Conformed Copy - C2013 BO - Mining Sector Rehabilitation Project - Project Agreement 2

Page 1 CONFORMED COPY LOAN NUMBER 2013 BO (Mining Sector Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and BANCO CENTRAL DE BOLIVIA Dated August 4, 1989 CREDIT NUMBER 2013 BO CENTRAL BANK PROJECT AGREEMENT AGREEMENT, dated August 4, 1989 between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and BANCO CENTRAL DE BOLIVIA (the Central Bank). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Republic of Bolivia (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to twenty-six million five hundred thousand Special Drawing Rights (SDR 26,500,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that the Central Bank agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a Central Bank subsidiary loan agreement (the Central Bank Subsidiary Loan Agreement) to be entered into between the Borrower and Central Bank, part of the proceeds of the Credit will be made available to the Central Bank on the terms and conditions set forth in the said Central Bank Subsidiary Loan Agreement; and WHEREAS the Central Bank, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: Page 2 ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as defined in the Development Credit Agreement) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. The Central Bank declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement, and, to this end, shall carry out Part B of the Project with due diligence and efficiency and in conformity with sound financial standards and practices, with qualified management and personnel and in accordance with the Charter and the Credit Guidelines. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for Part B of the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Section III of Schedule 3 to the Development Credit Agreement. Section 2.03. The Central Bank shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of this Agreement and Part B of the Project. Section 2.04. The Central Bank shall enter into the Central Bank Subsidiary Loan Agreement with the Borrower in accordance with the provisions of Section 3.01 (f) of the Development Credit Agreement, and shall duly perform all its obligations under the Central Bank Subsidiary Loan Agreement. Except as the Association shall otherwise agree, the Central Bank shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Central Bank Subsidiary Loan Agreement, or any provision thereof. Section 2.05. The Central Bank shall enter into Participating Agreements with the Financial Intermediaries in accordance with the terms and conditions set forth or referred to in Schedule 1 to this Agreement, and shall duly perform all its obligations under the Participating Agreements. Except as the Association shall otherwise agree, the Central Bank shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Participating Agreements, or any provision thereof. Section 2.06. (a) The Central Bank shall, at the request of the Association, exchange views with the Association with regard to the progress of Part B of the Project, the performance of its obligations under this Agreement, and under the Central Bank Subsidiary Loan Agreement and the performance of its obligations and those of the Financial Intermediaries under the Participating Agreements, as well as other matters relating to the purposes of the Credit. (b) The Central Bank shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part B of the Project, the accomplishment of the purposes of the Credit, or the performance by the Central Bank of its obligations under this Agreement, the Central Bank Subsidiary Loan Agreement, or the Participating Agreements. Section 2.07. (a) The Central Bank undertakes that, unless the Association shall otherwise agree, Sub-loans shall be made in accordance with the Credit Guidelines and the procedures and on the terms and conditions set forth or referred to in Schedule 2 to this Agreement. (b) The Central Bank shall exercise its rights in relation to each Sub-project in such manner as to: (i) protect the interests of the Association and the Financial Intermediaries; (ii) comply with its obligations under this Agreement and the Central Bank Subsidiary Loan Agreement; and (iii) achieve the purposes of the Project. Section 2.08. For the purpose of carrying out Part B of the Project, the Central Page 3 Bank shall: (a) prepare and submit, or cause to be prepared and submitted, for the Association's approval credit guidelines (the Credit Guidelines) setting forth the terms and conditions for the provision of credit under Parts B (1) and (2) of the Project; and (b) appoint an administrator for Part B of the Project within the DCD with qualifications and experience and terms of employment, all satisfactory to the Association. Section 2.09. The Central Bank shall, not later than June 30, 1990 prepare and submit, or cause to be prepared and submitted, to the Association a feasibility study, satisfactory to the Association, for the establishment and maintenance of a fund (the Guarantee fund) to guarantee the repayment of Sub-loans by the Eligible Miners to the Financial Intermediaries. Section 2.10. The Central Bank shall, from time to time as the Association may request, review with the Association the status of implementation of Part B of the Project, including the adequacy of the onlending terms, and in particular the interest rate, set forth in Schedule 2 to this Agreement. ARTICLE III Financial Covenants Section 3.01. (a) The Central Bank shall maintain, or cause to be maintained, separate records and accounts adequate to reflect, monitor and record all resources and expenditures in respect of Part B of the Project and of each Investment Project and Financial Restructuring (including its cost and the benefits to be derived therefrom), and the financial condition of each Financial Intermediary. (b) The Central Bank shall: (i) have the records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) 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 six (6) months after the end of each such year: (A) certified copies of the said financial statements for such year as so audited, and (B) 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, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. Section 3.02. The Central Bank shall take such steps, satisfactory to the Association, as shall be necessary to protect itself against risk of loss resulting from changes in the rates of exchange between the various currencies (including Bolivianos) used in its operations. 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 Development Credit Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association and of the Central Bank thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date twenty (20) years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify the Central Bank of this event. Page 4 Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE V Miscellaneous 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 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) For the Central Bank: Banco Central Casilla 3118 La Paz, Bolivia Telex: 2575 NAVIANA BAY Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of the Central Bank, or by the Central Bank on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by the President of the Central Bank or such other person or persons as the President of the Central Bank shall designate in writing, and the Central Bank shall furnish to the Association 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 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. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ S. Shahid Husain Regional Vice President Latin America and the Caribbean BANCO CENTRAL DE BOLIVIA Page 5 By /s/ Carlos Delius Authorized Representative SCHEDULE 1 Terms and Conditions of Participating Agreements The Participating Agreements shall contain: (1) the terms and conditions of the Central Bank Loans which shall be the same as those set forth for Sub-loans in Schedule 2 to this Agreement, except that: (a) the interest rate applicable to the Central Bank Loans shall be the LIBOR rate plus one (1) percentage point; and (b) the Central Bank Loans shall finance up to 80% of the Investment Project, Working Capital or Financial Restructuring costs, and up to 89% of the Sub-loan in question; (2) the terms for Sub-loans and Investment Projects and Financial Restructuring appraisals, and supervision guidelines, reporting requirements, accounting, auditing and procurement, including those set forth or referred to in Schedule 2 to this Agreement; (3) the Financial Intermediaries' undertaking to: (a) maintain separate records and accounts to reflect, in accordance with consistently maintained sound accounting practices, their operations, resources and expenditures in respect of Part B (1) and (2) of the Project; (b) have the records and accounts referred to in (a) above and the financial statements (balance sheets, statements of income and expenses and related statements) for each Fiscal Year audited in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; and (c) furnish to the Association, through the Central Bank, not later than six (6) months after the end of each fiscal year, certified copies of their financial statements for such year as so audited and the report of such audit by said auditors. SCHEDULE 2 Procedures for and Terms and Conditions of Sub-loans 1. (a) Amount: Each Sub-loan shall not exceed (i) 90% of the cost of Financial Restructuring or the Investment Project; (ii) $500,000 per Eligible Miner for Financial Restructuring; (iii) $200,000 per Eligible Miner for Investment Projects and (iv) $160,000 per Eligible Miner for Working Capital. (b) Currency: Sub-loans shall be denominated in dollars and disbursed and repaid in Bolivianos. (c) Repayment Period: The repayment period shall not exceed: (i) ten (10) years, including a grace period not to exceed three (3) years for Sub-loans other than Working Capital Sub-loans; and (ii) three (3) years, including a grace period of one (1) year for Working Capital Sub-loans. (d) Interest Rate: The Eligible Miner shall pay interest on the principal amount of the Sub-loan withdrawn and outstanding at the LIBOR rate plus a spread not to exceed six (6) percentage points. 2. No expenditures for goods or services or for Working Capital shall be eligible for financing out of the proceeds of the Credit unless: (a) the Sub-loan shall have been approved by the Association and such expenditures shall have been made not earlier than ninety (90) days prior to the date on which the Association shall have received the application and information required under paragraph 3 (a) of this Schedule in respect of such Sub-loan; or (b) the Sub-loan shall have been a free-limit Sub-loan for which the Association has authorized withdrawals from the Credit Account and such expenditures shall have been made not earlier than ninety (90) days prior to the date on which the Association shall have received the request and information required under paragraph 3 (b) of this Schedule in respect of such free-limit Sub-loan. For the purposes of the Development Credit Agreement and this Agreement, a free-limit Sub-loan shall be any Page 6 Sub-loan which is received by the Association after five (5) other Sub-loans have been approved by the Association, in an amount to be financed out of the proceeds of the Credit which shall not exceed the amount of (i) (A) $200,000 equivalent, for Sub-loans for Investment Projects or Working Capital Sub-loans, and (B) $300,000 equivalent for Sub-loans for Financial Restructuring, when added to any other outstanding amounts financed or proposed to be financed out of the proceeds of the Credit, or (ii) $500,000 equivalent, when added to all other free-limit Sub-loans financed or proposed to be financed out of the proceeds of the Credit, the foregoing amounts being subject to change from time to time as determined by the Association. 3. (a) When presenting a Sub-loan (other than a free-limit Sub-loan) to the Association for approval, the Central Bank shall furnish to the Association an application, in form satisfactory to the Association, together with: (i) a description of the Eligible Miner and an appraisal of the Investment Project or Financial Restructuring, including a description of the expenditures proposed to be financed out of the proceeds of the Credit; (ii) the proposed terms and conditions of the Sub-loan, including the schedule of amortization of the Sub-loan; and (iii) such other information as the Association shall reasonably request. (b) Each request by the Central Bank for authorization to make withdrawals from the Credit Account in respect of a free-limit Sub-loan shall contain: (i) a summary description of the Eligible Miner, and the Investment Project or the Financial Restructuring, as the case may be, including a description of the expenditures proposed to be financed out of the proceeds of the Credit; and (ii) the terms and conditions of the Sub-loan, including the schedule of amortization therefor. (c) Applications and requests made pursuant to the provisions of sub-paragraphs (a) and (b) of this paragraph shall be presented to the Association on or before June 30, 1994. 4. Sub-loans shall be made on terms whereby the Financial Intermediaries shall obtain, by written contract with the Eligible Miner or by other appropriate legal means, rights adequate to protect the interests of the Association and the Central Bank, including, in the case of any Sub-loan, the right to: (a) require the Eligible Miner to carry out and operate the Investment Project and the Financial Restructuring, as the case may be, with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (b) require that: (i) the goods and works to be financed out of the proceeds of the Credit 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 works, of their quality and the competence of the parties rendering them; (ii) such goods and works shall be used exclusively in the carrying out of the Investment Project and the Financial Restructuring, as the case may be; and (iii) the conditions set forth in Section III of Schedule 3 to the Development Credit Agreement, as applicable, shall be complied with; (c) inspect, by itself or jointly with representatives of the Association if the Association shall so request, such goods, works, plants and construction included in the Investment Project and Financial Restructuring, the operation thereof, and any relevant records and documents; (d) require that: (i) the Eligible Miners shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice; and (ii) without any limitation upon the foregoing, such insurance shall cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Credit to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the Eligible Miner to replace or repair such goods; (e) obtain all such information as the Association, the Central Bank or the Financial Intermediaries shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Eligible Miner and to the benefits to be derived from the Investment Project or the Financial Restructuring; and (f) suspend or terminate the right of the Eligible Miner to the use of the proceeds of the Credit upon failure by such Eligible Miner to perform its obligations under its contract with the Financial Intermediary. 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