Conformed Copy - L3778 - Rainfed Areas Development Project - Amendment

Page 1 October 4, 1996 Mr. Roberto Casillas Contreras Medellin Director Internacional Nacional Financiera, S.N.C. Torre IV, piso 8 Plaza Inn, Insurgentes Sur 1971 01020 Mexico, D.F. Mexico Mr. Martin Werner Director General de Credito Publico Secretaria de Hacienda y Credito Publico Insurgentes Sur 826, piso 9 03100 Mexico, D.F. Mexico Re.: Rainfed Areas Development Project - (Loan No. 3778-ME) Amendment to the Loan and Guarantee Agreements Dear Sirs: We refer to the Loan Agreement between International Bank for Reconstruction and Development (the Bank) and Nacional Financiera, S.N.C. (the Borrower), and the Guarantee Agreement between United Mexican States (the Guarantor) and the Bank, both dated July 19, 1994. We are pleased to inform you of our agreement to amend said Loan and Guarantee Agreements, as follows: I. Amendments to the Loan Agreement 1. Section 1.02 (f) is hereby amended to read as follows in its entirety: ""Project States" means the Guarantor's States of Chiapas, Guanajuato, Guerrero, Hidalgo, Jalisco, Mexico, Michoacan, Oaxaca, Puebla, Veracruz, Durango, Campeche, Nayarit, San Luis Potosi, Tabasco, Tlaxcala, Yucatan, Zacatecas, Aguascalientes, Colima, Morelos and Quintana Roo;". 2. Section 1.02 is hereby amended by relettering its paragraph (h) to become new paragraph (i) and by adding a new paragraph (h), immediately before said new paragraph (i), to read as follows in its entirety: ""SAGAR" means the Guarantor's Secretariat of Agriculture (Secretaria de Agricultura, Ganaderia y Desarrollo Rural);". 3. Section 3.01 (a) is hereby amended to read as follows in its entirety: "The Borrower shall enter into contractual arrangements with the Guarantor, satisfactory to the Bank, providing, inter alia, for: (i) the transfer to the Guarantor of the proceeds of the Loan for the carrying out Parts A and B.1 of the Project through SAGAR or FIRCO, as the case may be, and Parts B.2, B.3 and C of the Project through FIRCO; and (ii) the transfer by the Guarantor to the Borrower of such funds as the Borrower shall be required to pay to the Bank on account of principal, interest and other charges on the Loan. Except as the Bank may otherwise agree, the Borrower shall not amend or fail to enforce any provision of such contractual arrangements.". 4. Section 3.03 is hereby amended by replacing the words "shall caused" with the words "shall be caused". 5. Schedule 2 to the Loan Agreement is hereby amended to read in its entirety as shown in the Annex to this letter. II. Amendments to the Guarantee Agreement 6. Section 3.01 is hereby amended to read as follows in its entirety: "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, without any limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor shall carry out Parts A Page 2 and B.1 of the Project through SAGAR or FIRCO, as the case may be, and Parts B.2, B.3 and C of the Project through FIRCO, all with due diligence and efficiency and in conformity with appropriate financial, administrative, agricultural and environmental standards and practices.". 7. Section 3.04 is hereby amended to read as follows in its entirety: "The Guarantor shall, in a manner acceptable to the Bank, maintain within FIRCO a project unit with appropriate functions and with qualified staff in adequate numbers and maintain within FIRCO an appropriate organizational structure for the carrying out of FIRCO's obligations under the Project. The Guarantor shall, through the Borrower, inform the Bank of any proposed change in the Project Unit or in the organizational structure or functions of FIRCO if such change may adversely affect the implementation of the Project, prior to making any such change.". 8. Section 3.05 is hereby amended to read as follows in its entirety: "The Guarantor shall: (a) cause Parts A and B of the Project to be carried out in accordance with the Operating Rules (in the case of FIRCO Project execution); (b) cause Parts A and B of the Project to be carried out in accordance with the Operating Rules as such Operating Rules may be applied, mutatis mutandis, solely to substitute SAGAR financing in place of FIRCO financing (in the case of SAGAR Project execution); and (c) shall cause there to be no change or waiver of any provision of the Operating Rules (other than as permitted pursuant to paragraph (b) of this Section) if such change or waiver may adversely affect the implementation of said Parts of the Project.". 9. Section 3.06 is hereby amended by: (a) in its preamble, replacing the words "through FIRCO:" with the words "through SAGAR or FIRCO, as the case may be:"; (b) in paragraph (d), replacing the words "FIRCO under Part A" with the words "SAGAR or FIRCO under Part A"; and (c) in paragraph (e), replacing the word "FIRCO" with the words "SAGAR or FIRCO". 10. Section 3.07 is hereby amended by: (a) having its preamble read as follows in its entirety: "For the purpose of the execution of Part B of the Project, the Guarantor shall, through SAGAR or FIRCO, as the case may be:"; (b) having its paragraph (a) read as follows in its entirety: "ensure that producers receiving financing from SAGAR or FIRCO under Part A of the Project sign agreements with SAGAR or FIRCO, as the case may be, under which such producers agree to obtain agricultural extension services through participation in producers' groups organized for that purpose and that these agreements clearly inform producers of their right to choose freely the extension agents or organizations of their choice;"; (c) in paragraph (c), replacing the word "FIRCO" with the words "SAGAR or FIRCO, as the case may be"; (d) in paragraph (g), replacing the word "FIRCO" with the words "SAGAR or FIRCO"; and (e) in paragraph (h), replacing the word "FIRCO" with the words "SAGAR or FIRCO, as the case may be". 11. Section 3.08 is hereby amended by, in its preamble and its paragraph (a), replacing the word "FIRCO" with the words "SAGAR and FIRCO". Page 3 12. Section 4.01 (a) is hereby amended by replacing the word "FIRCO" with the words "SAGAR and FIRCO". Please confirm your agreement to the foregoing amendments by signing and dating the three originals of this letter in the space provided below, and returning one to us. This amendment shall enter into effect on the date of receipt by the Bank of one original of this letter signed by you. Withdrawals of the proceeds of Loan 3778-ME (from the Loan Account and the Special Account), consistent with the terms of this amendment, may be made for expenditures prior to the effective date of this amendment, on account of payments made for expenditures incurred after January 1, 1996. Sincerely yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT _______________________________ Olivier Lafourcade Director Mexico Country Department Latin America and the Caribbean Region AGREED: NACIONAL FINANCIERA, S.N.C. UNITED MEXICAN STATES By: ________________________ By: ________________________ Authorized Representative Authorized Representative Date: November 19, 1996 Date: November 19, 1996 Annex SCHEDULE 2 Description of the Project The objective of the Project is to raise agricultural productivity in the Project States. The Project consists of the following parts, subject to such modifications thereof as the Borrower, the Guarantor and the Bank may agree upon from time to time to achieve such objective. Part A: Rural Investment Financing by SAGAR or FIRCO of: (a) construction, rehabilitation and extension of tubewell irrigation systems in the Project States; (b) construction, rehabilitation and extension of small surface irrigation and drainage systems in the Project States; (c) soil conservation works in the Project States; and (d) small agricultural investments in the Project States to intensify resource use or to transform agricultural activities into more productive ones, such as, for example, pasture establishment, plant and animal disease control, plant nursery establishment, and livestock production. Part B: Agricultural Technology Transfer Page 4 1. Financing by SAGAR or FIRCO of: (a) the provision of agricultural extension services by the private sector with respect to all rural investment operations under Part A of the Project; and (b) validation and demonstration of new productive techniques on approximately 5,300 validation and demonstration plots in the Project States. 2. Promotion by FIRCO of soil conservation practices in the Project States, including watershed protection and on-farm soil conservation practices, and acquisition and use by FIRCO of specialized equipment for validation and demonstration of soil conservation practices. 3. Provision of assistance by FIRCO, including technical assistance, for the preparation of the activities financed or promoted under Parts A, B.1 and B.2 of the Project, as well as the carrying out of super- vision and evaluation of such activities by FIRCO. Part C: Institutional Development of FIRCO 1. Strengthening of FIRCO's investment design capacity through use of consultant services to complete approximately 1,000 investment feasibility studies. 2. Training of staff of FIRCO in areas related to the Project such as administration, infrastructure contracting management, agriculture and promotion of producers' organizations. 3. Improvement of FIRCO's information management through the acquisition and use of appropriate computer equipment for monitoring and control purposes and upgrading of FIRCO's documentation center. 4. Strengthening of FIRCO's monitoring and evaluation expertise, FIRCO's capabilities in environmental management and integrated pest management, and FIRCO'S capabilities in livestock production through the use of consultant services. *** The Project is expected to be completed by December 31, 1998.