Mexico - Eighth Agricultural Credit Project : Loan 2454 - Project Agreement - Conformed

OFFICIAL LOAN NUMBER 2454 ME DOCUMENTS Project Agreement (Eighth Agricultural Credit Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO DE MEXICO Dited , 1984 LOAN NUMBER 2454 HE PROJECT AGREEMENT AGREEMENT, dated A 9 , 1984, between INTERNATIONAL BANK FOR RECO TRUCTION AND DEVELOPMENT (herein- after called the Bank) and BANCO DE MEXICO (hereinafter called Banxico). WHEREAS by the Loan Agreement of even date herewith between Nacional Financiera, S.A. (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to three hundred mil- lion dollars ($300,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that Banxico, acting as trustee for FIRA, agree to undertake such obligations toward the Bank as are hereinafter set forth; WHEREAS Banxico, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to under- take the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) Banxico, acting as trustee for FIRA, declares its commitment to the objectives of the Project as set forth in Schedule 1 to this Agreement, and to this end, shall carry out the Project described in said Schedule with due dili- gence and efficiency and in accordance with sound administrative, financial, industrial and agricultural practices, and shall pro- vide, promptly as needed, all funds and other resources which shall be required by FIRA for purposes of the Project. (b) Banxico, acting as trustee for FIRA, shall enter into the contractual arrangements referred to in Section 2.02 (a) (ii) -2- of the Guarantee Agreement. Except as the Bank shall otherwise agree, Banxico shall not change or fail to enforce any provisions of such contractual arrangements. (c) Banxico, acting as trustee for FIRA, shall carry out the lending operations included in Part A of the Project in accordance with sound operational policies and in conformity with the principles and procedures set forth in Schedule 2 to this Agreement and FIRA Lending Policies and Operating Manual. Section 2.02. (a) Banxico, acting as trustee for FIRA, undertakes that, unless the Bank shall otherwise agree, all Sub- loans included in the Project will be made on terms whereby the Participating Bank shall obtain, by written contract with the Beneficiary or by other appropriate legal means, rights adequate to protect the interests of Banxico and the Participating Bank and to accomplish the purposes of the Project, including the right of the Participating Bank to: (i) require the Beneficiary to carry out and operate the Sub-project with due diligence and efficiency and in accordance with sound technical, financial, industrial, agricultural, and managerial standards and to main- tain adequate records; (ii) require that (A) the goods and ser- vices to be financed out of the proceeds of the Sub-loan shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and availability of maintenance facilities and spare parts therefor and, in the case of services, of their quality and the competence of the parties rendering them and, to the extent practicable, after evaluation and comparison of quotations from at least three suppliers, and (B) such goods and services shall be used exclusively in the carrying out of the Sub-project; (iii) inspect, by itself or jointly with representa- tives of the Bank and Banxico if the Bank shall so request, such goods and the sites, works, plants and construction included in the Sub-project, the operation thereof, and any relevant records and documents; (iv) require that the Beneficiary shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with norm- al Lusiness practice; and that such insurance cover hazards inci- dent to the acquisition, transportation and delivery of goods financed out of the proceeds of Sub-loans to the place of use or installation, and that any indemnity thereunder be made payable in a currency freely usable by the Beneficiary to replace or repair such goods; (v) obtain all such information as Banxico or the Participating Bank shall reasonably request relating to the -3- foregoing and to the administration, operation and financial condition of the Beneficiary; and (vi) suspend or terminate the right of the Beneficiary to the use of the proceeds of the Sub-loan upon failure by such Beneficiary to perform any of its obligations under its contract with the Participating Bank. (b) Banxico, acting as trustee for FIRA,.shall cause each Participating Bank to exercise its rights in relation to each Sub-loan in such manner as to: (i) protect the interests of the Bank and Banxico; (ii) comply with its obligations in respect of the corresponding Sub-loan; and (iii) achieve the purposes of the Pro4eet. (c) Banxico, acting as trustee for FIRA, shall not make available FIRA's credit facilities financed out of the proceeds of the Loan to any credit institution, other than those credit institutions which currently participate in carrying out the Prior Project, unless such credit institution has been considered eligible by the Bank as a Participating Bank. (d) Banxico, acting as trustee for FIRA, shall suspend the eligibility of any Participating Bank to make Sub-loans whenever the arrears under loans made by any such Participating Bank and discounted by FIRA exceed 15% of the aggregate outstanding amount of such loans. Section 2.03. Except as the Bank shall otherwise agree, Banxico, acting as trustee for FIRA, shall cause all goods and services financed out of the proceeds of the Loan made available to it by the Borrower to be used exclusively for the purposes of the Project. Section 2.04. Banxico, acting as trustee for FIRA, shall apply to the Bank for approval of any Sub-loan to be made under' the Project in excess of the equivalent of eight hundred thousand dollars ($800,000) or such other amount as shall be agreed be- tween the Bank and the Borrower. When applying to, the Bank for such approval, Banxico shall furnish to the Bank a -description of the Sub-project and such technical, economic and financial data regarding such Sub-project as the Bank shall reasonably request. Section 2.05. In order to carry out Parts B and C of the Project, Banxico, acting as trustee for FIRA, shall, as and when appropriate, employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to -4- the Bank, such consultants to be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Bor- rowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 2.06. Except as the Bank shall otherwise agree, goods and civil works for Parts B and C of the Project and to be financed out of the proceeds of the Loan shall be procured in accordance with the local competitive procedures of the Guaran- tor, acceptable to the Bank. Section 2.07. (a) Banxico, acting as trustee for FIRA, shall, at the request of the Bank, furnish to the Bank, the plans, specifications, contract documents and construction schedules for Part B of the Project, and any material modifications thereof or additions thereto. (b) Banxico, acting as trustee for FIRA, shall: (i) main- tain records and procedures adequate to record and monitor the progress of the Project (including its cost), to identify the goods and services for Parts B and C of the Project and financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) enable the Bank's accredited representatives to visit the facilities and construction sites included in Part B of the Project and to examine the goods for such Part of the Project financed out of the proceeds of the Loan and any relevant records and documents; and (iii) furnish to the Bank reports on the pro- gress of the Project with a periodicity acceptable to the Bank and, from time to time, all such other information as the Bank shall reasonably request concerning the Project, its cost and the expenditure of the proceeds of the Loan and the goods and ser- vices financed out of such proceeds. (c) Upon the award by Banxico 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 nation- ality of the party to whom the contract was awarded and the con- tract price. (d) Promptly after completion of the Project, but in any event not later than one year after the Closing Date or such later date as may be agreed for this purpose between Banxico and the Bank, Banxico shall, acting as trustee for FIRA, prepare and furnish to the Bank a report, of such scope and in such detail as -5- the Bank shall reasonably request, on the execution and operation of the Project, its cost and the accomplishment of the purposes of the Loan. (e) Banxico, acting as trustee for FIRA, shall, at the Bank's request, enable the Bank's accredited representatives to examine all plants, installations, sites, works,- buildings, pioperty and equipment of Banxico and any relevant records and dcuments related to the carrying out of Parts B and .C of the Project. Section 2.08. (a) Banxico, acting as trustee for FIRA, shall, at the request of the Bank, exchange views with the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Loan. (b) Banxico, acting as trustee for FIRA, shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the- Los, or the performance by Banxico of its obligations under this Agreement. Section 2.09. Banxico, acting as trustee for FIRA, shall from time to tiMe-assess the economic impact of representative Sub-projects included in the Project, and exchange views with the Bank on the conclusions of such assessment. ARTICLWE III Financial Covenants Section 3.01. (a) Banxico, acting as trustee for FIRA, shall maintain separate accounts and records adequate to reflect in accordance with consistently maintained appropriate accounting practices the operations, receipts and payments for or in con- nection with carrying out the Project and the use of the proceeds of the Loan made available to it by the Borrower, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure. (b) Banxico, acting as trustee for FIRA, shall retain, until one year after the Closing Date, all records (contracts, -6- orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure, and shall enable the Bank's representatives to examine such records. Section 3.02. Banxico, acting as trustee for FIRA, shall: (a) have the accounts referred to in paragraph (a) of this Section and financial statements (balance sheets, statements of income and expenses and related statements) of FIRA for each fis- cal year audited, in accordance with appropriate auditing princi- ples consistently applied, by independent auditors acceptable to the Bank; (b) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year: (i) certified copies of FIRA's financial statements for such year as so audited;"and (ii) the report of such audit by said auditors of such supe and La such detail as the Bank shall have reason- ably requested, including, without limitation to the foregoing, separate opinions by said auditors in respect of the expenditures and records referred to in Section 3.01 (b) of this Agreement, as to whether the proceeds of the Loan made available to it and withdrawn from the Loan Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (c) furnish to the Bank such other information concerning said accounts, financial statements, records and expenditures, as well as the audit thereof,. as the Bank shall from time to time reasonably request. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effec- tive, Section 4.02. This Agreement and all obligations of the Bank and of Banxico thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify Banxico thereof. - 7 -7- Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. ARTICLE V iscellaneous Provisions Section 5.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: 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 Banxico: Banco de M4xico 5 de Mayo, 2 06059 Mexico, D.F. Mexico Cable Address: BANXICO MEXICO, D.F. Secti-n 3.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Banxico may be taken or executed by its Director General or such other person or persons as its Director General shall designate in writing, and Banxico shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 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 Mexico D.F., Mexico, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By President BANCO DE MEXICO By Authorized Representative 9 SCHEDULE 1 Description of the Project The objectives of the project are to: (i) increase agricul- tural productivity and production in the territory of the Guaran- tor, thereby creating conditions to increase exports, improve food self-sufficiency and increase farm income; and (ii) continue to strengthen FIRA's institutional capabilities with a view to an efficient allocation of financial resources. The Project consists of the following Parts: Part A: Credit Financing of Sub-projects through the provision of Sub- loans. Part B: Technical Assistance - Expansion of FIRA's technical assistance program to promote the adoption of new and improved technology among farmers, including construction and equipping of demonstration centers, land improvement and development, crop and forage establishment, acquisition and utilization of agricultural machinery and equip- ment, and acquisition of livestock. Part C: Support Services (i) training of FIRA's technical staff, including fellow- ships, overseas training, and scholarships for post- graduate degrees. (ii) strengthening of FIRA's planning, programming and proj- ect-monitoring and evaluation capabilities. - 10 - SCHEDULE 2 Organization, Credit Policies I. Medium- and Long-Term Sub-loans A. General 1. Banxico, acting as trustee for FIRA, will rediscount or otherwise finance Sub-loans made by the Participating Banks. FIRA's determination of eligibility for such financing will be based primarily upon the appraisal as to technical feasibility and satisfactory return on investments. Each Sub-loan will be appraised and approved by qualified technicians of, or acceptable to, FIRA before such Sub-loan is made. Appraisals of Sub-projects will be reviewed from time to time by FIRA in order to determine that such appraisals show the technical, economic and financial viability of the Sub-projects and that the appraisals are in com- pliance with FIRA's Lending Policies and Operating Manual. B. Credit Policies 2. Participating Banks will be required to provide from their own resources not less than 10%, 15% and 20% of the total. amount of Sub-loans made to Category 1 Beneficiaries, Category 2 Bene- ficiaries and Category 3 Beneficiaries, respectively. The balance will be rediscounted or otherwise financed by Banxico, acting as trustee for FIRA. For this purpose, Banxico, acting as trustee for FIRA, will make available to the respective Participating Banks, promptly as needed, amounts sufficient to cover such b".L,4nces. The financing granted by Banxico, acting as trustee for FIRA, will have the same repayments of principal as the Sub-loans financed, and if such financing is granted through rediscounting, such rediscounting will be evidenced by negotiable instruments representing the Sub-loan to be rediscounted signed by the Beneficiaries. 3. In rediscounting or otherwise financing Sub-loans, the fol- lowing rules will be applied: - 11 - Minimum beneficiary contribution Maximum (percentage percentage of cost of Sub-loan Beneficiary of project rediscounted or category financed) otherwise financed (1) Category 1 10% 90% (2) Category 2 15% 85% (3) Category 3 20% 80% 4. No Sub-loan will be made to an individual Beneficiary for on-farm investment if the amount of the proposed Sub-loan toge- ther with the aggregate principal amount outstanding of Sub-loans made for on-farm investment to such Beneficiary and financed by FIRA exceeds 30,000,000 pesos or such other amount as shall be agreed between the Bank and Banxico. In case the Beneficiary is a group of persons, such amount will be multiplied by the number of members of such group. 5. The lending terms and grace periods will be as set forth in the technical and financial plans. Repayments of principal of Sub-loans will range from 2 to 15 years and will include grace periods of 1 to 3 years; provided that, in exceptional cases and with the prior agreement of the Bank, repayment of principal may extend for up to 20 years. 6. Interest rates on Sub-loans will be established and perio- dically readjusted in accordance with the provisions of the General Interest Rate Agreement. Unless the Bank shall otherwise agree, in rediscounting or otherwise financing Sub-loans made by Participating Banks, Banxico will allow the followitig percentage points as margins to such Participating Banks: (i) 6.5% with res- pect to Sub-loans to Category 1 Beneficiaries; (ii) 6% with res- pect to Sub-loans to Category 2 Beneficiaries; and (iii) 2% with respect to Sub-loans made to Category 3 Beneficiaries. II. Short-term Sub-loans 1. The appraisal and approval of Sub-projects to be financed out of the proceeds of a Short-term Sub-loan and their super- vision will be made in accordance with FIRA Lending Policies and Operating Manual. - 12 - 2. In rediscounting or otherwise financing Short-term Sub- loans, the interest rate to be charged to the Beneficiaries shall be as provided for in the General Interest Rate Agreement and the repayment terms shall be less than two years. 3. Short-term Sub-loans to be financed out of the proceeds of the Loan will be incremental, such increment defined as addi- tional over FIRA's total short-term lending of the previous year. By November 30 of each year, starting on November 30, 1984, FIRA will provide the Bank with an estimate of its incremental short-term lending for the subsequent year, which would consti- tute the estimated amount to be financed out of the proceeds of the Loan or Short-term Sub-loans during the year in question. Such amount will be revised against FIRA's actual incremental short-term lendind during each such year and any difference re- sulting therefrom will be added to or substracted from, as the case may be, the estimated amount to be financed out of the pro- ceeds of the Loan as short-term Sub-loans during the immediate following year. 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 -day ofJh l Akg 98 FOR SECRETARY