Honduras - Second Livestock Development Project : Credit 0434 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 434 HO Project Agreement (Second Livestock Development Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND BANCO CENTRAL DE HONDURAS DATED OCTOBER 29, 1973 CONFORMED COPY CREDIT NUMBER 434 HO Project Agreement (Second Livestock Development Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND BANCO CENTRAL DE HONDURAS DATED OCTOBER 29, 1973 PROJECT AGREEMENT AGREEMENT, dated October 29, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and BANCO CENTRAL DE HONDURAS (hereinafter called Banco Central). WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Honduras (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to six million six hundred thousand dollars ($6,600,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Banco Central agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement of even date herewith between the Borrower and Banco Central, the proceeds of the credit provided for under the Development Credit Agreement will be made available to Banco Central on the terms and conditions therein set forth; and WHEREAS Banco Central, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Director" means the person referred to in Section 2.02(a) of this Agreement. (b) "Project Account" means Banco Central's account referred to in Section 2.03 of this Agreement. 4 ARTICLE II Execution of the Project Section 2.01. (a) Banco Central shall carry out or cause to be carried out the Project with due diligence and efficiency and in conformity with sound administrative, agricultural, economic, financial and engineering practices, and in accordance with the provisions of this Project Agreement and of the Subsidiary Loan Agreement. (b) Banco Central shall at all times take all action necessary or advisable to enable the Project Commission to carry out its functions as provided in Acuerdo No. 865 and in Section 4.01(e) of the Development Credit Agreement. Section 2.02. (a) For the purpose of carrying out the Project, Banco Central shall employ a competent and experienced Project Director, acceptable to the Association. (b) Banco Central shall employ the Project Director at least until the Closing Date, upon terms and conditions (including terms of reference and scope of authority) satisfactory to the Association. (c) Banco Central shall ensure that each Participating Bank employ, in a full time basis and for the sole purpose of the Project, for a minimum of three years from the date of the Project Administration Agreement, an adequate number of livestock technicians, acceptable to the Project Director, to assist him on all technical aspects of the carrying out of the Project, such technicians to have such qualifications, duties and responsibilities as the Participating Banks and the Project Director shall agree upon. (d) In order to provide technical assistance to farmers included in Part A of the Project, and to the livestock technicians referred to in paragraph (c) of this Section, Banco Central shall employ, for a minimum period of three years, about four specialist livestock advisors responsible to the Project Director and acceptable to the Association, upon terms and conditions satisfactory to the Association. Section 2.03. Banco Central shall open and maintain on its books a Project Account to which the proceeds of the Credit relent to Banco Central by the Borrower shall be credited and through which all payments under the Subsidiary Loan Agreement and all payments under the Project Administration Agreements and in the Abattoir Sub-loan Agreements shall be made. 5 Section 2.04. Except as the Association shall otherwise agree, Banco Central shall enter into Abattoir Sub-Loan Agreements, on terms and conditions satisfactory to the Association, with each municipality concerned with the carrying out of Part B of the Project, such Abattoir Sub-Loan Agreements to stipulate, inter alia, that: (a) the Abattoir Sub-loans shall be in amount not exceeding eighty per cent (80%) of the estimated total investment of each municipality concerned; (b) the Abattoir Sub-loans shall be repayable within periods ranging from ten to twelve years, including a grace period of no more than two years for the repayment of principal; (c) the Abattoir Sub-loans shall bear interest at a rate of nine per cent (9%) per annum on the principal amount withdrawn and outstanding from time to time, and no other additional charges shall be payable thereon by the beneficiary municipality to Banco Central; (d) no Abattoir Sub-loan in excess of the equivalent of seventy-five thousand dollars ($75,000) shall be made before approval has been obtained from the Association; (e) Banco Central shall have the right to inspect by itself or jointly with representatives of the Association such goods and the sites, works, plants and construction included in Part B of the Project, the operations thereof, and any relevant records and documents; (f) the beneficiary municipalities shall (i) take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice, and (ii) without any limitation upon the foregoing, such insurance shall cover marine, transit, and other hazards incident to the acquisition, transportation and delivery of goods imported directly and financed out of the proceeds of the Credit to the place of use or installation, any indemnity there-nder to be made payable in a currency freely usable by such municipality to repha 'e or repair such goods; and (g) Banco Cer,i l shall have the right to suspend or terminate access by the beneficiary munici", ty to the use of the proceeds of the Credit upon failure by the beneficiary municipality to perform its obligations and, in appropriate cases, to premature the Abattoir Sub-loan. Section 2.05. Banco Central shall have such staff as shall be necessary for the administration and supervision of the carrying out of Part B of the Project. 6 Section 2.06. Banco Central shall enter into a Project Administration Agreement, on terms and conditions satisfactory to the Association, with each Participating Bank, under which each Participating Bank shall undertake: (a) To enter into sub-loan agreements with farmers for the purpose of carrying out Part A of the Project, such agreements to be on terms and conditions acceptable to the Project Director, and to provide Banco Central with certified copies of such sub-loan agreements. (b) To open on its books a separate account through which all amounts withdrawn from, and to be paid into, the Project Account by such bank shall flow, such account to (i) identify each such sub-loan made by such bank; (ii) identify the goods and services financed out of each such sub-loan; and (iii) reflect, in accordance with consistently maintained sound accounting practices, the administration of such account and of each such sub-loan. (c) To cause the account referred to in Section 2.06(b) of this Agreement to be audited annually by independent auditors acceptable to the Association and Banco Central and to transmit to Banco Central, and through it, to the Association, promptly after their preparation and not later than four months after the close of such bank's financial year to which they relate, certified copies of the financial statements and a signed copy of the auditor's report relating to such account. (d) To employ such livestock technicians as shall be required pursuant to Section 2.02(c) of this Agreement. (e) To process all sub-loans pursuant to sound administrative and banking procedures. (f) To take such steps as may be required to ensure compliance by each farmer with all obligations undertaken by him under the applicable sub-loan agreement. (g) In the event of any default by any farmer in respect of any of the obligations referred to in Section 2.06(f) of this Agreement, (i) to promptly inform the Project Director of such default, (ii) unless the Project Director otherwise agrees, to take all measures required to suspend or terminate access by the defaulting farmer to the use of any of the proceeds of the Credit, and (iii) if the Project Director agrees, to take all such remedial action as the circumstances require, including, the requiring of immediate repayment of all amounts lent to such defaulting farmer out of the proceeds of the Credit. 7 (h) To furnish to Banco Central, promptly upbn its request, the reports, loan applications for farm development plans eligible for financing out of the proceeds of the Credit, recommendations in respect of such loan applications, specifications and procurement schedules in respect of goods and services to be procured by any farmer out of the proceeds of any sub-loan and any material modifications subsequently made therein, in such detail as Banco Central shall reasonably request. (i) To inspect, by itself or jointly with representatives of the Association or Banco Central such goods and the sites, works, plants and construction included in Part A, the operation thereof, and any relevant records and documents. (j) To require that the farmers carrying out Part A of the Project shall take out with responsible insurers such insurance as shall be necessary to cover marine, transit and other hazards incident to the acquisition, transportation and delivery of goods imported directly and financed out of the proceeds of the Credit to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by such farmer to replace or repair such goods. (k) To provide to farmers short-term funds, including seasonal working capital, as approved by the Project Director, to enable the farmers to fulfill investment plans. Section 2.07. Banco Central shall furnish to the Association, promptly upon their execution, certified copies of all Project Administration Agreements, and shall furnish to the Association, upon request, copies of any Abattoir Sub-loan Agreement or Sub-loan agreement. Section 2.08. Except as the Association shall otherwise agree, the sub-loans shall be extended upon, inter alia, the following terms and conditions: (i) the sub-loans to farmers included in Part A(1) of the Project shall be in an amount not exceeding ninety per cent (90%) of the estimated total investment of each farmer concerned, and the sub-loans to farmers included in Part A(2) of the Project shall be in an amount not exceeding eighty per cent (80%) of the estimated total investment of each farmer concerned; (ii) the sub-loans shall be repayable within periods ranging from eight to twelve years, with grace periods of between two and five years for the repayment of principal; 8 (iii) the sub-loans shall bear interest at a rate of nine per cent (9%) per annum on the principal amount withdrawn and outstanding from time to time, and no other additional charges shall be payable thereon by the beneficiary farmer to the Participating Bank; (iv) no sub-loan in excess of the equivalent of seventy five thousand dollars ($75,000) shall be made before approval has been obtained from the Association; (v) all sub-loans shall be approved by the Project Director, who may delegate such authority to the Participating Banks as experience advises; and (vi) the farmers shall take all reasonable measures for the protection -of animal health. Section 2.09. Except as the Association shall otherwise agree, Banco Central shall cause each Participating Bank to pay interest at the rate of five per cent (5%) per annum on the amounts withdrawn from the Project Account by such Participating Bank and outstanding from time to time; no other additional charges shall be payable thereon by the Participating Bank. Interest shall accrue from the respective dates on which amounts shall be so withdrawn, and shall be computed on the basis of a 360-day year of twelve 30-day months. Interest shall be payable on the dates specified in each Project Administration Agreement. Section 2.10. Except as the Association shall otherwise agree, Banco Central shall cause the Participating Bank to repay the aggregate amounts withdrawn from the Project Account in installments payable on the dates specified in the Project Administration Agreement, and ending on the day of the last scheduled repayment by the borrowing farmer under the applicable Sub-loan agreement. Section 2.11. Banco Central shall discount to the Participating Banks: (i) ninety per cent (90%) of the sub-loans under Part A(l) of the Project; (ii) seventy-five per cent (75%) of the sub-loans under Part A(2) of the Project; (iii) if requested by the Participating Banks and in the amount approved by Banco Central, working capital loans referred to in Section 2.06(k), at the prevailing rediscount rate for agriculture and livestock loans made by Banco Central. Section 2.12. Banco Central shall ensure that funds including principal repayments and payments of interest received from the Participating Banks in accordance with the Participating Project Agreements, and from the municipalities 9 in accordance with the Abattoir Sub-loan Agreements, less interest and principal paid to the Borrower in accordance with the Subsidiary Loan Agreement, less Banco Central's direct operating expenses attributable to the administration of the Project, shall accrue to the Project Account for twenty years from the date of this Agreement, to be used for further lending in the livestock subsector of the Borrower. Section 2.13. Except as the Association shall otherwise agree, the goods and services required for the carrying out of Parts A and B of the Project and to be financed out of the proceeds of the Credit shall be procured in accordance, and subject to, the provisions set forth in Schedule 1 to this Agreement. Section 2.14. Except as the Association and the Borrower may otherwise agree, Banco Central shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.15. Banco Central: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall enable the Association's representatives to examine the Project, the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to it and the goods and services financed out of such proceeds. Section 2.16. Banco Central shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association 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 Subsidiary Loan Agreement or any provision thereof. ARTICLE IHl Financial Covenants Section 3.01. Banco Central shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition in respect of the Project. Section 3.02. Banco Central shall in respect of the Project: (i) have its accounts and financial statements (balance sheets, statements of income and 10 expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association 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 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 Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of Banco Central and Participating Banks and the audit thereof as the Association shall from time to time reasonably request. ARTICLE IV Consultation, Information and Inspection Section 4.01. The Association and Banco Central shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and Banco Central shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of Banco Central in respect of the Project and other matters relating to the purpose of the Credit. Section 4.02. The Association and Banco Central shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, or the performance by either of them of its obligations under this Agreement or the performance by the Borrower and Banco Central of their respective obligations under the Subsidiary Loan Agreement. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of Banco Central thereunder shall terminate on the earlier of the following two dates: 0 11 (i) the date on which the Development -Credit Agreement shall terminate in accordance with its terms; or (ii) a date twenty years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a)(ii) of this Section, the Association 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 Development Credit Agreement. 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 hereinafter 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 Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. For Banco Central: Banco Central de Honduras Tegucigalpa, D.C. Honduras 12 Cable address: BANTRAL Tegucigalpa 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 President 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 Association 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. Section 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbla, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / Gerald Alter Regional Vice President Latin America and the Caribbean BANCO CENTRAL DE HONDURAS By /s / Guillermo Bueso Authorized Representative 13 SCHEDULE 1 Procurement I. Livestock Farms Goods and services for livestock farms included in Part A of the Project shall be procured through existing commercial channels. II. Abattoirs The following procurement procedures shall be used for awarding contracts for constructing and equipping the municipal abattoirs included under Part B of the Project. Abattoirs with a total investment not exceeding $50,000 1. The municipalities shall: (a) with the assistance of the Project Director prepare abattoir specifications, drawings, construction and equipment delivery schedules, and requests for bid quotations; (b) obtain approval of abattoir design from the Meat Inspection Authority of the Ministry of Natural Resources of the Borrower; (c) include in the equipment purchase bidding documents the requirement that suppliers make satisfactory arrangements for delivery as well as being responsible for such equipment until it is installed; (d) require construction firms awarded contracts for civil works to post performance bonds to ensure that the buildings meet specifications and the completion dates; (e) obtain quotations from a minimum of three firms for each of the following: (i) civil works and well construction, including equipment installation; and (ii) slaughtering and processing equipment, including its installation. 14 (f) send the basis for selection of contractors and purchase contracts to the Project Director for review and approval prior to award; (g) award contracts and follow construction and installation to ensure that schedules and specifications are met; and (h) make final payments to contractors only after civil works construction has been satisfactorily completed and accepted and to suppliers of equipment after its satisfactory installation. 2. Banco Central shall: (a) review and approve purchase contracts; and (b) send to the Association for information, a consolidated summary showing bids received and selected, together with copies of contracts awarded. Abattoirs with a total investment greater than $50,000 1. The municipalities shall: (a) obtain proposals from at least three engineering consulting firms to undertake the following: (i) prepare abattoir specifications and plans; (ii) prepare construction and equipment delivery schedules; (iii) evaluate bid proposals; (iv) make contract award recommendations to the municipalities, based upon technical and financial analysis and delivery schedules; (v) supervise construction and equipment installation; and (vi) approve acceptance upon satisfactory completion. (b) evaluate the proposals in (a) above and select an engineering firm with the approval of the Project Director; and (c) award contract to the engineering firm. 15 2. The engineering firm shall: (a) prepare specifications, drawings, and construction and equipment schedules for a new medium sized abattoir in San Pedro Sula and the rehabilitation of the existing Tegucigalpa facility; (b) obtain approval of specifications and plans by the Meat Inspection Authority of the Ministry of Natural Resources of the Borrower; (c) prepare invitations to bid, to be advertised by the municipalities in at least one newspaper of general circulation in Honduras, and to be sent to known international suppliers and to all official representatives in Honduras of countries which are potential suppliers of the goods and services required; and (d) evaluate bids and proposals, prepare a consolidated summary showing bids received, and make recommendations to the municipalities for the award of contracts. 3. The municipalities shall: (a) obtain quotations from a minimum of three different firms from at least two different countries for equipment under each .of the following sub-categories: (i) slaughter and meat processing equipment; (ii) refrigeration equipment; and (iii) by-products rendering equipment (Tegucigalpa abattoir only); (b) obtain quotations from a minimum of three different firms for civil works and well construction, including land preparation, utilities, and equipment installation; (c) furnish to firms able and competent to make turnkey installation the complete set of bid documents; (d) select the contractors and suppliers and provide the basis for selection, along with purchase contracts, to Banco Central for review and approval prior to awards; (e) sign contracts with the contractors and suppliers making the lowest evaluated offers; and 16 (f) make final payments for goods and services to be financed under the Project only after receiving a report from the engineering firm that the civil works construction has been satisfactorily completed and the equipment installed. 4. Banco Central shall send to the Association a consolidated summary showing the bids received and selected, together with two certified copies of contracts awarded, these copies and any amendment thereto to be provided to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract or any such amendment. All contracts exceeding $75,000 shall be sent to the Association for approval prior to the award of contract.