Nicaragua - Urban Reconstruction Project : Credit 0965 - Development Credit Agreement - Conformed

CREDIT NUMBER 965 NI Development Credit Agreement (Urban Reconstruction Project) between REPUBLIC OF NICARAGUA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1980 CREDIT NUMBER 965 NI DEVELOPMENT CREDIT AGREEMENT AGREEMEFT, dated , 1980, between REPUBLIC OF NICARAGUA ( reinafteralled the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS, the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; WHEREAS, pursuant to Law No. 323, dated April 12, 1972, the Borrower has created "Fondo Especial de Desarrollo" (herein- after called Fondo), for the purpose, inter alia, of channeling international, public and private resources into development projects; WHEREAS, Banco Nacional de Desarrollo (hereinafter called BND) has been entrusted with the representation and management of Fondo by the Borrower and, as such, BND conducts the activities and operations of Fondo on behalf of the Borrower; WHEREAS, Part B of the Project described in Schedule 2 to this Agreement will be carried out by Fondo and for this purpose the Borrower will make available to Fondo part of the proceeds of the Credit; and WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth and in an agreement of even date herewith between the Association and BND; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association being hereinafter called the General Conditions). -2- Section 1.02. Wherever used in this 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 BND of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (b) "Banco Central" means Banco Central de Nicaragua; (c) "Municipality" means the municipalities of Le6n, Chinandega, Estelf, Matagalpa, Masaya and Rivas and "Municipal Board" means the Municipal Reconstruction Board of each Munici- pality of the Borrower; (d) "MIVAH" means Ministerio de Vivienda y Asentamientos Humanos; (e) "MTC" means Ministerio de Transporte and Ministerio de la Construcci6n; (f) "MIC" means Ministerio de Industria y Comercio; (g) "INE" means Instituto Nacional de Energla; (h) "INAA" means Instituto Nicaraguense de Acueductos y Alcantarillados; (i) "Participating Bank" means any bank legally established in Nicaragua, acceptable to the Association and Fondo, which has entered into a Subsidiary Loan Agreement; (j) "Participating Entity" means any of the agencies of the Borrower listed in the Annex to Schedule 2 to this Agreement and which will carry out any part of the Project for the Borrower, (Participating Bank and Participating Entity hereinafter referred to collectively as "Project Entities"); (k) "Supplementary Agreement" means any of the agreements to be entered into between the Borrower and any of the Participating Entities referred to in the Annex to Schedule 2 to this Agreement; (1) "Subsidiary Loan Agreement" means any of the agreements to be entered into between Fondo and any Participating Bank, and -3- "Subsidiary Loan" means the loan provided for in each Subsidiary Loan Agreement; (m) "Small Enterprise" means a small-scale enterprise or business engaged in a productive, service or commercial activity with no more than $60,000 equivalent in fixed assets; (n) "Micro-Enterprise" means a commercial, productive or service enterprise with less than $6,000 in fixed assets; (o) "Production Association" means a cooperative enterprise or any other type of association whose members produce common products; (p) "Micro-Enterprise Program" means the program admin- istered by BND to provide credit and technical assistance to Micro-Enterprises; (q) "Program Administrator" means the administrator of the Micro-Enterprise Program for each Municipality; (r) "Sub-loan" means a loan made or proposed to be made by a Participating Bank under Part B of the Project, subject to the lending terms and conditions set forth in the Schedule to the Project Agreement; (s) "Sub-loan contract" means the contract for any Sub-loan; (t) "Beneficiary" means a Small Enterprise, Micro-Enter- prise or Production Association to which a Sub-loan has been or is proposed to be made; (u) "Decree No. 22" means Decree No. 22 of the Borrower dated July 25, 1979 creating BND, as such Decree may be amended from time to time; (v) "Law" means Law No. 323 of the Borrower dated April 12, 1972, under which Fondo was created, as such Law may be amended from time to time; (w) "Decree No. 43" means Decree No. 43 of the Borrower dated August 15, 1979 under which the operation of Fondo was entrusted to BND, as such Decree may be amended from time to time; -4- (x) Whenever reference in this Agreement is made to action by BND or Fondo, it shall be deemed to mean action by BND taken pursuant to authority of BND vested in it by Decree No. 43; (y) "Fondo" includes the technical, financial and admin- istrative organization, resources, staff and facilities used or to be used by BND to operate Fondo; (z) "Special Account A" means the account established in the name of MIVAH and "Special Account B" means the account established in the name of Fondo all in accordance with Section 2.02 of this Agreement; and (aa) "c6rdoba" means the currency of the Borrower. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equi- valent to twenty-two million dollars ($22,000,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit 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 Associa- tion, 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 out of the proceeds of the Credit. (b) The Borrower shall cause Banco Central to open for MIVAH, Special Account A, with respect to expenditures for civil works under Part A of the Project, and for Fondo, Special Account B, with respect to expenditures under Part B of the Project, on terms and conditions satisfactory to the Association. Disburse- ments from Special Account A and Special Account B shall be made exclusively to finance local expenditures for civil works under Part A of the Project and local expenditures under Sub-loans under Part B of the Project, respectively. (c) The Association shall, promptly after receipt of: (i) evidence satisfactory to the Association of the establishment of -5- Special Account A; and (ii) evidence satisfactory to the Associa- tion that the Borrower has deposited in Special Account A an amount in c6rdobas equivalent to not less than $250,000, with- draw on behalf of MIVAH from the Credit Account and deposit in Special Account A an amount in c6rdobas not exceeding the equivalent of $750,000 and shall thereafter, at the request of MIVAH, further withdraw from the Credit Account, in accordance with the provision of Schedule 1 to this Agreement and in respect of Category (1) of the table set forth in paragraph 1 of such Schedule, and deposit in Special Account A such amounts as shall be required to reimburse MIVAH for 75% of payments made out of Special Account A for local expenditures for civil works eligible to be financed under this Agreement, but only to the extent that the amount of any such deposit, together with any amount already on deposit in Special Account A (including deposits made by the Borrower in accordance with paragraph (g) of this Section) as of the date of the request of MIVAH referred to above, shall not exceed in the aggregate the equivalent of $1,000,000. (d) The Association shall, promptly after receipt of evi- dence satisfactory to the Association of the establishment of Special Account B, withdraw on behalf of Fondo from the Credit Account and deposit in Special Account B an amount in c6rdobas not exceeding the equivalent of $800,000 and shall thereafter, at the request of Fondo, further withdraw from the Credit Account, in accordance with the provisions of Schedule 1 to this Agreement and in respect of Category (3) of the table set forth in paragraph 1 of such Schedule, and deposit in Special Account B such amounts as shall be required to reimburse Fondo for 100% of payments made out of Special Account B for Subsidiary Loans for local expenditures under Sub-loans eligible to be financed under this Agreement, but only to the extent that the amount of any such deposit, together with any amount already on deposit in Special Account B as of the date of the request of Fondo referred to above, shall not exceed in the aggregate the equivalent of $800,000. (e) The Borrower shall cause Fondo to furnish to the Asso- ciation in respect of each payment out of Special Account A and Special Account B such documents and other evidence as the Asso- ciation shall reasonably request showing that the payment was made on account of local expenditures for civil works required for Part A of the Project or on account of Sub-loans made under Part B of the Project for local expenditures, as the case may be. (f) If the Association shall have determined that any of the payments out of Special Account A or Special Account B: (i) was made for expenditures not eligible for financing under this Agreement; or (ii) was not justified by the evidence furnished pursuant to the preceding paragraph, the Borrower shall, promptly upon notice from the Association and prior to any further deposit in Special Account A or Special Account B by the Association, deposit in the respective Special Account an amount equal to the amount of any such payment. (g) Notwithstanding the provisions of paragraph (c) above, no further deposits to Special Account A shall be made unless the Association has been furnished with evidence satisfactory to the Association showing that the Borrower has deposited in Special Account A an amount (other than the $250,000 equivalent referred to in paragraph (c) above) equivalent to 25% of any amount re- quested by MIVAH to be-withdrawn from the Credit Account and deposited in Special Account A in accordance with the provisions of paragraph (c) above. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1981 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. 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 semiannually on April 1 and October 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each April 1 and October 1 commencing April 1, 1990, and ending October 1, 2029, each installment to and including the installment payable on October 1, 1999, 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. - 7 - Section 2.09. MIVAH, Fondo and MTC are designated as repre- sentatives of the Borrower for the purposes of taking any action required or permitted to be taken with respect to Parts A, B and C of the Project, respectively, under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Municipal Reconstruction Component (Part A of the Project) and of the Public Transport Component (Part C of the Project) Section 3.01. (a) The Borrower shall carry out Part A of the Project through MIVAH and the Participating Entities with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility prac- tices, and shall provide, promptly as needed, the funds, faci- lities, services and other resources required for the purpose. The Participating Entities shall participate in the carrying out of Part A of the Project as provided in the Annex to Schedule 2 to this Agreement, as such Annex may be amended by agreement between the Borrower and the Association. (b) The Borrower shall carry out Part C of the Project through MTC with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02 (a) With respect to Part A of the Project, the Borrower shall, through MIVAH, make available to each Partici- pating Entity the proceeds of the Credit required by each such Participating Entity for the carrying out of the respective part of Part A of the Project under a Supplementary Agreement to be entered into by MIVAH, acting on behalf of the Borrower, and each such Participating Entity on terms and conditions satisfactory to the Association, each such Supplementary Agreement to provide, inter alia, for: (i) the procedures for making available to each such Participating Entity the portion of the proceeds of the Credit made available to it thereunder and other funds required for carrying out the res- pective part of Part A of the Project; -8- (ii) the definition of responsibilities of each such Participating Entity in respect of the carrying out of the respective part of Part A of the Project; and (iii) the organizational arrangements and provision of adequate staff, resources and facilities to be made by the Participating Entity for carrying out the respective part of Part A of the Project. (b) The Borrower shall exercise its rights under the Supple- mentary Agreements in such a manner so 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 any Supplementary Agreement or any provision thereof. Section 3.03. The Borrower shall cause, with respect to Part A of the Project, MIVAH to: (a) establish, adequately staff and maintain technical units within its Vice Ministry of Planning to assist the Municipal Boards in sub-project design, planning and execution; (b) assign to its Vice Ministry of Operations the respon- sibility for the administrative and financial aspects of Part A of the Project; (c) cause its Vice Ministry of Operations to select a coordinator and the necessary staff for Part A of the Project; and (d) assign to the Division of Construction of its Vice Ministry of Operations the responsibility for procuring, in accordance with this Agreement, the civil works, vehicles and equipment for such Part of the Project. Section 3.04. The Borrower shall cause, with respect to Part A of the Project, the Municipal Board for each Municipality, to employ, not later than September 30, 1980, the technical staff required for purposes of Part A of the Project. Section 3.05. In order to assist the Borrower and MTC in the carrying out of their obligations under Part C (4) of the - 9 - Project, the Borrower shall employ, or cause MTC to employ, on a time schedule agreed with the Association, management and public transport consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Associa- tion. Section 3.06. The Borrower shall cause, with respect to Part C of the Project, Ministerio de Transporte to cause the newly formed municipal transport company in Managua to: (a) employ, not later than March 31, 1980, a qualified general manager and qualified senior technical and financial managers; (b) adopt and put into effect a system of preventive maintenance for all vehi- cles used for public transport in Managua and to place such system under the supervision of an engineer adequately trained and experienced in preventive maintenance systems; and (c) in respect of such preventive maintenance system, establish depots, with suitable facilities, workshops and equipment, for the carrying out of maintenance of up to about 120 vehicles, and place each such depot under separate management. Section 3.07. The Borrower shall cause, with respect to Part C (3) of the Project, MTC to initiate, as soon as prac- ticable, the paving and repair of essential parts of the bus routes, and complete such works not later than June 30, 1980. Section 3.08. The Borrower shall cause the appropriate Participating Entities to operate and maintain the public ser-- vices, including streets, streetlighting, water and drainage systems, municipal markets, public safety facilities, and public transport facilities and routes, which are being reconstructed or rehabilitated under I-arts A and C of the Project. Section 3.09. The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with consis- tently maintained appropriate accounting practices the operations, resources and expenditures, in respect of Parts A and C of the Project, of the departments and agencies of the Borrower respon- sible for carrying out any part of Parts A and C of the Project. ARTICLE IV Execution of the Credit Component (Part B of the Project) Section 4.01. Without any limitation or restriction upon any of its other obligations under the Development Credit Agree- ment, the Borrower shall cause Fondo to perform in accordance with - 10 - the provisions of the Project Agreement and each Subsidiary Loan Agreement all the obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable Fondo to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. Section 4.02. (a) The Borrower shall make available to Fondo the proceeds of the Credit for purposes of Part B of the Project under a Supplementary Agreement to be entered into by the Borrower and Fondo on terms and conditions satisfactory to the Association, such Supplementary Agreement to provide, inter alia, for: (i) the proceeds of the Credit to be loaned to Fondo in c6rdobas and to be repaid to the Borrower by Fondo in c6rdobas; (ii) the repayment by Fondo of the principal amount of the Credit to the Borrower in approximately equal semiannual installments commencing on a date not later than five years after the date of the Supple- mentary Agreement and ending twenty years after such date at the rate of interest of three per cent (3%) per annum; and (iii) the relending to Participating Banks of the pro- ceeds of the Credit allocated from time to time to Category (3) of Schedule 1 to this Agreement, such proceeds to be provided to Participating Banks for the carrying out of Part B of the Project under Subsidiary Loan Agreements on terms and conditions satisfactory to the Borrower and the Association, including those established in the Schedule to the Project Agreement, as such Schedule may be amended from time to time by agreement between the Associa- tion and Borrower. (b) The Borrower shall exercise its rights under such Supplementary Agreement in such a manner so 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, abro- gate or waive such Supplementary Agreement or any provision thereof. - 11 - Section 4.03. The Borrower shall exercise and shall cause Fondo to exercise its rights under the Supplementary Agreement referred to in Section 4.02 hereof in such a manner as to protect the interests of the Borrower, Fondo, and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive such contractual arrangements or any provision thereof. Section 4.04. The Borrower shall: (a) cause Fondo and MIC to commence, not later than 6 months after the date specified in Section 7.01 of this Agreement, a joint evaluation of Fondo's program for lending to Micro-Enterprises and Production Associa- tions; and (b) provide the necessary funds and resources needed for this purpose. ARTICLE V Other Covenants Section 5.01. (a) The Borrower shall cause MIVAH, Fondo, and MTC to establish and maintain separate accounts on its records to be used exclusively for such Part or Parts of the Project each of them participates in and shall cause such Participating Entities to register in such accounts all receipts and payments for or in connection with such Parts of the Project, in accordance with appropriate accounting principles and procedures consistently applied which are satisfactory to the Association. (b) The Borrower shall cause MIVAH, Fondo, and MTC to: (i) have their accounts referred to in paragraph (a) hereof and related statements for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Borrower and the Association as soon as available, but in any case not later than four months after the end of the fiscal year of each such Participating Entity, (A) certified copies of such accounts and related 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 infor- mation concerning such accounts and related statements of such Participating Entities and the audit thereof as the Association shall from time to time reasonably request. - 12 - Section 5.02. The Borrower shall cause Banco Central to: (a) have Special Account A and Special Account B referred to in Section 2.02 of this Agreement for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (b) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (c) furnish to the Association such other information con- cerning Special Account A and Special Account B referred to in (a) above and the audit thereof as the Assocation shall from time to time reasonably request. Section 5.03. (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 Credit against hazards inci- dent 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 usable by the,Borrower to replace or repair such goods. (b) Except as the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used for the Project. (c) The Borrower shall furnish, or shall cause the appro- priate Participating Entities to furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (d) The Borrower shall, or shall cause MIVAH, Fondo, and MTC to: (i) maintain records and procedures adequate to record and monitor the progress of the Project (including the cost and the benefits to be derived from them), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) enable the Association's accredited representatives to visit the facilities and construc- tion sites incluled in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) furnish to the Association at regular intervals all such information as the Association shall - 13 - reasonably request concerning the Project, their cost and, where appropriate, the benefits to be derived from them, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds. (e) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, the Borrower shall prepare and furnish, or cause to be prepared and furnished, to the Association a report, of such scope and in such detail as the Association shall reason- ably request, on the execution and initial operation of the Project, their cost and the benefits derived and to be derived from them, the performance by the Borrower, the Association and the Participating Entities of their respective obligations under the Development Credit Agreement and the accomplishment of the purposes of the Credit. ARTICLE VI Remedies of the Association Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) any of the Project Entities shall have failed to perform any of its obligations under the Project Agreement, Supplementary Agreement or Subsidiary Loan Agreement to which the Project Entity is a party, which failure materially and adversely affects the execution of the Project; (b) an extraordinary situation shall have arisen which materially and adversely affects the execution of the Project; (c) unless the Association shall otherwise agree, the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of any of the Project Entities or for the suspension of its operations adversely affecting the execution of the Project; Cd) unless the Association shall otherwise agree, the Borrower or any other authority having jurisdiction shall divest any of the Project Entities of any of the functions or powers vested in any of them as of the date of this Agreement, which are necessary for the efficient carrying out of the Project; and - 14 - (e) a change shall have been made in the Law or in Decree No. 43 which would materially and adversely affect the operations or the financial condition of Fondo with respect to the carrying out of Part B of the Project. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof, namely, any of the events specified in paragraphs (a) through (e) of Section 6.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower. ARTICLE VII Termination Section 7.01. The date 9I7 YO is hereby specified for the purposes of SIet ion 12.04 of the General Condi- tions. Section 7.02. The obligations of the Borrower shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 20 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VIII Representatives of the Borrower; Addresses Section 8.01. Fondo Internacional para la Reconstrucci6n de Nicaragua is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 8.02. The following addresses are specified for the purposes of Ser:tion 11.01 of the General Conditions: For the Borrower: Republic of Nicaragua Ministerio de Finanza Palacio de la Revoluci6n Managua, Nicaragua - 15 - For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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 deli- vered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF NICARAGUA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President Latin America and the Caribbean - 16 - 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 the amounts of such proceeds to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works and studies 6,400,000 75% under Parts A and C of che Project (2) Equipment, vehicles 12,100,000 100% of foreign and spare parts expenditures under Parts A and for direct C of the Project imports and 85% of local expenditures for locally procured (3) Subsidiary Loans under 3,200,000 100% of amounts Part B of the disbursed Project (4) Technical assis- 300,000 100% tance under Part C of the Project TOTAL 22,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" 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; and - 17 - (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in com- pliance with the policy of the Association that no proceeds of the Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Credit decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Association. 4. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (i) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $1,200,000 may be made in respect of Categories (1) and (2) on account of payments made for such expenditures before that date, but after October 15, 1979; and (ii) payments made for a Subsi- diary Loan to any Participating Bank under Category (3) until: (A) a Subsidiary Loan Agreement, satisfactory to the Association, between Fondo and such Participating Bank has been duly executed and delivered in accordance with Section 4.02 of this Agreement; and (B) there has been furnished to the Association a certificate satisfactory to the Association of a competent official of Fondo acceptable to the Association, showing that such Subsidiary Loan Agreement is legally binding upon Fondo and such Participating Bank in accordance with its terms. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expen- ditures in that Category, the Association may, at the request of the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit, which are then allocated to another Category and which in the opinion of the Association are not needed to meet other expen- ditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then - 18 - applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. 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 this Agreement, no expendi- tures 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 reason- able opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 19 - SCHEDULE 2 Description of the Project The Project is part of the Borrower's program to reconstruct and rehabilitate the urban sector of its economy and consists of the following Parts: Part A: Municipal Reconstruction Municipal reconstruction sub-projects in the Municipalities of Le6n, Chinandega, Estelf, Matagalpa, Masaya and Rivas as follows: (1) Repair and improvement of infrastructure, including: (a) street paving; (b) public street lighting; and (c) water and drainage systems and facilities. (2) Replacement of physical plant and equipment, including: (a) refuse collection vehicles; (b) maintenance equipment and vehicles; and (c) administrative, maintenance and storage facili- ties. (3) Reconstruction and rehabilitation of municipal facili- ties, including: (a) municipal markets; and (b) public safety facilities and vehicles. (4) Preparation of a water resource study for the city of Matagalpa. (5) Construction of a temporary administration building in Managua for INAA. Part B: Credit Program for Rehabilitation of Small Enterprises A credit program consisting of Subsidiary Loans to Partici- pating Banks to finance Sub-loans to Small Enterprises, Micro- Enterprises, and Production Associations to finance: (1) Construction and repair of commercial and industrial buildings and workshops. (2) Repair and replacement of equipment. (3) Provision of working capital. - 20 - Part C: Rehabilitation of Managua's Public Transport System (1) Purchase of about 140 buses and about 150 micro-buses and spare parts for new and existing buses and micro-buses. (2) Provision of facilities, workshops and equipment for bus maintenance. (3) Improvement of the pavement of about 28 kilometers of bus transit routes. (4) Provision of technical assistance to the newly formed municipal transport company in Managua in the areas of management, maintenance, route design, fare policies and the development of a long-term program for its operations. (5) Safety improvements to the bus system, including loading bays, signs and signaling devices. The Project is expected to completed by June 30, 1981. - 21 - ANNEX TO SCHEDULE 2 Participation in the Participating Entity Project Ministerio de Vivienda y Parts A (1) (a) and Asentamientos Humanos (c), (2) and (3) and overall coordination of the carrying out of Part A Ministerio de Transporte Part C and assis- and Ministerio de la tance to MIVAH for Construcci6n carrying out Part A (1) (a) and (c) and (2) (a) and (b) Banco Nacional de Desarrollo Part B for Fondo Especial de Desarollo Instituto Nacional de Part A (1) (b) Energia Instituto Nicaraguense de Part A (1) (c), (4) Acueductos y Alcan- and (5) tarillados Municipal Reconstruction Assistance to MIVAH Boards in carrying out Part A (1), (2) and (3) - 22 - SCHEDULE 3 Procurement A. International Competitive Bidding 1. Goods under Parts A (1) (b), (2) (a) and (b) and C (1) and (2) of the Project shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Cre- dits" published by the Association in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods to be procured on the basis of international competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Association as soon as possible, and in any event not later than 30 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Association shall reasonably request; the Association will arrange for the publica- tion of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international compe- titive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the f.o.b. and c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. B. Evaluation and Comparison of Bids for Goods; Preference for Manufacturers Established in the Territories of the Central American Common Market 1. For the purpose of evaluation and comparison of bids for the supply of goods: - 23 - (a) bidders shall be required to state in their bid the f.o.b. and c.i.f. (port of entry) price for imported goods, or the exfactory price for domestically-manufactured goods; (b) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded; and (c) the cost to the Borrower of inland freight, insurance and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Bids shall be compared in accordance with the following rules: (a) the term "Central American Bid" means a bid submitted by a manufacturer established in the territories of the Central American Common Market for goods manufactured or processed to a substantial extent (as reasonably determined by the Association) in such territories; any other bid will be deemed to be a "Non- Central American Bid"; (b) the bid price under a Central American bid will be the sum of the following amounts: (i) the ex-factory price of such goods; and (ii) freight, insurance and other costs of deli- very of such goods to the site designated in the specifications; and (c) for the purpose of comparing any Non-Central American Bid with any Central American Bid, the price under a Non-Central American Bid will be the sum of the following amounts: (i) the c.i.f. (port of entry) price of such goods; (ii) insurance costs to the port entry; (iii) half the amount of any taxes on the importation of such goods into the territories of the Guarantor which generally apply to non-exempt importers, or 15% of the amounts specified in (i) and (ii) above, whichever shall be the lower; and (iv) freight insurance and other costs of delivery of such goods from the port of entry to the site designated in the specifications. 3. The bidding documents shall clearly indicate the margin of preference to be granted. - 24 - C. Other Procurement Procedures 1. Contracts for goods, civil works and servic-es (other than those specified in Paragraph A.1 of this Schedule and those procured under Part B of the Project) shall be procured on the basis of local competitive bidding procedures satisfactory to the Association. 2. Subject to the Association's prior approval: (i) civil works under Part A (1), (2) and (3) of the Project may be carried out by the Municipal Boards in coordination with MIVAH by force account; and (ii) civil works under Part C (3) of the Project may be carried out by MTC in coordination with Managua's Municipal Board by force account. 3. Contracts for goods, civil works and services under Part B of the Project may be procured by local shopping. D. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for goods estimated to cost the equivalent of $500,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evalua- tion and comparison of the bids received, and such other inform- ation as the Association shall reasonably request. The Association - 25 - shall, if it determines that the intended award would be incon- sistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished 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 such contract. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish 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 such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an exten- sion of the stipulated time for performance of such contract, or issuing any change order under such contract (except in case of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, the Borrower shall inform the Association of the proposed modification, waiver, extension or change order and the reasons therefor. The Association, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the L day o 19$C. FOR SECRETARY