Conformed Copy - L2918 - Agricultural Sector Loan - Amendment 1

Page 1 February 4, 1990 Dr. Pedro Aspe Armella Minister of Finance Secretaria de Hacienda y Credito Publico Palacio Nacional, Primer Patio, Mariano, 4o Piso 06066 Mexico, D.F. Mexico. Mr. Juan Jose Paramo Director General Nacional Financiera, S.N.C. Plaza NAFINSA Insurgentes Sur 1971 Torre Sur, 9o. Fiso CP 01020 Mexico, D.F. Mexico. Dear Sirs: Re: Loan No. 2918-ME (Agricultural Sector Loan) - Amendment Please refer to the Loan Agreement dated March 15, 1988 for the above-referred Loan (the "Loan Agreement") between International Bank for Reconstruction and Development (the Bank) and Nacional Financiera, S.N.C. (the Borrower) , and to the Guarantee Agreement of even date therewith between the United Mexican States (the Guarantor) and the Bank ("the Guarantee Agreement"). In response to your request and the discussions between our respective representatives, we are pleased to inform you that the Bank hereby agrees to amend the Loan Agreement and the Guarantee agreement for the purpose of setting aside a portion of the proceeds of the Loan provided for in the Loan Agreement for the implementation of a debt reduction plan of the Guarantor. Accordingly, the Bank hereby proposes to amend the Loan Agreement and the Guarantee Agreement as follows: I. Loan Agreement A. Preamble (i) A new paragraph (B) is added after paragraph (A) to read as follows: "(B) it is contemplated that the Guarantor may require assistance from the Bank in the implementation of a Debt Reduction Plan (as hereinafter defined);". (ii) Former paragraphs (B) and (C) are relettered as "(C)" and "(D)II respectively. B. Section 1,02 (i) A new paragraph (g) is added after paragraph (f) to read as follows: "(g) "Debt Reduction Plan" means a plan of the Guarantor submitted to the Bank for partial funding under this Agreement to reduce the Guarantor's principal payments on its external loans from non-official creditors;" (ii) Former paragraphs (g) and (h) are relettered "(h)" and (i)" respectively. Page 2 C. Article III (i) A new Section 3.04 is added after Section 3.03 to read as follows: "Section 3.04. Subject to agreement by the Borrower, the Guarantor and the Bank on the terms and conditions to be applied in such case, the Borrower may use a portion of the proceeds of the Loan as provided in Schedule 1 to this Agreement for the implementation of a Debt Reduction Plan under Part C of the Project described in Schedule 2 to this Agreement." D. Schedule 1 (i) Paragraph 1 is deleted and the following substituted therefor: "1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditure for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Imported goods 125,000,000 100% of foreign under Part A expenditures of the Project (2) Debt Reduction 175,000,000 To be agreed by Plan the Bank, the Guarantor and the Borrower, subject to paragraph 5 below For purposes of this Schedule the term "foreign expenditures" means expenditures in the currency of any country other than that of the Guarantor for goods supplied from the territory of any country other than that of the Guarantor." (ii) The first four lines of paragraph 3 preceding clause (a) thereof are deleted and the following substituted therefor: "3. Subject to the provisions of paragraph 5 hereunder, 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 under Category 1:". (iii) The first six lines of clause (a) of paragraph 3 preceding sub-clause (i) thereof are deleted and the following substituted therefor: "(a) after the aggregate of the proceeds of the Loan withdrawn under Category 1 from the Loan account and the total amount of such commitments shall have reached the equivalent of $25,000,000 for Part A-of the Project, unless the Bank shall be satisfied, after an exchange of views as described in Section 3.02 of this Agreement based on evidence satisfactory to the Bank that:". Page 3 (iv) The first six lines of clause (b) of paragraph 3 preceding sub-clause (i) thereof are deleted and the following substituted therefor: "(b) after the aggregate of the proceeds of the Loan withdrawn under Category 1 from the Loan account and the total amount of such commitments shall have reached the equivalent of $100,000,000 for Part A of the Project, unless the Bank shall be satisfied, after an exchange of views as described in Section 3.02 of this Agreement based on evidence satisfactory to the Bank:". (v) New paragraphs 5 and 6 are added to read as follows: "5. If an agreement by the Bank, the Guarantor and the Borrower for the use of the portion of the proceeds of the Loan designated for the implementation of the Debt Reduction Plan shall not have been entered into by May 31, 1990 or such later date as approved by the Bank, then the amount of $175,000,000 under.Category 2 shall, at the request of the Borrower and the Guarantor, be reallocated to Category 1 for Part A of the Project. 6. The provisions of this Schedule are without prejudice to the provisions of Section 3.04 of the Loan Agreement." E. Schedule 2 (i) The objectives stated in the first paragraph are amended by deleting the word "and" at the end of clause (i) thereof, by deleting the period at the end of the paragraph and substituting the following there or: "; and (iii) if so determined under Section 3.04 of this Agreement, to assist the Guarantor in the implementation of a Debt Reduction Plan." (ii) A new Part C of the Project is added after Part B to read as follows: "Part C: Debt Reduction Plan Assistance to the Guarantor in the implementation of a Debt Reduction Plan which, in the judgment of the Guarantor and of the Bank, shall meet the requirements of the Bank's support of debt reduction." II. Guarantee Agreement A. Preamble (i) A new paragraph (B) is added after paragraph (A) to read as follows: "(B) it is contemplated that the Guarantor may require assistance from the Bank in the implementation of a Debt Reduction Plan; and" (ii) Former paragraph (B) is relettered as "(C)". B. Article III (i) A new Section 3.05 is added after Section 3.04 to read as follows: "Section 3.05. The Guarantor shall, if so Page 4 determined under Section 3.04 of the Loan Agreement, carry out Part C of the Project with due diligence and efficiency and in conformity with appropriate commercial, administrative and financial practices and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project." (ii) A new Section 3.06 is added after Section 3.05 to read as follows: "Section 3.06. The Guarantor shall take all actions as shall be required for implementing the provisions under Section 3.04 of the Loan Agreement." Please confirm your agreement to the foregoing amendments by signing and dating this letter in the spaces provided below. This Amendment may be executed in three counterparts, each of which shall be an original. Upon your confirmation, please return one fully executed original to us. This amendment will be effective as of the date of this letter upon receipt by the Bank of one fully executed original of this Amendment. Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S. Shahid Husain Vice President Latin America and the Caribbean Region CONFIRMED: UNITED MEXICAN STATES By /s/ Authorized Representative Date: February 4, 1990 NACIONAL FINANCIERA, S.N.C. By /s/ Authorized Representative Date: February 4, 1990