Ecuador - Technical Assistance Project : Loan 1230 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1230 EC LOAN AGREEMENT (Technical Assistance Project) between REPUBLIC OF ECUADOR and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated May 24, 1976 LOAN AGREEMENT AGREEMENT, dated May 24, 1976, between REPUBLIC OF ECUADOR (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RE- CONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS the Borrower has requested the Bank to finance part of the cost of the Project described in Schedule 2 to this Agree- ment; WHEREAS any financing so provided by the Bank would be re- funded, if the Bank so requests, out of the proceeds of any loan or loans which may later be made by the Bank to the Borrower for the financing of rural development projects identified under such Project; WHEREAS the Bank is willing, on the basis of the foregoing, to make a loan to the 3orrower on the terms and conditions here- inafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: 0 - 2 - ( ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General. Conditions Applicable to Loan and Guar- antee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said Gen- eral Conditions Applicable to Loan and Guarantee Agreements of the Bank, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the cnntext otherwise requires, the se,era' t,rms defined in the Gene- ra-, Conditions have the resDective meanings therein 3et forth and the following additional terms have the following meanings: (a) "JUNAPLA" means Juata Nacional de Planificaci6n y Coor- dinaci6n Econ6mica of the Borrower, or any successor thereto; (b) "Planning Unit" means the Planning Unit for Rural Devel- opment established or to be established within JUNAPLA and referred to in Section 3.03 of this Agreement; (c) "FONAPRE" means Fondo Nacional de Preinversi6n of the Borrower, established and operating pursuant to Decree No. 1385 of the Borrower, dated December 14, 1973, published in Registro Oficial No. 457 (hereinafter called the "Decree"), or any succes- sor thereto; -3- (d) "Banco Central" means the central bank of the Borrower or any successor thereto; and (e) "Lower Guayas Basin" means the southern part of the Guayas river basin, south of the cities of Vinces and Catarma, in par- ticular the plains which are frequently flooding, together with the lower basins of the Chimbo and Bulu-Bulu rivers up to the course of the Naranjal river. -4- ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to four million dol- lars ($4,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expendi- tures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Proj- ect described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. Section 2.03. The Borrower shall cause FONAPRE to make with Banco Central, arrangements satisfactory to the Bank, providing for the withdrawal by FONAPRE of the proceeds of the Loan from the Loan Account in accordance with Section 2.02 of this Agreement and for the transfer of such proceeds to JUNAPLA, and the various other departments and agencies of the Borrower responsible for carrying out the Project all as required for purposes of the Project. Section 2.04. Except as the Bank shall otherwise agree, the required goods for the Project to be financed out of the proceeds of the Loan, may be procured in accordance with local competitive bidding procedures acceptable to the Bank. -5- Section 2.05. The Closing Date shall be December 31, 1980 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.06. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.07. The Borrower shall pay interest at the rate of eight and one-half per cent (8-1/2%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.08. Interent and other charges shall be payable semi-annually on March 15 and September 15 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. -6- ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out the Project through JUNAPLA with due diligence and efficiency and in conformity with appropriate agricultural, engineering, financial and adminis- trative practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall, promptly as needed for purposes of the Project, designate after consultation with the Bank, the de- partments and agencies of the Borrower which shall be responsible for the carrying out of Parts B, C and D of the Project. (c) The Borrower shall cause JUNAPLA and the various other departments and agencies of the Borrower responsible for the carry- ing out of Parts B, C and D of the Project to cooperate effectively with each other in the carrying out thereof. Section 3.02. For the purpose of carrying out Part A of the Project, the Borrower shall cause JUNAPLA to employ, for a period of not less than three years, a team of experts consisting of: (a) an internationally experienced rural development adviser whose main function shall be to assist JUNAPLA on matters related to the Borrower's rural development policies and (b) other interna- tionally recruited experts as shall be needed to assist JUNAPLA in the identification of investment opportunities and detailed project preparation in the rural development sector, all such experts to possess such qualifications and experience, and to be employed on such terms and conditions, as shall be satisfac- tory to the Bank. Section 3.03. (a) The Borrower shall cause JUNAPLA to estab- lish and operate the Planning Unit, which shall be in charge of national rural development program and to which the experts pro- vided for in Section 3.02 of this Agreement shall be assigned, the functions of such Unit to include: (i) formulation of a national policy on rural development; (ii) development of criteria for rural development project planning and foreign assistance and coordination of the Borrower's efforts in re- questing such foreign assistance from United Nations Development Programme and other inter- national entities providing assistance for rural development; (iii) identification and formulation of high priority rural development projects, particularly those projects whose preparation will be financed under Parts B, C and D of the Project; (iv) Coordination of action and of liaison with the various departments and agencies of the Borrower involved in such program and in the carrying out of the Project; -8- (v) control of resources allocations in the rural development sector; (vi) monitoring and reviewing of the activities of the experts involved in the rural development sector and in the carrying out of the Project, ensuring adequacy of logistical and administra- tive support thereto; and (vii) such other functions as shall be necessary or advisable to achieve the foregoing. (b) The Borrower shall cause JUNAPLA to employ, in the Planning Unit a Project Coordinator who shall be in charge of the Planning Unit and shall be responsible for the day-to-day implementation of the Project. Section 3.04. In order to assist the Borrower in carrying out Parts B, C and D, the Borrower shall employ, under terms of refer- ence satisfactory to the Bank, the consultants referred to in Schedule 4 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank. Section 3.05. In order to assist the Borrower in the carrying out of the Project, the Borrower shall, upon the retaining of the conzultants referred to in Section 3.04 of this Agreement, desig- nate the Ecuadorian counterparts to such consultants referred to in Schedule 5 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, * -9- all to be trained on the job by such consultants or overseas, as required in accordance with the provisions of such Schedule 5. Section 3.06. (a) The Borrower shall make the proceeds of the Loan available to FONAPRE without imposing any charges thereon, pursuant to the provisions of Section 10 of Article 10 of the Decree or to other arrangements satisfactory to the Bank. (b) The Borrower shall cause FONAPRE to make the proceeds of the Loan provided to it by the Borrower pursuant to Section 3.06 (a) of this Agreement available to the various departments and agencies of the Borrower responsible for the execution of any part of the Project pursuant to loan contracts to be entered into between FONAPRE and such departments and agencies on the terms and condi- tions set forth in FONAPRE's Manual Reglamentario de las Operaciones, dated April 1975 as it may be amended from time to time. (c) The Borrower shall cause FONAPRE to carry out its obliga- tions in respect of the Project with due diligence and efficiency. Section 3.07. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. - 10 - Section 3.08. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall cause JUNAPLA, FONAPRE and the various other departments and agencies of the Borrower responsible for carrying out the Project to 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 Loan, and to disclose the use thereof in the Project; (ii) shall enable the Bank's accredited representatives to visit the facilities included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall cause JUNAPLA, FONAPRE and the various other depart- ments and agencies of the Borrower responsible for carrying out the Project to furnish to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. ARTICLE IV Other Covenants Section 4.ol. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, specific security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrow-r shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; -12- and (ii) any lien arising in the ordinary course of banking trans- actions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative subdi- vision thereof and of any entity owned or controlled by, or operat- ing for the account or benefit of, the Borrower or any such subdi- vision, including gold and other foreign exchange Lssets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. The Borrower shall maintain or cause to be main- tained records adequate to reflect in accordance with consistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of Banco Central, JUNAPLA, FONAPRE and of the various other departments and agencies of the Borrower responsible for carrying out the Project or any part thereof. Section 4.03. (a) The Borrower shall cause Banco Central, JUNAPLA and FONAPRE and the various other departments and agencies responsible for carrying out the Project or any part thereof, to establish and maintain separate accounts exclusively for the purposes of the Project and shall cause Banco Central, JUNAPLA and FONAPRE to record in such Project accounts all receipts and payments for or in connection with the Project. (b) The Borrower shall cause FONAPRE, in respect of the Proj- ect, to: (i) have their accounts and financial statements (balance -13- sheets, statements of income and expenses and related statements) 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 four ronths after the end of each such year, (A) certified copies of their 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other information con- cerning the accounts and financial statements of FONAPPE, and the audit thereof, as the Bank shall from time to time reasonably re- quest. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.02 (c) of the General Conditions: (a) that the rural development adviser referred to in Section 3.02 (a) of this Agreement has been retained by JUNAPLA, and his Ecuadorian counterpart has been designated and has taken his post; (b) that the Borrower has made the proceeds of the Loan avail- able to FONAPRE in accordance with Section 3.06 (a) of this Agree- ment; (c) that the Project Coordinator referred to in Section 3.03 (b) of this Agreement has been designated and has taken up his post; and (d) that all necessary acts, consents, and approvals to be performed or given by the Borrower, by its political subdivisions or agencies (including Banco Central) or by any agency of any such political subdivision, or otherwise to be performed or given in order to authorize the carr ing out of the Project and to enable the Borrower to perform all of its obligations in this Agreement contained, together with all necessary powers and rights in con- nection therewith, have been performed or given. Section 5.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General -15- Conditions, to be included in the opinion or certificate to be furnished to the Bank, namely that all acts, consents and approvals referred to in Section 5.01 (d) of this Agreement, together with all necessary powers and rights in connection therewith, have been duly and validly performed or given and that no other such acts, consents or approvals are required in order to authorize the carrying out of the Project and to enable the Borrower to perform all of its obligations in this Agreement contained. Section 5.03. The date September 23, 1976, is hereby specified for the purposes of Section 12.04 of the General Conditions. -16- ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Ministro de Finanzas of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministro de Finanzas Quito Ecuador Cable address: MINFINANZAS Quito, Ecuador And for purposes of any notice or request required or permitted to be given or made under Article X of the General Conditions, also: Procurador General de la Naci6n Avenida Colombia 248 Oficina 904 Quito, Ecuador For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America -17- Cable address: INTBAFRAD Washington, D.C. -18- IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF ECUADOR By /s/ Cesar Robalino Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ E. Lerdau Acting Regional Vice President Latin America and the Caribbean 9l -19- SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be fi- nanced out of the proceeds of the Loan, the allocation of 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) Consultants' 100% of foreign services and expenditures training Part A of the Project 575,000 Part B of the Project 2,120,000 Part C of the Project 330,000 Part D of the Project 325,000 Total 3,350,000 (2) Equipment 100% of foreign expenditures and 80% of ex. iditures for local pro- cured imported goods - 20- Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed Part A of the Project 20,000 Part B of the Project 65,000 Part C of the Project 45,000 Part D of the Project 20,000 Total 150,000 (3) Unallocated 500,000 TOTAL 4,000,000 I1 -21- 2. For the purposes of this Schedule, the term "foreign expendi- tures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no with- drawals 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 exceeding the equivalent of $200,000, may be made in respect of Categories (1) and (2) on account of payments made for such expendi- tures before that date but after January 1, 1976; (b) payments for expenditures under Part B, C or D of the Project until the Ecuadorian counterpart who shall head the team of experts in charge of such Part (and of any sub-part thereof) has been appointed and has taken up his post; (c) payments for expenditures under any contract for con- sultants' services for Part B, C or D of the Project until such contract, on terms and conditions satisfactory to the Bank, has been entered into; and (d) payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manu- facture, procurement or supply thereof. 4. Notwithstanding the allocation of an amount of the Loan set forth in the second column of the table in paragraph 1 above, if -22- the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance all ex- penditures in that Category, the Bank may, by notice to the Borrower, reallocate to such Category, to the extent required to meet such estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures. 5. If the Bank shall have reasonably determined that the procure- ment of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, ,io expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expendi- tures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 23 - SCHEDULE 2 Description of the Project The purpose of the Project is to provide a three-year program of technical assistance to the Borrower in its rural development efforts. The Project consists of the following parts: Part A: Operation of the Planning Unit. Part B: A phased program of studies for, and preparation of, agricultural and rural development projects to benefit the population of the Lower Guayas Basin in the coastal region comprising the following sub-parts (substantially as detailed in Exhibit A to this Schedule): 1. Identification and preparation of not more than two projects covering an area of about 100,000 1ectares each; and 2. Carrying out of studies of the Lower Guayas Basin with a view to contributing to a long-range overall plan for water control (flood control, drainage and irrigation). Part C: Preparation of rural development projects to benefit the population of the mountainous highlands of the Andes in the province of Tungurahua. - 24 - Part C comprises the following sub-parts: 1. PreTaration of the Huachi-Pelileo rural development project covering an area of about 11,000 ha between 2,500 m and 2,900 m altitude, including updating of previous engineering studies for the same project and analysis of existing and required support and social services, such as credit, marketing, storage, agricultural extension and research, primary schools, health services and potable water. 2. Preparation of the Quero rural development project covering an area of about 18,000 ha between 2,900 m and 3,600 m altitude in Canton Quero, including the updating of previous studies for the same project, with a view to providing better inputs (such as fertilizers, pesticides and improved seeds) to smaller farmers, the carrying out of a health program (potable water, health services and latrines) and construction of roads and community centers. 3. Carrying out of a preinvestment study of the possibility of developing a small industrial estate in the provincial capital of Ambato, including the updating of previous studies therefor. Part D: Part D comprises the carrying out of such high-priority studies as shall be needed to prepare integrated rural development projects in the Esmeraldas river basin, - 25 - taking into consideration the findings of previous studies that, for such area, have been conducted by the Organiza- tion of American States for the benefit of the Borrower. * * * * It is estimated that the Project will be completed by June 30, 1980. - 26 - EXHIBIT A to Part B of Schedule 2 to the Loan Agreement The studies of the Lower Guayas Basin will be carried out in the following phases: (a) A team of internationally recruited, high-level experts will, together with Ecuadorian counterparts assigned therefor, and during a period of 2-3 months: (i) review available information; (ii) identify one or two projects of about 100,000 hectares each; and (iii) draft terms of reference for the studies consistent with the resources available from the Borrower and the Bank for Part B of the Project. (b) Topographic maps (scale 1:10,000, contour intervals 1 meter) will be orepared for every project identified under (a), (ii) and hydrological stations will be established as required for such projects. -27- (c) The preinvestment studies will be carried out in accordance with the terms of reference referred to under (a) (iii) in a manner satisfactory to the Borrower and the Bank. - 28- SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* September 15, 1980 110,000 March 15, 1981 120,000 September 15, 1981 120,000 March 15, 1982 130,000 September 15, 1982 135,000 March 15, 1983 140,000 September 15, 1983 145,000 March 15, 1984 150,000 September 15, 1984 160,000 March 15, 1985 165,000 September 15, 1985 170,000 March 15, 1986 180,000 September 15, 1986 185,000 March 15, 1987 195,000 September 15, 1987 205,000 March 15, 1988 210,000 September 15, 1988 220,000 March 15, 1989 230,000 September 15, 1989 240,000 March 15, 1990 250,000 September 15, 1990 260,000 March 15, 1991 280,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. -29- Premiums on Prepayment The following percentages are specified as the premiums pay- able on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05(b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1-1/2% More than three years but not more than six years before maturity 2-3/4% More than six years but not more than eleven years before maturity 5-3/4% More than eleven years but not more than thirteen years before maturity 7% More than thirteen years before maturity 8-1/2% - 30 0 SCHEDULE 4 Consultants for Parts B, C and D A. Consultants required to assist the Borrower in carrying out Part B of the Project: about 160 man-months of services, over a three-year period, of specialists, including specialists in the fields of flood control, drainage, irrigation, agri- culture, soil and land classification, agricultural economics and mapping. B. Consultants required to assist the Borrower in carrying out Part C of the Project: about 30 man-months of services of specialists, including specialists in agriculture, agricultural economics, irrigation, groundwater, agricultural extension, geology and soil and land classification for Part C(l) of the Project. C. Consultants required to assist the Borrower in carrying out Part D of the Project: about 44 man-months of services of specialists, including specialists in agricultural economics, rural development, agronomy, forestry and livestock. -31- SCHEDULE 5 Ecuadorian Specialists and Training of Project Staff A. Part A of the Project: (1) Ecuadorian counterparts to second the experts referred to in Section 3.02(b) of this Agreement. (2) About 88 man-months of training of the staff of JUNAPLA and of other agencies and departments of the Borrower in project preparation and evaluation techqiques, and other "ctiviti.:s as needed, in Ecuador and abroad. . Part 3 of the Project: (1) About 300 man-months of services of Ecuadorian professionals, with experience in hydrological and soils investigations, topographical surveys, sociological and socio-economic surveys, provided by agencies and departments of the Borrower. (2) About 40 man-months of specialized training of Ecuadorian counterparts in Ecuador and abroad. C. Part C of the Project: About 75 man-months of services of Ecuadorian professionals, with experience in agriculture, economics, civil engineering, - 32 - sociology and education, provided by agencies and departments of the Borrower. D. Part D of the Project: About 60 man-months of services t' Ecuadorian professionals provided by agencies and departments of the Borrower.