Public Disclosure Authorized. Public Disclosure Authorized. Public Disclosure Authorized. Public Disclosure Authorized CONFORMED COPY

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1 CONFORMED COPY LOAN NUMBER 3475 ME (Science and Technology Infrastructure Project) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated June 16, 1992 LOAN NUMBER 3475 ME GUARANTEE AGREEMENT AGREEMENT, dated June 16, 1992, between UNITED MEXICAN STATES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS: (A) The Bank has received from the Guarantor a statement on science and technology policy dated April 10, 1992 (the Science and Technology Policy Statement) describing a program of actions, objectives and policies designed to rationalize increased public sector funding for scientific research and equipment infrastructure and to achieve the modernization of the Guarantor s science and technology capability; (B) the Guarantor and Nacional Financiera S.N.C. (the Borrower), having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to the Loan Agreement to help achieve the objectives set forth in the Science and Technology Policy Statement, have requested the Bank to assist in the financing of the Project;

2 (C) by the Loan Agreement of even date herewith between the Bank and the Borrower, the Bank has agreed to extend to the Borrower a loan in various currencies equivalent to one hundred eighty-nine million dollars ($189,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower and to undertake such other obligations in respect of such loan as provided in this Agreement; and WHEREAS the Guarantor, in consideration of the Bank s entering into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower and to undertake such other obligations as provided in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth in the Loan Agreement (the General Conditions) constitute an integral part of this Agreement. Section Unless the context otherwise requires, the several terms defined in the General Conditions in the Preamble to this Agreement and in the Preamble to and Section 1.02 of the Loan Agreement have the respective meanings therein set forth. ARTICLE II Guarantee; Provision of Funds Section The Guarantor declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan, and the punctual performance of all the other obligations of the Borrower, CONACYT, CENAM, and IMPI, all as set forth in the Loan Agreement, the Project Agreements, and the IMPI contractual arrangements referred to in Section 3.01 (b) of the Loan Agreement. Section The Guarantor shall enter into the contractual arrangements referred to in Section 3.01 (a) of the Loan Agreement and, except as the Bank shall otherwise agree, shall not change or fail to enforce any provisions of such contractual arrangements. Section Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guarantor specifically undertakes, whenever there is reasonable cause to believe that the funds available to CONACYT, CENAM, or IMPI will be inadequate to meet the estimated expenditures required for the carrying out of their respective parts of the Project, to make arrangements, satisfactory to the Bank, promptly to provide CONACYT, CENAM, or IMPI, as the case may be, or cause them to be provided with such funds as are needed to meet such expenditures. ARTICLE III Execution of the Project Section Without any limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor shall: (a) carry out Part C of the Project through SECOFI/DGN with due diligence and efficiency and in conformity with the Standardization Program and appropriate financial, technical, administrative, scientific and environmental standards and practic-

3 es; and (b) shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part C of the Project. Section Except as the Bank shall otherwise agree, procurement of the goods 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 the Loan Agreement. Section With respect to the execution of Part D of the Project, the Guarantor shall: (i) issue a decree for the creation of IMPI and thereafter organize IMPI consistent with the provisions of the IMPI Project Document; and (ii) provide IMPI with a budgetary allocation for FY1993 adequate for the implementation of IMPI s FY1993 work program. Section The Guarantor shall carry out, or cause to be carried out, the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) with regard to Part C of the Project. Section With respect to the execution of Part C of the Project, the Guarantor shall cause SECOFI/DGN: (i) to carry out studies, on the basis of terms of reference satisfactory to the Bank, on privatization of the system of standards and the national laboratory infrastructure; (ii) to complete both studies and to forward a copy of them to the Bank for its review by November 15, 1992; and (iii) to provide to the Bank by November 15, 1992 for its review and approval the 1993 work program for SECOFI/DGN. Section The Guarantor shall complete the rehabilitation and adaptation of the installations of the Guarantor s former National Commission for Fruit Culture ("Comision Nacional de Fruticultura") in accordance with the provisions of the Guarantee Agreement ("Industrial Technology Development Project") dated September 28, 1986 between the Guarantor and the Bank and, upon completion, shall transfer legal title to the installations to CENAM. Section Without limitation upon the provisions of Section 9.01 of the General Conditions, the Guarantor through SECOFI/DGN shall: (a) no later than February 28 in each year, starting in 1993, hold annual reviews with the Bank on the progress of Part C of the Project and shall, for that purpose, provide the Bank with a progress report of such scope and detail as the Bank may reasonably request not later than January 31 of each year; (b) include in each progress report referred to in paragraph (a) above a comparison of actual performance with the implementation indicators set forth in the letter of even date herewith from the Guarantor to the Bank; (c) for the purpose of the annual review to be held in 1994, include in its progress report covering FY1993 a report on the progress made in achieving the objectives set out in the Standardization Program; (d) promptly take all such remedial action, satisfactory to the Guarantor and the Bank, as shall be necessary for the efficient execution of Part C of the Project or the achievement of the objectives of the Project if, as a result of any of the above annual reviews, progress in the execution of said Parts of the Project or in the achievement of the objectives of the Project is not satisfactory to the Bank; and (e) participate in the annual reviews of the progress of the execution of Parts A, B and D of the Project between the Bank and, respectively, CONACYT, CENAM and IMPI.

4 ARTICLE IV Financial Covenants Section (a) The Guarantor shall cause SECOFI/DGN to maintain records and separate accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in respect of Part C of the Project. (b) The Guarantor shall: (i) (ii) (iii) have the records and accounts referred to in paragraph (a) of this Section for each of its fiscal years audited, in accordance with generally accepted auditing standards and procedures consistently applied, by independent and qualified auditors; furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and furnish to the Bank such other information concerning said records and accounts as well as the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures for Part C of the Project with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Guarantor through SECOFI/DGN shall: (i) (ii) (iii) (iv) maintain, in accordance with paragraph (a) of this Section, records and separate accounts reflecting such expenditures; retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account or payment out of the Special Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; enable the Bank s representatives to examine such records; and ensure that such records and separate accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. (d) For all expenditures for Part C of the Project with respect to which withdrawals were made from the Special Account, the Guarantor shall provide to the Borrower any information that may be required by the Borrower to comply with the Borrower s obligations under Section 4.01 (b) of the Loan Agreement. ARTICLE V Representatives of the Guarantor; Addresses Section The Director General de Captacion de Credito

5 Externo of the Guarantor is designated as representative of the Guarantor 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 Guarantor: Secretaria de Hacienda y Credito Publico Direccion General de Captacion de Credito Externo Palacio Nacional Primer Patio Mariano, piso 4 Despacho Mexico, D.F. Mexico Telex: For the Bank: SHDCME 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: (RCA) (FTCC) (WUI) or (TRT) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in Mexico D. F., United Mexican States, as of the day and year first above written. UNITED MEXICAN STATES By /s/ Ernesto Zedillo Ponce De Leon Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Rainer B. Steckhan Acting Regional Vice President Latin America and the Caribbean