met: (a) the farm has at least 20% of the pasture area improved; (b) the farmer qualifies as a practitioner of good herd and pasture management; (c) the animals purchased are specifically identified by Comisi6n staff; (d) the farmer undertakes to retain the maximum possible number of breeding heifers and maiden ewes resulting from the biological increase in his own herd; and (e) the farmer undertakes not to sell the animals purchased unless the sale is authorized by Comisi6n. Notwithstanding the provisions of the preceding paragraph, the purchase of livestock may always be included in an Investment Plan made for: (i) a farmer transforming his crop operations into a mixed crop and livestock operation provided the purchase of livestock is a necessary part of a soil restoration program; or (ii) an INC settler. - 26 - Banco Repfblica will be responsible for appraising the financial aspects of the Investment Plans. The technical and economic aspects of the Investment Plans will be appraised by Comisi6n. Beneficiaries with holdings covering in the aggregate up to 1,000 hectares will be assisted in the preparation of their Investment Plans by technical staff of Comisi6n. INC settlers will be assisted in the preparation of their Investment Plans by technical staff of INC supervised by Comisi6n. Beneficiaries with holdings covering in the aggregate more than 1,000 hectares will have to procure their own technical assistance for the preparation of their Investment Plans; consultants rendering such technical assistance will have to be approved by Comisi6n. After approval of the Sub-loans, the technical staff of Comisi6n and INC will continue to advise Beneficiaries, except for those with holdings covering in the aggregate more than 1,000 hectares who will have to procure their own technical assistance, as approved by Comisi6n. Technical staff of Comisi6n and INC will supervise the progress of the farm development undertaken. The cost of fees for technical assistance to prepare an Investment Plan and for advisory services during the carrying out of such Plan may be considered part of the investment cost for financing under a Sub-loan, up to an amount not exceeding 10% of the total cost of the Investment Plan. Banco Repu'blica will not make any Sub-loans unless such Sub-loans have been approved by Comisi6n. 2. Terms and Conditions Sub-loans Contracts will include, inter alia, the following terms and conditions: (a) Sub-loans will be denominated and repayable in nuevos pesos; the outstanding principal amount of each Sub-loan will be adjusted by Banco Rep'blica, on the basis of changes in producer prices, following the indexing principles and procedures established in the Statement of Indexing Principles and Proce- dures; (b) the principal amount of each Sub-loan will not exceed the following percentages of the cost of the investment to be financed therewith: - 27 - (i) 87% in the case of Sub-loans to INC settlers; and (ii) 80% in the case of Sub-loans to other farmers. (c) the principal amount of each Sub-loan, as adjusted in accordance with paragraph (a) above, will: (1) be repaid in not less than three years (except in cases where the Beneficiary exercises prepayment privileges) but not more than ten years, in such installments as will be commensurate with the Beneficiary's capacity to repay and the cash flow position of the Investment Plan, including a period of grace of up to five years; (2) bear interest at the rate of: (A) five per cent (5%) per annum in the case of Sub-loans to farmers with holdings covering in the aggre- gate 500 hectares or more; and (B) three per cent (3%) per annum in the case of Sub-loans to farmers with holdings covering in the aggregate less than 500 hectares; and (3) not be subject to any commissions, fees or charges whatsoever imposed by Banco Rep6b- lica; (d) any Sub-loan or Sub-loans made or proposed to be made to any single farmer (the term farmer to include any legal entity in which any such farmer owns a proprietary interest exceeding 50%) will not exceed, in the aggregate or together with any other Sub-loans to the same farmer, the equivalent of $150,000 (in terms of purchasing power of December 31, 1979 dollars); (e) the goods and services financed out of the proceeds of the sub-loan will be used exclusively for the purposes approved by Comisi6n; (f) the right of the Bank, Comisi6n, INC and Banco Repu5blica to inspect the premises, the improvement of which is financed by the Sub-loan, any equipment, materials or in- puts financed by the Sub-loan, the business of the Beneficiary, the operation thereof, and any relevant records and documents; (g) the right to obtain all such information as the Bank, Comisi6n, INC ana Banco Repu5blica will reasonably request relating to the foregoing and to the operations and financial condition of the Beneficiary; (h) the requirement that the goods and works to be financed out of the proceeds of the Loan will be procured in accordance with the provisions of Section 2.03 and Schedule 4 of this Agree- ment; - 28 - (i) the requirement that the Beneficiary carry out his Investment Plan, as approved, and carry on his business, with due diligence and efficiency and in accordance with appropriate technical, agricultural, commercial and financial practices and standards, and to maintain adequate records; (j) the requirement that the Beneficiary insure, or make adequate provision for the insurance of, any imported goods to be financed out of the proceeds of the Sub-loans against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation; and (k) the right to suspend or terminate access by the Benefi- ciary to the use of the proceeds of the Sub-loan upon failure by him to perform his obligations under the Sub-loan Contract and, in appropriate cases, to premature the Sub-loan. B. Subsidiary Loans 1. Eligibility Subsidiary Loans will be made by Banco Central to Banco Repablica, out of the Livestock Fund, to reimburse it in part for Sub-loans made under Part A of the Project. 2. Terms and Conditions The Subsidiary Loan Agreements will include, inter alia, the following terms and conditions: (a) Subsidiary Loans will be denominated and repayable in nuevos pesos; the outstanding principal amount of each Subsid- iary Loan will be adjusted from time to time in the same propor- tion applicable to the aggregate amount disbursed by Banco Repu'b- lica for Sub-loans. (b) Subsidiary Loans will finance the following percentage of the amount of Sub-loans: (i) 31% in the case of Sub-loans to INC settlers; and (ii) 25% in the case of Sub-loans to other farmers. (c) the adjusted outstanding principal amount of each Subsidiary Loan will: - 29 - (i) bear interest at the following rates per annum depending on the interest rates to be charged to Beneficiaries: Interest Rate to be Interest Rate to be Charged to Beneficiaries Charged to Banco Repfiblica 5% farmers with holdings 3% covering in the aggre- gate 500 hectares or more 3% farmers with holdings 1% covering in the aggre- gate less than 500 hectares ; and (ii) not be subject to any commissions, fees or charges whats.aier imposed by Banco Central. (d) Banco Republica will repay the principal of and pay the interest on Subsidiary Loans on the dates that repayments of principal and payments of interest of the Sub-loans financed with such Subsidiary Loans fall due. (e) Banco Republica will assume the risk of nonpayment for Sub-loans made by it. (f) Banco Rep6blica will provide, out of its own resources and on commercial lending terms, short-term loans to Beneficiaries to cover their working capital and other short-term financial requirements, in such amounts and for such periods as will be required under the respective Investment Plans. (g) Banco Republica will, upon request, furnish periodic statements to each Beneficiary showing the amounts drawn on the Beneficiary's Sub-loan account, including interest payments made and the outstanding adjusted balance of the respective Sub-loans. (h) Banco Rep6blica will establish and mait:tain separate acounts in respect of the Subsidiary Loan and of each Sub-loan made. (i) Until the Closing Date, Banco Rep6blica will not make to any farmers in Uruguay loans for purposes similar to those - 30 - described in Part A of the Project on conditions more favorable than those of Sub-loans. (j) The right to suspend or terminate access by Banco Rep'blica to the use of the proceeds of the Subsidiary Loan upon failure by it to perform its obligations under the Subsidiary Loan Agreement and, in appropriate cases, to premature the Subsid- iary Loan. (k) All prepayments received by Banco Rep'blica from Beneficiaries on account of Sub-loans will be transferred to the Livestock Fund not later than sixty days after receipt by Banco Rep6blica of the corresponding amounts from the Beneficiaries. (1) Banco Central will reimburse promptly Banco Rep'blica, from the Livestock Fund, the applicable percentage of the amounts lent by Banco Rep6blica on account of Sub-loans; and (m) The Subsidiary Loan Agreement will contain all other provisions necessary to ensure that Banco Rep'blica includes in the corresponding Sub-loan Contract the terms and conditions referred to in Part A of this Schedule. 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 2i-Lday of a AJ, 198 0. FOR SECRETARY