Loan Agreement. Public Disclosure Authorized. Public Disclosure Authorized. (Second Pre-investment Studies Project) Public Disclosure Authorized

Transcription

1 Public Disclosure Authorized 1 LOAN NUMBER 1780 PA Public Disclosure Authorized Loan Agreement (Second Pre-investment Studies Project) Public Disclosure Authorized between REPUBLIC OF PARAGUAY and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized Dated, 1979

2 LOAN NUMBdR 1780 PA LOAN AGREEMENT AGREEMENT, dated g /4?, 1979, between REPUBLIC OF PARAGUAY (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) the Borrower has applied to Fondo Financiero para el Desarrollo de la Cuenca del Plata (hereinafter called the Fund) for a loan (hereinafter called 'the Fund Loan) in an amount equivalent to three mill-on dollars ($3,000,000) to assist in financing Part A.1 of the Project on the terms and conditions set forth in an agreement (hereinafter called the Fund Loan Agreement) between the Borrower and the Fund; (C) the Borrower will carry out Parts B and C of the Project and, pursuant to its agreement dated October 7, 1977 with the United Nations Development Programme (hereinafter called UNDP and such agreement hereinafter called the UNDP Basic Agreement), intends to enter into an agreement with the Bank (acting as Executing Agency of UNDP) and UNDP, for the execution of Parts B and C of the Project, and the financing thereof by UNDP (such agreement hereinafter called the Project Document and the financing thereunder hereinafter called the UNDP Grant); (D) Part A.3 of the Project will be carried out by the Borrower's Central Bank (hereinafter called Banco Central) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Banco Central the proceeds of the Loan and of the Fund Loan as hereinafter provided; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in a pruject agreement of even date herewith between the Bank and Banco Central; NOW THEREFORE the parties hereto hereby agree as follows:

3 -2- ARTICLE I General Conditions; Definitions Section The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanirgs: (a) "Project Agreement" means the agreement between the Bank and Banco Central of even date herewith, as the same may be amended from time to time; (b) "Subsidiary Agreement" means the agreement to be entered into between the Borrower and Banco Central pursuant to Section 4.01 (c) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Agreement; (c) "FP" means Fondo de Pre-Inversiones, an account opened by Banco Central pursuant to the Borrower's Decree No , dated December 19, 1975 as such Decree was supplemented by the Borrower's Decree No , dated April 7, 1976 (the first of said Decrees, as so supplemented, hereinafter called the Decree); and "Regulations" means the Borrower's Decree No , dated April 7, 1976, which regulates the operations of FP and embodies the lending policies and procedures applicable to FP; (d) "ONP" means Oficina Nacional de Proyectos, an agency of the Borrower established by Decree No of the Borrower, dated June 30, 1970, as reorganized by the Borrower's Decree No , dated April 7, 1976; (e) "Management Committee" means the committee established by Article 3 of the Decree through which Banco Central manages FP;

4 (f) Council" means the Consejo Nacional de Preinversi6n established by the Borrower's Decree No dated November 19, 1979, which, inter alia, approves and oversees the Borrower's preinvestment policies and programs, and FP policies and lending programs and centralizes pre-investment work in FP and ONP; (g) "Sub-loan" means a loan made or proposed to be made by Banco Central, through FP, to a Sub-borrower for a Sub-project and to be financed, in the case of a Part A.1 Sub-loan, out of the proceeds of the Loan or Fund Loan, or both, made available to Banco Central under the Subsidiary Agreement or, in the case of a Part A.2 Sub-loan, out of the proceeds of the Loan, made available to Banco Central under the Subsidiary Agreement; (h) "Part A.1 Sub-loan" and "Part A.2 Sub-loan" mean a Sub-loan, as so defined, for a Sub-project for purposes of Part A.1 of the Project or for purposes of Part A.2 of the Project, respectively; (i) "Free-limit Sub-loan" means a Sub-loan, as so defined, in an amount which shall not exceed the sum of: (i) $200,000 equivalent, when added to any other outstanding amounts financed or proposed to be financed out of the proceeds of the Loan or of the Fund Loan or of the Prior Credit for the Sub-project in question, or (ii) $1,600,000 equivalent, when added to all other Free-limit Sub-loans financed or proposed to be financed out of the proceeds of the Loan or the Fund Loan; and "Part A.1 Freelimit Sub-loan" and "Part A.2 Free-limit Sub-loan" mean a Freelimit Sub-loan, as so defined, for a Sub-project for purposes of Part A.1 of the Project or for purposes of Part A.2 of the Project, respectively; (j) "Sub-borrower" means an agency of the Borrower to which Banco Central proposes to make or has made a Sub-loan; (k) "Sub-project" means a particular study for purposes of Part A.1 or Part A.2 of the Project approved by the Management Committee and to be carried out by a Sub-borrower utilizing the proceeds of a Sub-loan; (1) "STP" means the Secretarfa Tecnica de Planificaci6n de la Presidencia de la Repu5blica of the Borrower, established by Decreto-ley No. 312 and ratified by Law No. 841 dated September 14, 1962;

5 -4- (m) "Prior Credit" means the Credit provided for in the Development Credit Agreement between the Borrower and the International Development Association dated October 17, 1975, such agreement hereinafter called the "Prior Agreement"; and "Prior Project" means the project described in Schedule 2 to the Prior Agreement; (n) "Fund Loan Account" means the account or accounts used by the Fund for purposes of disbursing the Fund Loan; and (o) "Financial Programming Unit" means the unit to be established in accordance with Section 4.09 of this Agreement under Part C of the Project. ARTICLE II The Loan Section The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to five million dollars ($5,000,000). Section (a) The amount of the Loan allocated, from time to time, in respect of Part A.2 of the Project, to Category (2) of the table set forth in Schedule 1 to this Agreement, may be withdrawn from the Loan Account in accordance with the provisions of such Schedule, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, 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 such Part A.2 of the Project and to be financed out of the proceeds of the Loan; provided, however, that no withdrawal shall be made in respect of a Part A.2 Sub-loan unless: (i) the Part A.2 Sub-loan shall have been approved by the Bank; or (ii) the Part A.2 Subloan shall be a Part A.2 Free-limit Sub-loan for which the Bank shall have authorized withdrawals from the Loan Account. (b) The Borrower shall cause Banco Central to present Part A.2 Sub-loans for approval and to request authorization to make withdrawals in respect of a Part A.2 Free-limit Sub-loan, all in accordance with Section 2.06 of the Project Agreement. (c) The amount of the Loan allocated from time to time in respect of Part A.1 of the Project to Category (1) of the table referred to in paragraph (a) above, may be withdrawn from the Loan

6 -5- Account: in Agreement. accordance with the provisions of Article III of this Section The Closing Date shall be December 31, 1984 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section The Borrower shall pay interest at the rate of seven and ninety-five hundredths per cent (7.95%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section Interest and other charges shall be payable semiannually on April 1 and October 1 in each year. Section The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. Section Except as the Bank shall otherwise agree: (a) procurement of the services required for Part A of the Project shall be governed by the provisions of Sections 2.07 (a) (ii) and 2.08 of the Project Agreement; and (b) procurement of the goods to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section Banco Central is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions in respect of Part A of the Project.

7 -6- ARTICLE III Allocation and Withdrawal of Proceeds of Loan, in respect of Part A.1 of the Project, and Fund Loan Section Subject to the rights of suspension and cancellation set forth in the Loan Agreement and the Fund Loan Agreement, the amount of Loan allocated, in respect of Part A.1 of the Project, in Category (1) of the table set forth in Schedule 1 to this Agreement and the amount of the Fund Loan may be withdrawn from the Loan Account or from the Fund Loan, or both, in accordance with the provisions of this Agreement and the Fund Loan Agreement and with the provisions of such Schedule, as such Schedule may be modified from time to time pursuant to the provisions thereof or by further agreement between the Borrower and the Bank and the Fund. Section The amount of the Loan referred to in Section 3.01 of this Agreement and the amount of the Fund Loan may be withdrawn from the Loan Account or from the Fund Loan, or from both, as the case may be, on the basis of disbursement percentages set forth in, and in accordance with, Schedule 1 to this Agreement, for amounts paid (or, if the Bank and the Fund shall so agree, for amounts to be paid) by Banco Central on account of withdrawals made by a Sub-borrower under a Part A.1 Sub-loan to meet the reasonable cost of goods and services required for the Sub-project in respect of which the withdrawal is requested; provided, however, that no withdrawal shall be made in respect of a Part A.1 Sub-loan unless: (i) the Part A.1 Sub-loan shall have been approved by the Bank; or (ii) the Part A.1 Sub-loan shall be a Part A.1 Free-limit Sub-loan for which the Bank shall have authorized withdrawals from the Loan Account. Section (a) The Borrower shall cause Banco Central to present Part A.1 Sub-loans for approval and to request authorizations to make withdrawals in respect of a Part A.1 Free-limit Sub-loan, all in accordance with Section 2.06 of the Project Agreement. (b) Upon each approval of a Part A.1 Sub-loan or authorization to make withdrawals in respect of a Part& Al Free-limit Sub-loan, the Bank shall request from the Fund a statement on whether the Fund desires to finance the Sub-project to be financed under such Part A.1 Sub-loan or Part A.1 Free-limit Sub-loan and,

8 -7- if it so desires, on whether withdrawals in respect of such Part A.1 Sub-loan or Part A.1 Free-limit Sub-loan shall be made out of the Loan Account and of the Fund Loan in accordance with Section 3.04 of this Agreement, or only from the Fund Loan. Section Each application by Banco Central on behalf of the Borrower for withdrawal shall be deemed to be a request to withdraw funds from the Loan Account and from the Fund Loan and the funds to be withdrawn pursuant to such application shall be apportioned by the Bank, as nearly as practicable in the circumstances, between the Loan and the Fund Loan in the ratio of 1:1, or such other ratio as shall be agreed between the Bank and the Fund; provided, however, that, if such application shall be made in respect of expenditures to be financed out of the proceeds of the Loan or the Fund Loan only, such application shall be deemed to be a request to withdraw funds either from the Loan Account or the Fund Loan, as the case may be. Section When the Bank shall have approved an application by Banco Central on behalf of the Borrower for withdrawal, the Bank shall: (i) pay the amount, if any, which the Borrower is entitled to withdraw from the Loan Account to or on the order of the Borrower in accordance with the provisions of the Loan Agreement; and (ii) promptly notify the Fund that it has received an application for withdrawal from the Fund Loan in the aggregate amount specified in such notice, that it has approved payment of the portion, if any, to be withdrawn from the Loan Account in the amount set forth in such notice, and that the portion to be withdrawn from the Fund Loan in the amount set forth in such notice is eligible for payment by the Fund. Section If at any time the amount of the Loan or the Fund Loan shall have been fully withdrawn or cancelled, applications by Banco Central on behalf of the Borrower for further withdrawals shall be deemed to be requested for withdrawal of the full amount applied for from the Loan Account or the Fund Loan only, and the provisions of this Article III except for Section 3.04 hereof shall continue to apply mutatis mutandis until the full amount credited or to be credited to such application shall have been withdrawn or cancelled.

9 -8- ARTICLE IV Execution of the Project Section (a) The Borrower shall carry out Parts A.1, A.2, B and C and cause Banco Central to carry out Part A.3 of the Project with due diligence and efficiency and in conformity with appropriate administrative practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cause Banco Central to perform in accordance with the provisions of the Project Agreement and the Subsidiary Agreement all the obligations therein set forth, and shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable Banco Central to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. For purposes of Part A of the Project, the Borrower shall (on the basis of the work program for FP that, for each of FP's fiscal years, shall approve the Management Committee and the Council not later than six months before the beginning of such fiscal year) make, not later than four months before the beginning of such fiscal year, such budget appropriations as shall be necessary to maintain at all times sufficient resources to meet FP's forecast disbursements for such fiscal year. (c) The Borrower shall make the proceeds of the Loan and of the Fund Loan allocated from time to time to Categories (1) and (2) of the table set forth in Schedule 1 to this Agreement available to Banco Central for FP by way of grant under a subsidiary agreement to be entered into between the Borrower and Banco Central, under terms and conditions satisfactory to the Bank. (d) The Borrower shall exercise its rights under the Subsidiary Agreement 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, nor amend, abrogate or waive the Subsidiary Agreement or any provision thereof. Section The Borrower shall: (a) maintain the Council with the powers and responsibilities which have been legally vested on it;

10 -9- (b) maintain the Management Committee with the powers and responsibilities which have been legally vested on it; (c) provide the Council and the Management Committee with the funds, facilities and other resources required to exercise the powers and discharge the responsibilities thereof; and (d) cause the Council to approve FP's policies and the programs of Sub-proje_cs to be financed by FP, such approval to constitute an authorization to the Management Committee to approve the individual Sub-loans required for financing such Sub-projects and to sign all documents required therefor. Section (a) In order to assist the Borrower in the carrying out and overall coordination of Part B of the Project, the Borrower shall employ and provide ONP with the services of a general-purpose Project coordinator whose qualiiications, experience and terms and conditions of employment shall be satisfactory to the Borrower and the Bank. (b) In order to assist the Borrower in the carrying out of Part B of the Project, the Borrower shall employ transport, agriculture and industrial consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Borrower and the Bank. (c) In order to assist the Borrower in the carrying out of Part C of the Project, the Borrower shall employ, and provide the Unit to be established under such Part of the Project with the services of a consultant in organization and financial programming, whose qualifications, experience, and terms and conditions of employment shall be satisfactory to the Borrower and the Bank. Section The Borrower shall take all necessary steps to cause the Sub-borrowers to make punctually all payments of principal of, and interest and other charges on, the Sub-loans. Section The Borrower shall cause ONP to provide technical assistance to Banco Central required to carry out Part A of the Project. Section The Borrower shall cause ONP to make known, to the representatives in Paraguay of the member countries of the Bank and Switzerland, the register of consultants kept by ONP, and

11 advise such representatives that only those consultants who have been or will be included in such register are eligible to participate in the carrying out of Sub-projects. Section For purposes of Article 101 of the Borrower's Decree Law No. 18, dated March 25, 1952 and Article 32 of the Regulations, the Borrower 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, each of the Sub-loans approved by the Bank and each of the Freelimit Sub-loans for which the Bank has authorized withdrawals from the Loan Account or Fund Loan or both, and the premium, if any, on the prepayment of such Sub-loan or Free-limit Sub-loan, all as set forth in the applicable contract to be entered with the Subborrower in question in accordance with Section 2.07 of the Project Agreement. Section (a) The Borrower shall, promptly upon preparation thereof by ONP, furnish to the Bank each of the work programs for FP, including an estimate of the cost thereof and of the availability of funds for the purpose, and shall afford the Bank a reasonable opportunity to comment on such work program before any action on the approval thereof is taken by the Council or the Management Committee. (b) The Borrower shall, through ONP, furnish to the Bank, not later than four months after the end of each year, a report, of such scope and in such detail as the Bank shall reasonably request, on the execution of the corresponding work program for FP furnished to the Bank in accordance with paragraph (a) above which shall include an analysis of the availability of funds which were.estimated in respect of such work program. Section The Borrower shall take all such measures as shall be necessary to ensure that the Financial Programming Unit shall be made responsible for, inter alia, working out the financial implications of the short-term project lists prepared by the ONP, setting forth medium-term development budgets for the public sector, and representing, through its head, the Borrower's Ministry of Finance in the Executive Committee so as to enable such Ministry to effectively control the day-to-day management of FP. Section The Borrower shall, through ONP, furnish to the Bank copies of all documents prepared by the consultants employed for each Sub-project, promptly after ONP has received such copies.

12 Section The Borrower shall, until the Closing Date, provide FP through Banco Central with all such funds, additional to FP's own generated funds, as shall be required to finance pre-investment and pre-feasibility studies the carrying out of which has been approved by the Management Committee; provided, however, that the foregoing shall not apply if the financing of such studies has been secured from sources external to FP. ARTICLE V Other Covenants Section (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall,not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative subdivision thereof and of any entity owned or controlled by,

13 or operating for the account or benefit of, the Borrower or any such subdivision, including gold and other foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section (a) The Borrower shall maintain or cause to be maintained separate accounts and records adequate to reflect in accordance with consistently maintained sound accounting practices the operations, resources and expenditures of ONP and, in respect of Part A of the Project, of the departments or agencies of the Borrower responsible for carrying out such Part of the Project. (b) The Borrower shall: (i) have each of the accounts referred to in paragraph (a) hereof 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 four months after the end of each such year (A) certified copies of such account for such year as so audited and (B) the report of such audit by such 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 account and the audit thereof as the Bank shall from time to time reasonably request. Section In view of the Borrower's decision to merge the powers and responsibilities of FP and ONP into one single entity, endowed with legal personality and financial autonomy, the Borrower undertakes: (i) to take all such measures as shall be necessary for 1he purpose, without materially and adversely affecting the carrying out of any of the Parts of the Project; (ii) to exchange views with the Bank on the measures referred to in (i) above before putting them into effect; (iii) to cause the entity to be created to assume, in form and substance satisfactory to the Bank, all rights and obligations of Banco Central under the Project Agreement and the Subsidiary Agreement; (iv) to complete the putting into effect of the measures required for the creation of the entity, in a manner consistent with its undertakings under this Section, not.ater than June 30, 1981; and (v) to furnish to the Bank all such evidence, including legal opinions, in respect of the foregoing, as the Bank shall reasonably request. Section (a) The Borrower shall utilize the proceeds of the service charge paid to ONP in accordance with Section 2.05 (a) (iii) of the Project Agreement primarily for supplementing the remuneration of ONP's staff.

14 (b) The Borrower shall cause Banco Central to provide, from FP's resources, to ONP such advances as shall be required to cover ONP staff's supplemental remunerations until the proceeds referred to in paragraph (a) of this Section are sufficient to cover such remunerations. (c) The Borrower shall, not later than June 30, 1980, set forth to the satisfaction of the Bank remuneration levels of ONP's staff. ARTICLE VI Remedies of the Bank Section For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) Banco Central, or any successor thereto, shall have failed to perform any of its obligations under the Project Agreement or the Subsidiary Agreement; (b) the Borrower, Banco Central or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Council or the Financial Programming Unit or the Management Committee or ONP; (c) an extraordinary situation shall have arisen which shall make it improbable that Banco Central or any successor thereto will be able to perform its obligations under the Project Agreement; (d) a change shall have been made in the Decree or in the Regulations without the Bank's consent which may materially and adversely affect ONP or the carrying out of Part A of the Project by Banco Central or any successor thereto; and (e) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of the UNDP Grant or the Fund Loan or of any other grant or loan made to the Borrower or to Banco Central for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part,

15 -14- pursuant to the terms of the UNDP Basic Agreement or Project Document, in respect of the UNDP Grant, or the Fund Loan Agreement, in respect of the Fund Loan or in respect of the agreement providing therefor in the case of any such other grant or loan, or (B) the Fund Loan or any such other loan shall have become due and payable prior to the agreed maturity therefor. (ii) Subparagraph (i) of this paragraph shall not apply if: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower or Banco Central to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower or to Banco Central from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement and of Banco Central under the Project Agreement. Section For the purposes of Section 7.01 of the General Conditions, the following events are specified pursuant to paragraph (h) thereof: (a) the events specified in paragraph (a) of Section 6.01 of this Agreement ohall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower and Banco Central; and (b) the event specified in paragraph (b), or paragraph (d), or paragraph (e) (i) (B) of Section 6.01 of this Agreement shall occur. ARTICLE VII Effective Date; Termination Section The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section (c) of the General Conditions: (a) that the Subsidiary Agreement has been executed on behalf of the Borrower and Banco Central;

16 (b) that the Executive Director of ONP has been substituted for the Executive Secretary of STP in the membership of the Management Committee; (c) that the Financial Programming Unit has been established in form and substance satisfactory to the Bank; (d) that the Project Document has been executed on behalf of the Borrower and UNDP and the Bank; (e) that the Project Agreement has been executed on behalf of Banco Central; and (f) that the execution and dplivery on behalf of the Borrower of the Fund Loan Agreement have been duly authorized or ratified by all necessary governmental action and all other conditions precedent to the effectiveness of the Fund Loan Agreement, other than the effectiveness of this Agreement, have been fulfilled. Section The following are specified as additional matters, within the meaning of Section (c) of the General Conditions, to be included in the certificate or certificates, or opinion or opinions, as the case may be, to be furnished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by Banco Central, and is legally binding upon Banco Central in accordance with its terms; (b) that the Subsidiary Agreement has been duly authorized or ratified by the Borrower and Banco Central and is legally binding upon the Borrower and Banco Central in accordance with its terms; and (c) that the Fund Loan Agreement has been duly authorized by the Borrower and the Fund and is legally binding upon the Borrower and the Fund in accordance with its terms. Section The date /& 4&, is hereby specified for the purposes of Section of the General Conditions.

17 ARTICLE VIII Representatives of the Borrower; Addresses Section The Ministro de Hacienda of the Borrower is designated as representative of the Borrower for the purposes of Section of the General Conditions. Section The following addresses are specified for the purposes of Section of the General Conditions: For the Borrower: Ministerio de Hacienda Asunci6n Paraguay Cable address: MINHACIENDA Asunci6n For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C United States of America Cable address: INTBAFRAD Washington, D.C. Telex: (ITT) (RCA) or (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the

18 District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF PARAGUAY By 1 '-JI Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By / Regional Vice President Latin America and the Caribbean

19 SCHEDULE 1 Withdrawal of the Proceeds of the Loan and the Fund Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan and the Fund Loan, the allocation of the amounts of the Loan and the Fund Loan to each Category and the percentage of expenditures for items so to be financed in each Category; Amount of Amount of the the Loan Fund Loan Allocated Allocated % (Expressed (Expressed Expenditures in Dollar in Dollar to be Category Equivalent) Equivalent) Financed (1) Sub-loans under 4,000,000 3,000,000 70% of amounts Part A.1 of the disbursed by Project Banco Central, through FP for purposes of the Project (2) Sub-loans under 1,000,000 50% of amounts Part A.2 of the disbursed by Project Banco Central, through FP for purposes of the Project TOTAL 5,000,000 3,000, The disbursement percentages have been calculated in compliance with the policies of the Loan and the Fund that no proceeds of the Loan or the Fund Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan or the Fund Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such

20 item as required to be consistent with the aforementioned policies of the Bank and the Fund. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures: (a) prior to the date of this Agreement or, on account of Sub-loans or Free-limit Sub-loans, the date of the Fund Loan Agreement, if the latter shall be the later; and (b) by a Sub-borrower on account of Categories (1) and (2) in respect of a Sub-loan subject to the Bank's approval if such expenditures shall have been made more than ninety days prior to the date on which the Bank shall have received in respect of such Sub-loan the application and information required by Section 2.06 (a) of the Project Agreement or, in respect of a Free-limit Sub-loan, more than ninety days prior to the date on which the Bank shall have received in respect of such Free-limit Sub-loan the request and information required by Section 2.06 (b) of the Project Agreement. 4. Notwithstanding the allocation of an amount of the Loan or the Fund Loan or the disbursement percentages set forth in the table in paragraph 1 above, and without limitation upon the provisions of Section 3.04 of this Agreement, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures, provided, however, that no such reallocation of proceeds of the Fund Loan shall be made; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 5. If the Bank shall have reasonably determined that the procurement of any -item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting

21 any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan.

22 Part A: SCHEDULE 2 Description of the Project The Project consists of the following: 1. Selected pre-investment studies designed to prepare high-priority investment projects in the transport, agricultural, education, industry, public utilities, tourism and other economic sectors in Paraguay. 2. Selected sectoral and pre-feasibility studies, including studies focusing on institutional improvements required for strengthening economic agencies or administrative sub-divisions of the Borrower, designed to provide sectoral information apt to facilitate identification of high-priority investment projects in Paraguay, and to enhance the Borrower's project. execution capabilities. 3. Making of sub-loans by Banco Central, through FP, for purposes of financing 1 and 2 above. Part B: Strengthening the operations of: (a) ONP and the Borrower's Ministries of Agriculture and Public Works with regard to the identification and preparation of projects; and (b) The Borrower's National Development Bank with regard to promotion and evaluation of industrial projects. Part C: Establishment and operation, within the Borrower's Ministry of Finance, of the Financial Programming Unit. The Project is expected to be completed by December 31, 1983.

23 SCHEDULE 3 Amortization Schedule Date Payment Due Payment of Principal (expressed in dollars)* On each April 1 and October 1 beginning April 1, 1984 through April 1, ,000 On October 1, ,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal.

24 Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions or to Section 2.07 of the Loan Agreement: Time of Prepayment Premium Not more than three years before maturity 1.40% More than three years but not more than six years before maturity 2.80% More than six years but not more than eleven years before maturity 5.15% More than eleven years but not more than fifteen years before maturity 7.00% More than fifteen years before maturity 7.95%

25 SCHEDULE 4 Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods to be financed out of the proceeds of the Loan shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of international competitive bidding, and in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding, (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically manufactured goods; (ii) customs duties and other import taxes on goods evaluated on a c.i.f. basis, and sales and similar taxes (applicable to finished domestic products) on goods evaluated on an ex-factory basis, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in

26 Paraguay may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Paraguay if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Paraguay equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Paraguay. (3) Group C: bids offering any other goods. 3. All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C

27 which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures Cont.Lcts for goods which are estimated to cost less than the equivalent of $100,000 shall be procured through limited international tendering procedures satisfactory to the Bank, provided, however, that the contracts so awarded do not exceed in the aggregate the equivalent of $1,000,000. D. Review of Procurement Decisions by the BAnk 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equivalent of $50,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited.

28 (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the delivery to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other iiiormation as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination.

29 SCHEDULE 5 Functions and Staff of the Financial Programming Unit 1. Functions (a) To make available continually updated financial projections covering the entire public sector for the medium term, in line with the general goals of the development plan and the guidelines fixed by the fiscal policy for financing and public expenditure. (b) To establish the technical links of the major public sector financial aggregates (total expenditure, level and make-up of financing, investment, among others) with the monetary program, balance of payments and the short-term economic plan. Also, within this general economic framework, to lay the foundations for the annual formulation of the budget at the institution level. (c) To analyze the applications from the different public agencies with regard to domestic and external borrowing, verifying the existence of the projects concerned and paying special attention to the financial commitments that would be entailed, both in the execution stage (national counterpart funds required) and with regard to the service of the relevant debts in the future; to draw the authorities' attention to the need to provide for these financial impacts in the national budget for the fiscal year or years concerned; and to make the estimates of the financial commitments and tentative scheduling of the servicing payments on the borrowings envisaged. (d) To keep the Minister and the Ministry staff permanently informed regarding the status of negotiations concerning the above-mentioned operations. (e) To inform the Minister and the Vice Minister (Subsecretario) regarding public sector agency borrowings for which the guarantee of the Ministry would be required, drawing attention to their implications in terms of financial commitments (budgetary impact) in both the short and the medium term. In particular, it shall report periodically on the use of preinvestment funds and submit for their consideration any applications for guarantees from public agencies for studies not included in the Project, once the borrowing in question has been approved by the Management Committee of the Pre-investment Fund.

30 (f) To maintain close liaison with the pertinent technical agencies--banco Central, STP, ONP and the Directorate-General of the Budget--to ensure proper coordination of the work and to prevent any duplication. 2. Staff (a) Two experts with extensive experience in public sector financial administration (at least three years). (b) Three technical assistants with professional training in the financial area, but not necessarily with any previous experience, at least one of them with some training in computer programming. (c) Suitable secretarial and support staff.

31 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. In witness whereof I have signed this Certificate and affixed the Seal of the Bank thereunto this. ZZ day of O G., FOR SECRETARY