Loan Agreement. (Forest Products Transport Project) between REPUBLICA ORIENTAL DEL URUGUAY. and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Transcription

1 Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 4204-UR Public Disclosure Authorized Loan Agreement (Forest Products Transport Project) between REPUBLICA ORIENTAL DEL URUGUAY Public Disclosure Authorized Public Disclosure Authorized and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated July 1, 1997 LOAN AGREEMENT LOAN NUMBER 4204-UR AGREEMENT, dated July 1, 1997, between REPUBLICA ORIENTAL DEL URUGUAY (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) 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; (B) Parts A.2 and B.2 of the Project will be carried out by AFE with the Borrower s assistance and, as part of such assistance, the Borrower will make available to AFE the proceeds of the Loan allocated to such Parts of the Project as provided in this Agreement; (C) Parts A.3 and B.4 of the Project will be carried out by ANP with the Borrower s assistance and, as part of such assistance, the Borrower will make available to ANP the proceeds of the Loan allocated to such Part of the Project as provided in this Agreement; (D) the Borrower intends to contract a loan (the Foreign Loan) in an amount of $30,000,000 equivalent to assist in financing the Project on the terms and conditions set forth in an agreement (the Foreign Loan Agreement); and 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 and in: (a) the AFE Project Agreement of even date herewith between the Bank and AFE; and (b) the ANP Project Agreement of even date herewith between the Bank and ANP; NOW THEREFORE the parties hereto hereby agree as follows:

2 ARTICLE I General Conditions; Definitions Section The "General Conditions Applicable to Loan and Guarantee Agreements for Single Currency Loans" of the Bank, dated May 30, 1995 with the modification set forth below (the General Conditions) constitute an integral part of this Agreement. Section 6.03 is modified to read: "Section Cancellation by the Bank. If: (a) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty days; or (b) at any time, the Bank determines, after consultation with the Borrower, that an amount of the Loan will not be required to finance the Project s costs to be financed out of the proceeds of the Loan; or (c) at any time, the Bank determines, with respect to any contract to be financed out of the proceeds of the Loan, that corrupt or fraudulent practices were engaged in by representatives of the Borrower or of a beneficiary of the Loan during the procurement or the execution of such contract, without the Borrower having taken timely and appropriate action satisfactory to the Bank to remedy the situation, and establishes the amount of expenditures in respect of such contract which would otherwise have been eligible for financing out of the proceeds of the Loan; or (d) at any time, the Bank determines that the procurement of any contract to be financed out of the proceeds of the Loan is inconsistent with the procedures set forth or referred to in the Loan Agreement and establishes the amount of expenditures in respect of such contract which would otherwise have been eligible for financing out of the proceeds of the Loan; or (e) after the Closing Date, an amount of the Loan shall remain unwithdrawn from the Loan Account; or (f) the Bank shall have received notice from the Guarantor pursuant to Section 6.07 with respect to an amount of the Loan, the Bank may, by notice to the Borrower and the Guarantor, terminate the right of the Borrower to make withdrawals with respect to such amount. Upon the giving of such notice, such amount of the Loan shall be cancelled.". Section 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 meanings: (a) "AFE" means the State Railway Administration (Administración de Ferrocarriles del Estado) of the Borrower established pursuant to Law No ; (b) "AFE Financial Targets" means the targets to be met by AFE during the implementation of the Project, as such targets have been set forth in an annex to the Implementation Letter; (c) "AFE s Implementation Plan" means AFE s plan dated January 27, 1997, which sets forth, inter alia, the actions to be carried out by AFE in connection with the process of concessioning or contracting out its forest product operations, as such plan may be amended from time to time with the agreement of the Bank; (d) Agreement; "AFE PIU" means the unit referred to in Section 2.10 of the AFE Project (e) "AFE Project Agreement" means the agreement between the Bank and AFE of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the AFE Project Agreement; (f) "AFE Subproject" means a specific project which consists of: (i) the construction of railway stations and/or the rehabilitation of rail tracks within the Montevideo-Rivera and/or Montevideo-Blanquillo corridors; and/or (ii) the acquisition and utilization of track maintenance equipment; (g) "AFE Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and AFE pursuant to Section 3.01 (c) (i) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the AFE Subsidiary Loan Agreement; (h) "ANP" means the National Port Administration (Administración Nacional de

3 Puertos) of the Borrower established pursuant to Law No. 5495; (i) "ANP Financial Targets" means the targets to be met by ANP during the implementation of the Project, as such targets have been set forth in an annex to the Implementation Letter; (j) Agreement; "ANP PIU" means the unit referred to in Section 2.08 of the ANP Project (k) "ANP Project Agreement" means the agreement between the Bank and ANP of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the ANP Project Agreement; (l) "ANP Subproject" means a specific project which consists of the provision of maintenance or the improvement of the existing infrastructure in the ports of Montevideo and Fray Bentos for purposes of increasing the loading capacity of forest products in such ports; (m) "ANP Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and ANP pursuant to Section 3.01 (c) (ii) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the ANP Subsidiary Loan Agreement; (n) "Arrangement" means any of the arrangements referred to in Section 3.01 (f) (i) of this Agreement; (o) "BCU" means the Borrower s Central Bank (Banco Central del Uruguay); (p) "Cost-Sharing Agreement" means any of the agreements referred to in Section 3.01 (e) of this Agreement; (q) "Departmental Maintenance Subproject" means a specific project which consists of providing routine maintenance or periodic maintenance to gravel surfaced roads included in each of the roads maintenance programs of the Departamentos benefited by the Transport Project I; (r) "Departamento" means a political subdivision of the Borrower; (s) "DF" means the Forestry Directorate (Dirección Forestal) within the Ministry of Livestock, Agriculture and Fisheries (Ministerio de Ganadería, Agricultura y Pesca) of the Borrower; (t) "DNV" means the National Directorate of Roads (Dirección Nacional de Vialidad) within MTOP; (u) "Eligible Intendencia" means the government of a Departamento which is assisting the Borrower under the Transport Project I to carry out Departamental Maintenance Subprojects; (v) "Environmental Manual" means the Borrower s manual, satisfactory to the Bank, which sets forth, inter alia, the environmental guidelines to be used in the carrying out of the environmental assessments to be carried out under Part B.1 (c) of the Project; (w) "FP" means a forest producer operating in the Borrower s territory; (x) "Implementation Letter" means the letter from the Borrower to the Bank of even date herewith setting forth: (i) the AFE s Financial Targets; (ii) the ANP s Financial Targets; (iii) the Project s Performance Indicators; (iv) the time-bound action plan provided in Section 3.13 of this Agreement; and (v) the list of the positions for which personnel of MTOP, AFE and ANP will be assigned to the MTOP PIU, the AFE PIU and the ANP PIU, respectively; (y) "Infrastructure Subprojects" means collectively the AFE Subprojects, the ANP Subprojects and the MTOP Subprojects; (z) "Law No " means Ley No of the Borrower dated July 10, 1975 duly published in the official gazette (Diario Oficial) on July 17, 1975 which established AFE, and such term also includes the regulations to such law, as such law and regulations have been amended to the date of this Agreement; (aa) "Law No " means Ley No of the Borrower dated January 5,

4 1996 duly published in the official gazette (Diario Oficial) on January 12, 1996 which, inter alia, authorized AFE to concession its operations to the private sector, as such law has been amended to the date of this Agreement; (ab) "Law No. 5495" means Ley No of the Borrower dated July 21, 1916 which established ANP and such term also includes the regulations to such law, as such law and regulations have been amended to the date of this Agreement; (ac) "Law No " means Ley No of the Borrower dated April 8, 1992 duly published in the official gazette (Diario Oficial) on April 23, 1992 which, inter alia, authorized ANP to concession the operation of its ports to the private sector, and such term also includes the term 'Decree No. 555/92 (Decreto No. 555/92) of the Borrower dated November 16, 1992 which, inter alia, authorized ANP to administer the port of Fray Bentos, as such law and decree have been amended to the date of this Agreement; (ad) "MTOP" means the Ministry of Transportation and Public Works (Ministerio de Transportes y Obras Públicas) of the Borrower; (ae) "MTOP PIU" means the unit referred to in Section 3.06 of this Agreement; (af) "MTOP Subproject" means a specific project which consists of: (i) the rehabilitation of forest roads in the Borrower s national network; or (ii) the rehabilitation of regraveled forest roads in the Borrower s departmental network; (ag) "PCU" means the unit established in MTOP pursuant to the Borrower s resolution dated September 19, 1989; (ah) "Performance Indicators" means the indicators of Project inputs, outputs and impact set forth in an annex to the Implementation Letter, as such indicators may be amended from time to time with the agreement of the Bank; (ai) "Port/Rail Interface Working Group" means a group comprised of a representative from MTOP, AFE, ANP and the Office for Planning and Budget (Oficina de Planeamiento y Presupuesto) of the Borrower, duly established pursuant to the Borrower s resolution dated March 19, 1997 for purposes of planning and coordinating the design of the port/rail interface in the ports of Montevideo and Fray Bentos; (aj) "Railway Concession Working Group" means a group comprised of a representative from MTOP, AFE and the Office of Planning and Budget (Oficina de Planeamiento y Presupuesto), duly established pursuant to the Borrower s resolution dated March 19, 1997 for purposes of assisting AFE in the implementation of AFE s Implementation Plan; (ak) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; and (al) "Transport Project I" means the Borrower s project financed in part with the proceeds of Loan No UR as provided in the Loan Agreement entered into between the Borrower and the Bank on April 6, 1989, as such agreement has been amended to the date of this Agreement. ARTICLE II The Loan Section The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount equal to seventy six million Dollars ($76,000,000). Section (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 a special deposit account in BCU on terms and conditions satisfactory to the Bank. Deposits into, and payments out of the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section The Closing Date shall be December 31, 2001 or such later date as

5 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 percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section (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 LIBOR Base Rate plus LIBOR Total Spread. (b) For the purposes of this Section: (i) "Interest Period" means the initial period from and including the date of this Agreement to, but excluding, the first Interest Payment Date occurring thereafter, and after the initial period, each period from and including an Interest Payment Date to, but excluding the next following Interest Payment Date. (ii) "Interest Payment Date" means any date specified in Section 2.06 of this Agreement. (iii) "LIBOR Base Rate" means, for each Interest Period, the London interbank offered rate for six-month deposits in Dollars for value the first day of such Interest Period (or, in the case of the initial Interest Period, for value the Interest Payment Date occurring on or next preceding the first day of such Interest Period), as reasonably determined by the Bank and expressed as a percentage per annum. (iv) "LIBOR Total Spread" means, for each Interest Period: (A) one half of one percent (1/2 of 1%); (B) minus (or plus) the weighted average margin, for such Interest Period, below (or above) the London interbank offered rates, or other reference rates, for six-month deposits, in respect of the Bank s outstanding borrowings or portions thereof allocated by the Bank to fund single currency loans or portions thereof made by it that include the Loan; as reasonably determined by the Bank and expressed as a percentage per annum. (c) The Bank shall notify the Borrower of LIBOR Base Rate and LIBOR Total Spread for each Interest Period, promptly upon the determination thereof. (d) Whenever, in light of changes in market practice affecting the determination of the interest rates referred to in this Section 2.05, the Bank determines that it is in the interest of its borrowers as a whole and of the Bank to apply a basis for determining the interest rates applicable to the Loan other than as provided in said Section, the Bank may modify the basis for determining the interest rates applicable to the Loan upon not less than six months notice to the Borrower of the new basis. The basis shall become effective on the expiry of the notice period unless the Borrower notifies the Bank during said period of its objection thereto, in which case said modification shall not apply to the Loan. Section Interest and other charges shall be payable on April 15 and on October 15 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. ARTICLE III Execution of the Project Section (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall: (i) carry out Parts A.1, B.1 and B.3 of the Project through MTOP; and (ii) carry out Part A.4 of the Project through MTOP and with the participation of the Eligible Intendencias (as provided in paragraph (f) below) with due diligence and efficiency and in conformity with appropriate administrative, technical, financial, engineering and environmental practices, and in accordance with the Environmental Manual, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project.

6 (b) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall: (i) cause AFE to perform in accordance with the provisions of the AFE Project Agreement all the obligations of AFE therein set forth; and (ii) cause ANP to perform in accordance with the provisions of the ANP Project Agreement all the obligations of ANP 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 AFE and ANP to perform such obligations, respectively, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (c) The Borrower shall: (i) relend the proceeds of the Loan allocated to Parts A.2 and B.2 of the Project (as the amount of such proceeds is indicated in Categories (3), (5) and (6) (b) set forth in the table of paragraph 1 of Schedule 1 to this Agreement) to AFE under a subsidiary loan agreement (the AFE Subsidiary Loan Agreement) to be entered into between the Borrower and AFE, under terms and conditions which shall have been approved by the Bank which shall include, inter alia, mutatis mutandis, the procurement provisions referred to in Section 3.02 of this Agreement; and (ii) relend the proceeds of the Loan allocated to Parts A.3 and B.4 of the Project (as the amount of such proceeds is indicated in Categories (4) and (6) (d) set forth in the table in paragraph 1 of Schedule 1 to this Agreement) to ANP under a subsidiary loan agreement (the ANP Subsidiary Loan Agreement) to be entered into between the Borrower and ANP, under terms and conditions which shall have been approved by the Bank which shall include, inter alia, mutatis mutandis, the procurement provisions referred to in Section 3.02 of this Agreement. (d) The Borrower shall exercise its rights under the AFE Subsidiary Loan Agreement and ANP Subsidiary Loan 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, amend, abrogate, terminate, waive or fail to enforce the AFE Subsidiary Loan Agreement or the ANP Subsidiary Loan Agreement or any provision thereof. (e) (i) For purposes of carrying out MTOP Subprojects (under Part A.1 of the Project) which include the rehabilitation of departmental forest roads which link forest plantations to the Borrower s national network, the Borrower shall, prior to the carrying out of any such type of MTOP Subproject, enter into a cost-sharing agreement (the Cost-Sharing Agreement) with each FP to be benefited by such type of MTOP Subproject under terms and conditions satisfactory to the Bank, including, inter alia, the obligation of the FP to provide the portion of counterpart funds (to be calculated in a manner acceptable to the Bank) necessary to carry out such type of MTOP Subproject; and (ii) except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate, terminate, waive or fail to enforce any Cost-Sharing Agreement or any provision thereof. (f) (i) For purposes of carrying out Departmental Maintenance Subprojects (under Part A.4 of the Project), the Borrower shall enter into an arrangement (the Arrangement) with each Eligible Intendencia (which has jurisdiction over the corresponding Departmental Maintenance Subproject) under terms and conditions satisfactory to the Bank, including, inter alia, the obligation of each Eligible Intendencia to assist the Borrower in the carrying out of each such subproject; and (ii) except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate, terminate, waive or fail to enforce any Arrangement or any provision thereof. Section 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 provisions of Schedule 4 to this Agreement. Section 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. Section 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) in respect of: (a) Parts A.2

7 and B.2 of the Project; and (b) Parts A.3 and B.4 of the Project, shall be carried out by AFE and ANP pursuant to Sections 2.03 of the AFE Project Agreement and ANP Project Agreement, respectively. Section (a) The Borrower shall continue to operate and maintain during the implementation of the Project the PCU with functions and responsibilities satisfactory to the Bank, including, inter alia, the responsibility of assisting the Borrower in the coordination of the Project. (b) The Borrower shall ensure that the PCU is at all times headed by a Project coordinator and assisted by staff in adequate numbers, all with qualifications acceptable to the Bank. Section (a) The Borrower shall establish within DNV, and thereafter operate and maintain during the implementation of the Project a Project implementation unit (the MTOP PIU) with functions and responsibilities satisfactory to the Bank, including, inter alia, the responsibility of assisting the Borrower in the carrying out of Parts A.1, A.4 and B.1 of the Project. (b) The Borrower shall ensure that the MTOP PIU is at all times headed by a coordinator and assisted by staff in adequate numbers, all with qualifications acceptable to the Bank. Section The Borrower shall: (a) not later than December 31, 1997 complete the review of the recommendations resulting from the carrying out of the road-user charge receipts study being carried out under the Transport Project I; (b) not later than February 28, 1998 furnish to the Bank for its review and comments, if any, the results of the review of such recommendations by the Borrower; and (c) not later than June 30, 1998 undertake the necessary actions to implement the recommendations (including any Bank s comments thereon) of such study. Section Without limitation to the provisions of Section 3.01 (a) of this Agreement, the Borrower shall: (a) not later than June 30, 1998 complete the carrying out of the study mentioned in Part B.1 (b) of the Project; and (b) not later December 31, 1998 (and every two years thereafter until the completion of the Project) carry out a survey of the forest producers and shippers of forest products in order to update the information contained in the study mentioned in (a) herein. Section The Borrower shall: (a) not later than six months after the Effective Date prepare and furnish to the Bank a plan, satisfactory to the Bank, to monitor the Borrower s truck overloading and safety; and (b) not later than December 31, 1998 complete the implementation of such plan. Section The Borrower shall not later than June 30 of each year of Project implementation, starting in June 1998, furnish to the Bank the statistics published by DF with respect to the number of hectares of forested and grassland areas by Departamento since Section Without limitation to the provisions of Section 9.07 of the General Conditions, the Borrower shall not later than thirty days after the conclusion of each calendar semester, starting in December 1997, prepare and furnish to the Bank a report of such scope and in such detail as the Bank shall reasonably request with respect to the progress made by the Borrower, AFE and ANP in the carrying out of their corresponding Parts of the Project in accordance with the Performance Indicators. Section Without limitation to the provisions of Section 9.01 of the General Conditions, the Borrower shall not later than twenty four months after the Effective Date review jointly with AFE, ANP and the Bank the pertinent reports mentioned in Section 3.11 of this Agreement in order to determine the progress made by the Borrower, AFP and ANP in the carrying out of their corresponding Parts of the Project and in achieving the objectives of the Project. As part of such review the Bank may require the Borrower to prepare an action plan, satisfactory to the Bank, to make adjustments in Project implementation. If so, the Borrower shall: (a) not later than forty five calendar days after the conclusion of such review prepare and furnish to the Bank such action plan; and (b) thereafter carry out such action plan in accordance with its terms. Section The Borrower shall, prior to the signing of the contract with the winning bidder which will carry out the works under the MTOP Subproject (which consists of the rehabilitation of the San Jacinto-Route 12 link to Route 7), carry out or cause to be carried out the time-bound action plan referred to in an annex to the Implementation Letter in accordance with its terms.

8 Section The Borrower shall, if applicable, include in the bidding documents for the carrying out of each MTOP Subproject the obligation of the bidder to take (prior to the commencement of any works under such MTOP Subproject) the necessary actions to address any potential negative environmental impact identified in the environmental assessment carried out under Part B.1 (c) of the Project. Section The Borrower shall not later than six months after the Effective Date adopt and operate during the implementation of the Project a Project management information system, satisfactory to the Bank. Section The Borrower, through the Port/Rail Interface Working Group, shall: (a) not later than January 31, 1998 prepare and furnish to the Bank an action plan, satisfactory to the Bank with respect to the necessary actions to be taken to carry out the works in the port/rail interface in the Port of Montevideo; and (b) not later than June 30, 1998 commence the carrying out of such action plan in accordance with its terms. Section The Borrower shall: (a) take all the necessary actions to provide AFE the necessary annual budgetary allocations to operate its maintenance-of-way system in accordance with the provisions of the AFE Subsidiary Loan Agreement; and (b) not later than three years after the Effective Date eliminate the subsidy granted to AFE to carry out its operations. Section Without limitation to the provisions of Section 3.01 (a) (ii) of this Agreement, the Borrower shall not later than twelve months after the Effective Date complete the carrying out of Part A.4 of the Project. Section The Borrower shall: (a) assist AFE, through the Railway Concession Working Group, in carrying out AFE s Implementation Plan in accordance with its terms; and (b) participate with the Bank and AFE in the review referred to in Section 2.08 (b) of the AFE Project Agreement. ARTICLE IV Financial Covenants Section (a) The Borrower shall maintain or cause to be maintained records and separate accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of Parts A.1, A.4, B.1 and B.3 of the Project of the departments or agencies of the Borrower responsible for carrying out such Parts of the Project or any part thereof. (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 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 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 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 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

9 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. ARTICLE V Remedies of the Bank Section Pursuant to Section 6.02 (l) of the General Conditions, the following additional events are specified: (a) That AFE shall have failed to perform any of its obligations under the AFE Project Agreement. (b) That ANP shall have failed to perform any of its obligations under the ANP Project Agreement. (c) As a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that AFE and/or ANP will be able to perform their obligations under the AFE Project Agreement or ANP Project Agreement, respectively. (d) That Article 752 of Law No shall have been amended, suspended, abrogated, repealed, waived or not enforced so as to materially and adversely affect, in the opinion of the Bank, the ability of AFE to perform any of its obligations under the AFE Project Agreement. (e) That Law No or any provision thereof shall have been amended, suspended, abrogated, repealed, waived or not enforced so as to materially and adversely affect, in the opinion of the Bank, the ability of AFE to perform any of its obligations under the AFE Project Agreement. (f) That Law No or any provision thereof shall have been amended, suspended, abrogated, repealed, waived or not enforced so as to materially and adversely affect, in the opinion of the Bank, the ability of ANP to perform any of its obligations under the ANP Project Agreement. (g) That Law No or any provision thereof shall have been amended, suspended, abrogated, repealed, waived or not enforced so as to materially and adversely affect, in the opinion of the Bank, the ability of ANP to perform any of its obligations under the ANP Project Agreement. (h) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any loan (including the Foreign Loan) made to the Borrower for the financing of the Project shall have been suspended, canceled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor (including the Foreign Loan Agreement); or (B) any such loan (including the Foreign Loan) shall have become due and payable prior to the agreed maturity thereof. (ii) (iii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement (including the Foreign Loan Agreement); and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of AFE and/or ANP or for the suspension of their operations. Section Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) Any event specified in paragraphs (a) or (b) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower.

10 (b) Any event specified in paragraphs (d) or (e) or (f) or (g) or (i) of Section 5.01 of this Agreement shall occur. (c) The event specified in paragraph (h) (i) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (h) (ii) of that Section. ARTICLE VI 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) thereto. (b) thereto. That the AFE Subsidiary Loan Agreement has been signed by the parties That the ANP Subsidiary Loan Agreement has been signed by the parties (c) That the Foreign Loan Agreement has been signed by the parties thereto and all conditions precedent to its effectiveness or to the right of the Borrower to make withdrawals thereunder, except only the effectiveness of the Loan Agreement, have been fulfilled. (d) (i) That the MTOP PIU has been established as provided in Section 3.06 of this Agreement; and (ii) that the MTOP has assigned the personnel to the positions listed in an annex to the Implementation Letter for the MTOP PIU. (e) (i) That the AFE PIU and ANP PIU have been established as provided in Sections 2.09 and 2.08 of the AFE Project Agreement and the ANP Project Agreement, respectively; and (ii) that AFE and ANP have assigned the personnel to the positions listed in an annex to the Implementation Letter for the AFE PIU and ANP PIU, respectively. (f) to the Bank. That the Environmental Manual has been amended in a manner satisfactory Section The following are specified as additional matters, with the meaning of Section (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) That the AFE Project Agreement has been duly authorized or ratified by AFE, and is legally binding upon AFE in accordance with its terms. (b) That the AFE Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and AFE, and is legally binding upon the Borrower and AFE in accordance with its terms. (c) That the ANP Project Agreement has been duly authorized or ratified by ANP, and is legally binding upon ANP in accordance with its terms. (d) That the ANP Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and ANP, and is legally binding upon the Borrower and ANP in accordance with its terms. Section The date September 29, 1997 is hereby specified for the purposes of Section of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section The Minister of MTOP 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:

11 Ministerio de Transporte y Obras Públicas Rincón 561 esq. Ituzaingo Montevideo, Uruguay Cable address: Telex: For the Bank: MINTRANSP Montevideo, Uruguay International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C United States of America Cable address: Telex: INTBAFRAD (MCI) or Washington, D.C (MCI) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in Montevideo, Uruguay, as of the day and year first above written. REPUBLICA ORIENTAL DEL URUGUAY By /s/ Luis Mosca Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Shahid Javed Burki Regional Vice President Latin America and the Caribbean 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 Dollars) to be Financed (1) Works under MTOP Subprojects for: (a) national forest roads 25,216,000) 50% ) (b) departmental forest 2,771,000) roads ) (2) Works under Departmental 6,000,000 50% Maintenance Subprojects

12 (3) Works under AFE 19,501,000 50% Subprojects (4) Works under ANP 5,267,000 50% Subprojects (5) Goods under AFE 4,041, % of foreign Subprojects expenditures and 100% of local expenditures (ex-factory cost) (6) Consultants services (a) under Part B.1 of the 2,800,000) Project ) 50% ) (b) under Part B.2 of the 328,000) Project ) (c) under Part B.3 of the 75,000) 50% Project ) ) (d) under Part B.4 of the 354,000) Project (7) Unallocated 9,648,000 TOTAL 76,000, For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 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 exceeding the equivalent of $15,000,000, may be made in respect of Categories (1) through (4) set forth in the table in paragraph 1 of this Schedule on account of payments made for expenditures before that date but within twelve months of the date of this Agreement; and (b) payments made for expenditures under Category (2) of the table in paragraph 1 of this Schedule for the financing of each Departmental Maintenance Subproject unless the corresponding Arrangement has been signed by the parties thereto. 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 goods under AFE Subprojects costing $350,000 equivalent or less; (b) contracts for works under Infrastructure Subprojects costing $3,000,000 equivalent or less with the exception of the first contract for works under any Infrastructure Subproject to be awarded under Part C.1 (a) of Section I of Schedule 4 to this Agreement; (c) contracts for works under Departmental Maintenance Subprojects; (d) contracts for the employment of consulting firms costing less than $100,000 equivalent each; and (e) contracts for the employment of individual consultants costing less than $50,000 equivalent each, all under such terms and conditions as the Bank shall specify by notice to the Borrower. SCHEDULE 2 Description of the Project The objectives of the Project are: (a) to improve the transport of forestry products from the place of forest extraction to the port of exit through the carrying out of Infrastructure Subprojects to minimize the total transportation costs; (b) to increase the productivity in the road and ports sectors as a result of achieving the objective mentioned in (a) herein; and (c) to improve the efficiency of AFE and reduce

13 the subsidies allocated to such entity through the promotion of private sector participation in the operations and transport of forest products. 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: Infrastructure and Equipment 1. Carrying out of MTOP Subprojects. 2. Carrying out of AFE Subprojects. 3. Carrying out of ANP Subprojects. 4. Carrying out of Departmental Maintenance Subprojects. Part B: Institutional and Policy Development 1. Provision of technical assistance to the Borrower to: (a) introduce, if necessary, a road user charges system to reflect the actual cost incurred by each mode of transportation in its territory; (b) carry out a study of its trucking industry; (c) carry out economic, engineering and environmental analyses and/or assessments of the Infrastructure Subprojects and of those works which may be required for a possible expansion of its transport network; and (d) supervise the carrying out of the MTOP Subprojects and the Departmental Maintenance Subprojects. 2. Provision of technical assistance to AFE: (a) to assist it in the reorganization of its institutional structure, through, inter alia, the promotion of private sector participation in the carrying out of its forest products operations; and (b) to supervise the carrying out of AFE Subprojects. 3. Strengthening of the management capacity of the PCU. 4. Provision of technical assistance to ANP to supervise the carrying out of ANP Subprojects. * * * The Project is expected to be completed by June 30, SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (Expressed in Dollars)* On each April 15 and October 15 beginning October 15, 2002 through April 15, ,800,000

14 * The figures in this column represent the amount in Dollars to be repaid, except as provided in Section 4.04 (d) of the General Conditions. SCHEDULE 4 Procurement and Consultants Services Section I. Part A: Procurement of Goods and Works 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 and revised in January and August 1996 (the Guidelines) and the following provisions of Section I of this Schedule. Part B: International Competitive Bidding 1. Except as otherwise provided in Part C of this Section, goods and works under Infrastructure Subprojects 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 and works to be procured under contracts awarded in accordance with the provisions of paragraph 1 of this Part B. (a) Prequalification Bidders for Infrastructure Subprojects estimated to cost $10,000,000 equivalent or more shall be prequalified in accordance with the provisions of paragraphs 2.9 and 2.10 of the Guidelines. (b) Grouping of contracts To the extent practicable, contracts for goods under AFE Subprojects and works under Infrastructure Subprojects shall be grouped in bid packages estimated to cost more than $350,000 equivalent each and $3,000,000 equivalent each, respectively. (c) 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. (d) Notification and Advertising The invitation to prequalify or bid for each contract estimated to cost $10,000,000 equivalent or more shall be advertised in accordance with the procedures applicable to large contracts under paragraph 2.8 of the Guidelines. Part C: Other Procurement Procedures 1. National Competitive Bidding (a) Works under Infrastructure Subprojects estimated to cost $3,000,000 equivalent or less per contract, up to an aggregate amount not to exceed $10,500,000 equivalent, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines. (b) Procurement of all works under Part C.1 (a) herein shall be carried out using standard bidding documents acceptable to the Bank. 2. Force Account Departmental Maintenance Subprojects shall, with the Bank s prior agreement, be carried out by force account in accordance with the provisions of paragraph 3.8 of the Guidelines.

15 Part D: Review by the Bank of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to prequalify for bidding or 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 1 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 Prior Review With respect to: (a) each contract for goods and works to be awarded under Part B.1 of this Section; and (b) the first contract for works to be awarded under Part C.1 (a) of this Section, 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, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II. Part A: Employment of Consultants General Consultants services shall be procured in accordance with the provisions of the Introduction and Section IV of the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" published by the Bank in January 1997 (the Consultant Guidelines) and the following provisions of Section II of this Schedule. Part B: Quality- and Cost-based Selection 1. Except as otherwise provided in Part C of this Section, consultants services shall be procured under contracts awarded in accordance with the provisions of Section II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to quality- and cost-based selection of consultants. Part C: Other Procedures for the Selection of Consultants 1. Selection Under a Fixed Budget Services under Parts B.1 (d), B.2 (b) and B.4 of the Project may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.5 of the Consultant Guidelines. 2. Single Source Selection Services under Parts B.2 (a) and B.3 of the Project may, with the Bank's prior agreement, be procured in accordance with the provisions of paragraphs 3.8 through 3.11 of the Consultant Guidelines. 3. Individual Consultants Services under Part B of the Project may be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines. Part D: Review by the Bank of the Selection of Consultants 1. Selection Planning Prior to the issuance to consultants of any requests for proposals, the proposed plan for the selection of consultants under the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Consultant Guidelines. Selection of all consultants services shall be undertaken in accordance with such selection plan as shall have been approved by the Bank, and with the provisions of said paragraph 2. Prior Review (a) With respect to each contract for the employment of consulting firms to be awarded under Part B of the Project estimated to cost the equivalent of $100,000 or more, the procedures set forth in paragraphs 1, 2 (other than the second subparagraph

16 of paragraph 2 (a)) and 5 of Appendix 1 to the Consultant Guidelines shall apply. (b) With respect to each contract for the employment of consulting services to be awarded under Part B of the Project estimated to cost the equivalent of $50,000 or more, the qualifications, experience, terms of reference and terms of employment of the consultants shall be furnished to the Bank for its prior review and approval. The contract shall be awarded only after said approval shall have been given. 3. Post Review With respect to each contract not governed by paragraph 1 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall apply. Section III. Special Provisions A. In addition and without limitation to any other provisions set forth in this Schedule or the Guidelines, the following principles and rules of procurement shall expressly govern all procurement of works under Infrastructure Subprojects referred to in Part C.1 (a) of Section I of this Schedule. The principle and rule of procurement referred to in paragraph 5 below also governs all procurement of goods under AFE Subprojects and works under Infrastructure Subprojects referred to in Part B.1 of Section I of this Schedule. 1. The lowest evaluated bid shall be selected for contract award. 2. Foreign bidders shall be allowed to participate in national competitive bidding. 3. Foreign bidders may be required as a prerequisite for bidding to be registered with local authorities, provided, however, that the information to be requested to such bidders is of such nature that it will not discourage their participation. 4. There will be no prescribed minimum number of bids to be submitted in order for a contract to be subsequently awarded. 5. Foreign bidders shall not be required to legalize (legalizar) their bid documents or any documentation related to such bidding procedure with Uruguayan authorities as a prerequisite for bidding. B. In addition and without limitation to any other provisions set forth in this Schedule or the Consultant Guidelines, the following principles and rules of procurement shall expressly govern all procurement of consultants services referred to in Section II of this Schedule. 1. Foreign consultants shall not, as a condition for participating in the selection process, be required to enter into a joint venture agreement with local consultants. 2. The prices of contracts over one year duration may be adjusted. 3. Foreign consultants shall not be required to legalize (legalizar) their proposals or any documentation related to such proposals with Uruguayan authorities as a prerequisite for participating in the selection procedure. 1. For the purposes of this Schedule: SCHEDULE 5 Special Account (a) the term "eligible Categories" means Categories (1) through (6) set forth in the table in paragraph 1 of Schedule 1 to this Agreement in respect of the Project; (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 $7,500,000 to be withdrawn from the Loan Account and deposited into 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