Mexico - Irrigation Project : Loan 0275 - Guarantee Agreement - Conformed

LOAN NUMBER 275 ME Guarantee Agreement (Irrigation Program) BETWEEN UNITED MEXICAN STATES AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED JANUARY 16, 1961 LOAN NUMBER 275 ME Guarantee Agreement (Irrigation Program) BETWEEN UNITED MEXICAN STATES AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED JANUARY 16, 1961 Guaranter Agireement AGREEMENT, dated January 16, 1961 between UNITED \EXICAN STATES (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOP- MENT (hereinafter called the Bank). WHEREAS by an agreement of even date herewith between the Bank and Nacional Financiera, S. A., (hereinafter called the Borrower), which agreement and the schedules therein referred to are hereinafter called the Loan Agree- ment, the Bank has agreed to make to the Borrower a loan in various currencies equivalent to fifteen million dollars ($15,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to enter into this Agreement; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement has agreed to enter into this Agreement; Now THEREFORE the parties hereto hereby agree as follows: ARTICLE I SECTION 1.01. The parties to this Guarantee Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated June 15, 1956, subject, however, to the modifications thereof set fdrth in Schedule 2 to the Loan Agreement (said Loan Regulations No. 4 as so modified being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein. ARTICLE II SECTION 2.01. Without limitation or restriction upon any of the other covenants on its part in this Agreement con- tained, the Guarantor hereby unconditionally guarantees, 4 as primary obligor and not as surety merely, the due and punctual payment of the principal of, and the interest and other charges on, the Loan, the principal of and interest on the Bonds, and the premium, if any, on the prepayment of the Loan or the redemption of the Bonds, all as set forth in the Loan Agreement and in the Bonds. ARTICLE III SECTION 3.01. (a) The Guarantor shall cause the Project described in Schedule 1 to this Agreement to be carried out and operated with due diligence and efficiency and in con- formity with sound engineering, agricultural and financial standards and practices. (b) The Guarantor shall exercise every right and re- course available to it to cause to be taken all such action as shall be required to assure that no use, other than for domestic uses, will reduce the amounts of water available for irrigation purposes on the Project below the amounts needed therefor. (c) The Guarantor shall continue to take all such action as shall be required to assure that the land included in the Project and the water made available therefor are to the maximum extent possible fully, effectively and promptly utilized. (d) The Guarantor shall cause all works and facilities included in the Project to be adequately maintained and repaired in accordance with sound engineering and agri- cultural practices and standards and shall cause all dams, canals, structures and other works and facilities not in- cluded in the Project but necessary to the proper and effi- cient operation thereof to be operated and adequately main- tained and repaired in accordance with such practices and standards. (e) The Guarantor shall, in accordance with its laws, cause the water charges levied for operation and mainte- nance of the Project to be set and maintained at levels 5 necessary to provide (a) revenues sufficiert to cover all operating and maintenance costs and (b) reasonable re- serves for repair of damage to the Project caused by floods or other hazards. (f) Except as the Guarantor and the Bank shall other- wise agree, the Guarantor shall, in the carrying out of the Project, utilize the services of a drainage expert or ex- perts acceptable to, and to an extent and upon terms and conditions satisfactory to, the Guarantor and the Bank. (g) Except as the Bank shall otherwise agree, the Guar- antor shall cause the public works included in the Project to be constructed or rehabilitated and improved by con- tractors satisfactory to the Guarantor and the Bank em- ployed under contracts providing therefor. (h) Upon request from time to time by the Bank, the Guarantor shall promptly furnish or cause to be furnished to the Bank the plans, specifications and work schedules for the Project and any material modifications subsequently made therein, in such detail as the Bank shall request. (i) The Guarantor shall at all times make available promptly as needed all sums which shall be required for the carrying out and operation of the Project. (j) The Guarantor shall maintain or cause to be main- tained records adequate to identify the goods financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (in- cluding the cost thereof), to show the results achieved by irrigation of the land included in the Project and to reflect in accordance with consistently maintained sound account- ing practices the operations and financial condition with respect to the Project of the agency or agencies of the Guarantor responsible for the carrying out of the Project or any part thereof; shall enable the Bank's representa- tives to inspect the Project, the goods and any relevant records and documents; and shall furnish or cause to be furnished to the Bank all such information as the Bank shall reasonably request concerning the expenditure of the 6 proceeds of the Loan, the Project, and the goods, and the operations and financial condition with respect to the Proj- ect of the agency or agencies of the Guarantor responsible for the carrying out of the Project or any part thereof. SECTION 3.02. Except as the Guarantor and the Bank shall otherwise agree, the Guarantor shall cause all goods financed out of the proceeds of the Loan to be used in the territories of the Guarantor exclusively in the carrying out of the Project. SECTION 3.03. It is the mutual intention of the Guarantor and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assets. To that end, the Guarantor undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Guarantor as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan and the Bonds, and that in the creation of any such lien express provision will be made to that effect; provided, however, that the foregoing provi- sions of this Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as secu- rity for the payment of the purchase price of such property or (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. As used in this Section (a) the term "assets of the Guar- antor" includes assets of the Guarantor or of any of its political subdivisions or of any Agency and (b) the term "Agency " means any agency or instrumentality of the Guarani or or of any political subdivision of the Guarantor and shall include any institution or organization which is owned or controlled directly or 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 sub- division of the Guarantor. 7 SECTION 3.04. (a) The Guarantor and the Bank shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish to the other all such information as it shall rea- sonably request with regard to the general status of the Loan. On the part of the Guarantor, such information shall include information with respect to financial and economic conditions in the territories of the Guarantor and the in- ternational balance of payments position of the Guarantor. (b) The Guarantor and the Bank shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Guarantor shall promptly inform the Bank of any condition which inter- feres with, or threatens to interfere with, the accomplish- ment of the purposes of the Loan or the maintenance of the service thereof or materially affects the carrying out of the Project. (c) The Guarantor shall afford all reasonable opportu- nity for accredited representatives of the Bank to visit any part of the territories of the Guarantor for purposes related to the Loan. SECTION 3.05. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid without deduction for, and free from, any taxes or fees imposed under the laws of the Guarantor or laws in effect in its territories; provided, however, that the provisions of this Section shall not apply to taxation of, or fees upon, pay- ments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of the Guarantor. SECTION 3.06. This Agreement, the Loan Agreement and the Bonds shall be free from any taxes or fees that shall be imposed under the laws of the Guarantor or laws in effect in its territories on or in connection with the execution, issue, delivery or registration thereof. 8 SECTION 3.07. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid free from all restrictions imposed under the laws of the Guarantor or laws in effect in its territories. SECTION 3.08. The Guarantor shall satisfy the Bank that adequate arrangements have been made to insure the goods financed out of the proceeds of the Loan against risks in- cident to their purchase and importation to the sites of the Project. SECTION 3.09. The Guarantor shall make contractual ar- rangements, satisfactory to the Guarantor and the Bank, with the users of irrigation waters within the area of the Project, providing for the repayment, on reasonable terms and conditions, of the moneys invested by the Guarantor in the Project. ARTICLE IV SECTION 4.01. The Guarantor shall endorse, in accordance with the provisions of the Loan Regulations, its guarantee on the Bonds to be executed and delivered by the Borrower. Nacional Financiera, S. A. and such person or persons as it shall designate in writing are designated as the author- ized representatives of the Guarantor for the purposes of Section 6.12(b) of the Loan Regulations. ARTICLE V SECTION 5.01. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Guarantor: Secretario de Recursos Hidra'ulicos Mexico, D. F., Mexico Alternative address for cablegrams and radiograms: Secretaria Recursos Hidra'ulicos Mexico, D. F. 9 For the Bank: International Bank for Reconstruction and Development 1818 H Street, N. W. Washington 25, D. C. United States of America Alternative address for cablegrams and radiograms: Intbafrad Washington, D. C. SECTION 5.02. The Secretario de Recursos Hidrdulicos of the Guarantor is designated for the purposes of Section 8.03 of the Loan Regulations. IN WITNESS WIEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Guarantee Agreement to be signed in their re- spective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. UNITED MEXICAN STATES By: NACIONAL FINANCIERA, S. A. By /s/ MANUEL S. VALLADARES Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ EUGENE R. BLACK President 10 SCHEDULE 1 Description of the Project 1. The Project consists of: (a) the completion of the construction and of the re- habilitation and inprovement of the public irriga- tion and drainage works serving about 580,000 hectares of land situated within the irrigation dis- tricts of Rio Culiacin, Rio Mayo, Rio Yaqui and Rio Fuerte in order to: (i) lower the ground water table so as to prevent or reduce salinity; (ii) improve and extend the water distribution systems; and (iii) reduce flood damage; (b) assistance to users of irrigation waters in connection with the private on-farm works necessary for the effective utilization of the public irrigation facili- ties; and (c) maintenance of the public irrigation and drainage works included in paragraph (a) above. 2. The public works to be constructed include about 4000 kms. of drains, and 600 kius. of canals, together with the necessary related structures. Existing public works to be rehabilitated and improved include about 1700 kms. of drains, about 1000 kms. of canals and about 700 kms. of roads, together with the necessary related structures. 3. The assistance to be furnished by the Guarantor is re- lated to farm drainage, land levelling and leaching of saline land. Such assistance includes: (i) the preparation of plans for farm drainage systems and other land improve- ments by the Secretaria de Recursos Hidrdulicos with the advice of the drainage expert or experts required under Section 3.01(f) of this Agreement, (ii) the undertaking of research on drainage and salinit, problems necessary for the foregoing, and (iii) the prov.sion on suitable terms to users of irrigation waters of credit necessary for on-farm development.