Guatemala - Industrial Credit Project : Loan 2383 - Project Agreement - Conformed

OFFICIAL LOAN NUMBER 2383 GU DOCUMENTS Project Agreement (Industrial Credit Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO DE GUATEMALA Dated e 2 , 1984 LOAN NUMBER 2383 GU PROJECT AGREEMENT AGREEMENT, dated 01L4 - 1- , 1984, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (herein- after called the Bank) and BANCO DE GUATEMALA (hereinafter called BG). WHEREAS (A) by the Loan Agreement of even date herewith between Republic of Guatemala (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Bor- rower an amount in various currencies equivalent to twenty million dollars ($20,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that BG agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) by a subsidiary agreement to be entered into between the Borrower and BG, the proceeds of the Loan provided for under the Loan Agreement will be made available to BG on the terms and conditions therein set forth; and WHEREAS BG, in consideration of the Bank's entering 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 1i Execution of the Project; Management and Operations of the Borrower Section 2.01. BG shall carry out the Project in accordance with sound financial standards and practices, with qualified management and personnel, and in accordance with the Statement of - 2 - Operating Policies and Procedures and the Credit Manual. Section 2.02. BG shall: (a) maintain, until completion of the Project, the Project Unit; (b) provide such Project Unit, promptly as needed, such qualified and experienced staff, facilities, funds and other resources as shall be required for the efficient management and operation of the Project; (c) employ in the Project Unit, until completion of the Project, a sub-iefe, who shall be responsible for the execution of the Project; and (d) furnish to the Bank for approval the terms of reference of such sub-jefe. Section 2.03. In order to assist BG in the carrying out of the Project, BG shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Bank; such consultants to be selected in accor- dance 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" pub- lished by the Bank in August 1981. Section 2.04. (a) BG shall make Subsidiary Loans to Parti- cipating Intermediaries that have made Investment Sub-loans or Technical Assistance Sub-loans in accordance with the provisions of the Schedule to this Agreement, the Statement of Operational Policies and Procedures and the Credit Manual. (b) BG shall use the proceeds accrued to it from the repay- ment of the principal of Subsidiary Loans for further relending, under the terms and conditions set forth in this Agreement for Subsidiary Loans, to each Participating Intermediary that has made Investment Sub-loans or Technical Assistance Sub-loans. Section 2.05. (a) By August 31, 1985 and annually there- after until the completion of the Project, BG shall review with the Bank, the adequacy of interest rates to be charged to each Participating Intermediary and to Investment Enterprises during the succeeding twelve-month period. - 3 - (b) BG shall, in light of the review in (a) hereof, revise such interest rates in a manner satisfactory to the Bank. Section 2.06. BG shall duly perform all its obligations under the Subsidiary Agreement. Except as the Bank shall other- wise agree, BG shall not take or concur in any action which would have the affect of amending, abroga-ing, assigning or waiving the Susidiary Agreement or any provisioi. thereof. Section 2.07. (a) BG shall furnish 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 Investment Enterprises, the Investment Projects, the Investment Sub-loans, the Technical Assistance Sub-loans and, where appropriate, the benefits to be derived from the foregoing. (b) BG shall maintain or cause to be maintained records and procedures adequate to record and monitor the progress of the Project and the Investment Projects, 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 Investment Projects. (c) Within six months following the last withdrawal from the Loan Account in respect of the Investment Sub-loans or by such later date as the Bank shall request, BG shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Investment Projects, their costs and the benefits derived and to be derived from them, the performance by BG and the Bank of their respective obligations under this Agreement and the accomplishment of the purposes of the Loan. Section 2.08. (a) BG shall, at the request of the Bank, exchange views with the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Loan. (b) BG shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by BG of its obligations under this Agreement. ARTICLE III Investment Financing Section 3.01. Investment Sub-loans shall be made on terms and conditions satisfactory to the Bank which shall include, inter alia, the terms and conditions set forth in paragraph A of the Schedule to this Agreement, as such Schedule may be amenaded from time to time. The Participating Intermediaries which shall make such Investment Sub-loans shall be eligible to receive Subsidiary Loans from BG on terms and conditions satisfactory to the Bank which shall include, inter alia, the terms and condi- tions set forth in paragraph B of the Schedule to this Agreement. Section 3.02. (a) When presenting an Investment Sub-loan (other than a free-limit Investment Sub-loan) to the Bank for approval, BG shall furnish to the Bank an application, in form satisfactory to the Bank, together with: (i) a description of the Investment Enterprise and an appraisal of the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan, and its economic rate of return; (ii) the proposed terms and conditions of the Invest- ment Sub-loan, including the schedule of amortization of the Investment Sub-loan and the procurement procedures to be used by the Investment Enterprise; and (iii) such other information as the Bank shall reasonably request. (b) Each request by BG for authorization to make with- drawals from the Loan Account in respect of a free-limit Investment Sub-loan shall contain: (i) a summary description of the Investment Enterprise and the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; and (ii) the terms and conditions of the Investment Sub-loan, including the schedule of amortization therefor and the procurement procedures to be used by the Investment Enterprise. (c) Except as the Bank and BG shall otherwise agree, applications and requests made pursuant to the provisions of paragraphs (a) and (b) of this Section shall be presented to the Bank on or before June 30, 1986. - 5 - ARTICLE IV Technical Assistance Section 4.01. In carrying out Part B of the Project, BG shall, not later than September 30, 1984, establish a training program, satisfactory to the Bank, for BG's staff and for each Participating Intermediary's staff, and shall carry out such program in accordance with a schedule acceptable to the Bank. Section 4.02. In carrying out Part C of the Project, each Participating Intermediary shall make Technical Assistance Sub- loans to enterprises producing Non-traditional Goods on terms and conditions satisfactory to the Bank which shall include, inter alia, the terms and conditions set forth in paragraph C of the Schedule to this Agreement, as such Schedule may be amended from time to time. Each Participating Intermediary that shall make such Technical Assistance Sub-loans shall be eligible to. receive Subsidiary Loans from BG on terms and conditions satisfactory to the Bank which shall include, inter alia, the terms and condi- tions set forth in paragraph B of the Schedule to this Agreement. ARTICLE V Financial Covenants Section 5.01. (a) BG shall: (i) maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices the operation, resources and expenditures in respect of the Project; (ii) cause each Participating Inter- mediary to maintain separate accounts for purposes of Part A of the Project; and (iii) open on its books Project Accounts in order to maintain records adequate to reflect the operations, receipts and payments for or in connection with the carrying out of the Project and the use of the proceeds of the Loan, all in accordance with consistently maintained, sound accounting prac- tices, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which with- drawals are requested from the Loan Account on the basis of statements of expenditure. (b) BG 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 -6- 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 5.02. BG shall: (a) have the accounts referred to in Section 5.01 (a) of this Agreement, and financial statements related to such accounts (balance sheets, statements of income and expenses and statements of sources and application of funds) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (b) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year: (i) certified copies of such accounts and financial statements for such year as so audited; and (ii) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested, including, without limitation to the foregoing, separate opinions by said auditors in respect of the expenditures and records referred to in Section 5.01 (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 state- ments of expenditure have been used for the purpose for which they were provided; and (c) furnish to the Bank such other information concerning said accounts, financial statements, records and expenditures, as well as the audit thereof, as the Bank shall from time to time reasonably request. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effec- tive. Section 6.02. This Agreement and all obligations of the Bank and of BG thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify BG thereof. - 7 - Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. ARTICLE VII Miscellaneous Provisions Section 7.01. 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 hereinafter specified or at such other address as such party shall have designated by notice to the -party giving such notice or making such request. The addresses 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. 248423 (RCA) or 64145 (WUI) For BG: Banco de Guatemala 7a Avenida 22-01, Zona 1 Guatemala City Guatemala Cable address: Telex: GUATEBANCO 5231 Section 7.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this -8- Agreement on behalf of BG, or by BG on behalf of the Borrower under the Loan Agreement, may be taken or executed by BG's President or such other person or persons as such President shall designate in writing, and the President shall furnish to the Bank sufficient evidence of the authority and the authen- ticated specimen signature of each such person. Section 7.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 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. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By sec& -q-- Regional Vice President Latin America and the Caribbean BANCO DE GUATEMALA By IA-i Authorized Representative SCHEDULE Lending Terms and Conditions A. Terms and Conditions Applicable to Investment Sub-loans: (Section 3.01 of this Agreement) (a) Investment Sub-loans will be made and will be repayable in Quetzales. (b) Interest on Investment Sub-loans will be payable at a rate of not less than t'he annual interest rate appli- cable to the Loan pursuant to Section 2.06 of the Loan Agreement plus up to 5 percentage points on the princi- pal amount of the Investment Sub-loan disbursed and outstanding from time to time. (c) Investment Sub-loans will finance up to seventy-five percent of the cost of the Investment Project of a new Investment Enterprise or up to ninety percent of the cost of the Investment Project in the case of moderni- zation or expansion of an existing Investment Enter- prise. (d) Investment Sub-loans to an Investment Enterprise, in- cluding its Subsidiaries, will not exceed, in the aggregate, the equivalent of $1,500,000 except that an Investment Enterprise producing Non-traditional Goods and exporting at least fifty percent of its production to countries outside CACM may be eligible for Invest- ment Sub-loans exceeding such limit where such Invest- ment Enterprise could not meet its export goals with Investment Sub-loans below $1,500,000 equivalent. (e) The amortization schedule applicable to each Investment Sub-loan will provide for an appropriate period of grace but not more than 3 years, and: (i) will not extend beyond 12 years from the date of approval of such Investment Sub-loan by the Bank, or in the case of a free-limit Investment Sub-loan, of authorization by the Bank to make withdrawals from the Loan Account in respect thereof; and (ii) will provide for approximate- ly equal semiannual, or more frequent, aggregate pay- ments of principal and interest or approximately equal semiannual, or more frequent, payments of principal. - 10 - (f) The Investment Enterprise will carry out the Invest- ment Project with due diligence and efficiency and in accordance with sound technical, financial and mana- gerial standards and will maintain adequate records. (g) The goods and services to be financed out of the pro- ceeds of the Loan will be purchased at a reasoi.able price, also taking into account other relevant factors such as time of delivery, and efficiency and reliabi- lity of the goods, and availability of maintenance facilities and spare parts theref or, and, in the case of services, their quality and the competence of the parties rendering them; such goods and services to be used exclusively in the carrying out of the Investment Project. (h) The Participating Intermediary will have the right to inspect, by itself or jointly with representatives of the Bank and BG if the Bank will 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. (i) The Investment Enterprise will insure or make adequate provision for the insurance of the imported goods to be financed out of the proceeds of Investment Sub-loans against hazards incident to the acquisition, transport- ation and delivery thereof to the place of use or installation; any indemnity thereunder to be made pay- able in a currency freely usable by the Investment Enterprise to replace or repair such goods. (j) The Participating Intermediary will have the right to obtain all such information as BG shall reasonably request relating to paragraphs (f) through (i) above and to the administration, operations and financial condition of the Investment Enterprise and the benefits to be derived from the Investment Project. (k) The Participating Intermediary will have the right to suspend or terminate the right of the Investment Enter- prise to use the proceeds of the Investment Sub-loan, upon failure by such Investment Enterprise to perform its obligations under its contract with the Participat- ing Intermediary. - 11 - B. Terms and Conditions Applicable to Subsidiary Loans: (Section 2.04 of this Agreement) (a) Subsidiary Loans will finance up to ninety percent of Investment Sub-loans and one hundred percent of Techni- cal Assistance Sub-loans made. (b) Subsidiary Loans will be repayable in Quetzales. (c) The aggregate amount of Subsidiary Loans to any Parti- cipating Intermediary will not exceed the equivalent of $5,000,000, the adequacy of this limit to be reviewed by the Bank and BG not later than September 30, 1985. (d) Interest on the principal amount of Subsidiary Loans financing: (i) Investment Sub-loans (other than Invest- ment Sub-loans made to Small Investment Enterprises), disbursed and outstanding from time to time, will be payable at a rate of not less than the annual interest rate applicable to the Loan pursuant to Section 2.06 of the Loan Agreement plus two percentage points; (ii) Investment Sub-loans made to Small Investment Enter- prises, disbursed and outstanding from time to time, will be payable at a rate of not less than the annual interest rate applicable to the Loan pursuant to Sec- tion 2.06 of the Loan Agreement plus one percentage point; and (iii) Technical Assistance Sub-loans dis- bursed and outstanding from time to time, will be pay- able at a rate up to the rate applicable to the Loan pursuant to Section 2.06 of the Loan Agreement. (e) If an Investment Sub-loan or a Technical Assistance Sub-loan or any part thereof is repaid to the Partici- pating Intermediary in advance of maturity, or if an Investment Sub-loan or any part thereof is sold, trans- ferred, assigned or otherwise disposed of for value by the Participating Intermediary, the Participating Intermediary will promptly repay to BG the amount of the Subsidiary Loan corresponding to the Investment Sub-loans or parts thereof so repaid in advance or dis- posed of for value. - 12 - (f) The Participating Intermediary will obtain from the Investment Enterprise or enterprises that are benefici- aries of Technical Assistance Sub-loans by written con- tract or other appropriate legal means, rights adequate to protect the interests of the Bank, BG and the Parti- cipating Intermediary. (g) BG will cause each Participating Intermediary to exer- cise its rights in relation to each Investment Project in such manner as to: (i) protect the interest of the Bank and BG; (ii) comply with its obligations in re- spect of the corresponding Investment Sub-loan; and (iii) achieve the purposes of Part A of the Project. C. Terms and Conditions Applicable to Technical Assistance Sub-loans: (Section 5.04 of this Agreement) (a) Technical Assistance Sub-loans will be made to enter- prises producing Non-traditional Goods. (b) Technical Assistance Sub-loans will finance one hundred percent of the reasonable cost of consultants' ser- vices. (c) Technical Assistance Sub-loans will be made and will be repayable in Quetzales. Cd) Interest on Technical Assistance Sub-loans will be pay- able at a rate up to the rate applicable to the Loan pursuant to Section 2.06 of the Loan Agreement plus one percentage point. (e) Technical Assistance Sub-loans will be repayable over a period of five years and will have a period of grace of not more than two years. 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 27 day of ,l- ,1981. FOR SECRETARY