Conformed Copy - L3085 - Financial Sector Adjustment Loan - Amendment 1

Page 1 July 28, 1989 Lic. Humberto Soto Director General Direccion General Banco Nacional de Comercio Exterior, S.N.C. Camino Santa Teresa No. 1679 01900 Mexico, D.F. Mexico Re: Loan 3085-ME (Financial Sector Adjustment Loan) Amendment to the Loan Agreement Dear Mr. Soto: Please refer to the Loan Agreement for the above-referenced Project entered into between Banco Nacional de Comercio Exterior, S.N.C. (the Borrower) and the International Bank for Reconstruction and Development (the Bank) on June 16, 1989, and the Guarantee Agreement entered into between the United Mexican States (the Guarantor) and the Bank, of even date. The Bank is pleased to inform you that it accepts the proposal of the Guarantor to amend the Loan Agreement to provide for an increase of the equivalent of fifty million dollars in retroactive financing and a special account with an authorized allocation of the equivalent of one hundred million dollars. Therefore, the Bank proposes the following amendments to the Loan Agreement: I. Section 1.02 of the Loan Agreement. a) The "and" at the end of paragraph (k) is deleted; b) the period at the end of paragraph (1) is deleted and a semicolon substituted therefor; c) new paragraphs (m) and (n) are added as follows: (m) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement." (n) "Disbursement Documentation System" means the system of providing back-up documentation for expenditures for imported goods financed under loans from the Bank, set forth in the Aide Memoire signed by representatives of the Guarantor and the Bank, among others, on March 4, 1988." II. Section 2.02 of the Loan Agreement a) The paragraph designated as "Section 2.02" is redesignated as "Section 2.02 (a)"; b) new paragraphs (b) and (c) are added to Section 2.02 as follows: "(b) The Borrower shall, for purposes of the Project, open and maintain in dollars a special account in a bank on terms and conditions satisfactory to the Bank. Deposits into, and Page 2 payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. (c) The Borrower shall, by release of the proceeds of the Loan pursuant to paragraph 4 of Schedule 1 to this Agreement, substantially increase the dollar-equivalent volume of documentation provided to the Bank for expenditures financed under the Loan using the Disbursement Documentation System, over and above the volume of documentation provided to the Bank using such System in November, 1988." III. Schedule 1 to the Loan Agreement. a) Paragraph 3(b) is amended by deleting the number "$100,000,000" and substituting the number "$150,000,000 in respect of Category 1" therefor; b) Paragraph 4 is amended by: deleting the "and" at the end of subparagraph (d); deleting the period at the end of subparagraph (e) and substituting 1; and" therefor; adding a new paragraph (f) as follows: "(f) that the Borrower has submitted documents and other evidence showing that payments out of the Special Account were made exclusively for Eligible Expenditures, in accordance with paragraph 4 of Schedule 5 to this Agreement, for al amounts withdrawn rom t e Loan Account And deposited into the Special Account in accordance with paragraph 3 of said Schedule." IV. Part C of Schedule 4 to the Loan Agreement. a) Paragraph 1 is amended by adding the following sentence at the end of the paragraph: "When payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank, together with other documentation referred to above, shall be furnished to the Bank prior to making the first payment out of the Special Account in respect of such contract." b) Paragraph 2 is amended by.adding the following sentence at the end of the paragraph: "When payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that two conformed copies of the contract, together with such other documentation and information referred to above, shall be,furnished to the Bank prior to making the first payment out of the Special Account in respect of such contract." V. Schedule 5 to the Loan Agreement The following new Schedule 5 is added after Schedule 4 to the Loan Agreement: "SCHEDULE 5 Page 3 Special Account 1. For the purposes,of this Schedule: (a) the term "Eligible Categories" means Categories I and 2 set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "Eligible Expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the Eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $100,000,000 (one hundred million dollars) to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for Eligible Expenditures in accordance with the provisions of this Schedule. The Borrower shall make withdrawals from the Special Account for payments of Eligible Expenditures on the basis of the evidence that the Bank shall have reasonably determined and shall debit the Special Account with the amount in dollars so withdrawn or with the dollar equivalent of the currency other than dollares in which the payment was made, determined on the basis of the rate of exchange between the dollar and such currency in affect: (i) on the date each payment shall have been made, if the payment has taken place within 90,days of the date on which the withdrawal from the Special Account was made; or (ii) on the date each withdrawal shall have been made from the Special Account. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been made out of the Special Account for Eligible Expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective Eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, ,furnish to the Bank such documents and other Page 4 evidence showing that such payment was made exclusively for Eligible Expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Loan allocated to the Eligible Categories less the amount of any outstanding special commitment entered into.by the Bank pursuant to Section 5.02 of the General @Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the Eligible Categories shall follow such procedures as the Bank shall specify by notice;to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for Eligible Expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for Eligible Expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.' If you agree with the foregoing proposed amendment, please confirm your acceptance of the amendment by signing and dating the enclosed copy of this letter and returning the same to the Bank. The amendment will take effect when the confirmation copy is received by the Bank. Also, because of their interest in,the,matter, a copy of this letter is being sent to Licenciado Josd Angel Gurria Trevino at Secretaria de Hacienda y Credito Publico of the Guarantor. Sincerely, /s/ Rainer B. Steckhan Director Country Department II Page 5 Latin America and the Caribbean Regional Office CONFIRMED: /s/ Authorized Representative BANCO NACIONAL DE COMERCIO EXTERIOR, S.N.C. August 9, 1989 DATE cc: Lic. Jose Angel Gurria Trevino, Subsecretario de Asuntos Financieros Internacionales Secretaria de Hacienda y Credito Publico Palacio Nacional, Primer Patio Mariano 4to. piso, oficina 4037 Centro 06066 Mexico, D.F. Mexico