Conformed Copy - L2946 - Ports Rehabilitation Project - Guarantee Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2946 ME (Ports Rehabilitation Project) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated June 7, 1989 LOAN NUMBER 2946 ME GUARANTEE AGREEMENT AGREEMENT, dated June 7, 1989, between UNITED MEXICAN STATES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Guarantor and Banco Nacional de Obras y Servicios Publicos, S.N.C., I.B.D. (the Borrower), having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to the Loan Agreement (as defined below), have requested the Bank to assist in the financing of the Project; and (B) by the Loan Agreement (the Loan Agreement), of even date herewith, between the Bank and the Borrower, the Bank has agreed to extend to the Borrower a loan in various currencies equivalent to fifty million dollars ($50,000,000), on the terms and condi- tions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower Page 2 in respect of such loan and to undertake other obligations as provided in this Agreement; and WHEREAS the Guarantor, in consideration of the Bank's entering 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 "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth in Section 1.01 of the Loan Agreement (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions, in the Preamble to this Agreement and in the Preamble to and Section 1.02 of the Loan Agreement have the respective meanings therein set forth. 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 merely as surety, 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. The Guarantor shall enter into the contractual arrangements with the Borrower referred to in Section 3.01 of the Loan Agreement and, unless the Bank shall otherwise agree, shall not change or fail to enforce any of the provisions of such contractual arrangements. ARTICLE III Execution of the Project Section 3.01. (a) The Guarantor declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement and to this end, shall carry out the Project, acting through SCT and SEDRA, and with the assistance of the Borrower, with due diligence, efficiency and in conformity with appropriate administrative, financial, technical, environmental and engineering practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) For purposes of carrying out the Project, the Guarantor, acting through SCT, shall cause CNCP to bear responsibility for implementing, coordinating, supervising and evaluating the Project. Section 3.02. The Bank and the Guarantor agree that the obli- gations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) in respect of the Project shall be carried out by the Guarantor, acting through SCT, and by SEPOM, SEPOG, SPTA, and SEDRA, as the case may be. Section 3.03. Except as the Bank shall otherwise agree, pro- curement of goods, works and consultants' services required for the Project and to be financed from the proceeds of the Loan, Page 3 shall be governed by the provisions of Schedule 4 to the Loan Agreement. Section 3.04. (a) Without limitation upon any other provision of this Agreement or the Loan Agreement, the Guarantor, acting through SCT, shall: (i) cause SEPOG to carry out Part A.1 (b) of the Project, and, for that purpose, make available to SEPOG the proceeds of the Loan allocated to such Part A.1 (b), pursuant to a subsidiary loan agreement, satisfactory to the Bank and containing the terms and conditions set forth below, to be entered into between the Borrower and SEPOG; (ii) cause SEPOM to carry out Part A.2 (b) of the Project, and, for that purpose, make available to SEPOM the proceeds of the Loan allocated to such Part A.2 (b), pursuant to a subsidiary loan agreement, satisfactory to the Bank and containing the terms and conditions set forth below, to be entered into between the Borrower and SEPOM; and (iii) cause SPTA to carry out Parts A.3 AA (b) and A.3 BB (b) of the Project, and, for that purpose, make available to SPTA the proceeds of the Loan allocated to such Parts A.3 AA (b) and A.3 BB (b), pursuant to a subsidiary loan agreement, satis- factory to the Bank and containing the terms and conditions set forth below, to be entered into between the Borrower and SPTA. (b) The Subsidiary Loan Agreements, referred to in the immediately preceding paragraph (a), shall include, inter alia, the following terms and conditions: (i) each recipient of a Subsidiary Loan shall pay prin- cipal, interest and other charges on the Subsidiary Loan in such amount and at such times as shall be required for the Borrower to make payments to the Bank with respect to the corresponding portion of the Loan; (ii) each recipient of a Subsidiary Loan shall carry out the part of the Project assigned to it in accor- dance with the provisions of this Agreement and the Loan Agreement and shall cooperate in the carrying out of Part C of the Project; (iii) each recipient of a Subsidiary Loan shall carry out the Action Plan with respect to the Project Port for which it is responsible, including achievement of the financial ratios and productivity targets specified therein; (iv) procurement of the goods, works and consultants' services financed by any Subsidiary Loan shall be governed by the provisions of Schedule 4 to the Loan Agreement; (v) each recipient of a Subsidiary Loan shall comply in all respects, mutatis mutandi, with Section 4.01 of this Agreement, including giving access to its records to representatives of the Bank; and (vi) each recipient of a Subsidiary Loan shall take all actions and measures necessary or appropriate to facilitate or cause the implementation of the con- solidated financial reporting system referred to in Section 4.02 of this Agreement and the implementa- tion of the provisions of Section 3.12 of this Agreement. Page 4 (c) Except as the Bank shall otherwise agree, the Guarantor shall not change or fail to enforce any of the provisions of such Subsidiary Loan Agreements. Section 3.05. Without limitation upon any other provision of this Agreement or the Loan Agreement, the Guarantor, acting through SCT and CNCP, shall: (a) carry out Part A.4 of the Project; (b) maintain or cause to be maintained all machinery and equipment acquired under such Part A.4 according to sound maintenance standards; and (c) for the purpose of effecting such machinery and equipment maintenance, enter into a maintenance contract, satisfactory to the Bank, with SERPOVER. Section 3.06. Without limitation upon any other provision of this Agreement or the Loan Agreement, the Guarantor, acting through SEDRA, shall carry out Part B of the Project. Section 3.07. Without limitation upon any other provision of this Agreement or the Loan Agreement, the Guarantor, acting through SCT, shall enter into contractual arrangements, satis- factory to the Bank, with SERPOVER, for the purpose of causing SERPOVER to: (i) carry out the Veracruz Action Plan; (ii) take all measures and actions, including administrative improvements, necessary or appropriate to meet the targets and indicators included in the Veracruz Action Plan; and (iii) cooperate and coordinate with SCT in the carrying out of Parts A.4 and C of the Project, in implementing the provisions of Sections 3.12, 4.01 and 4.02 of this Agreement, and in complying with the procurement procedures set forth in Schedule 4 to the Loan Agreement. Except as the Bank shall otherwise agree, the Guarantor shall not change or fail to enforce any of the provisions of the SERPOVER Arrangements. Section 3.08. (a) The Guarantor, acting through SCT, shall cause: (i) SEPOG, with the assistance of CDP-Guaymas, to carry out and implement the Guaymas Action Plan; (ii) SEPOM, with the assistance of CDP-Manzanillo, to carry out and implement the Manzanillo Action Plan; (iii) SPTA to carry out and implement the Tampico-Altamira Action Plan; (iv) SERPOVER, with the assistance of CDP-Veracruz, to carry out and implement the Veracruz Action Plan; and (v) SEDRA to carry out and implement the SEDRA Action Plan. (b) For purposes of the foregoing, the Guarantor, acting through SCT, shall enter into contractual arrangements, satisfac- tory to the Bank, with SEPOG, SEPOM, and SPTA, and, except as the Bank shall otherwise agree, shall not change or fail to enforce any of the provisions of such contractual arrangements. Section 3.09. Without limitation upon any other provision of this Agreement or the Loan Agreement, the Guarantor, acting through SCT, shall, for the purpose of carrying out Part C of the Project, coordinate with the ESPs, SEDRA, the CDPs, DGP, DGPP, DGOM and CNCP, as necessary or appropriate. Section 3.10. The Guarantor, acting through SCT, shall, at all times until Project completion, cause CNCP to carry out the planning for formulating and coordinating overall strategy in the Guarantor's ports system, under the general guidance of DGP. Section 3.11. The Guarantor shall, either directly or through SCT: (a) no later than November 30 in each year until completion of the Project, exchange views with the Bank on its overall ports investment and financing program planned for the next following calendar year, and, thereafter, on any major changes in such investment and financing program to be made during such calendar year; provided, however, that: (i) such investment and financing program shall be based upon feasibility studies, and criteria and methodologies agreed with the Bank; and (ii) the components of Page 5 such investment and financing program which pertain to the Project Ports shall be satisfactory to the Bank; and (b) review with the Bank, no later than November 30 of each year until Project completion, the proposed budgetary allocations for each of the Project Ports for the next following calendar year, including the proposed expenditures schedule. Section 3.12. The Guarantor, acting through SCT shall, until Project completion: (a) establish and maintain in each of the Project Ports a costing system, satisfactory to the Bank, for the purpose of obtaining reliable and accurate data with respect to all costs of operations in the respective Project Ports; (b) update and maintain such costing data on an annual basis in a manner and according to the timetable satisfactory to the Bank; (c) review with the Bank, each year on or before Novem- ber 30, (i) the efficiency of such costing system, as well as such costing data, for each of the Project Ports; and (ii) the targets and indicators included in the Action Plans with respect to the Project Ports; (d) on the basis of such annual reviews, agree with the Bank, if necessary or appropriate, on modifications or revisions of such targets and indicators included in the Action Plans; (e) take all actions and measures, including financial and operational, necessary or appropriate in order to achieve such targets and indicators included in the Action Plans; and (f) with respect to the port of Tampico-Altamira, no later than June 30, 1990, provide to the Bank a program of actions and measures, satisfactory to the Bank, for the purpose of strengthening and improving the effectiveness and efficiency of operations at both ports under SPTA's control, as well as for all operations for which SPTA is responsible either directly or indirectly, including, if necessary or appropriate, actions and measures based on the costing data for such ports. If the Bank and the Guarantor fail to reach agreement on revised targets and indicators, as provided in subparagraph (d) of this Section, within ninety (90) days after the commencement of the review referred to in subparagraph (c), the Bank may, by notice to the Borrower and the Guarantor, suspend its disburse- ments under the Loan pursuant to Section 6.02 of the General Conditions. ARTICLE IV Financial Covenants Section 4.01. (a) The Guarantor shall maintain, or cause to be maintained, separate records and accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in respect of the Project of the departments or agencies of the Guarantor responsible for carrying out the Project or any part thereof. (b) The Guarantor shall: (i) have the accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with generally accepted auditing standards and procedures consistently applied, by independent and qualified auditors; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of Page 6 each such year a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said accounts and the audit thereof and said records as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Guarantor shall: (i) maintain, or cause to be maintained, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, or cause to be retained, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. (d) The Guarantor, acting, through SCT, shall cause each of the ESPs: (i) to maintain records and accounts adequate to reflect, in accordance with sound accounting practices, its operations and financial condition; (ii) to have such records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with generally accepted auditing standards and procedures consistently applied, by independent and qualified auditors; (iii) to furnish to the Bank, through the Guarantor, as soon as available, but in any case not later than six months after the end of each such year, a certified copy of the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested; and (iv) furnish to the Bank, through the Guarantor, such other information concerning said accounts, and the audit thereof, and said records, as the Bank shall from time to time reasonably request. Section 4.02. The Guarantor, acting through SCT, shall: (a) no later than November 30, 1989, review with the Bank a program for the purpose of establishing and maintaining a system of consolidated financial reports for each Project Port, reflect- ing such Project Port's overall financial position, including all revenues, whether from port charges, tariffs, fees, dues or Page 7 otherwise, and all expenditures, whether from operating costs, equipment and port rehabilitation, capital expenditures, or otherwise; (b) no later than June 30, 1990, establish and thereafter maintain in each of the Project Ports, in a manner satisfactory to the Bank, such financial reporting system; and (c) no later than June 30 each year until Project completion, furnish to the Bank consolidated financial reports of each of the Project Ports for the immediately preceding year, covering all revenues and expenditures. ARTICLE V Representative of the Guarantor; Addresses Section 5.01. The Director General de Credito Publico of the Secretaria de Hacienda y Credito Publico is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 5.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Direccion General de Credito Publico Secretaria de Hacienda y Credito Publico Palacio Nacional Edifico 10, P.B. 06066 Mexico, D.F. Mexico Telex: 1777313-SHDCME 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) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 /s/ Lic. Gustavo Petricioli Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Page 8 By /s/ Ping-Cheung Loh Acting Regional Vice President Latin America and the Caribbean