Mexico - Pacific Railway Project : Loan 0103 - Guarantee Agreement - Conformed

LOAN NO. 103 ME Guarantee Agreement (Pacific Railway Project) BETWEEN UNITED MEXICAN STATES AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED AUGUST 24, 1954 PRESS OF BYRON S. ADAMS. WASHINGTON EOuaranter Egreentent AGREEMENT, (1uled Aigust, 24, 1954, bI ween United Mexican States (iereinafter called the (lwarantor) and Jnternational Bank for Reconstruction and DevelopneIit (hereinafter called the Bank). WHEREAS by an mrreenent of even date herewith be- tweeii the Bank aid Ferrocarril del Pacifico, Sociedad An0iiiima de Capital Variable (hereinafter called the Bor- rower), whicli agreement and the schedules therehi re- ferred to are hereinafter called the Loan Agreement, the Bank has aogreed to make to the Borrower a loan in var-- ouis currencies in an aggregate principal amount equiva- lent to sixty one million dollars ($61,000,000), on hlie terms and eonditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guaraintee the paymient of the principal, interest and other charges on such loan and the obligations of the Borrower in re- spect thereof; and WTHEREAS the Oarintor, in consideration of fie Bank's entering into the Loan Agreement with the Borrower, bas agreed to guarantee the payment of the principal, interest and other charges on such loan and the obligations of the Borrower in respect thereof; Now THEREFORE the parties hereto hereby agree as fol- lows: ARTICLE I SECTION 1.01. The parties to this Guarantee Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated October 15, 1952, subject, however, to the modifications thereof set forth in Schedule 3 to the Loan Agreement (said Loan Regulations No. 4 as so modified being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein. 4 SECTION 1.02. Wherever used in this Agreement the term "Financiera" means Nacional Financiera, S.A. ARTICLE II SECTION 2.01. Without limitation or restriction upon any of the other covenants on its part in this Agreement contained, the Guarantor hereby unconditionally guaran- tees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and the interest and other charges on, the Loan, the principal of and inter- est on the Bonds, the premium, if any, on the prepayment of the Loan or the redemption of the Bonds, and the punc- tual performance of all the covenants and agreements of the Borrower, all as set forth in the Loan Agreement and in the Bonds. SECTION 2.02. AWithout limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guaran- tor specifically undertakes, whenever there is reasonable to cause to believe that the funds available to the Borrower will be inadequate to meet the estimated expenditures re- quired for carrying out the Project, lo make arrangements, satisfactory to the Bank, promptly to provide the Bor- rower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. ARTICLE III SECTION 3.01. The Guarantor undertakes that, except as the Bank shall otherwise agree, it will not cause or per- mit to be created any lien on any assets of the Guarantor or of any of its political subdivisions or of any agency of the Guarantor or of any such political subdivision as se- curity for any external debt unless the payment of the principal of, and interest and other charges on, the Loan and the Bonds, shall be secured by such lien equally and ratably with such other external debt; provided, however, that the foregoing provisions of this Section shall not 5 apply to: (a) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; (b) to any pledge of commercial goods to secure debt maturing by its terms not more than one year after the date on which it is incurred and to be paid out of the proceeds of sale of such commer- cial goods; or (c) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. SFroN 3.02. (a) The Guarantor and the Bank shall, cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish to the other all such information as it shall rea- sonably request with regard to the general status of the Loan. On the part of the Guarantor, such information shall inclu(e information with respect to financial and economic conditions in the territories of the Guarantor and the international balance of payments position of the Guar- antor. (b) The (luarantor and the Bank shall from time to time exchange views through their representatives with re- gard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Guarantor shall promptly inform the Bank of any condition which interferes with, or threatens to interfere with, the accom- plishment of the purposes of the Loan or the maintenance of the service thereof. (c) The Guarantor shall afford all reasonable oppor- tunity for accredited representatives of the Bank to visit any part of the territories of the Guarantor for purposes related to the Loan. SECTION 3.03. The Guarantor covenants that it will from time to time grant or cause to be granted rates to the Borrower which will maintain the rate structure of the 6 Borrower at a level which will over a reasonable period produce gross revenues sufficient to cover the following costs, charges, payments and provisions of the Borrower: (a) costs of the Project not financed by the Loan; (b) oper- ating costs; (c) adequate maintenance costs; (d) taxes; (e) payment of service on all outstanding debt; (f) pay- ment of the guaranteed dividend on Class A shares; and (g) adequate working capital. During an initial period of two years or such other initial period as may be agreed upon between the Guarantor and the Bank the rate struc- ture of the Borrower may be maintained at a lower level provided that such rate structure at such lower level is satisfactory to the Guarantor and the Bank. SECTION 3.04. The Guarantor covenants that it will con- tinue to permit the proceeds of the ten percent tax on freight charges and passenger fares (Impuesto del 10% sobre fletes y pasajes) applicable to such charges and fares of the Borrower to be retained by the Borrower as normal income. SECTION 3.05. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid without deduction for, and free from, any taxes or fees imposed under the laws of the Guarantor or laws in effect in its territories; provided, however, that the provisions of this Section shall not apply to taxation of, or fees upon, pay- ments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individ- ual or corporate resident of the Guarantor. SECTION 3.06. This Agreement, the Loan Agreement and the Bonds shall be free from any taxes or fees that shall be imposed under the laws of the Guarantor or laws in effect in its territories on or in connection with the execu- tion, issue, delivery or registration thereof. 7 SECTION 3.07. The principal of, and interest and other charges on, the Loan and the Bonds shall'be paid free from all restrictions imposed under the laws of the Guar- antor or Iqws in effect in its territories. ARTICLE IV SECTION 4.01. The Guarantor shall endorse, in accord- ance with the provisions of the Loan Regulations, its guarantee on the Bonds to be executed and delivered by the Borrower. Finan,ciera and such person or persons as it shkll designate in writing are designated as the authorized representatives of the Guarantor for the purposes of Sec- tion 6.12(b) of the Loan Regulations. ARTICLE V SECTION 5.01. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Guarantor: United Mexican States c/o Nacional Financiera, S.A. Avenida Venustiano Carranza 25 Mexico, D.F., Mexico For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 25, D.C. United States of America SECTION 5.02. Financiera is designated for the purposes of Section 8.03 of the Loan Regulations. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Guarantee Agreement to be signed in their respective 8 names and delivered in the District of Columbia, United States of America, as of the day and year first above written. UNITED MEXICAN STATES by RAUL MARTINEZ OsTos Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT by R. L. GARNER Vice-President .1I