Peru - Eighth Highway Project : Loan 2091 - Loan Agreement - Conformed

oFFICIAD : LOAN NUMBER 2091 PE DocummmeB Loan Agreement (Eighth Highway Pro ject) between REPUBLIC OF PERU and INTERNATIONAL BANK FOR. RECONSTRUCTION AND DEVELOPMENT and BANCO DE LA NACION Dated u, 1982 LOAN NUMDER 2091 PE LOAN AGREEMENT AGREEMENT, dated UL , 1982, between REPUBLIC OF PERU (hereinafter called the Borrower) and INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and BANCO DE 1A NACION (hereinafter called Banco Naci6n). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) Banco Naci6n has participated in the negotiation of this Agreement, has made representations to the Bank to the effect that it has discharged all of its other responsibilities as financial agent of the Borrower's Ministry of Transport and Communications pursuant to the Borrower's Decreto Legislativo No. 5 published in El Peruano on December 31, 1980, and has undertaken certain additional obligations in respect of the Bank and the Borrower as hereinafter provided; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: 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 October 27, 1980, 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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: -2- (a) "Crfdito Piblic6" means Direcci6n General de Crfdito PG"blico of the Borrower's Ministry of Economy, Finance and Commerce; (b) "Prior Project" means the project described in Schedule 2 to the Loan Agreement between the Borrower and the Bank dated May 27, 1976, and such agreement, as amended up to Janu- ary J0, 1981, is hereinafter called the Prior Loan Agreement; (c) "Ministry" means the Borrower's Ministry of Transport and Communications or any successor thereto; (d) "International Office" means Oficina de Pr6stamos Inter- nacionales, the office of internationally financed projects of the Ministry, as such office developed from the unit estab- lished under Part M of the Prior Project, and the term includes any office (i) resulting from the reorganization of the Ministry under the Borrower's Legislative Decree No. 96 published in El Peruano on June 1, 1981, and (ii) which assumes the functions of the aforesaid office of internationally financed projects; (e) "SEM" means the Ministry's Servicio de Equipo Mecanico or any successor thereto; (f) "Special Account" means the account to be opened pursuant to Section 2.02 (b) of this Agreement; (g) "Revolving Fund" means the fund to be established pursuant to Section 3.01 (b) (ii) of this Agreement; (h) "Road Investment Plan" means the road projects which have been listed in Schedule 5 to this Agreement, as such Schedule may be amended from time to time; and (i) "Original Price" means the original price in any given contract, as such price mal be adjusted from time to time due to inflation in accordance with the terms and conditions of such contract. 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 -3- or referred to, an amount in various currencies equivalent to ninety three million dollars ($93,000,000). Section 2.02. (a) 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. (b) The Borrower shall, for purposes of Parts A and E of the Project (excluding Part E (i) (4)), establish and maintain a Special Account in dollars in Banco Naci6n, on terms and conditions satisfactory to the Bank. Payments out of the Speclal Account shall be made exclusively to reimburse the Borrower for the reasonable cost of goods and services required to carry out Parts A or E of the Project (excluding Part E (i) (4)) and to be financed under this Agreement in accordance with the provi- sions thereof. Banco Naci6n shall authorize the Borrower to withdraw from the Special Account on the basis of the evidence referred to in paragraph (d). (c) The Bank shall, after the Effective Date and at the request of the Borrower, withdraw on behalf of the Borrower from the Loan Account and deposit in the Special Account all or part of the amount of the Loan then allocated to Category (7) of the table set forth in paragraph 1 of Schedule 1 to this Agreement. In the event the amount of such initial deposit is less than the amount of the Loan then allocated to such Category (7), the Borrower may, from time to time, request the Bank to make one or more additional withdrawals from the Loan Account under such Category (7) and make one or more additional initial deposits to the Special Account, provided, however, that the aggregate of all initial deposits shall not exceed the amount of the Loan allocated from time to time to such Category (7). Notwithstanding the aforesaid and, at the request of the Borrower, the Bank on behalf of the Borrower shall further withdraw from the Loan Account and deposit in the Special Account such amounts as shall be required to replenish the Special Account with amounts equal to payments made out of the Special Account for expenditures for Parts A and E of the Project (excluding Part E (i) (4)) eligible for financing under this Agreement. Except as the Bank shall otherwise determine, each application for withdrawal from the Loan Account in respect of a deposit in the Special Account, other than an initial deposit, shall be made in respect of Category (1) of the table set forth in paragraph 1 of Schedule 1 to this Agreement, and in the same respective amounts as have been justified by the evidence supporting the request for such deposit furnished pur- suant to paragraph (d) of this Section. (d) Prior to or at the time of each request by the Borrower for a deposit by the Bank on behalf of the Borrower in the Special Account, other than an initial deposit, the Borrower shall furnish to the Bank in respect of each payment out of the Special Account such documents and other evidence as the Bank shall reasonably request, showing that such payment was made to reimburse the Borrower for the reasonable cost of goods or services required for Parts A or E of the Project (excluding Part E (i) (4)) and to be financed out of the proceeds of the Loan in accordance with the provisions of this Agreement. (e) If the Bank shall have determined that any payment out of the Special Account: (i) was made to reimburse the Borrower for any expenditure or in any amount not eligible for financing from the Loan Account, or (ii) was not justified by the evidence furnished pursuant to paragraph (d) of this Section, the Borrower shall, promptly upon notice from the Bank aid, unless otherwise determined by the Bank, prioi to any further deposit into the Special Account by the Bank, deposit in the Special Account or, if the Bank shall so request, refund to the Bank an amount equal to the amount of such payment or the portion thereof not so eligible or justified. (f) Notwithstanding the provisions of paragraph (c) of this Section: (i) if the Bank shall have determined that all further withdrawals from the Loan Account may be made directly by the Borrower from the Loan Account under paragraph (a) of this Section, or (ii) if the total amount withdrawn from the Loan Account under Category (1) of the table set forth in paragraph 1 of Schedule 1 to this Agreement shall have reached an amount equivalent to the aggregate amount of the Loan then allocated to such Category less twice the amount of the Loan withdrawn from the Loan Account under Category (7) of the aforesaid table, the Bank may deny any request by the Borrower for further deposits in the Special Account. Withdrawals from the Loan Account for the Project of the remaining amount of the Loan shall thereafter follow such procedures as shall be agreed between the Borrower and the Bank and shall be made only to the extent that the Bank shall be satisfied by the evidence furnished in support of the applications -5- for such withdrawal that all payments by the Borrower out of the Special Account were,made on account of the reasonable cost of goods or services required for Parts A or E of the Project (excluding Part E (i) (4)) and to be financed out of the proceeds of the Loan in accordance with this Agreement. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and civil works required for the Project and 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, 1986 or such later date as the -.-ank shall establish. The .Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Bank a commit- ment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the L6an not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of eleven and three-fifths per cent (11-3/5%) 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 March 1 and September 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. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out Part G (i) of the Project through the office established, under the President of the Borrower's Council of Ministers, for the Pichis-PalcazG' Project, and all other Parts of the Project through the Ministry, all with due diligence and efficiency and in conformity with appropriate administrative, engineering and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. -6- (b) Without limitation or restrictilan upon the provisions of paragraph (a) of this Section, the Borrower shall: (i) take all such measures as shall be necessary to ensure that the Interna- tional Office (A) assumes, in respect of the Project, the same duties it presently discharges in respect of the Prior Project, expanded so as to include other duties provided for in this Agreement, and (B) is maintained until one year after the Closing Date and provided, promptly as needed, with such funds, facili- ties, services and other resources as shall be required for the efficient discharge of all of its aforesaid duties; and (ii) establish by August 31, 1982 and maintain thereafter until the Closing Date, in Banco Naci6n and on terms and conditions satis- factory to the Bank, a Revolving Fund for ise by the Ministry in meeting expenditures for Parts A and E (other than E (i) (4)) of the Project, and ensure that, (A) the amounts available in such Fund do not fall below 8 weeks estimated expenditures for such Part of the Project, (B) funds are promptly deposited in such Fund so as to cover any difference between the amouhts withdrawn from time to time from such Fund for the aforesaid expenditures and the amounts disbursed or to be disbursed from the Special Account or the Loan Account in respect of such expenditures, and (C) such Fund is at all times operated in accordance with rules and guide- lines satisfactory to the Bank. Section 3.02. (a) In order to assist the Borrower in carrying out Parts A (iv), B, C (iii), D (other than D (i)), E (iii), F, G and H of the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank; such employment to be made in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by the World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. (b) In order to assist the Borrower in carrying out Part C (ii) of the Project, the Borrower shall contract services from suppliers of the equipment and vehicles involved or hire addi- tional mechanical staff for SEM, both on terms and conditions satisfactory to the Bank. (c) In order to assist the Borrower in carrying out Part D (i) of the Project, the Borrower shall employ experts whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. II, addition to the 5 experts to be hired pursuant to Section 6.01 (a) of this Agreement, the -7- Borrower shall hire not less than 12 experts for purposes of this sub-paragraph (c) by the date specified in the letter referred to in such Section. Section 3.03. (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) The Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the purposes of the Project. Section 3.04. (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, through the International Office, 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 services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable the Bank's representa- tives 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, through the International Office furnish to the Bank at regular intervals all such information as the Bank shall reason- ably request concerning the Project, its cost and, where appro- priate, 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. (c) Upon the award by the Borrower of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) 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, through the International Office, -8- shall 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 by the Borrower and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. Section 3.05. 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 Parts A, C (iv), D (ii) and E of the Project and shall furnish to the Bank, promptly after such acqui- sition, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. Section 3.06. The Borrower shall exchange views with the Bank on the findings and recommendations of the study on the basis of which the Borrower shall determine the roads and civil works to be included in Part B of the Project before such determination is made. Section 3.07. In order to enable the Ministry to attract and maintain qualified and experienced staff for its operation as well as to carry out the Ministry's descentralization policies, the Borrower shall: (i) exercise all powers granted under the Borrower's laws and regulations particularly the powers granted under the Borrower's Legislative Decree No. 96 published in El Peruano on June 1, 1981; and (ii) after exchanging views with the Bank, but not later than January 1, 1984, put into effect a revised salary structure, including a revised grade classification for such staff. Section 3.08. The Borrower shall furnish to the Bank a program satisfactory to the Bank in respect of purchases for purposes of Part C (i) of the Project before placing any order in respect thereof. 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 -9- normal circumstances, 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 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. (a) The Borrower shall maintain or cause to be maintained records and separate accounts adequate to reflect in accordance with consistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the Ministry and other departments or agencies of the Borrower (including Banco Naci6n) responsible for carrying out the Project or any part thereof. - 10 - (b) The Borrower shall: (i) have or cause to have the Revolving Fund and the separate accounts referred to in paragraph (a) of this Section for each fiscal year audited in accordance wi: aRppropriate principles consistently applied by independent auditors acceptable to the Bank; (ii) furnish to the Bank through the International Office as soon as available but in any case not later than six months after the end of each such year, the reports of such audits by such auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank through the International Office such other information concerning said "Fund and accounts and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. Banco Naci6n shall: (i) have the Special Account for each fiscal year audited in accordance with appro- priate auditing princi)les consistently applied by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year, 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 the Special Account and the audit thereof as the Bank shall from time to time reasonably request. Section 4.04. (a) The Borrower shall: (i) cause all the public roads under the Ministry's jurisdiction to be maintained and repaired all in accordance with sound engineering practices; and (ii) provide, promptly as needed, the funds, facilities, services and other resources required for the foregoing. (b) The Borrower shall take all such measures permitted under the laws and regulations of the Borrower, including con- tractual arrangements, as shall be necessary to cause regional or other authorities with road jurisdiction (i) to maintain adequately all the roads under their reLpective jurisdiction, and (ii) to ensure that the funds, facilities, services and other resources required for the foregoing are available as and when needed. (c) The Borrower shall: (i) cause all of its road con- struction apd maintenance machinery and equipment required for maintenance of the roads referred to in paragraph (a) above, and if such shall be the case under any of the arrangements referred to in paragraph (b) above, the roads referred to in such paragraph - 11 - also, to be adequately maintained and repaired; (ii) cause suit- able workshops to be established and maintained in suitable places for the foregoing; (iii) grant priority in the use of the afore- said machinery and equipment for the maintenance of the roads referred to in paragraph (a) and (b), in that order; and (iv) provide, and cause the aforesaid authorities to provide, promptly as needed, the funds, facilities, services and other resources required for the foregoing. (d) The Borrower shall cause each of the authorities referred to in paragraph (b) above: (i) to cause all of their respective road construction and maintenance machinery and equipment required for maintenance of the roads referred to in such paragraph undet the jurisdiction of such authority to be adequately maintained and repaired; (ii) to cause suitable workshops to be established and maintained in suitable places for the foregoing; and (iii) to provide, promptly as needed, the funds, facilities, services and other resources required for the foregoing. (e) Without limiting the generality of the preceding provi- sions of this Section, the Borrower shall take all necessary action to cause the dimensions, axle-loading and weight of the vehicles using roads of the Borrower to be kept within the limits provided by the Borrower's laws and regulations and to ensure, and cause regional and other authorities with road jurisdiction to ensure consistent enforcement of the laws and regulations govern- ing road-use. All of the aforesaid to be done in a fashion consis- tent with the system to be established under Part D (iii) of the Project, after such system shall be established by the Borrower not later than December 31, 1982. Section 4.05. The Borrower shall take all such action as shall be necessary to ensure that: (i) by October 1, 1982 the jurisdiction for road planning, design, construction and main- tenance activities in respect of all of the Borrower's roads is defined and distributed among national, regional and other authorities with jurisdiction on roads as a function of a road classification; (ii) such road classification is updated at least annually; and (iii) the Ministry shall keep adequate separate records accounting for maintenance expenditures at national and regional levels. Section 4.06. The Borrower shall: - 12 - (a) furnish to the Bank for comment, not later than July 31, 1982, and update by every anniversary thereafter, a program of action to be taken, including the estimated cost thereof, in the next succeeding calendar year in respect of road maintenance, such program to be based on the maintenance plan described in the letter supplemental to this Agreement (re Road Maintenance Plan and Budgets) of even date herewith; (b) furnish to the Bank for comment, not later than Septem- ber 1, 1982, and update by every anniversary thereafter, a program of action to be taken (including the estimated cost thereof) in the next succeeding year in respect of maintenance equipment renewal, such program to be prepared on the basis of the systems and programs developed as a result of the carrying out of Part C (iii) of the Project; (c) furnish to the Bank, not later than September 1, 1982, a program of action to be taken, (including the estimated cost thereof) if agreed between the Borrower and the Bank, in respect of road rehabilitation in the next following four calendar years; such program to be prepared on the basis of the results obtained by carrying out Part L of the Prior Project and to be reviewed annually by the Borrower and the Bank not later than on every anniversary of the aforesaid date; (d) furnish to the Bank as soon as available the budget for expenditures to be incurred by the Borrower during eacb fiscal year in respect of roads, each such budget to show, inter alia, the funds allocated in respect of the carrying out of the action included in each of the corresponding programs referred to in the preceding paragraphs of this Section; and (e) exchange views with the Bank on any new investment which may result in expenditures equivalent to $10,000,000 or more; for purposes of this sub-paragraph "new investment" means an investment corresponding to a project which is not included in the Road Investment Plan. 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: - 13 - (a) Banco Naci6n shall have failed to perform any cove- nant, agreement or obligation of Banco Naci6n under the Loan Agreement; and (b) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of any loan made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agree- ment providing therefor, or (B) any such loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satis- faction of the Bank that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. I Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following events are specified pursuant to para- graph (h) thereof: (a) any event specified in paragraph (a) 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 and to Banco Naci6n also; (b) any event specified in paragraph (b) (i) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of subparagraph (ii) of that paragraph. - 14 - ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) that five experts have been hired to fill, for purposes of Part D (i) of the Project, the positions listed in the letter from the Borrower's Minister of Transport and Communications to the Bank dated November 17, 1981; and (b) that this Agreement has been duly registered by Cr6dito PGblico. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank on behalf of the Borrower namely, that the Loan Agreement has been duly reg ered by Cr6dito PGblico. Section 6.03. The date , 193, 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 Minister of Economy, Finance and Commerce of the Borrower and the Director of Cr6dito Pfblico are severally designated as representatives 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 Economia Finanzas y Comercio Avenida Abancay 51 Cuadra Lima PerG' -15- With copy to: Ministerio de Transportes y Comunicaciones 28 de Julio 800 Lima, Peru" Telex: 25511 PE DIGECOM For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For Banco Naci6n: Avenida Abancay 491 Lima Peru' Cable address: Telex: Lima, Peru' 25320 PE IN WITNESS WHEREOF, the parties hereto, and Banco Naci6n also in the role described in the Preamble to this Agreement, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names - 16 - in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF PERU By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Latin America and the Caribbean BANCO DE LA NACION By Authorized Representative - 17 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works for 44,500,000 51% Parts A and E (excluding Part E (i) (4)) of the Project (excluding amounts withheld as performance guarantees) (2) Civil works for 400,000 51% Parts C (iv) and D (ii) of the Project (excluding amounts withheld as per- formance guaran- tees) (3) Equipment and 9,000,000 100% of foreign spare parts for expenditures Parts C and D (iii) of the Project (4) Consultant services 5,600,000 100% of foreign for Parts A (iv) and expenditures E (iii) of the Project and 25% of local expendi- tures (5) Consultant services 1,200,000 100% of foreign for Parts B and F of expenditures the Project and 25% of local expendi- tures - 18 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (6) 2,700,000 (a) Services for 70% Parts C (in respect of C (i), only supplier services) D, G and H of the Project (b) Training abroad 100% of foreign for Part D (ii) expenditures of the Project (7) Initial deposits in 4,800,000 Special Account pur- suant to Section 2.02 (c) of this Agreement (8) Unallocated 24,800,000 TOTAL 93,000,000 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 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 or for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in compliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied - 19 - 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 af-zzu -tioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for ex- penditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $1,000,000 may be made: (i) in respect of Category (4) on account of payments made for such expenditures in an aggregate amount not exceeding $300,000 equivalent before such date but after March 31, 1981; (ii) in respect of Category (5) on account of payments made for expenditures for purposes of Part F (i) and (ii) of the Project before the date of this Agreement but after March 31, 1981 in an aggregate amount not exceeding $150,000 equivalent; (iii) in respect of Category (6) on account of pay- ments made for expenditures for purposes of Part D (i) of the Project before the date of this Agreement, but after March 31, 1981 in an aggregate amount not exceeding $175,000 equivalent; (iv) in respect of Category (6) on account of payments made for expenditures for purposes of Part C (ii) and Part C (iii) of the Project before the date of this Agreement but after November 1, 1981 in an aggregate amount not exceeding $200,000 equivalent; and (v) in respect of Category (6) on account of payments made for expenditures for purposes of Part G (i) of the Project before the date of this Agreement but after September 30, 1981 in an aggre- gate amount not exceeding $175,000 equivalent. 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 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 reallo- cation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditure in - 20 - order that further withdrawals under such Category may continue until all expenditures thereunder shall 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 the following Parts: Part A: Roads Rehabilitation Works (i) Strengthening and reconstruction of about 44 kilometers of existing pavement of the Morococha-La Oroya road, including passage through the town olf-La Oroya; (ii) Repairs, reconstruction and strengthening of about 98 kilometers of the existing pavement of the Talara- Cancas road, raising grades and improving drainage in some sections ofb such road to prevent flooding thereof and construction of protective works to counter erosion along two tortuous sections of such road located in hilly terrain; (iii) Reconstruction and strengthening of about 53 kilometers of existing pavement of the Piura-Paita road and raising road grade along about 25 kilometers of such road to reduce blockage by sand dunes; and (iv) Supervision of the works under each of the preceding components of this Part of the Project. The principal design standards to be used and works to be under- taken in the aforesaid roads are set forth in Part A of the Annex to this Schedule. Part B: Future Road Rehabilitation (i) Detailed engineering for road rehabilitation projects for which works are expected to start in 1983 and 1984; and (ii) Detailed engineering for a pilot geotechnical project under which state-of-the art slide stabilization techni- ques will be introduced. The scope of both to be determined, at the satisfaction of the Bank, on the basis of the study that, for the purpose, is being carried out under Part N of the Prior Project. - 22 - Part C: Improving Road Maintenance Equipment Availability (i) Acquisition of spare parts and utilization thereof to complete the overhaul program of about 275 units of equipment additional to those overhauled under Part C of the Prior Project; (ii) accelerating repair works on maintenance equipment and vehicles; (iii) continuation of the: (1) improvement of SEM's account- ing, equipment leasing and control, and spare parts warehousing and control systems; and (2) development of SEM's program for equipment rehabilitation, renewal and maintenance, both as started under Part L of the Prior Project by means of, inter alia, provision of technical assistance to SEM in respect of the aforesaid; (iv) improvement of workshops, including the acquisition and utilization therefor of workshop equipment and tools; and (v) improvement of Ministry's capacity to perform routine road maintenance, including the supervision thereof, by means of, inter alia, the acquisition and utilization of light equipment and vehicles. Part D: Strengthening of Highway Administration (i) Improving management of, and upgrading technical ex- pertise for, Ministry's activities in respect of: (1) road maintenance; (2) management of maintenance equip- ment and workshops; (3) geotechnical and soil engineer- ing; (4) programming and control; and (5) highway design and construction management; (ii) execution of annual training programs for Ministry's operational staff, particularly of road maintenance foremen and operators and mechanical foremen and field management staff, including construction of facilities therefor; and (iii) planning and establishing an improved vehicle weight control system, including the purchase and installation of the necessary equipment therefor. - 23 - Part E: Road Improvements in Developing Regions (i) Improving certain sections totalling about 263 kilo- meters of the main roads serving part of Selva Central area, the development potential of which was established under the study carried out under Part K of the Prior Project. The roads to be improved are: (1) Tarma-San Ram6n; (2) La Merced-Villa Rica; (3) Carhumayc Bridge- Satipo; and (4) Access to Oxapampa; (ii) improving the Rioja to Tarapoto section of the Corral Quemado-Tarapoto road serving the Rio Mayo area; and (iii) supervision of the works under each of the preceding components of this Part of the Project. The sections of the aforementioned roads to be improved under the Project, the principal design standards therefor and works to be undertaken thereon are as specified in Part B of the Annex to this Schedule. Part F: Engineering (i) Detailed engineering for Parts A (ii) and (iii) of the Project; (ii) detailed engineering for Part E (i) and (ii) of the Project; and (iii) detailed engineering for the section between Rioja and Corral Quemado (other than Sections included in (ii) above) of the road referred to in Part E (ii) of the Project. Part G: Studies (i) Preparation of a detailed regional agricultural develop- ment program, including feeder roads requirements, for the part of the Selva Central area served by the roads included in Part E (i) of the Project; (ii) execution of a study on traffic demand and regulatory or organizational measures, or both, for instituting integrated cabotage and trucking services along the coast of Perul; and - 24 - (iii) defining the organization and procedures required to establish separate channels for the seeking, by regional and other authorities, of financing for the construction or rehabilitation of feeder and access roads. Part H: Strengthening of the investment planning and scheduling capabilities of the Ministry and of the coordination between its Oficina Sectorial de Planificaci6n and its Direcei6n de Caminos. The Project is expected to be completed by December 31, 1985. - 25 - ANNEX TO SCHEDULE 2 Principal design standards and works for roads under Parts A and E of the Project and sections of the roads referred to under Part E of the Project Surface Width Shoulder and Type Width A. Part A of the Project 1. Morococha-Oroya 7.20m - A.C.* 0.75m (P/R, ID)* 2. Piura-Paital/ 6.60m - A.C. 1.20m (P/R, RG) 3. Talara-Cancas 6.60m - A.C. 1.20m (P/R, RG, ID) B. Part E of the Project 1. Tarma-Pte.San Felix (Tarma-Pte.Huayocnioc)/. (7.20m - A.C.) variable (P/R, ID) (Pte.Huayocnioc-Pte.San (6.00m - A.C.) 0.75m Felix) (P/C, S, ST, RW, ID) 2. La Merced-Villa Rica (La Merced-Desvio Satipo) (6.60m - A.C.) 1.20m (P/C, S, ST, RW, ID) (Desvio Satipo-Villa Rica) (6.60m - S.T.) 0.75m (P/C, S, ST, RW, ID) 3. Chanchamayo-Satipo 6.00m - S.T. 0.75m (P/C, S, ST, RG, RW, ID) 4. Access to Oxapampa 5.00m - GR (P/C, S, ST, ID) 1/ Includes about 7 km of Panamerican Highway between Piura and road junction to Paita. 2/ Includes about 2.4 km of street improvement in Tarma. See legend for explanation of symbols. - 26 - Surface Width Shoulder and Type Width 5. Rioja-Moiobamba- Tarapoto3 (Rioja km-481 - km 514) (6.00m - S.T.) 0.75m (P/C, ST, ID) (km 514 - km 584) (7.50m-8.40m-GR) - (P/R, ST, ID) (km 584 - km 618)-Tarapoto (6.00m - S.T.) 0.75m (P/C, ST, ID) 3/ Includes about 2 km of street improvement in Tarapoto. LEGEND Types of Improvement Works Surface Type P/R Pavement Reconstruction A.C. Asphalt Concrete P/C Pavement New Construction S.T. Surface Treatment S New Structures GR Gravel ST Stabilization of Slopes RG Raise Grade RW River Protection Works ID Improved Drainage - 27 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each March 1 and September 1 beginning September 1, 1986 through September 1, 1998 3,575,000 On March 1, 1999 3,625,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04. - 28 - 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 3.04 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 2.05% More than three years but not more than six years before maturity 4.10% More than six years but not more than eleven years before maturity 7.50% More than eleven years but not more than fifteen years before maturity 10.25% More than fifteen years before maturity 11.60% - 29 - 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 current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" dated 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. (a) With respect to any contract for civil works for Parts A and E (other than E (i) (4)) of the Project, contractors shall be prequalified, as described in paragraph 1.3 of Part A of the Guidelines, for one or more road sections in respect of each of the bidding lots referred to below. (b) For bidding purposes, construction and improvement works under Parts A and E (other than E (i) (4)) of the Project shall be divided into twelve road sections to be tendered under four separate bidding lots, each lot encompassing the following Parts of the Project: Part A (i) and E (i) (1), Part A (ii) and (iii); Part E (i) (2) and (3); and Part E (ii). Each invitation to bid for such works in respect of each lot shall, inter alia, specify that: (i) all bids in respect of such lot will be opened at the same time, and awarded simultaneously; (ii) prequalified bidders will be allowed to bid for one or more sections of each - 30 - bidding lot and required to express whether they are bidding for one or more sections individually or collectively and to bid accordingly; (iii) awards shall be made on the basis of the lower of (1) the lowest evaluated bid for the entire works of each lot or (2) the lowest evaluated combination of bids; and (iv) the Borrower will have the option of awarding to one contractor a single contract in respect of all sections, or to different contractors separate contracts in respect of one or more sections. (c) For bidding purposes, contracts for equipment for Part C of the Project will be grouped, so as to permit bulk procurement to the extent practicable, in such manner as shall be agreed between the Borrower and the Bank prior to issuing the invitation to bid. 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 the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; (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; 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 and Regional Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in Peru or in a country which is a party to the Cartagena Agreement or to any other regional trade agreement acceptable to the Bor- rower and the Bank (the Cartagena Agreement or any such other regional agreement hereinafter called the Regional Agreement), 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. - 31 - 2. After evaluation, responsive bids will be classified in one of the following four groups: (a) Group A: bids offering goods manufactured in Perfi 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 PerG equal to at least 20% of the ex-factory bid price of such goods. (b) Group B: all other domestic bids. (c) Group C: bids offering goods manufactured in a country other than PerG which is a party to the Regional Agreement. (d) Group D: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves. Such lowest evaluated bids shall then be com- pared 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 or group D, all group C and D 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 and group D 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 group D 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 or the group C bid in such further comparison is the lowest, it shall be selected for the award. 5. If, as a result of the further comparison under para- graph (4) above, a bid from group D is the lowest, and provided there are taxes actually payable for the importation of goods offered in the lowest evaluated bid from group C, as determined under paragraph (3) above, all group D bids shall be finally compared with such lowest evaluated bid from group C, after adding - 32 - to the c.i.f. bid price of goods to be imported offered in each group D bid, for the purpose of this final comparison only, an amount equal to the smaller of (i) the positive difference, if any, between the amount of customs duties and other import taxes which would actually be payable for the importation of goods offered in such group D bid and for the importation of goods offered in the group C bid, or (ii) 15% of the c.i.f. price of goods to be' imported offered in such group D bid. If the lowest bid in such comparison is the group C bid, it shall be selected for the award; if not, the lowest evaluated bid from group D, as determined under paragraph (3) above, shall be selected for the award. C. Other Procurement Procedures 1. Contracts for workshop tools which cannot be grouped in bidding lots estimated to cost $100,000 equivalent or more may be awarded to established dealers of such goods after obtaining not less than 3 quotations from such dealers, provided the aggre- gate of contracts to be so awarded does not exceed the equivalent of $500,000. 2. The provisions of the preceding Part C.1 may apply to contracts for purposes of Part D (iii) of the Project, except that the aggregate of contracts to be so awarded shall not exceed the equivalent of $150,000. 3. Contracts for spare parts for equipment overhaul may be awarded on the basis of competitive bidding locally advertised; provided, however, that when the nature of such spare parts makes it more convenient, in the interest of economy and efficiency, such contracts may be awarded, with the prior approval of the Bank, through normal commercial channels. The Borrower and the Bank shall agree, from time to time, which of the aforesaid contracts shall be subject to competitive bidding. 4. Contracts for civil works under Parts C (iv) and D (ii) of the Project may be awarded under locally advertised competitive bidding procedures satisfactory to the Bank. 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 procedure to be followed, and shall introduce such modifications -33- 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 estimated to cost the equiva- lent of $100,000 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 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 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. - 34 - 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. - 35 - SCHEDULE 5 Road Investment Plan Name of the Project Arequipa - Sumbay Nazca - Cusco Tarma - La Merced Pucusana - Caffete Tanaka - Chala Variante Coishco Balsas - Bolívar Huanta - Ayacucho Ilo Desaguadero Olmos - Corral Quemado Chosica - Oroya - Huanuco Calles de Pucallpa Vías de los Libertadores: Sector: Pisco - Ayacucho Huanuco - Aguaytia Marginal de la Selva: San Alejandro - Puerto Bermúdez Mazamari - Rio Puyemi Serranoyacu - Rio Nieva Juanjui - Pizana Reconstrucci6n Carretera Central Plan Vial Loreto: - 36 - Name of the Project Puente Pallar - Calemar Jefaturas Militares Huaral - Huacho Rio Seco - Ambo Juliaca - Urcos Jauja - Tarma Corral Quemado - Ocalli Urcos - Maldonado Matarani - Mollendo - Tambo VIII PrfstamoBIRIF Trujillo - Contumaza - San Miguel Trujillo - Juanjui Chongoyape - Chota Cutervo - Santa Cruz Chota - Paccha - Chadin - Maraffon Guzmango - Cruz Grande 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 4 day of M , 198 2 FOR SECRETARY