Conformed Copy - C1925 - Financial Sector Adjustment Credit - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1925 BO (Financial Sector Adjustment Credit) between REPUBLIC OF BOLIVIA BANCO CENTRAL DE BOLIVIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated June 24, 1988 CREDIT NUMBER 1925 BO DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 24, 1988, between REPUBLIC OF BOLIVIA (the Borrower), BANCO CENTRAL DE BOLIVIA (Banco Central) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) the Association has received a letter dated May 11, 1988, from the Borrower and Banco Central describing a program of actions, objectives and policies designed to achieve adjustment of the Borrower's financial sector (such program is hereinafter called the Program), by: (i) increasing confidence in the banking system and resource mobilization; (ii) strengthening the financial conditions of banks; and (iii) reducing the high cost of credit declaring the Borrower's commitment to the execution of the Program, and requesting assistance from the Association in the financing of urgently needed imports and services required during such execution; (B) the Borrower and Banco Central intend to undertake a program of actions, measures and other activities aimed at strengthening the newly established GSF (as defined hereinafter) within Banco Central and supporting the newly established Superintendencia (as defined hereinafter); and (C) on the basis, inter alia, of the foregoing, the Association has decided Page 2 in support of the Program to provide such assistance to the Borrower by making the Credit in two tranches as hereinafter provided; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the modifications thereof set forth below (the General Conditions) constitute an integral part of this Agreement: (a) Section 2.01, paragraph 9, shall be modified to read: "'Project' means the imports and other activities that may be financed out of the proceeds of the Credit pursuant to the provisions of Schedule 1 to the Development Credit Agreement."; (b) Section 9.06 (c) shall be modified to read: "(c) Not later than six months after the Closing Date or such later date as may be agreed for this purpose among the Borrower, Banco Central and the Association, the Borrower and Banco Central shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution of the Program referred to in the Preamble to the Development Credit Agreement, the performance by the Borrower, Banco Central and the Association of their respective obligations under the Development Credit Agreement and the accomplishment of the purposes of the Credit."; and (c) the last sentence of Section 3.02 is deleted. Section 1.02. 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) "SITC" means the Standard International Trade Classification, Revision 3 (SITC, Rev. 3), published by the United Nations in Statistical Papers, Series M, No. 34/Rev. 3 (1986); (b) "Superintendencia" means the Borrower's Superintendencia de Bancos; (c) "GSF" means Gerencia Principal del Sistema Financiero, a unit at vice-presidential level within Banco Central; (d) "BAB" means the Borrower's Banco Agricola de Bolivia; (e) "Reactivation Decree" means the Borrower's Decreto Supremo No. 21660 of July 10, 1987; (f) "BANEST" means the Borrower's Banco del Estado; (g) "Boliviano" means the currency of the Borrower; and (h) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, an amount in various currencies equivalent to fifty million six hundred thousand Special Drawing Rights (SDR 50,600,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement. Page 3 (b) The Borrower shall, for purposes of the Project, open and maintain in dollars a Special Account in a commercial bank acceptable to the Association, on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1989 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from a date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; (ii) at the rate set as of the June 30 immediately preceding the accrual date or at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied as of the next payment date in that year specified in Section 2.06 of this Agreement, except that the rate set as of June 30, 1988 shall be applied as of July 1, 1988. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.O5. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment and service charges shall be payable semiannually on April 1 and October 1 in each year. Section 2.O7. (a) The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each April 1 and October 1 commencing October 1, 1998, and ending April 1, 2028. Each installment to and including the installment payable on April 1, 2008 shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (b) Whenever: (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years, and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.O8. The currency of the United States of America is hereby specified for the purposes of Section 4.O2 of the General Conditions. Section 2.09. (a) Banco Central is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. Page 4 (b) Without limitation or restriction to the foregoing, the Borrower hereby entrusts Banco Central with responsibility for the preparation of withdrawal applications under the Credit and for the collection of the documents and other evidence to be furnished to the Association in support of such applications. ARTICLE III Particular Covenants Section 3.01. (a) The Borrower, Banco Central and the Association shall from time to time, at the request of any party, exchange views on the progress achieved in carrying out the Program and the actions specified in Schedule 3 to this Agreement. (b) Prior to each such exchange of views, the Borrower and Banco Central, shall furnish to the Association for its review and comment a report on the progress achieved in carrying out the Program, in such detail as the Association shall reasonably request. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 2 to this Agreement. Section 3.03. The Borrower, through the Superintendencia, and Banco Central shall develop and carry out a plan of action to strengthen the GSF and the Superintendencia in the supervision, rehabilitation and liquidation of banks, including: (i) technical support from consultants or experts in reviewing the financial condition of banks, preparing rehabilitation plans, revising banking laws and regulations, and restructuring BAB; (ii) external audits of banks' financial statements of June 30, 1988; (iii) acquisition and utilization of computer equipment and software; and (iv) training. To that end, the Borrower, through the Superintendencia, and Banco Central shall employ consultants whose qualifications, experience and terms and coditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with the principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 3.04. (a) The Borrower and Banco Central shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with consistently maintained sound accounting practices the expenditures financed out of the proceeds of the Credit. (b) The Borrower and Banco Central shall: (i) have the 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 Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records and accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower and Banco Central shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; Page 5 (iii) enable the Association's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audits referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE IV Additional Event of Suspension Section 4.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional event is specified, namely, that a situation has arisen which shall make it improbable that the Program, or a significant part thereof, will be carried out. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) that the macro-economic policy framework of the Borrower, including its fiscal, monetary and exchange rate policies, is consistent with the objectives of the Program; (b) that Banco Central: (i) has appointed an acting Gerente Principal and hired staff to make the GSF fully operational, such acting Gerente Principal and staff possessing experience and qualifications acceptable to the Association; and (ii) has presented to the Association Guidelines, satisfactory to the Association, for the functioning of the GSF, including, without limitation, provisions for the rehabilitation of banks; (c) that the Borrower has issued a Resolucion Suprema enacting new Estatutos for Banco Central or amending its existing Estatutos, so as to incorporate therein the role and functions of GSF; (d) that the Borrower has issued a Decreto Supremo for the purpose of authorizing Banco Central to purchase assets from commercial banks, subject to an obligation on the part of such banks to repurchase such assets; (e) that the Borrower has issued a Decreto Supremo, and that the Superintendencia has issued corresponding regulations, so as to prohibit banks from extending credit to finance any investor's equity investments in such bank; and (f) that the Superintendencia has issued regulations requiring any bank which has extended credit for the purpose of financing an investor's equity investment in such bank to achieve punctual collection of such credit, and prohibiting the refinancing, rescheduling or renewing of such credit by such banks. Section 5.02. The date of September 27, 1988 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representatives of the Borrower; Addresses Section 6.01. Banco Central is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Page 6 Minister of Finance Ministerio de Finanzas Calle Bolivar No. 582 La Paz, Bolivia Cable address: MINFIN La Paz, Bolivia For Banco Central: Ayacucho esq. Mercado La Paz Bolivia Attention: Presidente Cable address: Telex: NAVIANA 2426 BV La Paz, Bolivia NAVIANA For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 BOLIVIA By /s/ Carlos Delius Authorized Representative BANCO CENTRAL DE BOLIVIA By /s/ Carlos Delius Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ S. Shahid Husain Regional Vice President Latin America and the Caribbean SCHEDULE 1 Withdrawal of the Proceeds of the Credit Page 7 1. Subject to the provisions set forth or referred to in this Schedule, the proceeds of the Credit may be withdrawn from the Credit Account for expenditures made (or, if the Association shall so agree, to be made) in respect of (a) the reasonable cost of goods and services required during the execution of the Program and to be financed out of such proceeds; and (b) goods and consultants' services required for the execution of the plan of action referred to in Section 3.03 of this Agreement. 2. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures for goods included in the following SITC groups or sub-groups, or any successor groups or sub-groups under future revisions to the SITC, as designated by the Association by notice to the Borrower: Group Sub-group Description of Items 112 - Alcoholic beverages 121 - Tobacco, unmanufactured, tobacco refuse 122 - Tobacco, manufactured (whether or not containing tobacco substitutes) 525 - Radioactive and associated materials 667 - Pearls, precious and semi- precious stones, unworked or worked 718 718.7 Nuclear reactors, and parts thereof, fuel elements (cartridges), non-irradiated for nuclear reactors 897 897.3 Jewelry of gold, silver or platinum group metals (except watches and watch cases) and goldsmiths' or silversmiths' wares (including set gems) 971 - Gold, non-monetary (excluding gold ores and concentrates) (b) expenditures (other than those related to the activities referred to in Section 3.03 of this Agreement) in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; (c) payments made for expenditures prior to the date of this Agreement; (d) expenditures for goods procured under contracts costing less than $5,000 equivalent; (e) expenditures for goods supplied under a contract which any national or international financing institution or agency shall have financed or agreed to finance; (f) expenditures for goods intended for a military or related purpose or for luxury consumption; and (g) expenditures in connection with the plan of action referred to in Section 3.03 of this Agreement which, in the aggregate, exceed the equivalent of SDR 1,750,000. 3. No withdrawal shall be made and no commitment shall be entered into to pay amounts to or on the order of the Borrower in respect of expenditures, other than Page 8 those referred to in paragraph 2 (h) of this Schedule, to be financed out of the proceeds of the Credit after the aggregate of the proceeds of the Credit withdrawn from the Credit Account and the total amount of such commitments shall have reached the equivalent of SDR 32,000,000, unless the Association shall be satisfied, after an exchange of views as described in Section 3.01 of this Agreement: (a) with the progress achieved by the Borrower in the carrying out of the Program; and (b) that the actions described in Schedule 3 to this Agreement have been taken. 4. If, after the exchange of views described in paragraph 3 above, the Association shall have given notice to the Borrower that the progress achieved and actions taken are not satisfactory and, within 90 days after such notice, the Borrower shall not have achieved progress and taken actions satisfactory to the Association, then the Association may, by notice to the Borrower, cancel the unwithdrawn amount of the Credit or any part thereof, other than the amount required for the execution of the activities referred to in Section 3.03 of this Agreement. SCHEDULE 2 Procurement 1. Contracts for the procurement of goods estimated to cost the equivalent of $5,000,000 or more each shall be awarded through international competitive bidding in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines), subject to the following modifications: (a) Paragraph 2.8 of the Guidelines is deleted and the following is substituted therefor: "2.8 Notification and Advertising The international community should be notified in a timely manner of the opportunity to bid. This will be done by advertising invitations to apply for inclusion in a bidder's invitation list, to apply for prequalification, or to bid; such advertisements should be placed in at least one newspaper of general circulation in the Borrower's country and, in addition, in at least one of the following forms: (i) a notice in the United Nations publication, Development Forum, Business Edition; or (ii) an advertisement in a newspaper, periodical or technical journal of wide international circulation; or (iii) a notice to local representatives of countries and territories referred to in the Guidelines, that are potential suppliers of the goods required." (b) The following is added at the end of paragraph 2.21 of the Guidelines: "As a further alternative, bidding documents may require the bidder to state the bid price in a single currency widely used in international trade and specified in the bidding documents." (c) Paragraphs 2.55 and 2.56 of the Guidelines are deleted. 2. Except as provided in paragraph 3 hereof, contracts for goods estimated to cost the equivalent of less than $5,000,000 each shall be awarded on the basis of the normal procurement procedures of the purchaser of such goods. 3. Contracts for goods for the activities referred to in Section 3.03 of this Agreement may be procured on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 4. With respect to each contract referred to in paragraph 1 of this Schedule, the Borrower shall furnish to the Association, prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids and recommendations for award, a description of the advertising and tendering procedures followed and such other information as the Association shall reasonably request. Page 9 5. With respect to each contract referred to in paragraph 2 of this Schedule, the Borrower shall furnish to the Association, prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect thereof, such documentation and information as the Association may reasonably request to support withdrawal applications in respect of such contract. 6. The provisions of the immediately preceding paragraphs 4 and 5 shall not apply to contracts on account of which the Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. 7. Notwithstanding the provisions of paragraphs 4 and 5 of this Schedule, where payments under a contract are to be made out of the proceeds of the Special Account, the copies of such contract or the documentation and the information to be furnished to the Association pursuant to the provisions of paragraphs 4 and 5 of this Schedule shall be furnished to the Association as part of the evidence required under paragraph 4 of Schedule 4 to this Agreement. SCHEDULE 3 Actions Referred to in Paragraph 3 (b) of Schedule 1 to this Agreement (a) That the macro-economic policy framework of the Borrower, including its fiscal, monetary and exchange rate policies, is consistent with the objectives of the Program. (b) That the Borrower: (i) has issued a Decreto Supremo to the Association, for the purpose of enacting Reglamentos for the Superintendencia, to strengthen and clarify its legal autonomy and financial independence, and formally assigning to it a broad range of bank supervisory functions; and (ii) has prepared and presented to its Congress draft amendments to the existing bank supervisory legislation, satisfactory to the Association, for the purpose of granting it powers of intervention, and formally assigning to it powers to apply sanctions and fines to banks not in compliance with norms and regulations. (c) That the Borrower has created a policy group, and, through such policy group, caused Plans of Action and Implementation Schedules, all satisfactory to the Association, to be presented to the Association, for the restructuring, respectively, of BAB and of BANEST. (d) That the Borrower, through the Superintendencia, has issued regulations and taken all other action necessary or appropriate to require banks, before September 30, 1988, either to accept dollar-denominated bonds in exchange for Boliviano deposits of such banks in Banco Central, in accordance with Articles 49 and 50 of the Reactivation Decree, or to take other necessary or appropriate action with respect to such deposits. (e) That Banco Central has appointed a permanent Gerente Principal, possessing experience and qualifications satisfactory to the Association, for the GSF. SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "Eligible Expenditures" means expenditures in respect of the reasonable cost of goods and services required during the execution of the Program and to be financed out of the proceeds of the Credit in accordance with the provisions of Schedule 1 to this Agreement; and (b) the term "Authorized Allocation" means an amount equivalent to $14,000,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, payments out of the Special Account shall be made exclusively for Eligible Expenditures and in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent Page 10 withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for Eligible Expenditures. All such deposits shall be withdrawn by the Association from the Credit Account in accordance with Schedule 1 of this Agreement in the respective equivalent amounts as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such and other evidence as the Association shall reasonably request, showing that such payment was made for Eligible Expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit, minus the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for Eligible Expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for Eligible Expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount for crediting to the Credit Account and immediate cancellation.