Guatemala - Industrial Credit Project : Loan 2383 - Loan Agreement - Conformed

F 0F IIA L- LOAN NUMBER 2383 GU LDOCuLMENTS Loan Agreement (Industrial Credit Project) between REPUBLIC OF GUATEMALA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated ,24 , 1984 LOAN NUNBER 2383 GU LOAN AGREEMNT AGREEMENT, dated 2, 1984, between REPUBLIC OF GUATEMALA (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) the Project will be carried out by Banco de Guatemala with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Banco de Guatemala the proceeds of the Loan as hereinafter provided; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in the Project Agreement of even date herewith between the Bank and Banco de Guatemala; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated October 27, 1980, with the same force and effect as if they were fully set forth herein, subject, however, to the modifications thereof set forth in Schedule 4 to this Agreement (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Bank and Banco de Guatemala (hereinafter called BG) of even date -2- herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (b) "Subsidiary Agreement" means the agreement to be enter- ed into between the Borrower and BG pursuant to See,, ton 3.01 (b) of this Agreement, as the same may be amended from ime to time, and such term includes all schedules to the Subsidiary Agreement; (c) "Project Accounts" means the accounts to be opened by BG on its books for purposes of Section 5.01 (a) of the Project Agreement; (d) "Project Unit" means the Seccion de Cr&dito Bancario of the Departamento de Cr6ditos of BG, referred to in Section 2.02 of the Project Agreement, responsible for the management and operations of the Project; (e) "Statement of Operating Policies and Procedures" means the policies and procedures governing the investment financing operations of BG under the Project, referred to in Section 6.01 (c) of this Agreement, as amended from time to time, with the Bank's concurrence; (f) "Credit Manual" means the criteria to be used by BG and any Participating Intermediary in the identification, pre- paration, evaluation and supervision of Investment Projects, referred to in Section 6.01 (c) of this Agreement, as amended from time to time with the Bank's concurrence; (g) "Participating Intermediary" means any commercial bank or financial institution in Guatemala which meets BG's technical and financial requirements under the Statement of Operating Poli- cies and Procedures and the requirements of this Agreement, and which h f sied a Participating Agrecrent with BG, acceptable to the Bank; (h) "Participating Agreement" means each agreement to be entered into between BG and each Participating Intermediary for making Subsidiary Loans as provided in Section 2.04 of the Pro- ject Agreement; (i) "Subsidiary Loan" means a loan provided for in a Parti- cipating Agreement; -3- (j) "Investment Sub-loan" means a loan made or proposed to be made under an Investment Sub-loan Contract by a Participating Intermediary to an Investment Enterprise for an Investment Pro- ject and partly financed out of the proceeds of the Loan, and "free-limit Investment Sub-loan" means an Investment Sub-loan, as so defined, which qualifies as a free-limit Investment Sub-loan pursuant to the provisions of paragraph 4 of Schedule 1 to this Agreement; (k) "Investment Sub-loan Contract" means a contract provid- ing for an Investment Sub-loan; (1) "Investment Enterprise" means an enterprise to which a Participating Intermediary proposes to make or has made an In- vestment Sub-loan; (m) "Small Investment Enterprise" means an Investment Enterprise whose total assets, as of December 31, 1982, were less than $250,000 equivalent, excluding land but including the assets to be financed under the proposed Investment Sub-loan; (n) "Investment Project" means a specific industrial devel- opment project to be carried out by an Investment Enterprise uti- lizing the proceeds of an Investment Sub-loan; (o) "'Non-traditional Goods" means manufactured or processed goods, with the exception of bananas, beef, coffee, cotton and sugar, exported or to be exported by Guatemalan enterprises to countries outside the CACM; (p) "Technical Assistance Sub-loan" means a loan made or proposed to be made under a Technical Assistance Sub-loan Con- tract by a Participating Tintermei=rv to an enterprise producing Non-traditional Goods for the purposes of Part C of the Project; and "Technical Assistance Sub-loan Contract" means a contract providing for a Technical Assistance Sub-loan. (q) "CACM" means the Central American Common Market; (r) "Subsidiary" means any enterprise of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by an Investment Enterprise or by one or more Subsidiaries of an Investment Enterprise or by an Investment Enterprise and one or more of its Subsidiaries; (s) "Junta Monetaria" means the Board of Directors of BG; and (t) "Quetzal(es)" or "Q" means the currency of the Bor- rower. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in this Agreement set forth or referred to, an amount in various currencies equivalent to twenty million dollars ($20,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account, in accordance with the provisions of Schedule 1 to this Agreement as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expendi- tures made (or, if the Bank shall so agree, to be made) in re- spect 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. The Closing Date shall be December 31, 1987, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Bank a fee equivalent to forty-nine thousand eight hundred seventy-five dollars ($49,875). (b) On or promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of the said fee in such currency or currencies as the Bank shall determine. Section 2.05. The Borrower shall pay to the Bank a commit- ment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one-half percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. -5- (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Bor- rowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period com- mencing on each date specified in Section 2.07 of this Agreement, including the Interest Period in which this Agreement is signed; (ii) "Cost" of Qualified Borrowings means the cost, ex- pressed as a percentage per annum, as reasonably determined by the Bank, provided that the amount of $8,520.5 million referred to in (iii) (B) here- under shall be reckoned at a cost of 10.93% per annum; (iii) "Qualified Borrowings" means: (A) outstanding bor- rowings of the Bank drawn down after June 30, 1982; and (B) until July 1, 1985, the amount of $8,520.5 million (representing borrowings of the Bank between July 1, 1981 and June 30, 1982) less any part thereof repaid earlier than July 1, 1985; and (iv) "Semester" means the first six months or the second six months of a calendar year. 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. Section 2.09. The Borrower shall cause BG to provide, in a timely manner, to recipients of Investment Sub-loans or Technical Assistance Sub-loans, the foreign exchange required for the pro- curement abroad of goods and services under the Project. Section 2.10. BG is designated as representative of the Bor- rower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agree- ment and Article V of the General Conditions. - 6 - ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under this Agreement, the Borrower shall cause BG to perform, in accordance with the provisions of the Project Agreement, all the obligations of BG therein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable BG to perform such obliga- tions, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall make the proceeds of the Loan avail- able to BG under the Subsidiary Agreement to be entered into bet- ween the Borrower and BG, under terms and conditions which shall have been approved by the Bank, which shall include the follow- ing: (i) the proceeds of the Loan shall be made available to BG in dollars; (ii) $2,000,000 shall be made available to BG for purposes of technical assistance, of which $625,000 shall be made available to BG on a non-reimbursable basis, and the remaining $1,375,000 shall be re-lent to BG on the same terms as the Loan and at an annual interest rate not higher than the rate applic- able to the Loan pursuant to Section 2.06 of this Agreement; (iii) the remaining amount of the Loan shall be re-lent to BG on the same terms and at the annual interest rate applicable to the Loan pursuant to Section 2.06 of this Agreement; and (iv) the appointment of a representative of the Ministry of Finance of the Borrower to the credit committee established by BG to approve the utilization of the proceeds of the Loan. (c) The Borrower shall exercise its rights under the Sub- sidiary Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Agree- ment or any provision 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 -7- 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 in- terest and other charges on the Loan, and the Borrower, in creat- ing 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 or as security for the payment of debt incurred for the purpose of financing the purchase of such property; and (ii) any lien aris- ing 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 subdi- vision 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 Bor- rower. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the Gen- eral Conditions the following additional events are specified pursuant to paragraph (k) thereof: - 8 - (a) BG shall have failed to perform any of its obligations under the Project Agreement; (b) a change shall have been made in the Statement of Operating Policies and Procedures or in the Credit Manual without the Bank's consent; (c) a change shall have been made in the Participating Agreement entered into by BG and any Participating Intermediary without the Bank's consent, provided, however, that the remedies provided for in Section 6.02 of the General Conditions shall apply only to an amount of the Loan which corresponds to the total of BG's Subsidiary Loans made to such Participating Inter- mediary; and (d) a change shall have been made in the procedures referred to in Section 6.01 (e) of this Agreement without the Bank's consent. Section 5.02. For the purposes of Section 7.01 of the Gen- eral Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) the event specified in paragraph (b), (c) or (d) of Section 5.01 shall occur; and (b) the event specified in paragraph (a) 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 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 Condi- tions: (a) the Subsidiary Agreement has been executed on behalf of the Borrower and BG; (b) the Project Unit has been staffed with a sub-jefe, in accordance with Section 2.02 (c) of the Project Agree, nt; -9- (c) both the Statement of Operating Policies and Procedures and the Credit Manual, satisfactory to the Bank, have been approved by the Junta Monetaria; (d) BG has entered into Participating Agreements, satisfac- tory to the Bank, with at least three Participating Intermedia- ries; and (e) the Borrower has established procedures, satisfactory to the Bank, to exempt imported inputs to be used in Investment Projects and in connection with Technical Assistance Sub-loans by Investment Enterprises and enterprises to which a Participating Intermediary has made a Technical Assistance Sub-loan under the provisions of Law No. 406-82 of November 14, 1982. 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: (a) that the Project Agreement has been duly authorized or ratified by BG and is legally binding upon BG in accordance with its terms; (b) that the Subsidiary Agreement has been duly authorized or ratified by the Borrower and BG and is legally binding upon the Borrower and BG in accordance with its terms; and (c) that the procedures referred to in paragraph (e) of Section 6.01 of this Agreement, once established, do not require any further legal action for their implementation. Section 6.03. The date, 6ZwL- ' f a9eT , is hereby specified for the purposes of Section 12.04 of the General Condi- tions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. Except as provided in Section 2.10 of this Agreement, the Minister of Finance 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: - 10 - For the Borrower: Ministerio de Finanzas Pu0blicas Centro Civico Zona 1 Guatemala City Guatemala Cable address: Telex: MINIFIP 9207 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) "IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF GUATEMALA By/,' Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By t~- L - Regional Vice President Latin America and the Caribbean - 11 - 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 to be so financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Investment Financing 17,950,125 (Part A of the Project): (a) Civil works 40% (b) Goods 100% of foreign expenditures and 60% of local expenditures (c) Consultants' 100% services (2) Technical Assistance 2,000,000 (Parts B through E of the Project) Consultants' services 100% (3) Fee 49,875 Amount due under Section 2.04 (a) of this Agreement TOTAL 20,000,000 2. For the purposes of this Schedule the term "foreign expendi- tures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower. - 12 - 3. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that the proceeds of the Loan shall not 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; on this basis, if the amount of any such taxes levied on or in respect of items in any Category decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the dis- bursement percentage then applicable to such Category 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: (a) expenditures made prior to the date of this Agreement; and (b) expenditures by an Investment Enterprise: (i) in respect of an Investment Sub-loan unless: (A) the Investment Sub- loan has been approved by the Bank, (B) the Investment Sub-loan is a free-limit Investment Sub-loan for which the Bank has authorized withdrawals from the Loan Account, or (C) the Invest- ment Sub-loan is in an amount equivalent to less than $10,000; and (ii) in respect of an Investment Sub-loan subject to the Bank's approval, if such expenditures shall have been made more than one hundred eighty (180) days prior to the date on which the Bank shall have received, in respect of such Investment Sub-loan, the application and information required by Section 3.02 (a) of the Project Agreement or, in respect of a free-limit Investment Sub-loan, more than one hundred eighty (180) days prior to the date on which the Bank shall have received, in respect of such free-limit Investment Sub-loan, the request and information required by Section 3.02 (b) of the Project Agreement. A free- limit Investment Sub-loan shall be a sub-loan for an Invesment Project in an amount to be financed out of the proceeds of the Loan which shall not exceed the sum of $200,000 equivalent, when added to any other outstanding amounts financed or proposed to be financed out of the proceeds of the Loan for such Investment Pro- ject, the foregoing amount being subject to change from time to time as determined by the Bank, provided, however, that the term "free-limit Investment Sub-loan" shall not apply to the first five Investment Sub-loans to be made by the Participating Inter- mediary, such Investment Sub-loans to be subject to approval by the Bank under (i) above. - 13 - 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 allo- cated to another Category and which, in the opinion of the Bank, are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may con- tinue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expen- diture for such item shall be financed out of the proceeds of the Loan, and the Bank may, without in any way restricting or limit- ing 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. - 14 - SCHEDULE 2 Description of the Project The purpose of the Project is to assist the Borrower in financing such productive facilities and resources in Guatemala as will contribute to the economic and social development of the country, and provide technical assistance to enterprises and government agencies to support an export promotion program. The Project consists of the following Parts: Part A: Financing specific Investment Projects through Investment Sub-loans to Investment Enterprises in Guatemala. Part B: Training staff of the Project Unit and of Participating Intermediaries in project evaluation and supervision. Part C: Financing the provision of technical assistance through Technical Assistance Sub-loans to enterprises producing Non- traditional Goods to improve their capability to export such Goods. Part D: Provision of technical assistance to the Borrower for the development of an export promotion program. Part E: Study to identify means of developing the growth of Small Investment Enterprises. - 15 - SCHEDULE 3 AmDrtization Schedule Payment of Principal Date of Payment Due (Expressed in dollars)* On each March I and September 1 beginning September 1, 1988 through September 1, 2000 770,000 On March 1, 2001 750,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawals; see General Conditions, Section 3.04. - 16 - Premium 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 The interest rate (ex- pressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years 0.18 before maturity More than three years but 0.35 not more than six years before maturity More than six years but 0.65 not more than eleven years before maturity More than eleven years but not 0.88 more than fifteen years before maturity More than fifteen years 1.00 before maturity - 17 - SCHEDULE 4 Modifications of the General Conditions For the purposes of the Loan Agreement, the provisio-as of the General Conditions are modified as follows: (1) the words "and Investment Projects" are added after the words "the Project" at the end of Section 5.03; and (2) Section 6.03 is deleted and replaced by the following new Section: "Section 6.03. Cancellation by the Bank. If: (a) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty days, (b) by the date specified in Section 3.02 (c) of the Project Agreement no applications or requests permitted under paragraph (a) or paragraph (b) of such Section shall have been received by the Bank in respect of any portion of the Loan, or having been so received, shall have been denied, or (c) after the Closing Date an amount of the Loan shall remain unwithdrawn from the Loan Account, the Bank may, by notice to the Borrower, terminate the right of the Borrower to submit such applications or requests or to make withdrawals from the Loan Account, as the case may be, with respect to such amount or portion of the Loan. Upon the giving of such noticu such amount or portion of the Loan shall be cancelled." 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 of '7" -, 19,8 FOR SECRETARY