Mexico - Financial Sector Technical Assistance Project : Loan 3838 - Guarantee Agreement - 1 - Conformed

LOAN NUMBER 3838-ME Guarantee Agreement (Financial Sector Technical Assistance Project) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated t&\) , , 1995 LOAN NUMBER 3838-ME GUARANTEE AGREEMENT AGREEMENT, dated (Y a fciA C , 1995, between UNITED MEXICAN STATES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Guarantor and Naciojnal Financiera, S.N.C. (the Borrower), having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to the Loan Agreement, have requested the Bank to assist in the financing of the Project; and (B) by the Loan Agreement of even date herewith between the Bank and the Borrower, the Bank has agreed to extend to the Borrower a loan in various currencies equivalent to twenty-three million six hundred thousand dollars ($23,600,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan and to undertake such other obligations as provided in this Agreement; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower; has agreed so to guarantee such obligations of the Borrower and to undertake such other obligations as provided 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) In Section 6.02, subparagraph (k) is relettered as subparagraph (1) and a new subparagraph (k) is added to read: "(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." -2- Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to and Section 1.02 of the Loan Agreement have the respective meanings therein set forth. ARTICLE II Guarantee; Provision of Funds Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan, and the punctual performance of all the other obligations of the Borrower, all as set forth in the Loan Agreement. Section 2.02. The Guarantor shall enter into the contractual arrangements referred to in Section 3.01 (a) of the Loan Agreement and, except as the Bank may otherwise agree, shall not amend or fail to enforce any provisions of such contractual arrangements. The Guarantor shall exercise its rights under such contractual arrangements in such manner as to protect the interests of the Guarantor and the Bank and to accomplish the purposes of the Loan. Section 2.03. The Guarantor shall provide, in a timely manner as needed, the funds, facilities, services and other resources required for the Project. ARTICLE m Execution of the Project Section 3.01. 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, shall carry out the Project through SHCP with due diligence and efficiency and in conformity with appropriate financial, administrative, and technical standards and practices. Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods, consultants' services and training required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of the Schedule to this Agreement. -3- Section 3.03. The Guarantor, through SHCP, shall carry out, or cause to be carried out, the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9,09 of the General Conditions (relating respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) with regard to the Project. Section 3.04. The Guarantor, through SHCP, shall: (a) ensure that each of the Commissions carries out its respective Part of the Project in accordance with the provisions of this Agreement on the basis of an annual workplan acceptable to the Bank; (b) ensure that each Commission appoints a coordinator to work closely with SHCP and the Borrower in the administration of each Commission's Part of the Project; and (c) engage one or more specialized consultant or consultants to assist with all administrative matters for the Project and make such consultant or consultants available to the Commissions and to the unit referred to in Part B of the Project for the administration of the Project. Section 3.05. Without limitation upon the provisions of Section 9.01 of the General Conditions, the Guarantor, through SHCP, shall together with the Commissions, the Borrower and the Bank carry out a Project implementation review on a semi-annual basis to assess the status of Project implementation, to evaluate each Commission's Workplan and to determine any needed modifications to existing Workplans. The Guarantor, through SHCP and the Commissions, shall promptly take all such action, satisfactory to the Bank, as shall be necessary for the efficient execution of the Project or the achievement of its objectives if, as a result of any such implementation review, progress in the execution of the Project or in the achievement of the objectives of the Project is not satisfactory to the Bank. In the implementation review to be carried out in the first semester of 1996 and in the second semester of 1997, the progress and impact of the Project will be measured on the basis of indicators acceptable to the Bank. -4- ARTICLE IV Financial Covenants Section 4.01. (a) The Guarantor, through SHCP and the Commissions, shall maintain records and separate accounts adequate to reflect, in accordance with sound accounting practices, the resources and expenditures in connection with the execution of the Project. (b) The Guarantor shall: (i) have such records and separate accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with generally accepted auditing standards and procedures consistently applied, by independent and qualified auditors; (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, a certified copy of the report of such audit by said auditors, all 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 as well as 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 expenditures, the Guarantor shall: (i) maintain, in accordance with paragraph (a) of this Section, records and separate accounts reflecting such expenditures; (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 or payment out of the Special 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 separate accounts are included in the annual audit referred to in paragraph (b) of this Section and that -5- 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. (d) For all expenditures with respect to which withdrawals were made from the Special Account, the Guarantor shall provide to the Borrower any information that may be required by the Borrower to comply with the Borrower's obligations under Section 4.01 (b) of the Loan Agreement. ARTICLE V Representatives of the Guarantor; Addresses Section 5.01. The Director General de Crddito Piblico of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 5.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Secretaria de Hacienda y Cr6dito Publico Direcci6n General de Credito Pfiblico Palacio Nacional, Patio Central Oficina 4037 06066 M6xico, D.F., M6xico Telex: 1777313-SHOCME For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America -6- Cable address: Telex: INTBAFRAD 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 Mexico, D. F., United Mexican States, as of the day and year first above written. UNITED MEXICAN STATES By To 5icso e" Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By 's( Lw 30 UA 2) -* Regional Vice President Latin America and the Caribbean -7- SCHEDULE Procurement and Consultants' Services Section I. Procurement of Goods 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), and in accordance with the following additional procedures: (a) When contract award is delayed beyond the original bid validity period, such period may be extended once, subject to and in accordance with the provisions of paragraph 2.59 of the Guidelines, by the minimum amount of time required to complete the evaluation, obtain necessary approvals and clearances and award the contract. The bid validity period may be extended a second time only if the bidding documents or the request for extension shall provide for appropriate adjustment of the bid price to reflect changes in the cost of inputs for the contract over the period of extension. Such an increase in the bid price shall not be taken into account in the bid evaluation. With respect to each contract made subject to the Bank's prior review in accordance with the provisions of Part D.1(a) of this Section, the Bank's prior approval will be required for: (i) a first extension of the bid validity period if the period of extension exceeds sixty (60) days; and (ii) any subsequent extension of the bid validity period. (b) In the procurement of goods in accordance with Parts A and C.1 of this Schedule, the relevant standard bidding documents issued by the Bank as modified by agreement between the Guarantor and the Bank dated December 8, 1993 shall be used, with such modifications thereto as the Bank shall have agreed to be necessary for the purposes of the Project. 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 Mexico 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 1 through 4 of Appendix 2 thereto. -8- Part C: Other Procurement Procedures 1. Goods estimated to cost the equivalent of $350,000 or less per contract may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Bank. Such procurement shall take place using standard bidding documents satisfactory to the Bank. 2. Items or groups of items for goods estimated to cost the equivalent of less than $100,000 per contract, up to an aggregate amount equivalent to $750,000, 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 Bank. Part D: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and fina' contracts: (a) With respect to each contract for goods procured in accordance with the procedures set forth in Parts A, if any, and with respect to the first two contracts for goods procured in accordance with the procedures set forth in Part C. I of this Schedule, 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 Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank 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, said procedures shall be nodified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to the Loan Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals 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 I to the Guidelines. -9- Section II. Employment of Consultants 1. In order to assist the Guarantor in carrying out the Project, the Guarantor shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank 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 (the Consultant Guidelines). For assignments estimated to cost $500,000 equivalent or more, the Guarantor 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 Bank. For assignments estimated to cost less than $500,000 equivalent, the Guarantor shall use other standard forms agreed with the Bank. 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 $100,000 equivalent each; or (b) contracts for the employment of individuals estimated to cost less than $50,000 equivalent each. However, this exception 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 $100,000 equivalent or above; or (e) amendments to contracts for the employment of individual consultants raising the contract value to $50,000 equivalent or above. 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 SECRETARY