Costa Rica - Rio Macho Hydroelectric Project : Loan 0276 - Guarantee Agreement - Conformed

LOAN NUMBER 276 CR Guarantee Agreement (Rio Macho Hydroelectric Project) BETWEEN REPUBLICA DE COSTA RICA AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED FEBRUARY 3, 1961 LOAN NUMBER 276 CR Guarantee Agreement (Rio Macho Hydroelectric Project) BETWEEN REPUBLICA DE COSTA RICA AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED FEBRUARY 3, 1961 AGREEMENT, dated February 3, 1961, between REPUB- LICA DE COSTA RICA (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS by an agreement of even date herewith between the Bank and Instituto Costarricense de Electricidad (here- inafter called the Borrower), which agreement and the schedules therein referred to are hereinafter called the Loan Agreement, the Bank has agreed to make to the Bor- rower a loan in various currencies equivalent to eight mil- lion, eight hundred thousand dollars ($8,800,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as hereinafter provided; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower; Now THEREFORE the parties hereto hereby agree as follows: ARTICLE I SECTION 1.01. The parties to this Guarantee Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated June 15, 1956, subject, however, to the modi- fications thereof set forth in Schedule 3 to the Loan Agree- ment (said Loan Regulations No. 4 as so modified being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein. SECTION 1.02. Wherever used in this Agreement, unless the context shall otherwise require, the several terms de- fined in the Loan Agreement shall have the respective meanings therein set forth. 4 ARTICLE II SECTION 2.01. Without limitation or restriction upon any of the other covenants on its part in this Agreement con- tained, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and the interest and other charges on, the Loan, the principal of and interest on the Bonds, the premium, if any, on the prepayment of the Loan or the redemption of the Bonds, and the punctual performance of all the covenants and agreements of the Borrower, all as set forth in the Loan Agreement and in the Bonds. SECTION 2.02. Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guar- antor specifically undertakes, whenever there is reasonable cause to believe that the funds available to the Borrower will be inadequate to meet the estimated expenditures re- quired for carrying out the Project, to make arrangements, satisfactory to the Bank, promptly to provide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. ARTICLE III SECTION 3.01. It is the mutual intention of the Guarantor and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assets. To that end, the Guarantor undertakes that, except as the Bank shall otherwise agree, if any lien shall be cre- ated on any assets of the Guarantor as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan and the Bonds, and that in the creation of any such lien express provision will be made to that effect; provided, however, that the foregoing pro'- sions of this Section shall not apply to: (i) any lien created 5 on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. The term "assets of the Guarantor" as used in this Sec- tion includes assets of the Guarantor or of any of its politi- cal subdivisions or of any agency of the Guarantor or of any such political subdivision, including the Banco Central de Costa Rica. SECTION 3.02. (a) The Guarantor and the Bank shall co- operate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reasonably re- quest with regard to the general status of the Loan. On the part of the Guarantor, such information shall include in- formation with respect to financial and economic conditions in the territories of the Guarantor and the international balance of payments position of the Guarantor. (b) The Guarantor and the Bank shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Guarantor shall promptly inform the Bank of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Loan or the maintenance of the serv- ice thereof. (c) The Guarantor shall afford all reasonable opportunity for accredited representatives of the Bank to visit any part of the territories of the Guarantor for purposes related to the Loan. SECTION 3.03. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid without 6 deduction for, and free from, any taxes or fees imposed under the law% s of the Guarantor or laws in effect in its territories; provided, however, that the provisions of this Section shalA not apply to taxation of, or fees upon, pay- ments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individ- ual or corporate resident of the Guarantor. SECTION 3.04. This Agreement, the Loan Agreement, the Mortgage and the Bonds shall be free from any taxes or fees that shall be imposed under the laws of the Guarantor or laws in effect in its territories on or in connection with the execution, issue, delivery or registration thereof. SECTION 3.05. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid free from all restrictions imposed under the laws of the Guarantor or laws in effect in its territories. SECTION 3.06. The Guarantor shall take all such action within its power as will be necessary to enable the Bor- rower to obtain, and shall not take any action which would prevent the Borrower from obtaining, from time to time such adjustments in its rates as will provide revenues suffi- cient: (a) to cover operating expenses, including adequate maintenance and depreciation, taxes and interest; (b) to meet repayments on Long-term Indebtedness but only to the extent that such repayments shall exceed provision for de- preciation; and (c) to create a surplus for financing a rea- sonable portion of planned expansion of its power facilities. ARTICLE IV SECTION 4.01. The Guarantor shall endorse, in accordance with the provisions of the Loan Regulations, its guarantee on the Bonds to be executed and delivered by the Borrower. The Ministro de Economia y Hacienda of the Guarantor 7 and such person or persons as he shall designate in writing are designated as the authorized represenatives of the Guarantor for the purposes of Section 6.12 (b) of the Loan Regulations. ARTICLE V SECTION 5.01. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Guarantor: Ministro de Economia y Hacienda San Jose Costa Rica Alternative address for cablegrams and radiograms: Mineconomia San Jose For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 25, D. C. United States of America Alternative address for cablegrams and radiograms: Intbafrad Washington, D. C. SECTION 5.02. The Ministro de Economia y Hacienda of the Guarantor is designated for the purposes of Section 8.03 of the Loan Regulations. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have 8 caused this Guarantee Agreement to be signed in their re- spective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLICA DE COSTA RICA By M. G. ESCALANTE Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By J. BURKE KNAPP Vice President