Ecuador - Milagro Irrigation Project : Credit 0425 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 425 EC Development Credit Agreement (Milagro Irrigation Project) BETWEEN REPUBLIC OF ECUADOR AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED AUGUST 17, 1973 CONFORMED COPY CREDIT NUMBER 425 EC Development Credit Agreement (Milagro Irrigation Project) BETWEEN REPUBLIC OF ECUADOR AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED AUGUST 17, 1973 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated August 17, 1973, between REPUBLIC OF ECUADOR (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Development Credit Agreement by extending the Credit as hereinafter provided; (B) The Project will be carried out by Instituto Ecuatoriano de Recursos Hidrdulicos with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Instituto Ecuatoriano de Recursos Hidrdiulicos the proceeds of the Credit as hereinafter provided; and (C) The Association is willing to make the Credit available upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between the Association and Instituto Ecuatoriano de Recursos Hidrdulicos; NOW, THEREFORE, the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Development Credit Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated January 31, 1969, with the same force and effect as if they were fully set forth herein, subject, however, to the following modifications thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions): (a) Section 5.01 is deleted; (b) Paragraph (h) of Section 6.02 is deleted and paragraph (i) thereof becomes paragraph (h); and (c) the words ", the Project Agreement" are inserted after the words "the Development Credit Agreement" wherever they occur in Sections 6.06 and 8.02. 4 Section 1.02. Wherever used in this Development Credit Agreement, 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) "Project Agreement" means the agreement between the Association and Instituto Ecuatoriano de Recursos Hidrdulicos of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (b) "Transfer Agreement" means the agreement to be entered into between the Borrower and Instituto Ecuatoriano de Recursos Hidrdulicos pursuant to Section 3.01(b) of this Development Credit Agreement, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Transfer Agreement; (c) "INERHI" means Instituto Ecuatoriano de Recursos Hidrdulicos, an instrumentality of the Borrower, established in accordance with Decreto No. 1551 of the Borrower, dated November 10, 1966; (d) "IERAC" means Instituto Ecuatoriano de Reforna Agraria y Colonizaci6n, an instrumentality of the Borrower, established in accordance with Ley No. 155 of the Borrower, dated July 11, 1964; (e) "Project Implementation Agreements" means the several agreements entered or to be entered into, on terms and conditions satisfactory to the Association, for the purpose of assisting INERHI in the carrying out of the Project, between INERHI and, respectively, Instituto Ecuatoriano de Refbrma Agraria y Colonizaci6n, Instituto Nacional de Investigaciones Agropecuarias, the Ministerio de Agricultura y Ganader'a of the Borrower, Federaci6n de Cooperativas Agropecuarias y de Mercadeo and Banco Nacional de Fomento; (f) "Project Area" means an area of about 8,000 hectares lying on both banks of the Milagro River, the boundaries of which area being: at north, the proposed alignment of the northern-most branch of the main canal; at north-east, the Estero Anapoyo; at south-east, the proposed alignment of the southern-most branch of the main canal; at south, the Quito-Guayaquil railroad tracks, the Estero Papayal and the Estero Galdpagos; and at west, the eastern boundary, as of the date of this Development Credit Agreement, of Ingenio Valdez; (g) "Agricultural Production Unit" means the unit provided for under Section 2.03(a) of the Project Agreement; 5 (h) "Project Director" means the director referred to in Section 2.03(b) of the Project Agreement; (i) "Project Account" means the account provided for under Section 2.0 1(b)(i) of the Project Agreement; and (j) "Crop Compensation Fund" means the fund provided for under Section 3.05 of this Development Credit Agreement. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in this Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to five million five hundred thousand dollars ($5,500,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Development Credit Agreement, as such Schedule shall be amended from time to time, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed under this Development Credit Agreement; provided, however, that, except as the Association shall otherwise agree, no withdrawal shall be made on account of expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in, or services supplied from, such territories. Section 2.03. Except as the Association shall otherwise agree, the goods and services required for the Project and to be financed out of the proceeds of the Credit shall be procured pursuant to the provisions set forth or referred to in Section 2.05 of the Project Agreement. Section 2.04. The Closing Date shall be August 31, 1979, or such other date as shall be agreed between the Borrower and the Association. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semi-annually on April I and October 1 in each year. 6 Section 2.07. rhe Borrower shall repay the principal amount of the Credit withdrawn from the Credit Account in semi-annual installments payable on each April 1 and October 1 commencing October 1, 1983, and ending April 1, 2023, each installment to and including the installment payable on April 1, 1993, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.09. INERHI is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Development Credit Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall cause (i) INERHI to carry out Parts A and B of the Project and (ii) Banco Nacional de Foinento to carry out Part C of the Project, all with due diligence and efficiency, under competent management and in conformity with sound administrative, financial and technical practices, and shall provide, or cause INERHI and Banco Nacional de Fomento to be provided with, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall make available the proceeds of the Credit to INERHI under an agreement to be entered into between the Borrower and INERHI under terms and conditions which shall have been approved by the Association (hereinafter called the Transfer Agreement). (c) The Borrower shall exercise its rights under the Transfer Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and, except as the Association shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the Transfer Agreement, the Project Implementation Agreements or any provision thereof. (d) The Borrower shall take and shall cause all its agencies to take all action which shall be necessary on their part to perform their respective obligations 7 under the Project Implementation Agreements and to enable INERHI to perform all of its obligations under the Project Agreement and the Transfer Agreement and shall not take or permit to be taken any action which might interfere with such performance. Section 3.02. Unless the Association shall otherwise agree, the Borrower shall allocate, or cause to be allocated, to the Project Area not less than forty per cent (40%) of the water flow available at any time from the Rib Chimbo, as measured at Bucay. Section 3.03. The Borrower shall take, or cause IERAC to take, all such timely action as shall be necessary to ensure that (i) title to the lands within the Project Area has been granted to each farmer participating in the Project and that such grant of title has been duly recorded or otherwise adequately protected under the laws of the Borrower, not later than January 1, 1975; and (ii) whenever any realignment of farm boundaries deemed necessary by INERHI to carry out Part A of the Project results in an exchange of property in excess of a land swap and involves a net gain of land by one or more participating farmers at the expense of one or more of such farmers, IERAC shall acquire such land and transfer title thereon to the farmer designated by INERHI for the purpose. Section 3.04. Without limiting the generality of the provisions of Section 3.02(a) and (b) of this Development Credit Agreement, the Borrower shall provide INERHI, promptly as needed, with such funds as shall be required (i) by INERHI to carry out its obligations pursuant to Section 2.09 of the Project Agreement; and (ii) to enable JERAC to perform the obligations of the Borrower pursuant to Section 3.03(ii) of this Development Credit Agreement. Section 3.05. The Borrower shall: (i) cause INERHI to establish, not later than March 1, 1975, and maintain until at least the completion of Part A.3 of the Project a special fund to compensate farmers participating in the Project for the value of crops not produced during the carrying out of Part A.3 of the Project (hereinafter called the Crop Compensation Fund); and (ii) provide the Crop Compensation Fund with such amounts as shall be required to pay such compensation at least ninety days prior to the date when such compensation is payable, all in accordance with the provisions of Section 4.03 of the Project Agreement. ARTICLE IV Other Covenants Section 4.01. The Borrower shall take all steps necessary on its part to enable INERHI to maintain such charges for irrigation services and such betterment levies 8 as shall be required for INERHI to comply with the provisions of Section 4.04 of the Project Agreement. ARTICLE V Consultation, Information and Inspection Section 5.01. The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Borrower and the Association shall from time to time, at the request of either party: (a) exchange views through their representatives with regard to the performance of their respective obligations under the Development Credit Agreement and the Transfer Agreement, the performance by any department or agency of the Borrower and INERHI of their respective obligations under the Project Agreement, the Project Implementation Agreements and the Transfer Agreement, the administration, operations and financial condition, resources and expenditures of INERHI and, in respect of the Project, of the departments or agencies of the Borrower other than INERHI responsible for carrying out the Project or any part thereof, and other matters relating to the purposes of the Credit; and (b) furnish to the other all such information as it shall reasonably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borroyver, including its balance of payments, and the external debt of the Borrower, of any of its political subdivisions and of any agency of the Borrower or of any such political subdivision. Section 5.02. (a) The Borrower shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the operations and financial condition, resources and expenditures of INERHI and, in respect of the Project, of the departments or agencies of the Borrower other than INERHI responsible for carrying out the Project or any part thereof. (b) The Borrower and the Association shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the maintenance of the service thereof or the performance by either of them of their respective obligations under this Development Credit Agreement, or the performance by the Borrower or any department or agency of the Borrower of their respective obligations under the 5' 9 Project Agreement, the Project Implementation Agreements and the Transfer Agreement. Section 5.03. The Borrower shall afford all reasonable opportunity for accredited representatives of the Association to inspect all plants, installations, sites, works, buildings, property and equipment of INERHI and any relevant records and documents and to visit any part of the territories of the Borrower for purposes related to the Credit. ARTICLE VI Taxes and Restrictions Section 6.01. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes imposed under the laws of the Borrower or laws in effect in its territories. Section 6.02. This Development Credit Agre ement, the Project Agreement, the Project Implementation Agreements and the Transfer Agreement shall be free from any taxes on or in connection with the execution, delivery or registration thereof, imposed under the laws of the Borrower or laws in effect in its territories. Section 6.03. The payment of the principal of, and service charges on, the Credit shall be free from all restrictions, regulations, controls and moratoria of any nature imposed under the laws of the Borrower or laws in effect in its territories. ARTICLE VII Remedies of the Association Section 7.01. If any event specified in Section 7.01 of the General Conditions or in Section 7.03 of this Development Credit Agreement shah occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the continuance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable immediately together with the service charges thereon and upon any such declaration such principal and service charges shall become due and payable immediately, anything to the contrary in this Development Credit Agreement notwithstanding. Section 7.02. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: 10 (a) a default shall have occurred in the performance of any obligation (i) on the part of INERHI, under the Project Agreement or under the Project Implementation Agreements or under the Transfer Agreement, or (ii) on the part of the Borrower (including any department or agency of the Borrower) under the Transfer Agreement or under the Project Implementation Agreements; (b) the Borrower shall have taken any action for the dissolution or reorganization of INERHI or for the suspension of its operations; (c) either of (i) Decreto No. 1551 of the Borrower, dated November 10, 1966, or (ii) Decreto Supremo No. 369 of the Borrower, dated May 18, 1972 or (iii) Decreto Supreno No. 40 of the Borrower, dated January 18, 1973, shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of INERHI to carry out the covenants, agreements and obligations set forth in the Project Agreement and in the Transfer Agreement; and (d) an extraordinary situation shall have arisen which shall make it improbable that INERHI will be able to perform its obligations under the Project Agreement or under the Transfer Agreement or under the Project Implementation Agreements. Section 7.03. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: (a) any event specified in paragraph (a) of Section 7.02 of this Development Credit Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower and INERHI; and (b) any event specified in paragraph (b) or in paragraph (c) of Section 7.02 of this Development Credit Agreement shall occur. ARTICLE VIII Effective Date; Termination Section 8.01. The following events are specified as additional conditions to the effectiveness of this Development Credit Agreement within the meaning of Section 10.01 (b) of the General Conditions: (a) the execution and delivery of the Project Agreement on behalf of INERHI have been duly authorized or ratified by all necessary corporate and governmental action; 11 (b) the Transfer Agreement has been executed and delivered on behalf of the Borrower and INERHI, respectively, and such execution and delivery have been duly authorized or ratified by all necessary corporate and governmental action; (c) the Project Implementation Agreements have been executed and delivered on behalf of INERHI and each one of the other parties thereto, respectively, and such execution and delivery have been duly authorized or ratified by all necessary corporate and governmental action; (d) INERHI shall have established the Project Account and the Borrower shall have deposited in such account at least 14,000,000 Sucres; and (e) INERHI shall have made the first appointment to the post of Project Director. Section 8.02. The following are specified as additional matters, within the meaning of Section 10.02(b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, INERHI, and constitutes a valid and binding obligation of INERHI in accordance with its terms; (b) that the Transfer Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and INERHI, respectively, and constitutes a valid and binding obligation of the Borrower and INERHI in accordance with its terms; and (c) that the Project Implementation Agreements have been duly authorized or ratified by, and executed and delivered on behalf of, INERHI and each one of the other parties thereto, respectively, and constitute valid and binding obligations of INERHI and each one of such parties in accordance with their respective terms. Section 8.03. The date of November 15, 1973, is hereby specified for the pumposes of Section 10.04 of the General Conditions. Section 8.04. The obligations of the Borrower under Sections 3.01(c), 3.01(d), 3.02 and 4.01 of this Development Credit Agreement and the provisions of Sections 7.02 and 7.03 of this Development Credit Agreement shall cease and determine on the date on which this Development Credit Agreement shall terminate or on a date twenty five years after the date of this Development Credit Agreement, whichever shall be the earlier. 12 ARTICLE IX Representative of the Borrower; Addresses Section 9.01. The Ministro de Finanzas of the Borrower is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions. Section 9.02. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: Ministerio de Finanzas Quito, Ecuador Cable address: MINFINANZAS Quito, Ecuador 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. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Development Credit r 13 Agreement to be signed in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF ECUADOR By /s/ Alberto Quevedo Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Gerald Alter Regional Vice President Latin America and the Caribbean 14 SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of amounts of the Credit to each Category and the percentage of eligible expenditures so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed I. Equipment, ve- 3,800,000 100% of foreign hicles, materials expenditures or and supplies 80% of local ex- penditures (rep- resenting the estimated foreign expenditure com- ponent) 1I. Consultants and Experts' Services (a) Engineering and 500,000 100% of foreign supervision expenditures (b) Feasibility 300,000 100% of foreign Studies for expenditures Part A.8 of the Project (c) Field Surveys 200,000 95% of local for Part A.8 expenditures of the Project III. Unallocated 700,000 TOTAL 5,500,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods produced in, or services supplied from, the territories, and in the currency, of any country other than the Borrower; and 15 (b) the term "local expenditures" means expenditures in the currency of the Borrower, or for goods produced in, or services supplied from, the territories of the Borrower. 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures prior to the date of this Development Credit Agreement; and (b) payments for taxes imposed under the laws of the Borrower or laws in effect in its territories on goods or services, or on the importation, manufacture, procurement or supply thereof. To the extent that the amount represented by the percentage set forth in the third column of the table in paragraph 1 above in respect of any Category would exceed the amount payable net of all such taxes, such percentage shall be reduced to ensure that no proceeds of the Credit will be withdrawn on account of payments for such taxes. 4. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph I above: (a) if the estimate of the expenditures under any Category shall decrease, the amount of the Credit then allocated to such Category and no longer required therefor will be reallocated by the Association by increasing correspondingly the unallocated amount of the Credit; (b) if the estimate of the expenditures under any Category shall increase, the percentage set forth in the third column of the table in paragraph I above in respect of such expenditures shall be applied to the amount of such increase, and a corresponding amount will be allocated by the Association, at the request of the Borrower, to such Category from the unallocated amount of the Credit, subject, however, to the requirements for contingencies, as determined by the Association, in respect of any other expenditures; and (c) if the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in Section 2.05 of the Project Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as in the Association's reasonable 16 opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. 5. Notwithstanding the percentages set forth in the third column of the table in paragraph I above, if the estimate of local expenditures under Categories I or 11(c) shall increase and no proceeds of the Credit are available for reallocation to any such Category, the Association may, by notice to the Borrower, adjust the percentage then applicable to such expenditures in order that further withdrawals under any such Category may continue until all expenditures thereunder shall have been made. 17 SCHEDULE 2 Description of the Project The Project consists in the integrated irrigation and agricultural development of about 7,000 hectares within the Project Area, and includes the following parts: Part A: 1. Rehabilitation of the existing main canal and intake structure. 2. Construction of irrigation and drainage systems and roads to serve the area to be irrigated, with outlets to each of the 825 farms included therein. 3. Carrying out of on-farm development works, including, inter alia, land clearing, land leveling and construction of farm ditches and drains. 4. Realignment of existing farm boundaries to the extent required for the appropriate carrying out of the works described in Parts A.1, A.2 and A.3 and the efficient operation thereof. 5. Construction of buildings to provide headquarters for project administration, the Agricultural Production Unit and the extension service, warehouse and storage space and a maintenance shop. 6. Acquisition and use of equipment for construction, operation and maintenance, administration and agricultural development. 7. Provision of agricultural extension services to farmers participating in the Project. 8. Carrying out of a feasibility study for the extension of the Project Area to about 22,000 hectares. Part B: 1. Production of a basic supply of improved seeds for farmers participating in the Project and carrying out of a seed multiplication program. 2. Training of extension agents and farmers at the Boliche experimental station. Part C: The provision of agricultural credit for production inputs.