Conformed Copy - C2013 - Mining Sector Rehabilitation Project - Amendment 5

Page 1 April 7, 1993 His Excellency Mr. Samuel Doria Medina Minister of Planning and Coordination Ave. Arce 2147 La Paz, Bolivia Mr. Marcelo Perez Monasterios President Corporacion Minera de Bolivia Casilla 349 La Paz, Bolivia Mr. Armando Mendez Morales President Banco Central de Bolivia Casilla 3188 La Paz, Bolivia Re: BOLIVIA - Credit No. 2013-60 (Mining Sector Rehabilitation Project) Fourth Amendment Dear Sirs: Please refer to the Development Credit Agreement for the above referenced Project between the Republic of Bolivia (the Borrower) and the International Development Association (the Association), the COMIBOL Project Agreement between the Association and Corporacion Minera de Bolivia (COMIBOL), and the Central Bank Project Agreement between the Association and Banco Central de Bolivia (the Central Bank), all dated August 4, 1989 as amended on June 14, 1990, February 8, 1991 and April 5, 1991. Whereas the Association has received a letter dated March 24, 1993 from the Borrower describing a program of actions, objectives and policies designed to improve the competitiveness of its mining sector and to increase the participation of private enterprises in such sector, I am pleased to inform you that, pursuant to your request, and subject to the Association having received: (a) a legal opinion or opinions, satisfactory to the Association, from counsel, satisfactory to the Association, evidencing that this amendment letter is legally binding and enforceable on the Borrower, COMIBOL and the Central Bank in accordance with its terms; and (b) evidence, satisfactory to the Association, that the COMIBOL Subsidiary Loan Agreement and the Central Bank Subsidiary Loan Agreements have been amended to reflect --mutatis mutandis-- the provisions of this amendment letter, the Association hereby amends the Development Credit Agreement, the COMIBOL Project Agreement and the Central Bank Project Agreement as follows: 1. Development Credit Agreement 1. Section 1.02 (a) Paragraph (h): the definition of BAMIN is deleted and paragraphs W through (cc) are redesignated accordingly; (b) Redesignated paragraph (h): the definition of Financial Intermediary is amended by deleting all words in the eighth through thirteenth lines after the words (hereinafter defined); (c) New subparagraphs (cc) through (ff) are added to read as follows: "(cc) "SENCAM" means the Borrower's Servicio Nacional de Catastro Minero; (dd) "Supreme Decree 23306" means the Borrower's Supreme Decree Number 23306 of October 19, 1992, published in the Official Gazette on October 26, 1992 modifying the organizational structure of COMISOL; Page 2 (ee) "Nationalized Properties" means the mining properties referred to in Article 138 of the Borrower's Constitution, which are in the Borrower's exclusive ownership and which are not transferrable to the private sector; and (ff) "Non-nationalized Properties" means mining properties of the Borrower in respect of which pursuant to Law 1243 it has concession rights for the exploration and/or exploitation of such mining properties and which are transferrable to the private sector." 2. Section 3.01 (a) Paragraph (b) (i): (i) A semicolon and the word "and" are added after the words "Part C (4) of the Project" in the tenth line; (ii) The acronym "STCM" is deleted and replaced by "IIMM"; and (iii) the acronym "BAMIN" is deleted and replaced by "SENCAM". (b) Paragraph (d) is deleted and replaced by the following: "(d) The Borrower shall relend to COMIBOL the proceeds of the Credit required for the carrying out of Part A of the Project in an amount equivalent to SDR 8,000,000 under a subsidiary loan agreement (the COMIBOL Subsidiary Loan Agreement) to be entered into between the Borrower and COMIBOL under terms and conditions which shall have been approved by the Association which shall include, inter alia, that: (i) the subsidiary loan shall be denominated in dollars equivalent to the SDR amounts relent, and repaid in dollars; (ii) COMIBOL shall pay to the Borrower the commitment charge and service charge set forth in Sections 2.04 and 2.05 of this Agreement allocable to the part of the proceeds of the Credit relent to COMIBOL; and (iii) COMISOL shall repay the principal amount of the subsidiary loan and applicable charges in accordance with the provisions set forth in Section 2.07 of this Agreement." (c) Paragraph (f): (i) the words "five million five hundred thousand" and the number "5,500,000" are deleted and respectively replaced by "two million", and, "2,000,000"; and (ii) the words "approximately $7,300,000" are deleted. 3. Section 3.05 (a) Paragraph (b) is deleted; (b) Paragraphs (c), (d) and (e) are redesignated (b), (c) and (d); and (c) Redesignated paragraph (b): the words ", and BAMIN" in the second line are deleted, the word "and" is added between the acronyms "MMM" and "GEOBOL", and the acronym "STCM" in the sixth line is deleted and replaced by "SENCAM". 4. Section 3.09 (a) The date "June 30, 1991" is deleted and replaced by "June 30, 1994". (b) The existing section is redesignated as paragraph (a) of Section 3.05 and a new paragraph (b) is added to read as follows: "(b) Not later than June 30, 1995, and each year thereafter during the period of Project implementation, the Borrower shall prepare and furnish to the Association a follow-up report on the actions taken and to be taken regarding the environmental protection plan referred to in paragraph (a) Page 3 above". 5. (a) New Sections 3.10 through 3.13 are added to read as follows: "Section 3.10. The Borrower shall, not later than December 31, 1993, take all necessary measures so as to enable the joint venture partners under contracts signed for the Colquiri mine tailings processing, the TASNA mine exploration and exploitation and the Catavi mine ailings processing, to initiate preparatory works for the evaluation of their respective projects. Section 3.11. The Borrower shall, not later than June 30, 1993 and December 31, 1993, take all necessary measures to ensure that DICISMIN and SENCAM start operations, respectively, by such dates. Section 3.12. The Borrower shall, not later than June 30, 1993, appoint in DICISMIN and SENCAM and maintain thereafter, personnel with qualifications and experience satisfactory to the Association, including in particular their respective directors, department chiefs and project managers. Section 3.13 (a) The Borrower shall, not later than June 30, 1993, prepare or cause MMM, GEOBOL and IIMM to prepare policies, satisfactory to the Association, for personnel recruitment, including, in particular, their respective policies applicable for the hiring of directors, department chiefs and project managers. (b) The Borrower shall, not later than June 30, 1993, cause GEOBOL to prepare, and furnish to the Association: (i) a personnel rationalization plan satisfactory to the Association; and (ii) a program and time schedule, satisfactory to the Association, for the restructuring of its department of services, which shall take into account the participation of the private sector in the management and operation of services for the support of mining activities, as well as the requirements for research and development in the mining field in the Borrower's territory. (c) The Borrower shall, not later than June 30, 1993, cause IIMM to prepare and furnish to the Association, a program and time schedule satisfactory to the Association, for the privatization of IIMM, which shall take into account the requirements for research and development in the field of metallurgical development, and environmental monitoring, assessment and auditing, in the Borrower's territory; and (d) The Borrower shall cause GEOBOL and IIMM to carry out the programs referred to in paragraphs (b) and (c) above. Section 3.14. The Borrower shall, not later than June 30, 1994, prepare and furnish to the Association, a proposal, satisfactory to the Association, to ensure the sustainability of its mining sector institutions after the completion of the Project." 6. Section 5.01 (a) The word "and" is deleted at the end of paragraph (y) and the colon at the end of paragraph (k) is replaced by a semicolon; (b) Two new subparagraphs, "(l)" and "(m)" are added to read as follows: (l) Decreto Supremo No. 23306 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 the Borrower or COMIBOL to perform any of its obligations under this Agreement or the COMIBOL Project Agreement, respectively; and (m) Decreto Supremo No. 23230 of July 30, 1992, or the by-laws referred to in Section 2.12 (a) (i) of the COMIBOL Project Agreement shall have been amended, suspended, abrogated, repeated or waived so as to affect, in the opinion of the Association, materially and adversely the Page 4 ability of COMIBOL to perform any of its obligations under the COMIBOL Project Agreement." 7. Schedule 1: (a) The table in paragraph 1 is amended as per Attachment 1 to this letter. (b) Paragraph 2: (i) The letters "W", "(b)", "(c)", are respectively added before the words "the term" in the first, fourth and sixth lines; (ii) the word "and" specified before the words "the term" is deleted; and (iii) the semicolon is deleted and replaced by the following: "; (d) the term "Special Personnel Contract Services" means services: (A) provided in support of the achievement of the objectives of the Project; (8) related to the restructuring of agencies participating in the Project, in the execution of the technical assistance under Part C of the Project or in the planning of such activities; and (C) that have been approved as such by the Association at the beginning of each calendar year; (e) the term " 1993 Eligible Services" means the salaries of no more than 236 individuals providing Special Personnel Services during calendar year 1993; (f) the term "1994 Eligible Services" means the salaries of no more than 153 individuals providing Special Personnel Services during calendar-year 1994; and (g) the term "1995 Eligible Services" means the salaries of no more than 82 individuals providing Special Personnel Services during calendar year 1995." 8. Schedule 2: (a) The objectives of the Project set forth in the first paragraph are deleted and replaced by those set forth in Attachment 2 to this letter. (b) Parts A and C are deleted and new Parts A and C are added to read as per Attachment 2 to this letter. (c) The Project completion date "December 31, 1994" specified in the last sentence of Schedule 2 is deleted and replaced by "December 31, 1995". 9. Schedule 5: Paragraph 1 (c), the amount "1,200,000" is replaced by "1,800,000". II. COMIBOL Project Agreement 1. Section 2.07 is deleted and replaced by a new Section 2.07 to read as follows: "Section 2.07. COMIBOL shall: (a) not later than June 30, 1993, furnish to the Association, terms of reference and a time schedule, satisfactory to the Association, for the implementation of the exploration programs and studies included in Part A (1) and (2) of the Project; (b) not later than June 30, 1994, review with the Association, the recommendations of the studies referred to in Part A (1) in respect of the following mines: San Jose, Colquiri, Cerro Rico and Mutun; and (c) promptly thereafter, carry out the programs, and recommendations of the studies referred to in (a) and (b) above, modified --if needed-- to take into account the comments made by the Association thereon." Page 5 2. Section 2.08 is deleted. 3. Section 2.09 is redesignated 2.08; paragraph (b) is deleted; the "(a)" at the beginning of the Section is also deleted; and the words "and operational" are added in the ninth line, after the word "non-operational". 4. Section 2.10 is redesignated 2.09; paragraph (b) is deleted; and the "(a)" at the beginning of the Section is also deleted. 5. Section 2.11 is redesignated Section 2.10 and the date "December 31, 1988" is replaced by "May 31, 1993". 6. Sections 2.12 and 2.13 are deleted and new Sections 2.11 through 2.13 are added to read as follows: "Section 2.11 COMIBOL shall: (a) not later than December 31, 1993, prepare and furnish to the Association, a program and time schedule, satisfactory to the Association for the transfer to the private sector of operative responsibilities of the Nationalized Properties, and the concession rights of Non-nationalized Properties; and (b) promptly thereafter carry out the program referred to in (a) above, modified as needed to take into account the Association's comments thereon. Section 2.12 COMIBOL shall: (a) not later than June 30, 1993: (i) approve its by-laws; and (ii) appoint executive, financial, and technical directors for COMIBOL with qualifications and experience, and terms of employment satisfactory to the Association; and (b) not later than December 31, 1993, take measures, satisfactory to the Association, to adjust its organizational structure in line with Supreme Decree 23306. Section 2.13: COMIBOL shall, not later than December 31, 1993, prepare and furnish to the Association a detailed schedule, satisfactory to the Association, for the implementation of the recommendations of the study referred to in Part A. 1 (a) (i) of the Project. 7. A new Section 4.06 is added to read as follows: "Section 4.06. Without limitation to the provisions of Section 4.01 of this Agreement, COMIBOL shall, not later than December 31, 1993, implement a new accounting system, satisfactory to the Association, which shall enable COMIBOL to adequately control its financial operations." III. Central Bank Project Agreement Section 2.10 (a) the existing section is redesignated paragraph (a); (b) two paragraphs are added to read as follows: "(b) Without limitation to the provisions of paragraph (a) above, the Central Bank shall review with the Association, not later than June 30, 1994, in addition to the subjects referred to in paragraph (a) above, the estimated demand for Subloans with a view to ascertaining the need of reallocation between the proceeds the Credit allocated to finance Subloans and those allocated to finance the remaining parts of the Project; and (c) if by a date falling thirty days after the date for review stipulated in paragraph (b) above, the Central Bank and the Association shall not have reached an agreement on the on-lending terms for Subloans to be made as of such date, the Association may refrain from approving or authorizing Subloans pursuant to the provisions of paragraph 3 of Schedule 1 to this Agreement. Please confirm your agreement to these amendments by signing and dating the Page 6 form of confirmation below and returning it to us. I am also pleased to inform you that the Association hereby extends the date specified in Section 2.03 of the Development Credit Agreement to June 30, 1996. Sincerely, International Development Association By /s/ Acting Regional Vice President Latin America and the Caribbean CONFIRMED: REPUBLIC OF BOLIVIA By /s/ Samuel Doria Medina Auza Authorized Representative Date: May 6, 1993 CORPORACION MINERA DE BOLIVIA By /s/ Armando Guzman Bustamante Authorized Representative Date: May 6, 1993 BANCO CENTRAL DE BOLIVIA By /s/ Armando Mendez Morata Authorized Representative Date: May 6, 1993 Attachment 1 Schedule 1 Table in paragraph 1 of Schedule 1 Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Works under 100,000 100% of foreign Part A of the expenditures and Project 90% of local expenditures (2) Works under 300,000 100% of foreign Part C of the expenditures and Project 100% of local expenditures (3) Goods (including 550,000 100% of foreign equipment, spare expenditures and parts thereof and 80% of local materials) under expenditures Part A of the Project Page 7 (4) Goods (including 2,400,000 100% of foreign equipment, spare parts expenditures and thereof and materials) 80% of local under Part C of the expenditures Project (5) Subloans made under 2,000,000 100% of amounts Part B of the Project disbursed by the Central Bank for Subloans made by Financial Intermediaries (6) Consultants' services, 6,650,000 100% of foreign support services and expenditures and 90% Coordinator (including of local expenditures training) under Part A of the Project (7) (a) Consultants' Services7,150,000 100% and Coordinators (including training) under Part C of the Project (b) Special Personnel Contract Services under Part C of the Project: (i) 1993 Eligible ) services 1,400,000) (ii) 1994 Eligible ) services 1,160,000) 100% (iii) 1995 Eligible ) services 790,000) (8) Refunding of Project 931,583 Amount due pursuant Preparation Advance to Section 2.02 (c) of this Agreement (9) Unallocated 768,417 (10) Operating c costs 2,300,000 100% of foreign including expenditures and those of MMM 100% of local coordinating expenditures units under Part C of the Project TOTAL 26,500,000 Attachment 2 Schedule 2 Description of the Project The objectives of the Project are to: (a) assist the Borrower in implementing its mining sector strategy; (b) increase the sources of funding available to mining companies operating in the Borrower's territory, including the Central Bank's ability to Promote mining credit within the Borrower's banking system; (c) attract new private mining investment, both local and foreign, in accordance with the Borrower's economic policies; (d) increase private sector participation in the COMIBOL operations with a view to rehabilitate them, increase their productivity and enhance their profitability; (e) restructure COMIBOL with a view to focus on the administration of the portfolio of interests of the Borrower in the mining sector; (f) assist the Borrower in the protection of the environment from the negative effects of industrial and mining activities; and (g) assist the Borrower in implementing a regulatory and institutional framework for its mining sector conducive to the achievements of the above-mentioned objectives. The Project consists of the following parts, subject to such modifications Page 8 thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A (1) Li Liquidation or Transfer, to the Private Sector of COMIBOL's Non Nationalized Pro Properties and Nationalized Pro Properties: (a) Preparatory Studies: (i) preparation of an economic restructuring plan for COMIBOL (ii) selected mining and metallurgical studies as shall be approved by the Association; (iii) inventory, evaluation and legalization of COMIBOL's mining properties; (iv) inventory, and legal analysis of the steps to be taken, for the transfer by COMIBOL to the private sector of COMIBOL's non-mining assets; (v) environmental audit of COMIBOL's mines; and (vi) industrial safety of COMIBOL's operations. (b) Exploration Program: (i) diamond drilling in the following mines: Huanuni, Colquiri, San Vicente, and San Jose; and (ii) exploratory studies of COMIBOL's properties as shall be approved by the Association. (c) Assistance for the Transfer Process: (i) preparation of tenders, qualification of offers and support during negotiations in respect of the mining and non-mining properties to be leased, joint-ventured or transferred to the private sector; (ii) technical, legal and management support for the transfer of COMIBOL's mining and non-mining properties; and (iii) divulgence of information on COMIBOL's joint venture and lease program. (d) Training of COMIBOL's displaced workers and their dependents in technical and handicraft skills. (2) Restructuring of COMIBOL (a) Strengthening the management capacity of COMIBOL staff; (b) Consolidation and modernization of COMIBOL facilities including: (i) establishment of a documents center; (ii) modernization of its office technology; and (iii) reorganization of its accounting systems. Part C (1) MMM (a) Strengthening MMM through: (i) the installation and operation of information systems and the improvement of selected offices; (ii) the planning and operation of the offices of the general and Page 9 institutional coordinators; (iii) the development of a national mining information system and the establishment of a unit to support small-scale mining; (iv) disclosure and promotion of investment projects and properties; and (v) training of staff in credit matters. (b) Carrying out of studies for the preparation of the Borrower's proposed Environmental Industry and Mining Project, including, inter alia: (i) background mining and environment sector studies; (ii) preparation of draft environmental regulations; (iii) development of strategies to address environmental problems related to industrial and mining activities; (iv) establishment of a working group that will later develop into environment directorates at MMM and the Borrower's Ministry of Exports and Economic Competitiveness; and (v) execution of a pilot project in a selected geographical area to develop an integrated environmental planning and management scheme. (2) GEOBOL (a) Strengthening GEOBOL through: (i) the modernization of technology and the improvement of selected laboratories and offices; (ii) technical assistance for the execution of its technical development projects, including, inter alia, the national geological map, thematic maps, evaluation of mineral resources of the pre-cambrian and the data bank; and (iii) training of GEOBOL staff in disciplines related to the execution and administration of its technical development programs. (b) The implementation of selected geological research project as shall be approved by the Association. (3) DICISMIN Strengthening DICISMIN through the equipping of its offices. (4) IIMM (a) Strengthening IIMM through: (i) the modernization of technology, provision of equipment, and the improvement of selected laboratories and offices; (ii) technical assistance for the execution of its technical development projects, including, inter alia, polymetallic and precious metal ore projects, environmental projects and information network projects; and (iii) training of IIMM staff in disciplines related to the execution and administration of its technical development programs. (b) The implementation of selected metallurgical research projects as shall be approved by the Association. (5) SENCAM Strengthening of the implementation of SENCAM through: Page 10 (a) The modernization of the technology of the Borrower's technical and cadastral service through the provision of surveying, field and office equipment and assistance in the implementation of modern cadastral systems; and (b) Training of SENCAM staff in systems and techniques applicable to cadastral services .