Bolivia - Investment Fund Project : Credit 2532 - Credit Agreement - Conformed

i F CREDIT NUMBER 2532 BO Development Credit Agreement (Second Social Investnent Fund Project) between REPUBLIC OF BOLIVIA and INTERNATIONAL DEVELOPHENT ASSOCIATION Dated , 1993 CREDIT NUMBER 2532 BO DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated , 1993, between REPUBLIC OF BOLIVIA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS: (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) the Borrower intends to contract from the OPEC Fund for International Development (the OPEC Fund) a loan in an amount equivalent to $5,000,000 to assist in the financing of the Project on the terms and conditions set forth in an agreement (the OPEC Fund Loan Agreement) to be entered into between the Borrower and the OPEC Fund; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Civil Service Reform Program" means the Borrower's program designed to improve its public administration as described in the Borrower's document entitled Programa de Reforma Administrativa en Bolivia dated August 1992; (b) "Evaluation Manual" means the manual for appraisal of Investment Subprojects (as defined below) adopted by SIF (as defined - 2 - below) on March 31, 1992 and to be modified by SIP pursuant to the provisions of Section 6.01 (c) of this Agreement; (C) "Investment Subproject" means a cubproject in health (excluding those for the construction of health posts until such time as the Association shall be satisfied that the Borrower has commenced delivering health services in all the health posts already financed by SIP), water supply or sanitation, education and institutional support for Requesting Entities which is eligible for financing by SIP (as defined below) in accordance with the provisions of the Evaluation Manual; (d) "Operations Manual" means the manual setting forth the procedures for administering Investment Subprojects, adopted by SIF (as defined below) on August 31, 1992; (e) "Prior Development Credit Agreement" means the Development Credit Agreement for Credit Number 2127-BO (Social Investment Fund Project) entered into between the Borrower and the Association on May 7, 1990, as amended; (f) "Requesting Entities" means the govarnmental or non- governmental entities involved in health, water supply or sanitation or education activities, and/or the governmental or non-governmental entities which meet the eligibility criteria set forth in the Evaluation Manual; (g) "SIF" or "Social Investment Fund" means the Social Investment Fund (Fondo de Inversi6n Social), established by the President of the Republic of Bolivia as a public entity with juridical personality pursuant to Decreto Supremo No. 22407 of January 11, 1990 as amended by Decreto Supremo No. 22452 of March 8, 1990, published in the Official Gazette on March 26, 1990; (h) "SIF Subsidiary Agreement" means the agreement to be entered into between the Borrower and SIF pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to such subsidiary agreement; (i) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (j) "Subproject Agreement" means the agreement to be entered into between SIF and a Requesting Entity and, where applicable, a - 3 - contractor or supplier, for purposes of carrying out an Investment Subproject, as the same may be amended from time to time, and such term includes all schedules to the Subproject Agreement; and (k) "Supervision Manual" means the manual for the monitoring and supervision of Investment Subprojects adopted by SIF on August 31, 1992. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to twenty-eight million three hundred thousand Special Drawing Rights (SDR 28,300,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in its Central Bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1997 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. -4- (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date or at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next payment date in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on April 1 and October 1 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi- annual installments payable on each April 1 and October 1 commencing October 1, 2003 and ending April 1, 2033. Each installment to and including the installment payable on April 1, 2013 shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (b) Whenever: (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years; and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the -5 Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.09. The Executive Director of SIF or the person or persons he may designate in writing, are designated as repre- sentative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions in respect of the Project. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end shall carry out the Project, through SIF, with due diligence and efficiency and in conformity with appropriate financial, administrative, economic and environmental practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project; (b) The Borrower shall make the proceeds of the Credit available to SIF under a subsidiary agreement to be entered into between the Borrower and SIF, under terms and conditions which shall have been approved by the Association, which shall include SIF's obligation to carry out the Project in accordance with the provisions of this Agreement and the Operations Manual; -6- (c) The Borrower shall exercise its rights and comply with its obligations under the SIF Subsidiary Agreement in such manner as to protect the interests of the Borrower and the Association, and to accomplish the purposes of the Credit, and, except as the Association shall otherwise agree, the Borrower shall not change, assign, amend, abrogate or waive the SIF Subsidiary Agreement or any provision thereof; and (d) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out the Project in accordance with performance and implementation indicators acceptable to the Association. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. The Association and the Borrower hereby agree that the obligations set forth in Sections 9.03, 9.04. 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project shall be carried out by SIF. Section 3.04. The Borrower undertakes that, unless the Association shall otherwise agree, Investment Subprojects shall be promoted, identified, appraised, approved, carried out and monitored in accordance with the procedures set forth or referred to in the Evaluation Manual, the Operations Manual and the Supervision Manual. Section 3.05. Without limitation to its obligations under Article IX of the General Conditions, the Borrower shall: (a) not later than one month before each of the reviews referred to in paragraph (b) below, furnish to the Association: (i) progress reports on the Investment Subprojects approved by SIF, source of financing, procurement reviews status of processing or execution, and key performance and implementation indicators; (ii) in the event SIF is considering the financing of additional activities in the health, water supply or sanitation, and education sectors, information on the modifications to the Evaluation Manual, the Supervision Manual and the Operations Manual proposed to be made during the following six months so as to authorize the financing of - 7 - such activities; and (iii) for its approval, the operating plans for each part of the Project proposed to be carried out during the following six months, including as a part thereof the corresponding budgets and the related Project implementation and performance indicators and specifying the extent of compliance with the operating plans submitted the prior semester, and implemented during that semester; (b) not later than April 30 and October 31 each year, review with the Association its progress in the implementation of the Project, including in particular, procurement, the consistency of the Investment Subprojects with its sector strategies and priorities, the budget allocations referred to in Section 3.06 of this Agreement, and the progress made in meeting the performance and implementation indicators referred to in Section 3.01 (d) of this Agreement; (c) not later than April 30, 1995 review with the Association, in addition to the matters referred to in paragraph (b) hereof: (i) the effectiveness of SIF in targeting the financing of Investment Subprojects to the economically disadvantaged groups; (ii) the impact of its financing in alleviating poverty; (iii) the administrative efficiency and financial soundness of SIF's operations; (iv) the prospects for SIF's continued operations; (v) the quality and level of SIF's coordination with ministries related to its operations and with other agancies providing financing for subprojects; (vi) the progress made by the Borrower in strengthening sector policies, strategies and social sector ministries; and (vii) progress made by the Borrower and/or SIF in obtaining funds for the financing of SIF such subprojects and SIFs operations; and (d) if the results of any of the reviews referred to in paragraphs (b) and (c) hereof are not satisfactory to the Association: (i) not later than sixty days after the respective review, furnish to the Association an action plan, satisfactory to the Association, with the remedial actions necessary to achieve the objectives of the Project and to meet the performance ani imple- mentation indicators referred to in Section 3.01 (d) of this Agreement; and (ii) take promptly, all remedial actions included in such action plan. -8- Section 3.06. Without limitation to its obligations under the General Conditions and under Section 3.01 (a) of this Agreement, the Borrower shall: (a) allocate in its annual budget for SIF, and make available promptly as needed, for the calendar years 1994 through 1997, the following minimum amounts, as counterpart funds for the financing of the Project: (i) $2,547,000 equivalent for calendar year 1994; (ii) $3,218,000 equivalent for calendar year 1995; (iii) $3,890,000 equivalent for calendar year 1996; and (iv) $4,561,000 equivalent for calendar year 1997; (b) advance, from the amounts referred to in paragraph (a) of this Section, and no later than the first day of each quarter, amounts sufficient to cover the counterpart funding requirements for the Project during such quarter; and (c) (i) maintain in respect of SIF: (A) an organizational structure satisfactory to the Association; and (B) key personnel positions detailed in such organizational structure filled with personnel who shall have experience and qualifications acceptable to the Association; and (ii) consult with the Association with respect to any changes to SIF organizational structure and any replacement of key personnel positions prior to any such change or replacement. Section 3.07. The Borrower shall: (a) not later than March 31, 1994 furnish to the Association for its comments its recommendations from the studies referred to in Part B.1 (a) of the Project; and (b) promptly thereafter carry out such recommendations modified as needed to take into account the Association's comments thereon. Section 3.08. The Borrower shall, in the event the Civil Service Reform Program is implemented, include SIF's personnel in the initial phase of such program. Section 3.09. The Prior Development Credit Agreement is hereby amended by incorporating thereto the provisions of paragraphs (a) and (b) of Section 3.05 of this Agreement and by deleting therefrom -9- items (A) through (D) of subparagraph 3 (e) and paragraph 4 of Part II of Schedule 6 to said Prior Development Credit Agreement. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause SIF to maintain records and separate accounts adequate to reflect in accordance with sound accounting practices, the operations, resources and expenditures in respect of the Project. (b) The Borrower shall or shall cause SIF to: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association, as soon as available, but in any case not later than four 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 Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or shall cause SIF to maintain in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, or shall cause SIF to retain until at least one year after the Association has received the audit for the fiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, - 10 - bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association'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. ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) Supreme Decree No. 22407 of January 11, 1990 or Supreme Decree No. 22452 of March 8, 1990 or any provision thereof shall have been amended, suspended, abrogated, repealed or waived so as to affect, in the opinion of the Association, materially and adversely the ability of SIF to perform any of its obligations under the SIF Subsidiary Agreement or under any Subproject Agreement; (b) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of SIF, or for the suspension of its operations; (c) the OPEC Fund Loan Agreement shall have failed to become effective by December 31, 1993, or such later date as the Association may agree, provided, however, that the provisions of this paragraph shall not apply if the Borrower establishes, to the satisfaction of the Association, that adequate funds for the Project are available to the Borrower from other sources, on terms and conditions consistent with the obligations of the Borrower under the OPEC Fund Loan Agreement; - 11 - (d) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any grant or loan made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor; or (B) any such loan shall have become due and payable prior to the agreed maturity thereof; and (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement; (e) the Operations Manual or the Evaluation Manual or the Supervision Manual shall have been amended, suspended, abrogated, repealed or waived so as to affect, in the opinion of the Association, materially and adversely the ability of SIF to carry out the Project or to perform its obligations under the SIF Subsidiary Agreement; and (f) SIF shall have failed to comply with any of its obligations under the SIF Subsidiary Agreement. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: (a) any event specified in paragraphs (c) or (e) or (f) of Section 5.01 of this Agreement shall occur and shall continue for a - 12 - period of sixty days after notice thereof shall have been given by the Association to the Borrower; (b) any event specified in paragraph (a) of Section 5.01 of this Agreement shall occur; and (c) any event specified in paragraph (d) (i) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (d) (ii) of that Section. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified a- additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the SIP Subsidiary Agreement has been entered into between the Borrower and SIF; (b) the OPEC Fund Loan Agreement has been entered into between the Borrower and the OPEC Fund; and (c) the Evaluation Manual has been modified by SIP so as to incorporate criteria, satisfactory to the Association, for the evaluation of Investment Subprojects for water supply and sanitation, and for the carrying out of environmental impact assessments for relevant Investment Subprojects. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the SIP Subsidiary Agreement has been duly authorized or ratified by, and is legally binding upon, the Borrower and SIP in accordance with its terms; (b) that the OPEC Fund Loan Agreement has been duly authorized or ratified by, and is legally binding upon, the parties thereto in accordance with its terms; and (c) that the Evaluation Manual has been duly modified by SIP. - 13 - Section 6.03. The date ,JCAlC/ v / /6is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.04. The obligations of the Borrower under Sections 3.01, 3.04, 3.05, 3.06 (c) and 3.08 of this Agreement shall cease and determine on the date on which this Agreement shall terminate or on the date 10 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. Except as provided in Section 2.09 of this Agreement, the Minister of Finance and Economic Development and the Secretary of Finance of the Borrower are severally designated as representatives of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Minister of Finance and Economic Development and/or Secretary of Finance Ministerio de Hacienda y Desarrollo Econ6mico Secretaria Nacional de Hacienda Caj6n Postal - Ministerio de Finanzas Calle Bolivar esq. Indaburo No. 688 La Paz, Bolivia Cable address: Telex: FINANZA 2617 (FINANZA BV) La Paz, Boliva For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America - 14 - Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) 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. REPUBLIC OF BOLIVIA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By ~ j B4 Regional Vice President Latin 2merica and the Caribbean - 15 - SCHEDULE I Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Investment 90% of amounts Subprojects: disbursed by SIF for each (a) for health 7,130,000 Investment Subproject for (b) for water 8,120,000 which a Sub- supply and project Agree- sanitation ment has been signed on or (c) for education 7,910,000 before December 31, 1995 (d) for institu- 710,000 tibnal support to Requesting Entities (2) Consultants' 565,000 100% Services (3) Training 142,000 - 16 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (4) Goods under 570,000 100% of foreign Part B of the expenditures, Project 100% of local expenditures (ex-factory cost) and 85% of local expenditures for other items procured locally (5) Salaries and Travel costs of SIF's staff: (a) for payments 1,280,000 75% made after December 31, 1993 and on or before December 31, 1994 (b) for payments 780,000 50% made after December 31, 1994 and on or before December 31, 1995 (c) for payments 360,000 25% made after December 31, 1995 and on or before December 31, 1996 - 17 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (6) Unallocated 733,000 TOTAL 28,300,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; and (c) the term "Salaries and Travel costs of SIF's Staff" means the salaric of all professionals and technicians of SIF (other than its ExecuL.ie Director) as listed in the letter sent by the Borrower to the Association on June 1, 1993 and the travel costs of such staff associated with the administration of Investment Subprojects. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement; and (b) payments made under any Investment Subproject costing more than the equivalent of $250,000 unless the Association shall have approved the respective Investment Subproject. - 18 - SCHEDULE 2 Description of the Project The objectives of the Project are: (a) to improve the coverage and quality of the delivery of basic services in the health, education, water supply and sanitation sectors targeting primarily the rural poor; and (b) to strengthen the institutional capacity of SIF. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: SIF Carrying out of Investment Subprojects. Part B: Institutional Strengthening of SIF Strengthening of SIF's capabilities in financial planning and management, and the processing, appraisal, supervision, poverty targeting and monitoring of Investment Subprojects through, inter alia: (a) the carrying out of studies: (i) to identify measures that need to be taken by SIF to improve the efficiency of its operations including an increased decentralization; and (ii) to develop a medium- and long-term financial plan for SIF to identify and correct imbalances in its resource use, guide its operational decisions, and ensure its sustainability; (b) the training of SIF's staff; (c) the revision of the Evaluation Manual so as to incorporate in the poverty targeting methodology thereof, data from the 1992 census of the Bolivian population; (d) the improvement of SIF's information systems including those related to procurement and monitoring and evaluation; and - 19 - (e) the provision and utilization of equipment required therefor. The Project is expected to be compleved by June 30, 1997. - 20 - SCHEDULE 3 Procurement and Consultants' Services Section 1. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1992 (the Guidelines): (a) For fixed-price contracts, the invitation to bid referred to in paragraph 2.13 of the Guidelines shall provide that, when the contract award is delayed beyond the original bid validity period, the successful bidder's bid price will be increased for each week of delay by two predisclosed correction factors acceptable to the Association, one to be applied to all foreign currency components and the other to the local currency component of the bid price. Such an increase shall not be taken into account in the bid evaluation. (b) In the procurement of goods in accordance with this Part A, the Borrower shall use the relevant standard bidding documents issued by the Bank, with such modifications thereto as the Association shall have agreed to be necessary for the purposes of the Project. Where no relevant standard bidding documents have been issued by the Bank, the Borrower shall use bidding documents based on other internationally recognized standard forms agreed with the Association. 2. To the extent practicable, contracts for goods shall be grouped into bid packages estimated to cost the equivalent of $100,000 or more. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in Bolivia may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs I through 4 of Appendix 2 thereto. - 21 - Part C: Other Procurement Procedures 1. Computer equipment and related software up to an aggregate amount equivalent to $120,000 may be procured under contracts awarded through direct contracting in accordance with procedures satisfactory to the Association. 2. Goods estimated to cost the equivalent of $100,000 or less per contract up to an aggregate amount equivalent to $10,920,000 may, and works shall, be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 3. Goods estimated to cost the equivalent of $25,000 or less per contract, and works estimated to cost the equivalent of $50,000 or less per contract up to an aggregate amount equivalent to $2,100,000 for goods and $6,800,000 for works, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. Part D: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to: (i) all contracts procured pursuant to the provisions of Part A.1 hereof; (ii) all contracts estimated to cost the equivalent of $250,000 or more; and (iii) the first three contracts for works and for goods procured each year pursuant to the provisions of Part C hereof, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where 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 Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where 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 together with the other information required to be - 22 - furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals from the Credit Account are to be made on the basis of statements of expenditure. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association 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. For complex, time-based assignments, the Borrower shall employ such consultants under contracts using the standard form of contract for consultants' services issued by the Bank, with such modifications as shall have been agreed by the Association. Where no relevant standard contract documents have been issued by the Bank, the Borrower shall use other standard forms agreed with the Association. - 23 - SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (5) 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 Credit 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 of $3,000,000 to be withdrawn from the Credit Account and deposited in 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. 3. After the Association 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 Association 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 Association shall, on behalf of the Borrower, withdraw from the Credit 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 Association requests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association - 24 - 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 Association shall, on behalf of the Borrower, withdraw from the Credit 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 paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit 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 Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit 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 Credit allocated to the eligible Categories, less the amount of any outstanding special commitment entered into by the Association 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 Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have - 25 - 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 Association 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 Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association 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 Association 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 Association, refund to the Association such outstanding amount. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY