Mexico - Fifth Agricultural And Livestock Credit Project : Loan 1217 - Guarantee Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1217 ME GUARANTEE AGREEMENT (Fifth Agricultural and Livestock Credit Project) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated March 11, 1976 GUARANTEE AGREEMENT AGREEMENT, dated March 11, 1976, between UNITED MEXICAN STATES (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS by a trust agreement between the Guarantor and Banxico dated August 26, 1965, Banxico has been entrusted by the Guarantor with a special fund for the purpose of financing livestock and agricultural development in Mexico; WHEREAS the Guarantor, Banxico and the Borrower have requested the Bank to assist in financing such development; WHEREAS the Bank has in the past made the prior loans for that purpose and is now willing to make to the Borrower a fifth loan in various currencies equivalent to one hundred and twenty- five million dollars ($125,000,000) on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as hereinafter provided and that Banxico un- dertake certain obligations to the Bank as in the Project Agree- ment set forth; and WHEREAS the Guarantor, in consideration of the Bank's en- tering into the Loan Agreement with the Borrower, has agreed so to enter into this Guarantee Agreement; NOW THEREFORE the parties hereto hereby agree as follows: -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, subject, however, to the modifications thereof set forth in Schedule 3 to the Loan Agreement (said General Conditions Applicable to Loan and Guarantee Agreements, as so modified, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the Gen- eral Conditions and in Section 1.02 of the Loan Agreement have the respective meanings therein set forth. -3- ARTICLE II Guarantee; Provision of Funds Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan, all as set forth in the Loan Agreentent. Section 2.02. Without limitation or restriction upon the pro- visions of Section 2.01 of this Agreement, the Guarantor speci- fically undertakes: (a) to cause Banxico to carry out the Project with due dili- gence and efficiency and in conformity with sound agricultural, industrial, administrative and financial policies and practices; (b) whenever there is reasonable cause to believe that the funds available to Banxico for purposes of the Project will be in- adequate to meet the estimated expenditures required for carrying out the Project, to make arrangements, satisfactory to the Bank, promptly to provide Banxico or cause Banxico to be provided with such funds as are needed to meet such expenditures; (c) upon the request of Banxico, from time to time pay into the Fondo Especial de Asistencia Tecnica v Garantia para Creditos -4- Agropecuarios, managed by Banxico, such amounts as shall he re- quired by Barxico to give technical assistance to low-income bene- ficiaries; and (d) to pay to the Borrower: (i) such amounts as the Borrower shall require to repay to the Bank the principal of the Loan; and (ii) out of the resources of the Fondo Especial de Asistencia Tecnica y Garantia para Creditos Agropecuarios, such amounts as the Borrower shall require to pay to the Bank on account of interest and other charges on the proceeds of the portion of the Loan allocated to carry out Part 2 of the Project. -5- ARTICLE III Other Covenants Section 3.01. (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 governmental as- sets (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 Guarantor, in creating or per- mitting 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 adminis- trative subdivisions, the Guarantor 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 governmental 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; -6- 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 "governmental assets" means assets of the Guarantor, of any of its political subdivisions, or of any agency; and the term "agency" means any agency or in- strumentality of the Guarantor or of any political subdivision of the Guarantor and shall include any institution or organization which is owned or controlled directly or indirectly by the Guar- antor or by any political subdivision of the Guaranlor or the operations of which are conducted primarily in the interest of or for account of the Guarantor or any political subdivision of the Guarantor. Section 3.02. The Guarantor shall take all action which shall be necessary or advisable: (a) upon the recommendation of Fondo to that effect, to cause such import permits as shall be needed for the importation of agricultural and agro-industrial machinery and equipment pur- chased for the Project outside of Mexico, to be issued as promptly as possible, in compliance with the legislation and administrative procedures of the Guarantor, and as required for carrying out the Project; and (b) to enable Banxico to apply or cause to be applied the policies set forth in Schedule 2 to the Project Agreement. -7- Section 3.03. The Guarantor shall cause BNCR: (a) to prepare a detailed report on, inter alia: (i) finan- cial accounts, (ii) operational policies and procedures, (iii) progress made in the establishment of the banks of BNCR's system, including steps taken for rationalizing staff and beench network, (iv) progress made in the transfer of assets and liabilities of other public credit institutions to BNCR and the banks of BNCR's system, (v) improvement in the system for collecting loans, in- cluding overdue loans, and (vi) organizational structure; (b) to furnish to the Bank such report for purposes of determining the eligibility of BNCR and the banks of BNCR's system to the rediscount facilities under the Project; and (c) not later than nine months after the date of this Agree- ment or such other date as the Bank shall agree, furnish to the Bank an audited consolidated financial statement of BNCR. Section 3.04. The Guarantor covenants that it will not take, cause or permit any of its political subdivisions or any of its agencies or any agency of any political subdivision to take, any action which would prevent or interfere with the performance by the Borrower or Banxico of their respective obligations contained in the Loan Agreement or the Project Agreement (including any ac- tion in respect of the contractual arrangements referred to in Section 3.03 of the Loan Agreement) and will xake all reasonable action which shall be necessary or appropriate to enable the Bor- rower and Banxico to perform such obligations. -8- Section 3.05. The Guarantor shall, in accordance with its laws, appoint independent and qualified auditors for the purposes of Section 2.10 of the Project Agreement. -9- ARTICLE IV Representative of the Guarantor; Addresses Section 4.01. Nacional Financiera, S.A., is designated as representative of the Guarantor for the purposes of Section 10.03 of the General Conditions. Section 4.02. The following addresses are specified for the purposes of Section 10.01 of the General Conditions: For the Guarantor: United Mexican States c.o Nacional Financiera, S.A. Isabel la Cat6lica 51 Mexico 1, D.F. Mexico Cable address: NAFIN 383-1772538 Mexico City For the Bank: International Bank for Reconstruction and Development 1818 H1 Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. - 10 0 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. UNITED MEXICAN STATES By: NACIONAL FINANCIERA, S.A. By /s/ Pedro Galicia Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTI ON AND DEVELOPMENT By /s/ G. K. Wiese Acting Regional Vice President Latin America and the Caribbean