Honduras - Second Industrial Credit Project : Loan 2075 - Project Agreement - Conformed

go3 LOAN NUMBER 2075 HO Project Agreement (Second Industrial Credit Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO CENTRAL DE HONDURAS Dated / ,1982 LOAN NUMBER 2075 HO PROJECT AGREEMENT AGREEMENT, dated /9 , 1982, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank), and BANCO CENTRAL DE HONDURAS (hereinafter called Banco Central). WHEREAS (A) the Banco Central de Honduras (hereinafter called Banco Central) by Resoluci6n 356-12/78, dated Decem- ber 28, 1978 has established the Fondo Nacional de Desarrollo Industrial (hereinafter called FONDEI), a National Industrial Development Fund established to help meet the medium- and long- term financing requirements of the industrial and tourism sectors of Honduras; (B) by a loan agreement between,' the Republic of Honduras (hereinafter called the Borrower) and the Bank, dated March 8, 1979, the Bank has made a loan to the Borrower for the purpose of providing financial assistance for an industrial credit project carried out by FONDEI; (C) the Borrower has requested the Bank to assist in the financing of a second industrial credit project to be carried out by FONDEI; (D) the Borrower intends to obtain from the United Nations Development Programme (hereinafter called UNDP) a grant (herein- after called the UNDP Grant) in an amount of about $1,300,000 equivalent to assist in financing part of Part II of the Project described in Section 3.01 (a) of the Loan Agreement; (E) by the Loan Agreement of even date herewith between the Borrower and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to thirty million dollars ($30,000,000), on the terms and condi- tions set forth in the Loan Agreement, but only on condition that Banco Central agree to undertake such obligations toward the Bank as are hereinafter set forth; (F) by a Subsidiary Loan Agreement of even date herewith between the Borrower and Banco Central the Borrower has undertaken to relend to Banco Central part of the proceeds of the Loan, on the condition that such proceeds will be part of the resources that FONDEI will channel to industrial enterprises in Honduras -2- by means of participating intermediaries which meet FONDEI's technical and financial requirements; and WHEREAS Banco Central, in consideration of the Bank's enter- ing into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project; Management and Operations of FONDEI Section 2.01. Banco Central shall carry out Part I of the Project ,escribed in Section 3.01 (a) of the Loan Agreement, and conduct .FONDEI's operations and affairs, with due diligence and efficiency and in conformity with appropriate economic, finan- cial and investment standards and practices, with qualified and experienced management and in accordance with the Subsidiary Loan Agreement and FONDEI's Statement of Policies and Industrial Regulations. Section 2.02. In accordance with and subject to the provi- sions of the Loan Agreement, Banco Central shall submit Investment Projects to the Bank for approval or for authorization for with- drawals to be made from the Loan Account, as provided in Section 2.03 of the Loan Agreement. Section 2.03. Banco Central shall: (a) make loans out of FONDEI's resources, to Participating Intermediaries for Investment Projects, all in accordance with the -3- provisions of this Agreement, the Loan Agreement, the Subsidiary Loan Agreement and FONDEI's Statement of Policies and Industrial Regulations. (b) enter into a Participation Agreement, satisfactory to the Bank, with each Participating Intermediary, such Participation Agreement to govern the terms and conditions of lending by the Participating Intermediary to Investment Enterprises and to contain, inter alia, procedures related to the withdrawal and repayment of FONDEI Loans, the appraisal and supervision of Investment Projects and the procurement of goods and services for Investment Projects. Section 2.04. (a) Banco Central shall charge the following annual interest rates on the amounts of FONDEI Loans outstanding from time to time: (i) twelve per cent (12%) in the case of Investment Projects to be carried out by Small Investment Enterprises with fixed assets, as of the date of the presentation to the Participating Intermediary of a proposed Investment Project, excluding land and buildings, but including the fixed assets to be financed under such proposed Investment Project, of not more than the equivalent of $50,000; (ii) thirteen per cent (13%) in the case of Investment Projects to be carried out by other Small Invest- ment Enterprises; and (iii) fourteen per cent (14%) in the case of Investment Projects to be carried out by Investment Enter- prises other than Small Investment Enterprises. (b) Banco Central shall cause the Participating Inter- mediaries to charge an interest rate of no more than seventeen per cent (17%) per annum on the outstanding amounts of Sub-loans. (c) Banco Central shall provide, in each Participating Agreement, that if a Sub-loan or any part thereof shall be repaid to the Participating Intermediary in advance of maturity, or, if a Sub-loan or any part thereof shall be sold, transferred, assigned or otherwise disposed of for value by the Participating Inter- mediary, the Participating Intermediary shall promptly repay to FONDEI the amount of the FONDEI Loan corresponding to the Sub- -4- loan or parts thereof so repaid in advance or disposed of for value. (d) Every July 1 and January 1, until the Project has been completed, starting not later than July 1, 1982, the Bank and Banco Central shall review the adequacy of, and, if necessary Banco Central shall revise, in a manner satisfactory to the Bank, the interest rates set forth in paragraphs (a) and (b) above; provided, however, that the interest rates to be charged under paragraphs (a) (i), (ii) and (iii) above shall be, respectively, 5, 4 and 3 percentage points below the interest rate to be charged under paragraph (b) above. Section 2.05. (a) Banco Central shall hold FONDEI harmless for any loss resulting from changes in the rates of exchange between currencies (including Lempiras) used in the operations of FONDEI. (b) For such service, Banco Central shall charge and pay itself, out of FONDEI's funds, a fee of one per cent (1.0%) per annum on the aggregate of the principal amount of FONDEI's Loan with the resources of the Loan outstanding from time to time. Section 2.06. For each Investment Project to be financed by a Participating Intermediary, Banco Central shall cause such Participating Intermediary to make loans out of its own resources for: (i) at least ten per cent (10%) of the total cost of such Investment Project, and (ii) the working capital requirements for such Investment Project. Section 2.07. (a) Banco Central undertakes that, unless the Bank shall otherwise agree, it will cause all Sub-loans to be made on terms whereby the Participating Intermediary shall obtain, by means of a Sub-loan Contract with the Investment Enterprise or by other appropriate legal means, rights adequtte to protect the interests of the Borrower, the Bank, Banco Central and the Participating Intermediary including the right of the Participating Intermediary to: (i) require the Investment Enterprise to carry out and operate the Investment Project with due diligence and efficiency and in accordance with sound tech- nical, financial and managerial standards and to maintain adequate records; (ii) require that (A) the goods and services to be financed out of the proceeds of the Sub-loan shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of -5- the goods and availability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them; provided, however, that in the case of contracts for any good estimated to cost $50,000 equivalent or more, at least three quotations must be obtained, and (B) such goods and services shall be used exclu- sively in the carrying out of the Investment Project; (iii) inspect, by itself or jointly with representatives of the Bank and Banco Central if the Bank shall so request, such goods and the sites, works, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (iv) require that the Investment Enterprise shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice; and that such insurance cover marine, transit and other hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Loan to the place of use or installation, and that any indemnity thereunder be made payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (v) obtain all such information as Banco Central or the Participating Intermediary shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Investment Enterprise and to the benefits to be derived from the Investment Project; and (vi) suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the Sub-loan upon failure by such Investment Enterprise to perform any of its obligations under its contract with the Participating Intermediary. (b) Banco Central shall, and shall cause each Participating Intermediary to, exercise its rights in relation to each Invest- ment Project in such manner as to: (i) protect the interests of the Bank, and Banco Central; (ii) comply with its obligations in respect of the FONDEI Loan made to it; and (iii) achieve the purposes of the Project. Section 2.08. Banco Central shall: (a) furnish, or cause to be furnished to the Bank, at regular intervals, all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan, the Project, the Participating Intermediaries, the FONDEI Loans, the Sub-loans, the Investment Enterprises, and the -6- Investment Projects, and, where appropriate, the benefits to be derived from the foregoing; (b) cause Participating Intermediaries to maintain records and procedures adequate to: (i) record and monitor the progress of the Investment Projects; (ii) identify the goods and services financed out of the proceeds of the Loan and to disclose their use in the Investment Projects; and (iii) reflect, in accordance with consistently maintained sound accounting practices, the operations and the financial condition of the Investment Enterprise; and (c) within six months following the last withdrawal from the Loan Account in respect of the Sub-loans or by such later date as the Bank shall request, prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reason- ably request, on the execution and initial operation of the Project, their costs and the benefits derived and to be derived from them, the performance by the Borrower, Banco Central, and the Bank of their respective obligations under the Loan Agreement and the Project Agreement and the accomplishment of the purposes of the Loan. Section 2.09. (a) Banco Central shall enter into the Subsidiary Loan Agreement with the Borrower referred to in Section 3.01 (b) of the Loan Agreement; and (b) except as the Bank shall otherwise agree, Banco Central shall not amend, waive or terminate such Subsidiary Loan Agreement or any provisions thereof without the prior consent of the Bank. Section 2.10. Banco Central shall, at the request of the Bank, exchange views with the Bank with regard to the progress of the Project and the Investment Projects, the performance of its obligations under this Agreement and other matters relating to the purposes of the Loan. ARTICLE III Financial Covenants Section 3.01. (a) Banco Central shall maintain procedures and records adequate to record the progress of the Project and of each Investment Project (including its cost and the benefits -7- derived from it) and to reflect, in accordance with consistently maintained sound accounting practices, the operations and finan- cial condition of FONDEI, including, without limitation to the foregoing separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure. (b) Banco Central shall retain, until one year after the Closing Date, all records, (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure, and shall enable the Bank's representatives to examine such records. Section 3.02. Banco Central shall: (i) have FONDEI's accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited in accordance with sound 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 months after the end of each such year, (A) certified copies of FONDEI's 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, includ- ing, without limitation to the foregoing, separate opinions by said auditors: (I) on the separate accounts referred to in Section 3.01 (a) of this Agreement; and (II) in respect of expenditures and records referred to in Section 3.01 (b) of this Agreement, as to whether the proceeds of the Loan made available to it and withdrawn from the Loan Account on the basis of statements of expenditures have been used for the purpose for which they were provided; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of FONDEI and the audit thereof as the Bank shall from time to time reasonably request. Section 3.03. Bancc Central shall take all action necessary to prevent reductions in the amount of FONDEI's resources includ- ing reductions resulting from changes in the rates of exchange between the currencies, including Lempiras, used in FONDEI's operations. Section 3.04. The Bank and Banco Central shall from time to time, at the request of either party, exchange views through their representatives with regard to the administration, operations and financial condition of FONDEI; and Banco Central shall furnish to -8- the Bank all such information as the Bank shall reasonably request concerning the administration, operations and financial condition of FONDEI. Section 3.05. The Borrower shall enable the representatives of the Bank to inspect the records referred to in Section 4.02 of the Loan Agreement and any relevant documents. Section 3.06. Banco Central shall promptly inform the Bank of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Loan, the mainte- nance of the service thereof or the performance by Banco Central of its obligations under this Agreement. ARTICLE IV Effective Date; Termination Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 4.02. This Agreement and all obligations of the Bank and of Banco Central thereunder shall terminate on the date on which the Loan Agreement shall terminate. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under Article VI of the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address here- inafter specified or at such other address as such party shall -9- have designated by notice to the party giving such notice or making such request. The address so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT), Washington, D.C. 24423 (RCA) or 89658 (WUI) For Banco Central: Banco Central de Honduras Tegucigalpa, D.C. Honduras Cable address: Telex: BANTRAL 1121 HTBANTRAL Tegucigalpa Section 5.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement, under Section 2.09 of the Loan Agreement on behalf of or by Banco Central may be taken or executed by its President, or by such other person or persons as Banco Central shall designate in writing, and Banco Central shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused - 10 - this Agreement 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. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By 12e Regional Vice President Lati America and the Caribbean BANCO CENTRAL DE HONDURAS By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this I.d day of 4 , 198 aZ... FOR SECRETARY