Conformed Copy - L2918 - Agricultural Sector Loan - Loan Agreement

Page 1 LOAN NUMBER 2918 ME Loan Agreement (Agricultural Sector Loan) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT NACIONAL FINANCIERA, S.N.C. Dated March 15, 1988 LOAN NUMBER 2918 ME LOAN AGREEMENT AGREEMENT, dated March 15, 1988, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and NACIONAL FINANCIERA, S.N.C. (the Borrower). WHEREAS (A) the Bank has received a letter dated February 25, 1988 (the Agricultural Sector Policy Letter), from the UNITED MEXICAN STATES (the Guarantor) describing a program of actions, objectives and policies designed to promote greater efficiency and higher productivity in the Guarantor's agricultural and agro-industrial sectors (hereinafter called the Program), declaring the Guarantor's commitment to the execution of the Program, and requesting assistance from the Bank in the financing of imported goods required during such execution; Page 2 (B) by an agreement (the Guarantee Agreement) of even date herewith between the Guarantor and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower in respect of the Loan and to undertake other obligations as set forth in the Guarantee Agreement; and (C) on the basis, inter alia, of the foregoing, the Bank has decided, in support of the Program, to provide such assistance to the Guarantor by making the Loan to the Borrower in 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 Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, (the General Conditions) with the modifications thereof set forth below constitute an integral part of this Agreement: (a) The last sentence of Section 3.02 is deleted; and (b) Section 9.07 (c) is modified to read: "(c) Not later than six months after the Closing Date such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower and the Guarantor shall prepare and furnish to the Bank a joint report, of such scope and in such detail as the Bank shall reasonably request, on the execution of the Program referred to in the Preamble to the Loan Agreement, the carrying out of the Project, the performance by the Guarantor, the Borrower and the Bank of their respective obligations under the Loan and Guarantee Agreements and the accomplishment of the purposes of the Loan." Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "SARH" means the Secretariat of Agriculture and Water Resources (Secretariat de Agricultura y Recursos Hidraulicos) of the Guarantor; (b) "SITC" means the Standard International Trade Classification, Revision 3 (SITC, Rev. 3), published by the United Nations in Statistical Papers, Series, No. 341 Rev. 3 (1986); (c) "tortibonos" means food coupons redeemable in tortillas, established by ministerial regulations, distributed as part of one of the Guarantor's food assistance programs to low-income populations; (d) "ORB" means quantitative restrictions placed by the Guarantor on imported goods and materials; (e) Official Reference Prices means the reference prices for imported goods and materials published by the Guarantor; Page 3 (f) "Non-tariff Barriers" means any form of restriction, other than the levy of a tariff, on imports, including, inter alia, ORB and restrictions by means of Official Reference Prices and import permits; (g) "Pacto de Solidaridad Economica" means the Economic Solidarity Pact signed on December 15, 1987 by the Guarantor, representatives of farmer and labor organizations, and the private sector establishing a system for setting and maintaining prices of certain products and commodities; and (h) "Fiscal Year" means the fiscal year of the Guarantor, beginning of January 1 of each year. ARTICLE II The Loan Section 2.01. The Bank 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 three hundred million dollars ($300,000,000). 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. Section 2.03. The Closing Date shall be June 30, 1989 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (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 per cent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.06 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost of the outstanding borrowings of the Bank drawn down after June 30, 1982, expressed as a percentage per annum, as reasonably determined by the Bank. (iii) "Semester" means the first six months or the second six months of a calendar year. Section 2.06. Interest and other charges shall be Page 4 payable semiannually on June 15 and December 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Transfer of Loan Proceeds; Other Covenants Section 3.01. The Borrower shall enter into contractual arrangements, satisfactory to the Bank, with the Guarantor providing, inter alia: (a) for the transfer to the Guarantor of the proceeds of the Loan; and (b) for the transfer by the Guarantor to the Borrower of such funds as the Borrower shall be required to pay to the Bank on account of principal, interest and other charges on the Loan. Except as the Bank shall otherwise agree, the Borrower shall not change or fail to enforce any provision of such arrangements. Section 3.02. The Borrower and the Guarantor pursuant to Section 3.01 of the Guarantee Agreement, shall quarterly, and at the request of either party, exchange views with the Bank on the progress achieved in carrying out the Program, the Project and the actions specified in the Schedule to the Guarantee Agreement. Section 3.03. Except as the Bank shall otherwise agree, procurement of the goods to be financed out of the proceeds of the Loan shall he governed by the provisions of schedule 4 to this Agreement. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain, or cause to be maintained, separate records and accounts adequate to reflect, in accordance with consistently maintained sound accounting practices, the expenditures financed out of the proceeds of the Loan. (b) The Borrower 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 and qualified auditors; (ii) furnish to the Bank as soon as available, but in any case not later than six 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said accounts and the audit thereof as the Bank shall from time to time reasonably request. Page 5 (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower 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 Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts or other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such separate accounts are included in the annual audits referred to in paragraph (b) of this Section and that the report thereof contain, in respect of such separate accounts, a separate opinion by said auditors as to whether the proceeds of the Loan withdrawn in respect of such expenditures were used for the purposes for which they were provided. ARTICLE V Remedies Section 5.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional event is specified, namely, that a situation has occurred which shall make lt improbable that the Program, or a significant part thereof, will be carried out. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) that the contractual arrangements referred to in Section 3.01 of this Agreement shall have been executed; and (b) that the Guarantor shall have provided to the Bank evidence that its macro-economic policy framework is consistent with the Program. Section 6.02. The following is specified as an additional matter, 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, namely, that the contractual arrangements referred to in Section 3.01 of this Agreement have been executed and delivered on behalf of the parties thereto and are legally binding upon them in accordance with their terms. Section 6.03. The date June 14, 1988, is hereby specified for the purposes of Section 12.04 of the General Conditions. Page 6 ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Director Internacional 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: For the Borrower: Direccion Internacional Nacional Financiera, S.N.C. Plaza NAFINSA, Insurgentes Sur 1971 9