Argentina - Decentralization And Improvement Of Secondary Education And Polymodal Education Development Project : Loan 3971 - Loan Agreement - Conformed

OFFICIAUj LOAN NUMBER 3971-AR Loan Agreement (Decentralization and Improvement of Secondary Education and Polymodal Education Development Project) between ARGENTINE REPUBLIC and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated u -st '7 ,1996 LOAN AGREEMENT 3971-AR AGREEMENT, dated A u 9 u 1 , 1996, between ARGENTINE REPUBLIC (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan 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 Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth below (the General Conditions) constitute an integral part of this Agreement: (a) The last sentence of Section 3.02 is deleted. (b) The second sentence of Section 5.01 is modified to read: "Except as the Bank and the Borrower shall otherwise agree, no withdrawals shall be made: (a) on account of expenditures in the territories of any country which is not a member of the Bank or for goods produced, in, or services supplied from, such territories; or (b) for the purpose of any payment to persons or entities, or for any import of goods, if such payment or import, to the knowledge of the Bank, is prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations." (c) In Section 6.02, subparagraph (k) is relettered as subparagraph (1) and a new subparagraph (k) is added to read: -2- "(k) An extraordinary situation shall have arisen under which any further withdrawals under the Loan would be inconsistent with the provisions of Article III, Section 3 of the Bank's Articles of Agreement." Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Action Plan" means any of the plans of actions of a Beneficiary, satisfactory to the Bank, required to implement the recommendations of the corresponding Sector Management Productivity Study; (b) "Beneficiary" means a Participating Entity, a Replacement Participating Entity or a Third Group Province, which is carrying out a Subproject or a Third Group Subproject, as the case may be; (c) "NMCE" means Ministerio Nacional de Cultura y Educaci6n, the Borrower's Ministry of Culture and Education; (d) "NPCU" means the existing unit, within NMCE, established to coordinate the execution of the Decentralization and Improvement of Secondary Education Project financed by Loan 3794-AR, under the Prior Loan Agreement; (e) "Participating Entity" means any of the Provinces of Buenos Aires, Chaco, Corrientes, Entre Rios, Salta, Santa Cruz and Tucumin, or the Municipality of Buenos Aires, provided it has not been replaced by a Replacement Participating Entity or a Third Group Province, as set forth in Section 3.04 (b) of this Agreement; (f) "PME" means any of the Ministries of Education of a Beneficiary; (g) "Polymodal Education" means the last three years of high school education, corresponding to grades 10 through 12; (h) "PPCU" means any of the units referred to in paragraph 2 (b) of Schedule 6 to this Agreement; (i) "Prior Loan Agreement" means the Loan Agreement, dated March 24, 1995, between the Borrower and the Bank for Loan 3794-AR, as amended; (j) "Project Consultative Council" means the council referred to in Section 3.06 of this Agreement; -3- (k) "Project Implementation Targets" means the targets set forth in Annex A to the letter of even date with this Agreement from the Borrower to the Bank; (1) "Project Impact Indicators" means the impact indicators set forth in Annex B to the letter of even date with this Agreement from the Borrower to the Bank; (m) "Replacement Participating Entity" means any province of the Borrower, acceptable to the Bank, which is selected by the Borrower to replace any of the Participating Entities referred to in (e) above, if any of the events referred to in Section 3.04 (b) of this Agreement shall occur; (n) "Sector Management Productivity Study" means any of the studies, furnished by the Borrower to the Bank, in respect of each Beneficiary which: (i) identifies inefficiencies in the use of human and physical resources in the corresponding PME; (ii) recommends corrective actions for such inefficiencies; and (iii) proposes alternative designs to decentralize secondary education management and improve its internal efficiency; (o) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (p) "Subproject" means any of the projects to be carried out by a Participating Entity or, if applicable, a Replacement Participating Entity, consisting of some or all of the activities described in Part A of the Project; (q) "Subloan" means a loan to be made under a Subsidiary Loan Agreement or a Third Group Subsidiary Loan Agreement; (r) "Subsidiary Loan Agreement" means any of the agreements referred to in Section 3.04 (a) of this Agreement; (s) "Third Group Province" means a province of the Borrower, other than a Participating Entity, a Replacement Participating Entity or a Participating Province (as such term is defined in Section 1.02 (c) of the Prior Loan Agreement), which is eligible, in the opinion of the Bank, to enter into Third Group Subsidiary Loan Agreements; (t) "Third Group Subproject" means any of the projects, consisting of some or all of the activities described in Part A of the Project, to be carried out by the Borrower on behalf of a Third Group Province, if any of the events referred to in Section 3.04 (b) of this Agreement shall occur; and (u) "Third Group Subsidiary Loan Agreement" means any of the agreements referred to in Section 3.04 (b) of this Agreement. -4- ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, various currencies that shall have an aggregate value equivalent to the amount of one hundred and fifteen million and five hundred thousand dollars ($115,500,000), being the sum of withdrawals of the proceeds of the Loan, with each withdrawal valued by the Bank as of the date of such withdrawal. Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank 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 Loan. (b) The Borrower may, for the purposes of the Project, open and maintain in dollars a special deposit account in a commercial bank on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be June 30, 2001 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Semester. (c) For the purposes of this Section: -5- (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and expressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings or portions thereof as the Bank has allocated to fund: (A) the Bank's investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. (iii) "Semester" means the first six months or the second six monthsof a calendar year. (d) On such date as the Bank may specify by no less than six months' notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respei of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) 'Quarter' means a three-month period commencing on January 1, April 1, July 1 or October 1 in a calendar year." Section 2.06. Interest and other charges shall be payable semiannually on May 15 and November 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. -6- Section 2.08. The Secretary of the Treasury of the Borrower's Ministry of Economy, Public Works and Services and any person designated by such Secretary are designated as representatives of the Borrower for the purpose 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. ARTICLE M Execution of the Project Section 3.01. The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end: (a) shall, through the NMCE, carry out Part B of the Project, and, if applicable, the Third Group Subprojects on behalf of the Third Group Provinces, all with due diligence and efficiency and in conformity with appropriate administrative, financial, environmental and educational practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required therefor; and (b) through the Subsidiary Loan Agreements, shall cause the Participating Entities and, if applicable, the Replacement Participating Entities to carry out their respective Subprojects with due diligence and efficiency an in conformity with appropriate administrative, financial, environmental and educational practices, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources necessary or appropriate to enable the carrying out of the Subprojects, and shall not take or permit to be taken any action which would prevent or interfere with the carrying out of the Subprojects. Section 3.02. Except as the Bank 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 Loan shall be governed by the provisins of Schedule 4 to this Agreement. Section 3.03. The Bank and the Borrower hereby agree that the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) shall be carried out by each Participating Entity or Replacement Participating Entity, if applicable, in respect of such Participating Entity's or Replacement Participating Entity's Subproject, as the case may be. Section 3.04. (a) The Borrower shall enter into an agreement with each Participating Entity and, subject to paragraph (b) of this Section, each Replacement Participating Entity (the Subsidiary Loan Agreement), whereby the Borrower shall relend to -7- such Participating Entity or, if applicable, Replacement Participating Entity, the proceeds of the Loan allocated to finance the Subproject to be carried out by such Participating Entity or Replacement Participating Entity, as the case may be, such Subsidiary Loan Agreement to have, except as the Bank shall otherwise agree, terms and conditions satisfactory to the Bank, including those set forth or referred to in Section I of Schedule 6 to this Agreement. (b) If: (i) a Participating Entity shall not enter into a Subsidiary Loan Agreement within eight months from the Effective Date; (ii) a Participating Entity shall enter into a Subsidiary Loan Agreement providing, with the agreement of the Bank, for a Subloan in an amount lower than the corresponding amount set forth in paragraph 1 of Section I of Schedule 6 to this Agreement; or (iii) after 30 months from the date of the signing of the Subsidiary Loan Agreement, an amount equivalent to more than 80% of the Subloan amount shall remain unwithdrawn by the Participating Entity, the Borrower may propose to the Bank a reallocation of the corresponding amount of the Loan that would have been used to finance: (A) the Subloan under the Subsidiary Loan Agreement referred to in (i) above; (B) the remaining portion of the Subloan referred to in (ii) above; or (C) the unwithdrawn amount of the Subloan referred to in (iii) above, as the case may be, either for purposes of financing Third Group Subprojects or Subprojects, acceptable to the Bank, to be carried out by Replacement Participating Entities. If approved by the Bank, the Borrower shall enter into a Subsidiary Loan Agreement with each Replacement Participating Entity or into an agreement with each Third Group Province (the Third Group Subsidiary Loan Agreement) whereby the Borrower shall relend to such Third Group Province the proceeds of the Loan reallocated to finance the corresponding Third Group Subproject, such Third Group Subsidiary Loan Agreement to have terms and conditions satisfactory to the Bank, including, except as the Bank shall otherwise agree, those set forth or referred to in Section II of Schedule 6 to this Agreement. (c) The Borrower shall exercise its rights and comply with its obligations under the Subsidiary Loan Agreements and, if applicable, the Third Group Subsidiary Loan Agreements in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or fail to enforce any of such agreements or any provision thereof. Section 3.05. The Borrower shall, during the execution of the Project: (a) cause the NPCU to be maintained with staff, responsibilities and functions satisfactory to the Bank, and to be responsible for the overall coordination of the execution of the Project; and (b) provide, promptly as needed, the funds, facilities, services and other resources required by the NPCU to carry out its functions and responsibilities in a timely manner. -8- Section 3.06. The Borrower shall, during the execution of the Project, maintain a consultative council (the Project Consultative Council) composed by the Borrower's Minister of Culture and Education, the NMCE's Secretary of Educational Programming and Evaluation and the Ministers of Education of the Beneficiaries for the purposes of providing policy and strategy guidance with respect to the Project, monitoring the compliance with the Project Implementation Targets and, if applicable, the implementation targets referred to in paragraphs 3 (b) (v) and 3 (c) of Schedule 1 to this Agreement, and resolving any implementation or organization problems that may threaten the efficient execution of the Project. Section 3.07. Without limitation to the provisions of Section 9.07 of the General Conditions, the Borrower, through the NPCU, shall, not later than May 31 of each year during Project execution, furnish to the Bank a report of such scope and in such detail as the Bank shall reasonably request: (a) on the progress in the Project execution during the immediately preceding calendar year; (b) containing an analysis of the compliance with the Project Implementation Targets and the Project Impact Indicators (and, if applicable, the implementation targets and impact indicators referred to in paragraphs 3 (b) (v) and 3 (c) of Schedule 1 to this Agreement) during such year; and (c) containing an action plan for the execution of the Project during the year of presentation of such report. Section 3.08. Without limitation to the provisions of Section 9.01 (a) of the General Conditions, the Bp.-ower, jointly with the Beneficiaries, shall: (a) during the month of June in each year during Project execution, undertake a review with the Bank of: (i) the progress in the execution of the Project during the next preceding year; (ii) the proposed work plan and budget for the Project during the year of such review; and (iii) the adjustments to be made to the Project implementation schedule during the year.of such review; and (b) during the thirtieth month after the Effective Date, undertake a review with the Bank of the progress in the execution of the Project and the attainment of its objectives, with special emphasis on the compliance with the Project Implementation Targets and the Project Impact Indicators (and, if applicable, the implementation targets and impact indicators referred to in paragraphs 3 (b) (v) and 3 (c) of Schedule 1 to this Agreement). As part of such review, the Bank may require that the Borrower prepare an action plan, satisfactory to the Bank, to make adjustments in Project implementation. In the event that the Bank requires the preparation of such action plan, the Borrower shall furnish it to the Bank not later than 90 days after the conclusion of such review, and shall carry out, or cause to be carried out, such action plan in accordance with the terms thereof. Section 3.09. For the purposes of Section 9.08 of the General Conditions and without limitation thereto, the Borrower shall: (a) prepare, on the basis of guidelines acceptable to the Bank, and furnish to the Bank not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, a plan for the future operation of the Project; and (b) afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain records and separate accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures of NMCE in respect of Part B of the Project, and, if applicable, the Third Group Subprojects. (b) The Borrower shall: (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 accordmce with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, 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 records and accounts and the audit thereof 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 Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and separate accounts reflecting such expenditures; -10- (ii) retain, 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. Section 4.02. (a) The Borrower shall cause each Participating Entity and, if applicable, each Replacement Participating Entity to maintain records and separate accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures of such Participating Entity and, if applicable, such Replacement Participating Entity, in respect of their Subproject. (b) The Borrower shall cause each Participating Entity and, if applicable, each Replacement Participating Entity to: (i) have the records and accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, 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 such records and accounts and the audit thereof as the Bank shal from time to time reasonably request. -11 - ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (1) of the General Conditions, the following additional events are specified: (a) Any of the Beneficiaries shall have failed to perform any of its obligations under a Subsidiary Loan Agreement or a Third Group Subsidiary Loan Agreement, as the case may be. (b) As a result of events which have occurred after the date of this Agreement, an extraordinary situation shall have arisen which shall make it improbable that a Beneficiary will be able to perform its obligations under a Subsidiary Loan Agreement or a Third Group Subsidiary Loan Agreement, as the case may be. It is understood that, if any of the events referred to in paragraphs (a) or (b) above shall occur, the Bank may limit the suspension of the right of the Borrower to make withdrawals from the Loan Account for expenditures incurred by the Beneficiary in question. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional event is specified, namely, that any event specified in paragraph(a) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) at least one Subsidiary Loan Agreement between the Borrower and a Participating Entity has become effective; (b) the PPCU in the Participating Entity referred to in paragraph (a) above has been established; -12 - (c) all action, satisfactory to the Bank, has been taken by the Participating Entity referred to in paragraph (a) above in order to permit the procurement of goods, works and consultants' services to be financed under the Loan to be undertaken in accordance with the provisions set forth or referred to in this Agreement; (d) the Action Plan of the Participating Entity referred to in paragraph (a) above has been furnished to the Bank; and (e) the Project Consultative Council has been established by a Resolution of the Borrower's Minister of Culture and Education. Section 6.02. The date NojowA/ ex 5 , 1996 is hereby specified for the purposes of Section 12.04 of the General Conditions. -13 - ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Economy and Public Works and Services of the Borrower is designated as representative 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: Ministerio de Economia y Obras y Servicios PiTblicos Hip6lito Yrigoyen 250 Buenos Aires, Argentina Telex: (390) 21-952 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 248423 (MCI) or Washington, D.C. 64145 (MCI) -14- 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. ARGENTINE REPUBLIC By Isl F~~ evn&(\'&e-z Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By ' (:: Ob'vicY-T4 NoawLvv1A-VA Al c Aq Regional Vice President Latin America and the Caribbean -15- SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works 30,000,000 65% (2) Goods 30,000,000 80% (3) Consultant's 26,000,000 90% services (4) Grants for school- 4,000,000 100% based institutional innovations projects under Part A.2 (e) of the Project and scholarships (5) Incremental recurrent 5,000,000 50% expenditures (6) Project implementation 6,800,000 90% costs (7) Unallocated 13,700,000 TOTAL 115,500,000 -16- 2. For the purposes of this Schedule: (a) the term "incremental recurrent expenditures" means expenditures incurred, as a result of the execution of the Project, for salaries, building and equipment maintenance costs, insurance, rentals, utilities costs, publications and office materials; and (b) the term "Project implementation costs" means expenditures required during Project execution for travel and per diems for training and Project coordination and monitoring activities, office materials, office rentals, publications, bidding and other similar expenditures related to the execution of the Project. 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, except that withdrawals, in an aggregate amount not to exceed the equivalent of $5,000,000, may be made on account of payments made for expenditures before that date but after July 15, 1995; (b) expenditures by any Participating Entity or, if applicable, any Replacement Participating Entity, except the Participating Entity or Entities, referred to in Section 6.01 (a) of this Agreement, unless the Bank shall have received evidence satisfactory to the Bank that: (i) the Subsidiary Loan Agreement between the Borrower and such Participating Entity or Replacement Participating Entity has become effective; (ii) the PPCU in such Participating Entity or Replacement Participating Entity has been established; (iii) all action, satisfactory to the Bank, has been taken by such Participating Entity or Replacement Participating Entity, in order to permit the procurement of goods, works and consultants' services to be financed under the Loan to be undertaken in accordance with the provisions set forth or referred to in this Agreement; (iv) the Action Plan for such Participating Entity or Replacement Participating Entity has been prepared; and (v) in the case of a Replacement Participating Entity, implementation targets for the Subproject of such Replacement Participating Entity and indicators of impact of the Subproject on the secondary education system of such Replacement Participating Entity have been approved by the Bank; and (c) expenditures under a Third Group Subproject, unless the Bank shall have received evidence satisfactory to the Bank that: (i) the corresponding Third Group Subsidiary Loan Agreement between the Borrower and the Third Group Province has become effective; (ii) a plan, acceptable to the Bank, to improve the efficiency of the education sector of such Third Group Province has been prepared; and (iii) implementation targets for such Third Group Subproject and indicators of impact of the Third Group -17- Subproject on the secondary education system of such Third Group Province have been approved by the Bank. 4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures under: (a) contracts for vehicles, informatics goods and communications equipment costing less than $100,000 equivalent each; (b) contracts for other goods costing $250,000 equivalent or less each (other than the first contract to be awarded under each Subproject or Third Group Subproject, in each of the first three years of execution of the Project, pursuant to Part C.2 of Section I of Schedule 4 to this Agreement); (c) contracts for works costing $1,000,000 equivalent or less each (other than the first contract costing $1,000,000 equivalent or less to be awarded under each Subproject or Third Group Subproject, in each of the first three years of execution of the Project, pursuant to Part C.2 of Section I of Schedule 4 to this Agreement); (d) contracts for consulting firms' services costing less than $50,000 equivalent each; (e) contracts for individual consultants' services costing less than $20,000 equivalent each; and (f) Categories (5) and (6) of the table in paragraph 1 hereof, all under such terms and conditions as the Bank shall specify by notice to the Borrower. -18- SCHEDULE 2 Description of the Project The objectives of the Project are to: (a) strengthen institutional capacity in the PMEs under a decentralized framework; (b) increase the quality and efficiency of secondary education in the Beneficiaries; and (c) increase and improve physical capacity of the Beneficiaries' school facilities to serve the secondary school-aged population more effectively. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Part A: 1. Institutional strengthening activities in the Beneficiaries consisting of: (a) improvement of the educational administration in the PMEs pursiant to the corresponding Action Plan (in the case of a Participating Entity or a Replacement Participating Entity) or the corresponding plan referred to in paragraph 3 (c) (ii) of Schedule 1 to this Agreement (in the case of a Third Group Province), through: (i) strengthening of their capacity in the strategic planning and monitoring of the secondary education school system; (ii) modernization of key central units, in particular those responsible for planning, budgeting and monitoring, and decentralization of some administrative units; and (iii) establishment of the regulatory framework under which the new decentralized structures will function; (b) development of a management information system, integrating modules for education statistics, financial information, physical inventory, human resources management, and educational research; (c) development of an education quality evaluation system in coordination with the Sistema Nacional de Evaluaci6n de la Calidad de la Educaci6n. (d) training of staff as required for the implementation of the activities under (a), (b) and (c) above; and (e) , in the case of the Province of Buenos Aires, carrying out of three diagnostic studies, including action plans for the implementation of the recommendations thereof, on: (i) management of the secondary education subsystem and its adaptation to the multimodal curricular model; (ii) education planning; and (iii) structures and functions of the education supervision system. -19- 2. Activities to increase the quality of public secondary education in the Participating Entities, consisting of: (a) acquisition and utilization of education resources such as textbooks, libraries, basic science laboratories, learning modules in basic areas such as biology, physics and multimedia information, teacher guides, maps, charts, dictionaries, and multimedia equipment such as televisions and videorecorders and cassettes; (b) provision, under the coordination of the Red Federal de Formaci6n Docente Continua, of training to: (i) teachers to upgrade their skills in basic subject disciplines, and in the use of education materials and new technologies such as computers, and to prepare them for the curriculum changes already underway; and (ii) school principals and supervisors in the areas of school management and pedagogical monitoring and supervision; (c) planning and development of Polymodal Education curriculum; (d) design and implementation of school-based institutional development projects, especially with respect to organizational and pedagogical changes; (e) provision of incentives to school-based institutional innovations projects; and (f) in the case of the Province of Buenos Aires, carrying out of diagnostic studies, including action plans for the implementation of the recommendations thereof, on: (i) Polymodal Education curriculum development; (ii) improvement of the internal and external efficiency of secondary education; and (iii) education innovations linked with the labor market. 3. Construction, expansion and rehabilitation of Beneficiaries' secondary education schools. Part B: Strengthening of the capacity of the NPCU to coordinate and monitor Project execution, and to provide technical assistance to the Beneficiaries. The Project is expected to be completed by December 31, 2000. -20 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each May 15 and September 15 beginning May 15, 2001 through November 15, 2010 5,775,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. -21 - Premiums on Prepayment Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years before maturity 0.20 More than three years but not more than six years before maturity 0.40 More than six years but not more than 11 years before maturity 0.73 More than 11 years but not more than 13 years before maturity 0.87 More than 13 years before maturity 1.00 -22 - SCHEDULE 4 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: General Goods and works shall be procured in accordance with the provisions of Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 (the Guidelines) and the following provisions of this Section, as applicable. Part B: International Competitive Bidding 1. Except as otherwise provided in Part C of this Section, goods and works shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto. 2. The following provisions shall apply to goods to be procured under contracts awarded in accordance with the provisions of paragraph 1 of this Part B: (a) Two-stage bidding procedure The bidding procedure for textbooks shall be carried out in two stages in accordance with the provisions of paragraph 2.6 of the Guidelines. (b) Preference for domestically manufactured goods The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix 2 thereto shall apply to goods manufactured in the territory of the Borrower. Part C: Other Procurement Procedures 1. Limited International Bidding Vehicles, informatics goods (computers, peripheral equipment and computer software) and communications equipment (fax and photocopying machines) estimated to cost $100,000 equivalent or more per contract, and $7,500,000 equivalent or less in the aggregate, may be procured under contracts awarded in accordance with the provisions of paragraph 3.2 of the Guidelines. -23 - 2. National Competitive Bidding (a) Goods (other than those referred to in paragraph 1 of this Part C) and works estimated to cost $250,000 and $5,000,000 equivalent or less per contract, respectively, and $17,200,000 and $40,300,000 equivalent or less in the aggregate, respectively, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. (b) Procurement of goods and works under this Part C.2 shall be undertaken on the basis of standard bidding documents approved by the Bank. 3. National Shopping Goods estimated to cost less than $100,000 equivalent per contract, and $8,800,000 equivalent or less in the aggregate, may be procured under contracts awarded on the basis of national shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. 4. Procurement of Small Works Works estimated to cost $300,000 equivalent or less per contract, and $12,900,000 equivalent or less in the aggregate, may be procured under lumpsum, fixed price contracts awarded on the basis of quotations obtained from three qualified domestic contractors in response to a written invitation. The invitation shall include a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to the Bank, and relevant drawings, where applicable. The award shall be made to the contractor who offers the lowest price quotation for the required work, and who has the experience and resources to successfully complete the contract. Part D: Review by the Bank of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix I to the Guidelines. Procurement of all goods and works shall be undertaken in accordance with such procurement plan as shall have been approved by the Bank, and with the provisions of said paragraph 1. -24 - 2. Prior Review With respect to: (a) each contract to be awarded pursuant to the provisions of Part B or Part C.1 hereof; (b) each contract for works estimated to cost more than $1,000,000 equivalent; and (c) the first contract for works costing $1,000,000 or less and the first contract for goods to be awarded under each Subproject and each Third Group Subproject, in each of the first three years of execution of the Project, pursuant to the provisions of Part C.2 hereof, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part D, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II. Employment of Consultants 1. Consultants' services shall be procured under contracts awarded in accordance with the provisions 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 (the Consultant Guidelines). For complex, time-based assignments, such contracts shall be based on the standard form of contract for consultants' services issued by the Bank, with such modifications thereto as shall have been agreed by the Bank. Where no relevant standard contract documents have been issued by the Bank, other standard forms acceptable to the Bank shall be used. 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Bank review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts shall not apply to: (a) contracts for the employment of consulting firms estimated to cost less than $50,000 equivalent each; or (b) contracts for the employment of individual consultants estimated to cost less than $20,000 equivalent each. However, said exceptions to prior Bank review shall not apply to: (a) the terms of reference for such contracts, (b) single- source selection of consulting firms; (c) assignments of a critical nature, as reasonably determined by the Bank; (d) amendments to contracts for the employment of consulting firms raising the contract value to $50,000 equivalent or above; or (e) amendments to contracts for the employment of individual consultants raising the contract value to $20,000 equivalent or above. -25- SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (6) 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 Loan 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 equivalent to $10,000,000 to be withdrawn from the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Bank shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to $5,000,000 until the aggregate amount of withdrawals from the Loan Account plus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of $20,000,000. 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 Bank 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 Bank a request or requests for deposit into the Special Account of an amount or amounts determined by the Bank to be required to pay for eligible expenditures during the four months following the date of each such request, which amount shall not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit in the Special Account such amounto r amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. -26- (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank 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 Bank shall, on behalf of the Borrower, withdraw from the Loan 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 Bank from the Loan 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 Bank shall reasonably request, furnish to the Bank 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 Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, the Bank shall have determined that all further withdravals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Ar.cle V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower shall have failed to furnish to the Bank, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Bank pursuant to said Section in respect of the audit of the records and accounts for the Special Account; (c) if, at any time, the Bank shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) once the total unwithdrawn amount of the Loan allocated to the eligible Categories, less the amount of any outstanding special commitment entered into by the Bank 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. -27- Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have 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 Bank 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 Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank 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 Bank 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 Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. -28- SCHEDULE 6 Subsidiary Loan Agreements and Third Group Subsidiary Loan Agreements Section I - Subsidiary Loan Agreements The Subsidiary Loan Agreements shall include the following terms and conditions: 1. Subloans shall be made under the same terms and conditions of the Loan with respect to repayment period, interest rate, commitment charge and currency provisions, and, subject to the provisions of Section 3.04 (b) of this Agreement, the respective amounts of the Subloans to the Participating Entities, shall be as follows: Province of Buenos Aires: $4,900,000 Province of Chaco: $14,000,000 Province of Corrientes: $13,800,000 Province of Entre Rios: $13,600,000 Municipality of Buenos Aires: $36,400,000 Province of Salta: $13,200,000 Province of Santa Cruz: $7,300,000 Province of Tucuman: $10,000,000 2. The Participating Entity and, if applicable, the Replacement Participating Entity shall: (a) comply with the provisions of Sections 3.01 (b), 3.02, 3.03 and 4.02 of the Loan Agreement in respect of its Subproject; (b) during the execution of its Subproject, maintain a unit, within PME, in charge of the coordination of the execution of the Subproject (the PPCU), with staff, responsibilities, budget and functions satisfactory to the Borrower and the Bank; (c) substantially comply, on a progressive basis acceptable to the Bank, with the Project Impact Indicators in respect of such Participating Entity, or, in the case of a Replacement Participating Entity, with the impact indicators referred to in paragraph 3 (b) (v) of Schedule 1 to this Agreement; (d) substantially achieve, in a manner acceptable to the Bank, the components of the Project Implementation Targets applicable to such Participating Entity, or, in the -29- case of a Replacement Participating Entity, the implementation targets referred to in paragraph 3 (b) (v) of Schedule 1 to this Agreement; (e) provide all the assistance required by the Borrower for the purposes of compliance with Sections 3.07 and 3.09 of the Loan Agreement; and (f) participate, jointly with the Borower, in the reviews referred to in Section 3.08 of the Loan Agreement. 3. Each Participating Entity or Replacement Participating Entity shAll make available, promptly as needed in each year during the execution of its Subproject, the counterpart funds required for the efficient execution of its Subproject. Section II - Third Group Subsidiary Loan Agreements The Third Group Subsidiary Loan Agreements shall include the following terms and conditions: 1. Subloans shall be made under the same terms and conditions of the Loan with respect to repayment period, interest rate, commitment charge and currency provisions. 2. The Third Group Province shall take all action on its part necessary to enable the Borrower to carry out, on behalf of the Third Group Province, the Third Group Subproject. 3. The Third Group Province shall substantially comply, on a progressive basis acceptable to the Bank, with the impact indicators referred to in paragraph 3 (c) of Schedule 1 to this Agreement. 4. The Borrower shall substantially achieve, in a manner acceptable to the Bank, the implementation targets referred to in paragraph 3 (c) of Schedule 1 to this Agreement. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Bank for Reconstruction and Development. FOR SECR TARY