Mexico - Third Medium-Size Cities And Sinaloa State Water Project : Loan 2281 - Guarantee Agreement - Conformed

=OFFICIAL OCUIENTS LOAN NUMBER 2281-ME Guarantee Agreement (Third Medium-Size Cities and Sinaloa State Water Project) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated c25 , 1983 Loan Number 2281-HE GUARANTEE AGREEMENT AGREEMENT, dated QS , 1983, between UNITED MEXICAN STATES (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (herein- after called the Bank). WHEREAS by the Loan Agreement of even date herewith between the Bank and Banco Nacional de Obras y Servicios Pu'blicos, S.A. (hereinafter called the Borrower) the Bank has agreed to make to the Borrower a loan in various currencies equivalent to one hundred million three hundred thousand dollars ($100,300,000), 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 and undertake to carry out, through its Secretarla de Desarrollo Urbano y Ecologia (hereinafter called SEDUE), and unless as provided under paragraph (b) of Section 3.01 of this Agreement, the investment projects included under the Project as hereinafter provided; and WHEREAS the Guarantor, in consideration of the Bank's enter- ing into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower; 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 Loan and Guarantee Agreements of the Bank dated October 27, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements 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 General Conditions, in Section 1.02 of and in the Preamble to, the Loan Agreement have the respective meanings therein set forth. -2- 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, and the punctual performance of all -the other obligations of the Borrower, all as set forth in the Loan Agreement. Section 2.02. Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guarantor specifically undertakes, whenever there is reasonable cause to believe that the funds available to the Fund will be inadequate to meet the estimated expenditures required for the carrying out of the Project, promptly to provide the Fund or cause the Fund to be provided with such funds as are needed to meet such expenditures. ARTICLE III Execution of the Project Section 3.01. (a) The Guarantor, acting through SEDUE, shall carry out the Project and each of the Eligible Sub-projects with due diligence -and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices. (b) Without limitation to the provisions of paragraph (a) above, the Guarantor may assign the obligation to carry out an Eligible Sub-project to such Beneficiaries which have been selected by the Guarantor in accordance with technical and administrative criteria satisfactory to the Bank. In such cases the obligation of such Beneficiaries shall be duly reflected in their respective Sub-loan Agreement and the Guarantor shall remain responsible for the supervision of the Eligible Sub-projects and the provision of technical assistance to the said Beneficiaries. (c) The Guarantor shall, acting through SEDUE, provide technical assistance to the Beneficiaries as required by the latter in accordance with the terms of the Sub-projects. -3- (d) The Guarantor shall, acting through SEDUE, enter into a Sub-loan Agreement with the Borrower and the respective Sub- borrower in respect of each of the Sub-projects in accordance with the provisions set forth in Schedule 4 to the Loan Agreement. Except as the Bank shall otherwise agree, the Guarantor shall not amend or waive or abrogate or fail to enforce any provision of the Sub-loan Agreements. (e) Except as the Bank shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of the Schedule to this Agreement. (f) For purposes of carrying out Part A.2 of the Project, the Guarantor shall: (i) by June 30, 1985, furnish to the Bank, for its comments, the conclusions of the diagnosis on the institutional and management requirements of the Comisi6n; (ii) by December 31, 1987, furnish to the Bank the program referred to in Part A.2 of the Project in terms satisfactory to the Bank; and (iii) thereafter, cause the Comisio'n to put into effect such program. (g) For purposes of Part C.3 of the Project, the Guarantor shall carry out the studies described therein in accordance with terms of reference satisfactory to the Bank. Section 3.02. In order to assist the Guarantor in the carrying out of the Project and in the preparation and the carrying out of the Eligible Sub-projects, the Guarantor shall employ engineering and management consultants whose selection, qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, such consultants to be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Section 3.03. (a) The Guarantor undertakes to insure or cause to be insured, or make or cause to be made 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 Guarantor to replace or repair such goods. -4- (b) Except as the Bank shall otherwise agree, the Guarantor shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the purposes of the Project. Section 3.04. (a) The Guarantor shall furnish to the Bank, 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 Bank shall reasonably request. (b) The Guarantor: (i) shall maintain or cause to be main- tained records and procedures adequate to record and monitor the progress of the Project and the Sub-projects (including their costs and the benefits to be derived from them), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project and in the Sub-projects; (ii) shall enable the Bank's accredited representatives, or cause Them to be enabled, to visit the facilities and construc- tion sites included in the Project and in the Sub-projects and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the Project and the Sub- projects, their costs and, where appropriate, the benefits to be derived from them, the expenditure of the proceeds of the Loan and the goods and services financed out of the proceeds. (c) Upon the award by the Guarantor of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. Section 3.05. The Guarantor shall, not later than Decem- ber 31, 1984, furnish to the Bank for each of the Regional Companies, the monitoring indicators listed in sub-paragraph B (ii) of Schedule 4 to the Loan Agreement applicable to each such Companies, ir terms satisfactory to the Bank. Section 3.06. The Guarantor shall carry out, in the cities benefitting from a Sub-project which have a percentage of unaccounted-for water higher than 30% of the water supplied by - 5 - the respective Beneficiary, a leak detection and control program during the period of Sub-project execution. Section 3.07. The Guarantor shall, not later than six months after the signing of the Sub-loan Agreement for each Beneficiary, carry out a specific tariff study for such Beneficiary, in terms satisfactory to the Bank, such study to present as conclusion the tariff structure and tariff levels to be implemented by each such Beneficiary. ARTICLE IV Other Covenants Section 4.01. (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 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 Guarantor, 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 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 or as security for the payment of debt incurred for the purpose of financing the purchase of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. -6- (c) As used in this Section, the term "governmental assets" means assets of the Guarantor, of any political subdivision or of any agency; and the term "agency" means any agency or iistrumentality of the Guarantor or of any political subdivision of the Guarantor and shall include any institution or organization which is owned or controlled directly and indirectly by the Guarantor or by any political subdivision of the Guarantor 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 4.02. The Guarantor shall: (a) maintain in SEDUE a special unit in charge of carrying out feasibility studies and appraisals of the Sub-projects, to supervise the carrying out of said Sub-projects and to monitor their operation; and (b) at all times, assign suitably qualified staff in adequate numbers to such unit, including sanitary engineers, financial analysts, economists, and other supporting staff. Section 4.03. The Guarantor, acting through SEDUE, shall: (a) maintain within its national training program, particular sub-programs in accordance with each Beneficiary's specific needs, as identified in the respective Sub-project feasibility studies; and (b) by June 30, 1985 carry out the revision of SEDUE's guidelines for project preparation in accordance with terms of reference satisfactory to the Bank. ARTICLE V Representative of the Guarantor; Addresses Section 5.01. The Director General of Public Credit of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section .02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: -7- For the Guarantor: Secretaria de Hacienda y Credito Publico Palacio Nacional Mexico 1, D.F. Mexico Telex: 01774300 Mexico City For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Telex: 440098 (ITT) 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 in the District of Columbia, United States of America, as of the day and year first above written. UNITED MEXICAN STATES By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Latin America and the Caribbean -8- SCHEDULE Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank 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 and works to be procured on the basis of inter- national competitive bidding, and in addition to the requirements of paragraph 1.2 of the Guidelines, the Guarantor shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 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 Bank shall reasonably request; the Bank 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 G-arantor 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 competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international com- petitive bidding: (i) bidders shall be required to state in their bid the 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; (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; and (iii) the cost of inland freight and other expenditures incidental to the delivery of the goods to the place of their use or installation shall be included. -9- B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in Mexico may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Mexico if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Mexico equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar -taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in - 10 - such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures 1. Contracts estimated to cost., after grouping in accordance with appropriate procurement standards, an amount not exceeding the equivalent of $2,500,000, in the case of works, and not exceeding the equivalent of $500,000, in the case of equipment and materials, may be procured in accordance with local competi- tive bidding procedures, satisfactory to the Bank. 2. Contracts estimated to cost, after grouping in accordance with appropriate procurement standards, an amount not exceeding the equivalent of $250,000, in the case of works, and not exceed- ing the equivalent of $150,000, in the case of materials and equipment, but up to an aggregate amount equivalent of $8,000,000, may be awarded after evaluation and comparison of at least three quotations from contractors or suppliers, as the case may be. Contracts shall be awarded to the lowest evaluated bidders. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts procured in accordance with the procedure set forth in paragraph A above: (a) Before bids are invited, the Guarantor shall furnish to the Bank, 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 docu- ments or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. - 11 - (b) After bids have been received and evaluated, the Guarantor shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Bank shall reasonably request. The Bank shall, if it deter- mines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Guarantor and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification was invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, the Guarantor shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan 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 Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Guarantor 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 extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 30% of the original price, the Guarantor shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it detarmines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inlorm the Borrower and state the reasons for its determination. 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 -day of" 8 3. FOR SECRETARY