Conformed Copy - L3207 - Road Transport and Telecommunications Sector Adjustment Loan - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3207 ME (Road Transport and Telecommunications Sector Adjustment Loan) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS, S.N.C. Dated June 5, 1990 LOAN NUMBER 3207 ME LOAN AGREEMENT AGREEMENT, dated June 5, 1990, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS, S.N.C. (the Borrower). WHEREAS (A) the Bank has received a letter dated May 4, 1990 from the UNITED MEXICAN STATES (the Guarantor) describing a program of actions, objectives and policies designed to achieve structural adjustment of the Guarantor's road transport and telecommunications 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 imports required during such execution; (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 all other obligations set forth in the Guarantee Agreeemnt; and Page 2 (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 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 Loan and Guarantee Agreements" of the Bank, 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 11, shall be modified to read: "'Project' means the imports and other activities that may be financed out of the proceeds of the Loan pursuant to the provisions of Schedule 1 to the Loan Agreement."; (b) Section 9.07 (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 between the Guarantor, the Borrower and the Bank, the Guarantor and the Borrower 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 performance by the Guarantor, the Borrower and the Bank of their respective obligations under the Guarantee and Loan Agreements and the accomplishment of the purposes of the Loan."; 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) "Fiscal Year" means the fiscal year of the Guarantor, beginning on January 1 of each year; (b) "QRs" means quantitative restrictions placed by the Guarantor on imported goods; (c) "Non-tariff Barriers" means any form of restriction, other than the levy of a tariff, on imports, including QRs. (d) "FERRONALES" means Ferrocarriles Nacionales de Mexico, the national railway agency of the Guarantor; (e) "Peso" means the Currency of the Guarantor; (f) "SCT" means Secretaria de Communicaciones y Transportes (Secretariat of Communications and Transport) of the Guarantor; (g) "TELMEX" means Telefonos de Mexico S.A. de C.V., a telephone company established originally as a private enterprise by an Escritura Constitutiva No. 34726, dated December 23, 1947, and subsequently taking the character of a parastatal enterprise since November 1, 1972 with majority ownership by the Guarantor; (h) "TELMEX Privatization Plan" means the plan, satis- factory to the Bank, submitted by the Guarantor to the Bank on May 4, 1990, to sell the Guarantor's equity shares in TELMEX to private entities in the domestic and international markets, including a time-table, satisfactory to the Bank, to implement such plan; (i) "TELECOMM" means Telecomunicaciones de Mexico, a Page 3 decentralized public enterprise of the Guarantor established by Presidential Decree of November 17, 1989, published in the Diario Oficial de la Federacion dated November 17, 1989, and which is wholly-owned by the Guarantor; and (j) "SPP" means Secretaria de Programacion y Presupuesto, the Secretariat of Planning and Budgeting of the Guarantor. 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 the Loan Agreement, various currencies that shall have an aggregate value equivalent to the amount of three hundred eighty million dollars ($380,000,000), being the sum of withdrawals of the proceeds of the Loan, with each withdrawal valued by the Bank as of the date of such withdrawal. 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, 1991 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower 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 percent (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 for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during 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 determined in respect of such Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and expressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings or portions thereof as the Bank has allocated to fund: (A) the Bank's investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. (iii) "Semester" means the first six months or the second six months of a calendar year. (d) On such date as the Bank may specify by no less than six months' notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: Page 4 "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respect of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) `Quarter' means a three-month period commencing on January 1, April 1, July 1 or October 1 in a calendar year." Section 2.06. Interest and other charges shall be payable semiannually on January 15 and July 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 2 to this Agreement. ARTICLE III Transfer of Funds; Other Covenants Section 3.01. The Borrower shall enter into contractual arrangements, satisfactory to the Bank, with the Guarantor, providing, inter alia, for relending the proceeds of the Loan to the Guarantor on the same terms and conditions as are set forth in Sections 2.04, 2.05, 2.06 and 2.07 of this Agreement. Except as the Bank may otherwise agree, the Borrower shall not change or fail to enforce any provision of such contractual arrangements. Section 3.02. (a) The Borrower and the Bank, and the Gua- rantor pursuant to Section 3.01 (a) of the Guarantee Agreement, shall, on a quarterly basis and at the request of any party, exchange views on the progress achieved in carrying out the Program and the actions specified in the Schedule to the Guarantee Agreement. (b) Prior to each such exchange of views, the Borrower, and the Guarantor pursuant to Section 3.01 (b) of the Guarantee Agreement, shall furnish to the Bank, for its review and comment, a report in such detail as the Bank shall reasonably request on the matters specified in paragraph (a) of this Section. 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 be governed by the provisions of Schedule 3 to this Agreement. Section 3.04. The Borrower shall on January 1, April 1, July 1, and October 1 of each year submit to the Bank a report verifying under terms of reference acceptable to the Bank that the goods with respect to which withdrawal applications have been submitted during the previous three months were eligible for financing out of the proceeds of the loan. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain, or cause to be maintained, records and accounts adequate to reflect in accordance with consistently maintained sound accounting practices, its operations and financial condition, including separate records and accounts reflecting the resources and the expenditures in respect of the Project. Page 5 (b) The Borrower shall: (i) have the accounts referred to in paragraph (a) above and its 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 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 copies of such financial statement so audited; and (B) 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 con- cerning said records, accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request. (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 accord- ance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, or cause to be retained, 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 and other documents) evidencing such expenditures; (iii) enable the Bank'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 proce-dures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Additional Event of Suspension Section 5.01. Pursuant to Section 6.02 (k) 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 VI Effective Date; Termination Section 6.01. The following event is specified as an addi- tional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the contractual arrangements referred to in Section 3.01 of this Agreement shall have been executed. Page 6 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 duly 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 September 4, 1990 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Director General 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 Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrower: Banco Nacional de Obras y Servicios Publicos, S.N.C. Insurgentes Norte 423 Mexico, D.F. 069000 Mexico Cable address: Telex: BANTE CARIO BN DSME Mexico City 01772619 Mexico City 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Shahid Husain Regional Vice President Latin America and the Caribbean BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS, S.N.C. Page 7 By /s/ German Sandoval Faz Authorized Representative SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. Subject to the provisions set forth or referred to in this Schedule, the proceeds of the Loan may be withdrawn from the Loan Account for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods required during the execution of the Program and to be financed out of such proceeds. 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 Bank by notice to the Borrower: Group Sub-group Description of item 112 - Alcoholic beverages 121 - Tobacco, unmanufac- tured, tobacco refuse 122 - Tobacco, manufactured (whether or not con- taining tobacco sub- stitutes) 525 - Radioactive and associated materials 667 - Pearls, precious and semi-precious stones, worked or unworked 718 718.7 Nuclear reactors, and parts thereof, fuel elements (cartridges), non- irradiated for nuclear reactors Group Sub-group Description of item 897 897.3 Jewelry of gold, silver or platinum, group metals (except watches and watch cases) and gold- smiths' or silver- smiths' wares (including set gems) 971 - Gold, non-monetary (excluding gold ores and concentrates) (b) expenditures in the currency of the Guarantor or for goods supplied from the territory of the Guarantor; (c) payments made for expenditures prior to the date of this Agreement, except that withdrawals in an aggregate amount not exceeding the equivalent of $76,000,000 may be made on account of payments made for such expenditures before that date but after February 1, 1990; Page 8 (d) expenditures for goods procured under contracts costing less than $10,000 equivalent; (e) expenditures for goods supplied under a contract which any national or international financing institution or agency other than the Bank shall have financed or agreed to finance; (f) expenditures for crude oil, foodstuffs or goods intended for a military or paramilitary purpose or for luxury consumption; and (g) expenditures for goods, the importation of which is subject to Non-tariff Barriers in Mexico. 3. Withdrawals for expenditures under contracts for the procurement of goods estimated to cost less than $5,000,000 may be permitted by the Bank upon the basis of statements of expenditure under such terms and conditions as the Bank shall specify. 4. 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 to be financed out of the proceeds of the Loan after the aggregate of the proceeds of the Loan withdrawn from the Loan Account and the total amount of such commitments shall have reached the equivalent of $190,000,000, unless the Bank shall be satisfied, after an exchange of views as described in Section 3.02 (a) of this Agreement and Section 3.01 (a) of the Guarantee Agreement based on evidence satisfactory to the Bank: (a) with the progress achieved by the Guarantor in the carrying out of the Program; (b) that the Guarantor's macroeconomic framework is consistent with the Program; and (c) that the actions described in the Schedule to the Guarantee Agreement have been taken (all calculations "in real terms" referred to in clauses 1, 2 and 3 of such Schedule to be made in accordance with methodology and assumptions satisfactory to the Bank); and that the Bank shall be satisfied with (i) the regulations referred to in clauses 4 and 8, (ii) the plan of action referred to in clause 5 (a), (iii) the progress made in implementing the TELMEX Privatization Plan referred to in clause 6 in accordance with the time-table included under such Plan, (iv) the program referred to in clause 7, and (v) the program of action referred to in clause 9 of such Schedule; provided, however, that in no case shall any withdrawal be made and any commitment be entered into in excess of such aggregate amount of the equivalent of $190,000,000 prior to November 15, 1990. 5. If, after the exchange of views described in paragraph 4 above, the Bank shall have given notice to the Borrower and the Guarantor that the progress achieved and actions taken are not satisfactory and, within ninety days after such notice, the Guarantor shall not have achieved progress and taken actions satisfactory to the Bank, then the Bank may, by notice to the Borrower and the Guarantor, cancel the unwithdrawn amount of the Loan or any part thereof. 6. Withdrawal applications for disbursements under paragraph (1) above shall, to the extent practicable, be consolidated in aggregate amounts of not less than $20,000,000 equivalent. SCHEDULE 2 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each January 15 and July 15 beginning January 15, 1996 Page 9 through January 15, 2007 15,835,000 On July 15, 2007 15,795,000 ________________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.18 before maturity More than three years but 0.35 not more than six years before maturity More than six years but 0.65 not more than eleven years before maturity More than eleven years but not 0.88 more than fifteen years before maturity More than fifteen years 1.00 before maturity SCHEDULE 3 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 Business; or (ii) an advertisement in a newspaper, periodical or technical journal of wide international circulation; or Page 10 (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. Contracts for the procurement of goods estimated to cost the equivalent of less than $5,000,000 shall be awarded: (a) by purchasers required to follow the Guarantor's public procurement procedures for the importation of goods, on the basis of such procedures, provided that such procedures shall have been found acceptable by the Bank; (b) by other purchasers, in accordance with established commercial practice, provided that such contracts shall be awarded on the basis of evaluation and comparison of quotations obtained from suppliers from at least two countries, except that direct contracting procedures acceptable to the Bank may be used where considered appropriate under paragraph 3.5 of the Guidelines; and (c) notwithstanding the provisions of subparagraph (b) above, in the case of the purchasers referred to therein, if the estimated cost of the contract is equivalent to less than $1,000,000, in accordance with established commercial practices under procedures satisfactory to the Bank. 3. With respect to each contract referred to in paragraph 1 of this Schedule, the Borrower shall furnish to the Bank, prior to the submission to the Bank of the first application for withdrawal of funds from the Loan 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 Bank shall reasonably request. 4. With respect to each contract referred to in paragraph 2 of this Schedule, the Borrower shall furnish to the Bank, prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect thereof, such documentation and information as the Bank may reasonably request to support withdrawal applications in respect of such contract. 5. The provisions of the preceding paragraph 4 of this Schedule shall not apply to contracts on account of which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure.