Conformed Copy - L3860 - Second Municipal Development Project - Loan Agreement

CONFORMED COPY LOAN NUMBER 3860-AR Loan Agreement (Second Municipal Development Project) between ARGENTINE REPUBLIC and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated October 18, 1995 LOAN NUMBER 3860-AR LOAN AGREEMENT AGREEMENT, dated October 18, 1995, between ARGENTINE REPUBLIC (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; 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 set forth below (the General Conditions) constitute an integral part of this Agreement: (a) The last sentence of Section 3.02 is deleted. (b) In Section 6.02, subparagraph (k) is relettered as subparagraph (1) and a new subparagraph (k) is added to read: "(k) An extraordinary situation shall have arisen under which any further withdrawals under the Loan would be inconsistent with the provisions of Article III, Section 3 of the Bank's Articles of Agreement." Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Annual Investment Plan" means any of the plans referred to in paragraph 7 (c) of Schedule 6 to this Agreement; (b) "CCU" means the unit referred to in Section 3.06 (a) of this Agreement; (c) "Eligible Institutional Strengthening Subproject" means any of the projects referred to in Part B of the Project, to be carried out by a Participating Province or a Municipality, which has been selected pursuant to the criteria set forth in the Operational Manual; (d) "Eligible Investment Subproject" means any of the projects referred to in Part A of the Project, to be carried out by a Municipality, which has been selected pursuant to the criteria set forth in the Operational Manual; (e) "Initial Allocation" means the amount of the Loan to be initially relent by the Borrower to a Participating Province under a Subsidiary Loan Agreement, as referred to in Section 3.05 of this Agreement; (f) "Municipal Development Fund" means the fund, referred to in paragraph 7 (e) of Schedule 6 to this Agreement, to be established in each Participating Province as a condition for such Province to participate in the Project; (g) "Municipality" means any municipality in a Participating Province which shall have been considered eligible to participate in the Project pursuant to the criteria set forth in the Operational Manual; (h) "Operational Manual" means the manual, satisfactory to the Bank, to be issued by the Borrower for the implementation of the Project, containing, inter alia, the eligibility criteria for the selection of Participating Provinces, Municipalities, Eligible Investment Subprojects and Eligible Institutional Strengthening Subprojects, the Subsidiary Loan allocation criteria, instructions for the procurement of goods, works and consultants' services, models of bidding documents and letters of invitation, instructions concerning disbursement procedures under the Subsidiary Loans and Subloans, accounting and auditing procedures, and environmental guidelines for the evaluation of Eligible Investment Subprojects; (i) "Participating Province" means any of the Borrower's provinces which shall have been considered eligible to participate in the execution of the Project pursuant to the criteria set forth in the Operational Manual; (j) "PET" means the unit referred to in paragraph 7 (b) of Schedule 6 to this Agreement; (k) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (1) "Subloan" means a loan to be provided under a Subloan Agreement; (m) "Subloan Agreement" means any of the agreements referred to in paragraph 7 (d) of Schedule 6 to this Agreement; (n) "Subsidiary Loan" means any of the loans to be provided under a Subsidiary Loan Agreement; and (o) "Subsidiary Loan Agreement" means any of the agreements referred to in Section 3.05 (b) of this Agreement. 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 two hundred and ten million dollars ($210,000,000), 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. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower may, for the purposes of the Project, open and maintain in dollars a special deposit account in Banco de la Nacion Argentina on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be June 30, 2002 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: "(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 May 15 and November 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 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall, through the Subsidiary Loan Agreements, cause the Project to be carried out with due diligence and efficiency and in conformity with appropriate administrative, financial, management, engineering and environment practices and the provisions of the Operational Manual, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources necessary or appropriate for the carrying out of the Project, and shall not take or permit to be taken any action which would prevent or interfere with the carrying out of the Project. Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section 3.03. Without limitation upon the provisions of Article IX of the General Conditions, the Borrower shall: (a) prepare, or cause to be prepared, and furnish to the Bank not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, a plan, of such scope and in such detail as the Bank shall reasonably request, for the future operation of the Project; (b) afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan; and (c) thereafter, cause said plan to be carried out with due diligence and efficiency and in accordance with appropriate practices, taking into account the Bank's comments thereon. Section 3.04. The Bank and the Borrower hereby agree that the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) shall be carried out by the Participating Provinces or the Municipalities, as the case may be, with respect to their respective activities under the Project. Section 3.05. (a) The Borrower shall allocate amounts of the Loan among the Participating Provinces for an initial period of three years from the date of this Agreement (the Initial Allocation) in accordance with criteria satisfactory to the Bank. (b) The Borrower shall relend the proceeds of the Initial Allocation and any remaining unallocated amounts to the Participating Provinces under agreements to be entered between the Borrower and each Participating Province (the Subsidiary Loan Agreement), such agreements to have terms and conditions satisfactory to the Bank, including those set forth in Schedule 6 to this Agreement. (c) The Borrower shall exercise its rights and comply with its obligations under the Subsidiary Loan Agreements in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or fail to enforce any Subsidiary Loan Agreement or any provision thereof. Section 3.06. The Borrower shall, for the purposes of carrying out Part C of the Project: (a) maintain, within the Borrower's Under Secretariat of Housing, a unit, with staff, responsibilities and functions satisfactory to the Bank (the CCU); and (b) provide, or cause to be provided, promptly as needed, all the funds, facilities and other resources required by the CCU to carry out its functions and responsibilities in an efficient and timely manner. Section 3.07. The Borrower shall furnish to the Bank, not later than April 30 and October 31 of each year during the execution of the Project, a report prepared by the CCU, of such detail as the Bank may reasonably request, presenting the overall progress of the Project and providing an independent opinion on the reports referred to in paragraph (7) (i) of Schedule 6 to this Agreement with regard to the execution of the provisions of this Agreement and of the Operational Manual. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and separate accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures, in respect of the Project, of the CCU, Participating Provinces and Municipalities. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) above and the records and accounts for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (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, 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 such 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 accordance with paragraph (a) of this Section, records and separate accounts reflecting such expenditures; (ii) retain, 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 or payment out of the Special 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 audit 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 procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 4.02. The Borrower shall cause the audit reports referred to in Section 4.01 (b) of this Agreement to include information on the compliance by the Participating Provinces and Municipalities with their respective obligations regarding the Municipal Development Funds and recovery of investment costs under the Eligible Investment Subprojects. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (1) of the General Conditions, the following additional events are specified, provided, however, that, if any of such events shall have occurred and be continuing, the suspension of the Borrower's right to make withdrawals from the Loan Account may be limited by the Bank to withdrawals in respect of Project expenditures related to the Participating Provinces or Municipalities concerned: (a) any Participating Province or any Municipality shall have failed to perform any of its respective obligations under a Subsidiary Loan Agreement or a Subloan Agreement, as the case may be; and (b) as a result of events which have occurred after the date of this Agreement, an extraordinary situation shall have arisen which shall make it improbable that a Participating Province or a Municipality will be able to perform its respective obligations under a Subsidiary Loan Agreement or a Subloan Agreement, as the case may be. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional event is specified, namely, that any event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Operational Manual has been issued by the Borrower; (b) at least one Subsidiary Loan Agreement has been entered into between the Borrower and a Participating Province; (c) the Participating Province referred to in paragraph (b) above has: (i) established and adequately staffed, in a manner satisfactory to the Bank, its PEU; (ii) taken all action necessary to exempt all contracts for goods, works and consultants' services to be financed under the Loan from all legal and regulatory provisions limiting the international procurement of such goods, works and consultants' services; and (iii) adopted environmental procedures and established environmental institutional responsibilities applicable to the Eligible Investment Subprojects, consistent with the provisions of the Operational Manual and satisfactory to the Bank; (d) terms of reference, satisfactory to the Bank, for the preparation of the reports referred to in Section 3.07 of this Agreement and paragraph 7 (i) of Schedule 6 to this Agreement have been furnished to the Bank; and (e) the Borrowr has submitted a timed action plan, satisfactory to the Bank, to strengthen the CCU to perform its functions within the meaning of Section 3.06 (a) of this agreement. Section 6.02. The following are specified as additional matters, 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: (a) that the Subsidiary Loan Agreement referred to in Section 6.01 (b) of this Agreement has been duly authorized or ratified by the Borrower and the Participating Province party to such agreement, and is legally binding upon the Borrower and such Provinces in accordance with its terms; and (b) that the exemption referred to in Section 6.01 (c) (ii) of this Agreement has been duly granted and no other action is required on behalf of the Borrower or the Participating Province referred to in Section 6.01 (b) of this Agreement for the procurement of goods, works and consultants' services in accordance with the provisions set forth or referred to in this Agreement. Section 6.03. The date January 17, 1996 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 Minister of Economy and Public Works and Services 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 Borrower: Ministerio de Economia y Obras y Servicios Publicos Hipolito Yrigoyen 250, 5o piso 1310 Buenos Aires Argentina Cable address: Telex: MINISTERIO ECONOMIA 121950 AR Baires 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 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in Buenos Aires, Argentine Republic, as of the day and year first above written. ARGENTINE REPUBLIC By /s/ Jose Armando Caro Figueroa Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Shahid Javed Burki Regional Vice President Latin America and the Caribbean SCHEDULE 1 Withdrawal of the Proceeds of the Loan 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 expenditures 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) Civil works 122,000,000 100% of foreign expenditures and 75% of local expenditures (2) Goods 39,000,000 100% of foreign expenditures and 75% of local expenditures (3) Consultants' 100% services: (a) under Parts A 22,000,000 and B of the Project (b) for the CCU 5,200,000 (4) Auditing services 1,500,000 100% (5) Training 300,000 100% (6) Unallocated 20,000,000 TOTAL 210,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; (c) the term "auditing services" includes the fees and costs of individual auditors or auditing firms, and travel costs and per diem of auditors who are civil servants; and (d) the term "training" includes tuition fees, and per diems and travel costs of trainees. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not to exceed the equivalent of $21,000,000, may be made on account of payments made for expenditures before that date but after March 1, 1994 or a date which is 12 months before the date of this Agreement, whichever is later; (b) expenditures by any Participating Province (other than that referred to in Section 6.01 (b) of this Agreement), unless the Bank has received a certified copy of the Subsidiary Loan Agreement entered into between the Borrower and such Participating Province, together with: (i) evidence satisfactory to the Bank that such Participating Province has: (A) established and adequately staffed, in a manner satisfactory to the Bank, its PEU; (B) taken all action necessary to exempt all contracts for goods, works and consultants' services to be financed under the Loan from all legal and regulatory provisions limiting the international procurement of such goods, works and consultants' services; and (C) adopted environmental procedures and established environmental institutional responsibilities applicable to the Eligible Investment Subprojects, consistent with the provisions of the Operational Manual and satisfactory to the Bank; and (ii) an opinion or opinions, satisfactory to the Bank, of counsel acceptable to the Bank showing that: (A) such Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and such Participating Province, and is legally binding upon the Borrower and such Province in accordance with its terms; and (B) the exemption referred to in subparagraph (b)(i) (B) above has been duly granted and no other action is required on behalf of the Borrower and such Participating Province for the procurement of goods, works and consultants' services in accordance with the provisions set forth or referred to in this Agreement; (c) expenditures in a Participating Province in a given calendar year (excluding expenditures for Eligible Investment Subprojects and Eligible Institutional Strengthening Subprojects included in an Annual Investment Plan approved by the Bank for a previous calendar year), unless the Bank has approved such Province's Annual Investment Plan for such year; (d) expenditures under any Eligible Investment Subproject in the Provinces of Buenos Aires, Cordoba, Mendoza and Santa Fe with an estimated cost higher than the equivalent of $2,000,000; and (e) expenditures for civil works to be carried out by force account. 4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures for training, for goods under contracts costing less than $150,000 equivalent, for works under contracts costing less than $1,500,000 equivalent, for consulting firms' services under contracts costing less than $100,000 equivalent and for individual consultants' services under contracts costing less than $50,000 equivalent, all under such terms and conditions as the Bank shall specify by notice to the Borrower. SCHEDULE 2 Description of the Project The objectives of the Project are to strengthen public sector management in the Participating Provinces and Municipalities through improved financing mechanisms for municipal investments, and to help achieve more effective fiscal federalism by strengthening the Municipalities' capacity to assume the responsibilities being transferred to them. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Part A: Carrying out of projects (the Eligible Investment Subprojects) consisting of construction or rehabilitation of municipal infrastructure (such as road paving, public lighting and sanitation) and community facilities (such as markets and bus terminals), and acquisition and utilization of equipment and materials for other municipal services (such as road maintenance and refuse collection and disposal). Part B: Carrying out of projects (the Eligible Institutional Strengthening Subprojects) consisting of improvements in municipal or provincial financial management, information systems, accounting procedures, taxpayer and property cadasters, infrastructure maintenance procedures, and analyses to identify key policy issues and make recommendations for improvement in the assignment of revenues and responsibilities for the provision of services between provincial and municipal levels of government. Part C: Coordination and monitoring of the other Parts of the Project and provision of technical assistance to the Participating Provinces for the implementation of the Project in such Provinces, including auditing services. The Project is expected to be completed by December 31, 2001. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars) On each May 15 and November 15 beginning November 15, 2000 through May 15, 2010 10,500,000 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 0.20 before maturity More than three years but 0.40 not more than six years before maturity More than six years but 0.73 not more than 11 years before maturity More than 11 years but not 0.87 more than 13 years before maturity More than 13 years before 1.00 maturity SCHEDULE 4 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods and works shall be procured under contracts awarded 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 1992 (the Guidelines), and in accordance with the following additional procedures: (a) When contract award is delayed beyond the original bid validity period, such period may be extended once, subject to and in accordance with the provisions of paragraph 2.59 of the Guidelines, by the minimum amount of time required to complete the evaluation, obtain necessary approvals and clearances and award the contract. The bid validity period may be extended a second time only if the bidding documents or the request for extension shall provide for appropriate adjustment of the bid price to reflect changes in the cost of inputs for the contract over the period of extension. Such an increase in the bid price shall not be taken into account in the bid evaluation. With respect to each contract made subject to the Bank's prior review in accordance with the provisions of Part D.1(a) of this Section, the Bank's prior approval will be required for: (i) a first extension of the bid validity period if the period of extension exceeds sixty (60) days; and (ii) any subsequent extension of the bid validity period. (b) In the procurement of goods and works in accordance with this Part A, the Borrower shall cause to be used the relevant standard bidding documents issued by the Bank, with such modifications thereto as the Bank shall have agreed to be necessary for the purposes of the Project. Where no relevant standard bidding documents have been issued by the Bank, the Borrower shall cause to be used bidding documents based on other internationally recognized standard forms agreed with the Bank. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in Argentina may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures 1. Goods and works estimated to cost the equivalent of $350,000 and $5,000,000 or less, respectively, per contract, up to aggregate amounts equivalent to $41,000,000 and $158,000,000, respectively, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Bank. 2. Goods and works estimated to cost the equivalent of $100,000 and $350,000 or less, respectively, per contract, up to aggregate amounts equivalent to $7,000,000 and $18,000,000, respectively, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers or contractors, as the case may, eligible under the Guidelines, in accordance with procedures acceptable to the Bank. Part D: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to: (i) each contract for works estimated to cost the equivalent of $1,500,000 or more; and (ii) each contract for goods estimated to cost the equivalent of $150,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, said procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 5 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals are to be made on the basis of statements of expenditure. 2. The figure of 10% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants 1. In order to assist in the carrying out of the Project, the Borrower shall cause to be employed consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981 (the Consultant Guidelines). For complex, time-based assignments, the Borrower shall cause such consultants to be employed under contracts using the standard form of contract for consultants' services issued by the Bank, with such modifications as shall have been agreed by the Bank. Where no relevant standard contract documents have been issued by the Bank, the Borrower shall cause to be used other standard forms agreed with the Bank. 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Bank review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts shall not apply to: (a) contracts for the employment of consulting firms estimated to cost less than $100,000 equivalent each; or (b) contracts for the employment of individual consultants estimated to cost less than $50,000 equivalent each. However, this exception to prior Bank review shall not apply to: (a) the terms of reference for such contracts; (b) single-source selection of consulting firms; (c) assignments of a critical nature, as reasonably determined by the Bank; (d) amendments to contracts for the employment of consulting firms raising the contract value to $100,000 equivalent or above; or (e) amendments to contracts for the employment of individual consultants raising the contract value to $50,000 equivalent or above. SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) to (5) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $15,000,000 to be withdrawn from the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Bank shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to $5,000,000 until the aggregate amount of withdrawals from the Loan Account plus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of $20,000,000. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documentsand other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) if the Borrower shall have failed to furnish to the Bank, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Bank pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Bank shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) once the total unwithdrawn amount of the Loan allocated to the eligible Categories, less the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. SCHEDULE 6 Subsidiary Loans 1. The Subsidiary Loan shall be repaid within a period of up to 15 years, including a grace period of up to five years. 2. The Subsidiary Loan shall be denominated in dollar equivalents and the amounts withdrawn thereunder and outstanding (together with interest and commitment charge) shall be payable in the same currency in which they are denominated and in amounts equivalent to the various currencies in which the corresponding principal amount of the Loan, interest and commitment charges are to be paid by the Borrower to the Bank pursuant to Article IV of the General Conditions. 3. The Subsidiary Loans shall carry the same interest rate applicable to the Loan pursuant to Section 2.05 of the Loan Agreement. 4. The Borrower shall allocate the commitment charge applicable to the Loan pursuant to Section 2.04 of the Loan Agreement proportionately among the Participating Provinces according to criteria satisfactory to the Bank. 5. As part of the Subsidiary Loan, an amount of up to 2.5% of the amount of the Subsidiary Loan disbursed to finance Eligible Investment Subprojects and Eligible Institutional Strengthening Subprojects shall be debited to the Participating Province for the purposes of covering the costs of the CCU. 6. The full amount of the Initial Allocation shall be made available to each Participating Province for a period of three years from the date of this Agreement, and any amounts not committed in terms satisfactory to the Borrower and the Bank after such three-year period shall, together with the portion of the Loan not included in the Initial Allocation, be made available, in accordance with criteria satisfactory to the Bank, to the Participating Provinces willing to continue participating in the execution of the Project. 7. The Subsidiary Loan Agreement shall include, inter alia, that: (a) the Participating Province shall carry out its Eligible Institutional Strengthening Subprojects and shall cause, under the Subloan Agreements, the Municipalities to carry out their respective Eligible Investment Subprojects and Eligible Institutional Strengthening Subprojects, all as provided in Section 3.01 of the Loan Agreement, and shall provide or cause to be provided, promptly as needed, the funds, facilities, services and other resources required therefor; (b) the Participating Province shall, during the execution of the Project, maintain a unit (the PEU) for purposes of coordinating, supervising and participating in the execution of the Project, with functions, responsibilities and staff satisfactory to the Borrower and the Bank, and shall provide the PEU with the funds, facilities and other resources required for the timely and efficient carrying out of its functions and responsibilities; (c) not later than September 30 of each year during the execution of the Project, the Participating Province, through the PEU, shall furnish to the CCU a detailed annual investment plan (the Annual Investment Plan) for the immediately following calendar year, such plan to be of such scope and detail as the Bank shall reasonably request, and to include the Eligible Investment Subprojects and Eligible Institutional Strengthening Subprojects proposed to be carried out during such period and to show in respect of each Eligible Investment Subproject the applicable cost recovery procedures and projections and their impact on the Municipality's creditworthiness; (d) (i) the Participating Province shall enter into an agreement with each Municipality (the Subloan Agreement) which shall provide for: (A) the loan to be made out of the proceeds of the Subsidiary Loan to such Municipality to finance its Eligible Investment Subprojects and Eligible Institutional Strengthening Subprojects (the Subloan); and (B) the obligations of such Municipality concerning or relating to the execution of such Subprojects, such Subloan Agreement to have terms and conditions satisfactory to the Bank, including those referred to in the Loan Agreement as applicable to the Municipalities. Subloans shall have the same financial terms and conditions as the Subsidiary Loans, except that their amortization period shall not exceed ten years, including one year of grace period, and that the Subloans shall carry an interest rate equal to the interest rate applicable to the Subsidiary Loan plus a margin of 1.5% per annum; and (ii) the Participating Province shall exercise its rights and comply with its obligations under the Subloan Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Subloan and, except as the Borrower and the Bank shall otherwise agree, the Participating Province shall not assign, amend, abrogate or fail to enforce any Subloan Agreement or any provision thereof; (e) the Participating Province shall: (i) maintain a fund (the Municipal Development Fund) for purposes of depositing, inter alia, into such Fund all payments received under the Subloan Agreements; (ii) manage the Municipal Development Fund in accordance with appropriate financial and administrative practices, satisfactory to the Bank, and shall utilize the proceeds thereof exclusively to: (A) make payments of principal, interest and other charges on the Subsidiary Loan; and (B) finance municipal investments, including technical assistance and training programs, similar to the Eligible Investment Subprojects and Eligible Institutional Strengthening Subprojects; (f) the Participating Province shall, and shall cause the Municipalities to, procure goods, works and consultants' services, and shall maintain, and shall cause the Municipalities to, maintain records and separate accounts in respect of their respective activities under the Project, all as provided in the Loan Agreement; (g) the Participating Province shall, and shall cause the Municipalities to, carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 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 their respective activities under the Project; (h) the Participating Province, through the PEU, shall ensure that all necessary action is taken for the preparation of environmental impact assessments and development of environmental impact mitigation and management plans in respect of any Eligible Investment Subproject which may have adverse environmental impacts; (i) each Participating Province shall furnish, not later than March 31 and September 30 of each year during the execution of the Project: (A) to the CCU and the Bank a report, of such scope and in such detail as the Bank shall request, prepared by the respective PEU or by consultants engaged by the PEU, on the performance by the Participating Province and its Municipalities of their respective obligations under the respective Subsidiary Loan Agreement and Subloan Agreement, including compliance with the procurement procedures set forth or referred to in this Agreement; and (B) to the auditors referred to in Section 4.01 (b)(i) all the information and documents required by such auditors in connection with the records and accounts referred to in such Section; (j) if any report referred to in Section 3.07 of the Loan Agreement shows: (i) deficiencies in the capacity of a Participating Province to comply with its obligations under the Subsidiary Loan Agreement, such Participating Province shall include in its Annual Investment Plan for the next succeeding year a specific program to remedy such deficiencies; and (ii) non-compliance by any Municipality with its obligations under the Subloan Agreement (including the obligation to have established mechanisms to recover at least 65% of the aggregate total cost of Eligible Investment Subprojects), the Participating Province may suspend disbursements of the Subloan and declare such Municipality ineligible for receiving any other subsequent Subloan until such Municipality shall have presented a specific institutional strengthening program, satisfactory to the Bank, which will enable such Municipality to comply with such obligations; and (k) the payment obligations of the Participating Provinces and Municipalities under the Subsidiary Loan Agreements and Subloan Agreements, respectively, shall be secured by their respective co-participation funds, set forth in the Borrower's Law No. 23548.