Conformed Copy - L2774 - Second Guayaquil and Guayas Province Water Supply Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2774 EC (Second Guayaquil and Guayas Province Water Supply Project) between REPUBLIC OF ECUADOR and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated June 17, 1991 LOAN NUMBER 2774 EC LOAN ASSUMPTION AGREEMENT AGREEMENT, dated June 17, 1991, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and the REPUBLIC OF ECUADOR (hereinafter called the Republic). WHEREAS (A) by a loan agreement between the Bank and Empresa Municipal de Agua Potable de Guayaquil (hereinafter called EMAP-G), dated September 26, 1987 (hereinafter called the Loan Agreement), the Bank made a loan (hereinafter called the Loan) to EMAP-G in an amount in various currencies equivalent to thirty one million dollars ($31,000,000) on the terms and conditions set forth in the Loan Agreement; (B) by a guarantee agreement between the Republic and the Bank, dated September 26, 1987 (hereinafter called the Guarantee Agreement), the Republic guaranteed all the obligations of EMAP-G contained or referred to in the Loan Agreement on the terms and conditions set forth in the Guarantee Agreement; Page 2 (C) by Law No. 38 passed by the National Congress of the Republic, as published in the Registro Oficial on August 3, 1989 (hereinafter called Law No. 38), and as also reflected in Executive Decree No. 1168 issued by the President of the Republic, as published in the Registro Oficial on January 9, 1990 (hereinafter called Executive Decree No. 1168), the new entity Empresa Provincial de Agua Potable del Guayas (hereinafter called EPAP-G) was created and assumed all the functions, assets and liabilities of EMAP-G; (D) the Republic and EPAP-G have requested the Bank to agree to: (i) the undertaking by the Republic of all of EMAP-G's covenants, agreements and obligations as Borrower (as distinguished from EMAP-G's role as Project executing agency) contained or referred to in the Loan Agreement, and for that purpose, to enter into this Loan Assumption Agreement; and (ii) the undertaking by EPAP-G of all of EMAP-G's covenants, agreements and obligations as Project executing agency contained or referred to in the Loan Agreement, and for that purpose, to enter into the project agreement with EPAP-G of even date herewith (hereinafter called the Project Agreement); and (E) the Bank has agreed to the request of the Republic and of EPAG-G; WHEREAS the Bank and the Republic have agreed on the basis, inter alia, of the foregoing, to enter into this Agreement (herein- after called the Loan Assumption Agreement) on the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. Except as otherwise provided in Section 3.01 of this Loan Assumption Agreement, wherever used in this Loan Assump- tion Agreement, unless the context requires otherwise, the several terms defined in the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated January 1, 1985, in the Loan Agreement and in the Preamble to this Loan Assumption Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "EPAP-G Estatutos" means the by-laws of EPAP-G as amended to the date of this Loan Assumption Agreement; (b) "Master Plan" means the master plan referred to in Schedule 2, Part C.1 of the Loan Agreement; (c) "sucres" means the legal currency of Ecuador; and (d) "water utility serving Guayaquil" means EPAP-G. ARTICLE II Loan Assumption Section 2.01. The Republic hereby assumes, and agrees to carry out and fulfill, all of the covenants, agreements and obligations of EMAP-G as Borrower (as distinguished from EMAP-G's role as Project executing agency) contained or referred to in the Loan Agreement, including, without limitation, all liabilities and obligations of EMAP-G relating to payment of principal, interest and other charges on the Loan, and the premium, if any, on the prepayment of the Loan, as well as including the obligation to maintain the Special Account, all as set forth in the Loan Agreement. The Bank hereby recognizes the succession of the Republic to the rights and obligations of EMAP-G as Borrower (as distinguished from EMAP-G's role as Project executing agency) under the Loan Agreement, and, consequently, the Republic is hereby substituted for EMAP-G as a party to and Borrower Page 3 under the Loan Agreement. Section 2.02. All actions taken, rights acquired or obliga- tions incurred under the Loan Agreement by EMAP-G as Borrower (as distinguished from EMAP-G's role as Project executing agency) shall be valid and binding on the Republic as though the Republic had been EMAP-G and the coming into effect of this Loan Assumption Agreement shall not affect the consequences of any action taken or omitted to be taken by the Bank or EMAP-G as Borrower (as distinguished from EMAP-G's role as Project executing agency) under the Loan Agreement. ARTICLE III Amendments to the Loan Agreement Section 3.01. The Loan Agreement is hereby amended as follows: 1. The first paragraph of the Preamble to the Loan Agreement is amended by substituting the words "(the Borrower or EMAP-G)" in place of the words "(the Borrower)". 2. Paragraphs (c), (d) and (e) of Section 1.02 of the Loan Agreement are deleted. 3. Paragraph (f) of Section 1.02 of the Loan Agreement is redesignated as paragraph (c) and amended by inserting the word "and" at the end thereof. 4. Paragraphs (g), (i) and (j) of Section 1.02 of the Loan Agreement are deleted. 5. Paragraph (h) of Section 1.02 of the Loan Agreement is redesignated as paragraph (d) and amended by substituting a period in place of the semi-colon at the end thereof and by substituting the words "water utility serving Guayaquil" in place of the word "Borrower". 6. Articles III and IV of the Loan Agreement are deleted. 7. Article V of the Loan Agreement is redesignated as Article III. 8. Section 5.01 of the Loan Agreement is redesignated as Section 3.01; its paragraph (a) is amended to read as follows in its entirety: "The Borrower shall maintain separate records and accounts adequate to reflect, in accordance with consistently maintained sound accounting practices, its resources and expenditures in respect of the Project."; its paragraph (b) (i) is amended to read as follows in its entirety: "have its records and accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank;"; its paragraph (b) (ii) is amended to read as follows in its entirety: "furnish to the Bank as soon as available, but in any case not later than six 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"; and its paragraph (b) (iii) is amended to read as follows in its entirety: "furnish to the Bank such other information concerning said records and accounts, as well as the audit thereof, as the Bank shall from time to time reasonably request.". 9. Sections 5.02 and 5.03 of the Loan Agreement are deleted. 10. Articles VI, VII and VIII of the Loan Agreement are deleted. 11. Schedule 1 of the Loan Agreement is amended as follows: (i) the amount of the Loan allocated to Category (2) (b) in the table in paragraph 1 is amended to read "8,700,000" instead of "6,500,000"; (ii) the amount of the Loan allocated to Category (5) in the table in paragraph 1 is amended to read "1,100,000" instead of "3,300,000- "; and (iii) paragraph 3 is amended by deleting the words ": (i)", Page 4 by deleting the semi-colon and all text immediately after the words "July 1, 1986" and by inserting a period immediately after the words "July 1, 1986". 12. The first paragraph of the Preamble to Schedule 2 of the Loan Agreement is amended by deleting the words "the Borrower", by substituting the word "the" in place of the word "its" and by inserting the words "of the water utility serving Guayaquil" immediately after the word "management". 13. The second paragraph of the Preamble to Schedule 2 of the Loan Agreement is amended by substituting the words "may be agreed" in place of the words "the Bank and the Borrower may agree". 14. Part A.1 of Schedule 2 of the Loan Agreement is amended by deleting the word "Borrower's". 15. Part A.2 of Schedule 2 of the Loan Agreement is amended by inserting the word "Guayaquil" immediately after the words "in the" and by deleting the words "of the Borrower". 16. Part B.1 of Schedule 2 of the Loan Agreement is amended by substituting the words "staff of the water utility serving Guayaquil" in place of the words "Borrower's staff". 17. Part B.2 of Schedule 2 of the Loan Agreement is amended by substituting the words "water utility serving Guayaquil" in place of the word "Borrower". 18. Part B.3 of Schedule 2 of the Loan Agreement is amended by substituting the words "meter repair workshop of the water utility serving Guayaquil" in place of the words "Borrower's meter repair workshop". 19. Part C of Schedule 2 of the Loan Agreement is amended by substituting the words "to prepare an updated master plan for the water utility serving Guayaquil, such master plan to include activities foreseen for the period up to the year 2010" in place of the words "to update the second stage of the Borrower's Master Plan until the year 2010". 20. Section I, Part C.2 of Schedule 4 of the Loan Agreement is amended by substituting the amount "$50,000" in place of the amount "$10,000". Section I, Part C.1 of Schedule 4 of the Loan Agrement is amended by substituting the amount "$1,500,000" in place of the amount "$1,000,000". 21. Section I, Part E of Schedule 4 of the Loan Agreement is deleted. 22. Section II of Schedule 4 of the Loan Agreement is amended by substituting the words "In order to assist the water utility serving Guayaquil in carrying out the Project, such water utility shall employ consultants (which term may also include consulting firms)" in place of the words "In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants" and by inserting the words "(the Consultants Guidelines)" immediately after the words "August 1981". 23. A new Section III is added to Schedule 4 of the Loan Agreement and reads as follows in its entirety: "Section III. Special Provisions A. In addition and without limitation to any other provisions set forth in this Schedule or the Guidelines, the following principles of procurement shall expressly govern all procurement of goods and works referred to in Part A of Section I of this Schedule: 1. Bids for contract awards must be submitted in one single envelope, and the name of each bidder and the total amount of each bid, as well as any alternative proposals, if they have been Page 5 requested or permitted, shall be read aloud when opened. 2. Foreign bidders must not be required to have a local represen- tative for purposes of submitting bids, but may be required to have such a representative upon entering into contracts which they have been awarded. 3. Foreign bidders must be permitted to have their financial solvency certified by a foreign bank acceptable to the water utility serving Guayaquil without recertification by any Ecuadorian bank or other Ecuadorian person or entity. 4. Bid and performance bonds and guarantees issued by foreign sureties approved by the water utility serving Guayaquil must be admissible without recertification or other participation by any Ecuadorian bank or other Ecuadorian person or entity. 5. Letters of credit issued to any supplier of goods or provider of services must not be required to be counter-guaranteed by such supplier or provider in whole or in part. This shall not prevent purchasers from obtaining other performance warranties from suppliers. B. In addition and without limitation to any other provisions set forth in this Schedule or the Guidelines, the following principles of procurement shall expressly govern all procurement of goods and services referred to in Part C.1 of Section I of this Schedule: 1. Foreign contractors and suppliers shall be allowed to bid on all contracts. 2. The date for the opening of bids shall be set on a date which shall be at least thirty days from the date of the last advertise- ment of the invitation to bid. 3. The invitation to bid shall be advertised for at least three days in a newspaper of wide circulation in Ecuador. 4. Contracts must be awarded to the lowest evaluated bidder in accordance with criteria set forth in the bidding documents. C. In addition to and without limitation to any other provisions set forth in this Schedule or the Consultants Guidelines, the following principles of procurement shall expressly govern all procurement of consultants' services referred to in Section II of this Schedule: 1. Foreign consultants must not be required to be locally registered as a condition of participation in the selection process, but may be required to be so registered, at the time of contracting, if the water utility serving Guayaquil and the Bank so agree. 2. Foreign consultants must not be required, either directly or indirectly, to give any participation in or share of any consulting contracts to any local firm or person, except in connection with a joint venture arrangement where: (i) a sufficient number of capable domestic firms or individual consultants exist to allow a foreign consultant reasonable freedom of choice; (ii) the contribution of either party to the joint venture arrangement will not be con- strained by any prescribed manner or extent of participation; and (iii) the foreign consultant is not required to associate itself with any specific named domestic firms or individual consultants. 3. Foreign consulting firms shall not be required, as a condition to provide services in Ecuador under contracts to be financed out of the proceeds of the Loan, to be registered in Ecuador with a minimum capital different from that required for Ecuadorian firms. 4. Foreign consultants, either individuals or firms, providing services under contracts financed out of the proceeds of the Loan, shall not be required to pay fees to the Ecuadorian Consultants' Association that are different from those required for Ecuadorian Page 6 consultants." 24. A new Section IV is added to Schedule 4 of the Loan Agreement and reads as follows in its entirety: "Section IV. Internal Approvals In the procurement of goods, works and services to be financed out of the proceeds of the Loan, standard bidding documents satisfactory to the Bank shall be utilized. The approval by the Contralor General del Estado (National Controller General) and the Procurador General del Estado (National Attorney General) referred to in Article 18 of Law No. 95, of August 2, 1990 (Ley de Con- trataci