Costa Rica - Agricultural Credit And Development Project : Loan 1410 - Project Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1410 CR Project Agreement (Agricultural Credit and Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO CENTRAL DE COSTA RICA Dated June 2, 1977 PROJECT AGREEMENT AGREEMENT, dated June 2, 1977, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and BANCO CENTRAL DE COSTA RICA (hereinafter called Banco Central). WHEREAS (A) by the Loan Agreement of even date herewith between Repfblica de Costa Rica (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to eighteen million dollars ($18,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that Banco Central agree to undertake such obligations toward the Bank as hereinafter set forth; (B) by the Banco Central Agreement between the Borrower and Banco Central, a portion of the proceeds of the loan provided for under the Loan Agreement will be relent to Banco Central on the terms and conditions therein set forth; and WHEREAS Banco Central, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. - 3 - ARTICLE II Execution of the Project Section 2.01. (a) Banco Central shall carry out Part A of the Project described in Schedule 2 to the Loan Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Banco Central shall relend to the Participating Banks, under subsidiary loan agreements to be entered into between Banco Central and the Participating Banks: (i) the part of the proceeds of the Loan withdrawn from Category (1) of Schedule 1 to the Loan Agreement; and (ii) such additional funds as may be needed by the Participating Banks to finance all expenditures for Sub-loans, including incremental working capital. (c) The subsidiary loan agreements between Banco Central and the Participating Banks referred to in paragraph (b) hereof shall be satisfactory to the Bank, and shall reflect, inter alia, the terms, conditions, policies and procedures set forth in Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Bank and Banco Central. -4. (d) Banco Central shall exercise its rights under the subsidiary loan agreements referred to in paragraph (b) hereof in such manner as to protect the interests of Banco Central and the Bank and to accomplish the purposes of the Loan. (e) Except as the Bank shall otherwise agree, Banco Central shall, in carrying out the Project, make arrangements to cause the Participating Banks to make Sub-loans to the Beneficiaries in accordance with the provisions of Part II of Schedule 1 to this Agreement. Section 2.02. Banco Central shall: (a) establish and maintain a separate Project Account for each Part of the Project; and (b) record in each such Project Account all receipts and payments for or in connection with that Part of the Project, in accordance with sound accounting principles consistently applied, including the following: (i) amounts withdrawn from the Loan Account; (ii) for Part A of the Project, amounts disbursed to and received from a Participating Bank; and (iii) for Parts B, C, D and E of the Project, amounts disbursed to each of the Executing Agencies. -5- Section 2.03. Banco Central shall require each Participating Bank: (a) to establish and maintain a separate Sub-loan Account to be used exclusively for each Sub-loan; and (b) to record in such Sub-loan Account all receipts and payments for or in connection with such Sub-loan, in accordance with sound accounting principles consistently applied, including the following: (i) amounts received from and payments made to the Banco Central under a Subsidiary Loan; (ii) amounts disbursed to and received from each Beneficiary under a Sub-loan; and (iii) amounts provided by the Participating Bank from its own resources for Sub-loans. Section 2.04. Banco Central shall, through DCD: (a) supervise the Participating Banks in carrying out Part A of the Project; (b) provide guidance, training and assistance to the Participating Banks, and assistance to the Extension Service of MAG, in carrying out Parts A and B of the Project, respectively; and (c) establish, no later than March 1, 1978, and maintain thereafter, a monitoring system to collect and analyze statistical - 6 - data related to the carrying out of Part A of the Project, and to aid in the preparation of completion and evaluation reports concerning Part A of the Project. Section 2.05. Except as the Bank shall otherwise agree, contracts for the purchase of goods or for civil works to be financed out of the proceeds of the Loan under Category (1) of Schedule 1 to the Loan Agreement, shall be procured in accordance with the provisions of Schedule 5 to the Loan Agreement. Section 2.06. Except as the Bank may otherwise agree, Banco Central shall cause all goods and services financed out of the proceeds of the Loan relent to it by the Borrower to be used exclusively for the Project. Section 2.07. (a) Banco Central shall furnish to the Bank all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan under Category (1) of Schedule 1 to the Loan Agreement, Part A of the Project, and the Sub-loans. (b) Banco Central shall enable, and shall cause the Participating Banks to enable, the Bank's representatives to examine all buildings, property and equipment of Banco Central and of the Participating Banks relating to the Project, and any relevant records and documents. - 7 - Section 2.08. Banco Central shall duly perform all its obligations under the Banco Central Agreement, and shall duly perform all its obligations and enforce all its rights under any Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, Banco Central shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Banco Central Agreement or any Subsidiary Loan Agreement or any provision thereof. Section 2.09. (a) Banco Central shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Part A of the Project, the performance of its obligations under this Agreement, under the Banco Central Agreement, and under any Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan and to the Subsidiary Loans. (b) Banco Central shall promptly inform the Bank of any condition which interferes or threatens to interfere with, the progress of Part A of the Project, the accomplishment of the purposes of the Loan, or the performance by Banco Central of its obligations under this Agreement, under the Banco Central Agree- ment, and under any Subsidiary Loan Agreement. -8- ARTICLE III Management and Operations of Banco Central Section 3.01. Banco Central shall conduct its business and operations with regard to the Project in accordance with sound administrative and financial policies and practices, and under the supervision of competent and experienced management. -9- ARTICLE IV Financial Covenants Section 4.01. Banco Central shall maintain, and shall cause the Participating Banks to maintain, records adequate to record the progress of the Project and to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. Banco Central shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) and the Project Accounts for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish Lo the Bank as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements and of the Project Accounts 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of Banco Central and the Project Accounts and the audit thereof as the Bank shall from time to time reasonably request. - 10 - Section 4.03. Banco Central shall: (a) cause the Participat- ing Banks to: (i) have their Sub-loan Accounts for each fiscal year audited, in accordance with sound auditing principles con- sistently applied, by independent auditors acceptable to Banco Central and the Bank; (ii) furnish to Banco Central as soon as available, but in any case not later than three months after the end of each such year, (A) certified copies of the Sub-loan Accounts for such year as so audited and (B) the report of such audits by said auditors, of such scope and in such detail as the Bank shall have reasonably requested from Banco Central; and (iii) furnish to Banco Central such other information concerning the Sub-loan Accounts of the Participating Banks and the audit thereof as the Bank shall from time to time reasonably request from Banco Central; and (b) furnish to the Bank as soon as available, but in any case not later than one month after receipt from the Participating Banks, the certified copies, reports and information referred to in Sub-section (a) hereof. - 11 - ARTICLE V Effective Date; Termination; Cancellation and Sus.ension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. . Section 5.02. (a) This Agreement and all obligations of the Bank and of Banco Central thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Loan Agreement shall terminate in accordance with its terms; or (ii) a date 17 years after the date of this Agreement. (b) If the Loan Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Bank shall promptly notify Banco Central of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Loan Agreement. - 12 - ARTICLE VI Miscellaneous Provisions Section 6.01. 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 herein- after 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 Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. For Banco Central: Banco Central de Costa Rica San Josg Costa Rica Cable address: BANCENTRAL San Jos6 - 13 - Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of Banco Central may be taken or executed by the General Manager of Banco Central or such other person or persons as Banco Central shall designate in writing. Section 6.03. Banco Central shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of Banco Central, take any action or execute any documents required or permitted to be taken or executed by Banco Central pursuant to any of the provisions of this Agreement and of the Loan Agreement. Section 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. - 14 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment to be signed in their respective names in the city of San Josf, Republic of Costa Rica, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ A. Krieger Regional Vice President Latin America and the Caribbean BANCO CENTRAL DE COSTA RICA By /s/ Bernal JimGnez Monge Authorized Representative - 15 - SCHEDULE 1 Lending and Operating Policies and Procedures I. SUBSIDIARY LOAN AGREEMENTS Banco Central will relend the proceeds of the Loan under Category (1) of Schedule 1 to the Loan Agreement to each Participating Bank under Subsidiary Loan Agreements which shall provide, inter alia, for the following terms and conditions: 1. The interest rate shall be five percent (5%) per annum on funds to be relent to small farmers, and nine and one-half percent (9-1/2%) per annum on funds to be relent to all other Beneficiaries. 2. The Participating Banks will repay Banco Central by the end of the same quarter in which repayments from Beneficiaries fall due. 3. Banco Central shall provide to the Participating Banks sufficient funds, in addition to funds withdrawn from the Loan Account, as shall be necessary to finance (a) 100% of the amount of eligible Sub-loans to small farmers, and (b) 80% of the amount of eligible Sub-loans to all other Beneficiaries. 4. The Participating Banks shall maintain Sub-loan Accounts in accordance with Section 2.03 of this Agreement. 5. Sub-loans not exceeding the equivalent of $35,000 may be approved by local offices of the Participating Banks. - 16 - 6. Sub-loans exceeding the equivalent of $100,000 shall be made only with the prior approval of Banco Central, and Sub-loans exceeding the equivalent of $150,000 shall be made only with the prior approval of Banco Central and the Bank. 7. Each Participating Bank will undertake to make addi- tional short-term loans to each Beneficiary for the financing of working capital requirements of each Beneficiary. 8. Such other terms and conditions as shall have been approved by the Bank. The Borrower shall furnish to the Bank for approval a standard form of the Subsidiary Loan Agreement to be used under this Project. II. SUB-LOANS Eligibility 1. Sub-loans shall be made for the following types of investments: (a) On-farm investments, including the financing of comprehensive farm development subprojects and the financing of inputs that are complementary to existing farm investments. Such investments shall be made in the following areas: (i) Livestock, primarily beef and dairy production, including pasture establishment and improve- - 17 - ment, fertilizers during pasture establish- ment, buildings, on-farm roads, fencing, water and handling facilities, wells and on-farm irrigation, breeding stock and semen, and agricultural machinery and equipment; and (ii) Crops, both annual and perennial, including land preparation, drainage, buildings, machinery and equipment, fencing, on-farm roads, wells and on-farm irrigation, as well as fertilizers, insecticides, fungicides and herbicides, and labor, for the establishment of perennial crops (including bananas and plantains) and sugarcane. (b) Agro-industries, including buildings, machinery and equipment. (c) Farm Contracting Enterprises, including investments in agricultural machinery, equipment, and vehicles for contractors engaged in providing services to farmers. 2. (a) For purposes of this Project, the term "small farmer" shall apply to any person whose net income does not exceed 025,000 per year, or such other sum as the Bank and Banco Central shall from time to time determine. - 18 - (b) Sub-loans shall not exceed 90%, in the case of small farmers, and 80%, in the case of all other Beneficiaries, of the estimated cost of the new investment proposed by the applicant. The Participating Banks shall exclude from such investment cost (i) any items for which the Beneficiary has received (or arranged to receive) alternative financing; and (ii) any short-term credit. (c) The total amount of Sub-loans to any small farmer at the interest rate of 8% shall not exceed an aggregate amount of 0100,000 to the same Beneficiary, or such other amount as the Bank and Banco Central shall from time to time determine. (d) Except in the case of Sub-loans to small farmers or of complementary investments for dairy production, no more than 50 per cent of the proceeds of each Sub-loan shall be used for the purchase of breeding cattle. Interest 3. Sub-loans will bear interest (including commission) at not less than a rate of eight per cent (8%) per annum, in the case of small farmers, and twelve per cent (12%) per annum in the case of all other Beneficiaries, on the principal amount withdrawn and outstanding. - 19 - Term 4. The repayment period shall be established for each Sub- loan on the basis of cash-flow projections, and shall range from a minimum of 3 years to a maximum of 12 years, including grace periods not to exceed 5 years. Appraisal: 5. The staff of the Participating Banks shall assist appli- cants for Sub-loans in the preparation of farm plans as needed for the appraisal of Sub-loan applications and shall appraise all such Sub-loans in terms of their incremental returns. 6. In appraising an application the Participating Banks shall ensure that the conditions specified in paragraph 4 above are met. Sub-loan Agreements: 7. Sub-loans shall be made under written agreements with participating Beneficiaries which shall include, without limita- tion, provisions implementing the terms of paragraphs 2, 3 and 4 above, and granting the following rights, inter alia: (a) the right to require the Beneficiary to carry out its investment plan, as approved by the respective Participating Bank, and to carry on his business, with due diligence and efficiency and in accordance with sound technical, agricul- tural, commercial and financial practices and standards, and to maintain adequate records; - 20 - (b) the right of Banco Central, the respective Participating Bank and the Bank to inspect the premises the improvement of which is financed by the Sub-loan, any equipment, materials or inputs financed by the Sub-loan, the business of the Beneficiary, the operation thereof, and any relevant records and documents; (c) the right to obtain all such information as the Borrower, the respective Participating Bank or the Bank shall reasonably request relating to the foregoing and to the operations and financial condition of the Beneficiary; (d) the right to require that the goods and services to be financed out of the proceeds of the Loan shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability thereof, and availability of service and spare parts therefor; (e) the right to require the Beneficiaries to take out and maintain with responsible insurers insurance against such risks and in such amounts as shall be consistent with sound practice; and (f) the right to suspend or terminate access by the Beneficiary to the use of such proceeds upon failure by him to perform his obligations and, in appropriate cases, to accelerate the maturity of the Sub-loan. - 21 - Supervision: 8. The Participating Banks shall ensure that amounts drawn on Sub-loans are applied exclusively to the purposes for which they were lent and their staffs shall regularly visit the Beneficiaries' facilities to ensure that they are complying with the terms of their respective Sub-loan Agreements.