Conformed Copy - L3878 - Provincial Bank Privatization Loan - Supplemental Letter

Page 1 ARGENTINE REPUBLIC May 5, 1995 International Bank for Reconstruction and Development 1818 H St., N.W. Washington, D.C. 20433 United States of America Re: Argentina/Provincial Bank Privatization Loan: Privatization Trust Fund Dear Sirs: Please refer to the Loan Agreement (Provincial Bank Privatization Loan) between the Argentine Republic (the Borrower) and the International Bank for Reconstruction and Development (the Bank) of even date herewith (the Loan Agreement). Whenever used in this letter, the several terms defined in the Loan Agreement have the respective meanings therein set forth. With respect to Section 3.04 (b) of the Loan Agreement, the Borrower hereby agrees that, in addition to the requirements for the operation of the Privatization Trust Fund set forth in the Privatization Trust Fund Documents: (a) the instruction of the Secretary of Finance, Banking and Insurance to the Banco de la Nacion Argentina referred to in subparagraph (f) of Article 9 (b) of the document entitled "Normas Programaticas y Operativas del Fondo Fiduciario para el Desarrollo Provincial" attached as Annex I to the Resolution dated April 28, 1995 of the Secretary of Finance, Banking and Insurance (the Resolution) shall be required both with respect to the first and the second draw-down by any Province under the Privatization Trust Fund, and, prior to any such draw-down, the Borrower shall forward to the Bank for its review and no-objection all documents and other evidence necessary to show that the conditions precedent under the Resolution and the financing agreements with the Provinces for the first and the second draw-down, as the case may be, have been satisfied, and such instruction shall not be issued unless and until the Bank has provided its no-objection; (b) the following shall also be deemed part of the operating guidelines of the Privatization Trust Fund attached as Annex I to the Resolution and shall be enforced as such: the utilization of proceeds of the Privatization Trust Fund will only be allowed for the benefit of a Provincial Bank: (i) when such Provincial Bank has not benefitted from proceeds of the Transformation Fund (as such term is defined in the Loan Agreement, dated March 24, 1995, between the Borrower and the Bank for Loan No. 3836-AR); or (ii) if such Provincial Bank has benefitted from proceeds of the Transformation Fund, Privatization Trust Fund loan amounts shall be determined by deducting the amounts allocated by the Transformation Fund for the same purpose; and (c) the supervision by the Superintendency of Banks referred to in Article 4 of Annex I to the Resolution shall ensure that appropriate pre-privatization holding policies be put in place in each Provincial Bank to be privatized, such as: restrictions on increases in compensation, on hiring of new staff, and on engaging in major contractual obligations, and prohibition on making major new loans. Please confirm your agreement with the above by signing this letter in the space provided below. Sincerely yours, ARGENTINE REPUBLIC By: ____________________________ Authorized Representative Page 2 AGREED: INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By: _____________________________ Regional Vice President Latin America and the Caribbean