Project Agreement. Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 1563 BR. Public Disclosure Authorized. (Urban Transport Project)

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1 Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 1563 BR Public Disclosure Authorized Project Agreement (Urban Transport Project) Public Disclosure Authorized between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and EMPRESA BRASILEIRA DOS TRANSPORTES URBANOS - EBTU Public Disclosure Authorized Dated May 22, 1978

2 LOAN NO BR PROJECT AGREEMENT AGREEMENT, dated May 22, 1978, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and EMPRESA BRASILEIRA DOS TRANSPORTES URBANOS - EBTU (hereinafter called EBTU). WHEREAS (A) by the Loan Agreement of even date herewith between the Federative Republic of Brazil (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to eighty-eight million dollars ($88,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition inter alia that EBTU agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) the proceeds of the loan provided for under the Loan Agreement will be made available by the Borrower to EBTU for the benefit of the Executing Entities (as this term is defined in the Loan Agreement) and EBTU on the terms and conditions set forth in the Loan Agreement; and WHEREAS EBTU, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section Wherever used in this Agreement, unless the context shall otherwise require, the several terms defirned in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth and the term "FDTU" means Fundo de Desenvolvimento dos Transportes Urbanos (FDTU), a sub-account of the Fundo Nacional de Apoio ao Desenvolvimento Urbano (FNDU), established by Lei No of November 14, 1975, of the Borrower, and administered by EBTU.

3 -2- ARTICLE II Execution of the Project Section EBTU shall: (a) act as agent of the Borrower for purposes of Parts A to E of the Project described in Schedule 2 to the Loan Agreement, (b) carry out a detailed appraisal of Part A of the Project in accordance with appraisal guidelines approved by the Bank, including those set forth in Schedule 3 to this Agreement, (c) supervise the execution of Parts A to E of the Project, and (d) carry out Part F of the Project described in Schedule 1 to this Agreement, all with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and urban transport practices. Sectiou (a) For the purpose of carrying out a detailed appraisal of Part A of the Project, EBTU shall establish an appraisal team consisting of qualified and experienced staff from its technical, institutional relations/operations and financial/ administration directorates. (b) In order to supervise the execution of Parts A to E of the Project, EBTU shall maintain, during the execution of the Project, a qualified and experienced general coordinator, assisted by EBTU staff as required. EBTU shall notify the Bank of any proposed change in the position of the general coordinator. Such general coordinator shall closely work together with the coordinators appointed, for the purpose of the Project, in the metropolitan regions of Belo Horizonte, Porto Alegre, Recife and Salvador and in the city of Curitiba. Section (a) EBTU shall enter into Convenios, satisfactory to the Bank, with the Executing Entities for each of Parts A to E of the Project for the purpose of determining the rights and obligations of EBTU, SEPLAN/PR, the Ministry of Transport of the Borrower, CNPU and the Executing Entities in respect of the carrying out of each such Part of the Project. Such Convenios shall include: (i) the obligation of EBTU to provide the Executing Entities out of FDTU resources and the proceeds of the Loan with seventy per cent (70%) of the funds necessary for the carrying out of each such Part of the Project; and (ii) the obligation of the Executing Entities to provide the remaining thirty per cent (30%) required for such purpose, all pursuant to the financing plan set forth in Schedule 2 to this Agreement.

4 - 3 - (b) EBTU shall not amend, abrogate or waive any provision of the Convenios without the Bank's approval. Section In order to assist EBTU in the carrying out of Part F of the Project, EBTU shall employ experts whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Section EBTU shall arrange for the advertising twice yearly of all the goods and civil works required for the Project and to be procured during the six-months period following such advertising in accordance with advertising procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March Section 2.06, Except as the Bank may otherwise agree, EBTU shall cause all services procured for Part F of the Project and financed out of the proceeds of the Loan made available to it by the Borrower to be used exclusively for such part of the Project. Section (a) EBTU shall furnish to the Bank, promptly upon their preparation, such plans, specifications, reports, contracts documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, as the Bank shall reasonably request. (b) EBTU: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan made available to it by the Borrower, and to disclose their use in the Project; (ii) shall enable the Bank's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan so made available to it and the goods and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Bank and

5 -4- EBTU, EBTU shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Bank and EBTU of their respective obligations under this Agreement and the accomplishment of the purposes of the Loan. Section (a) EBTU shall, at the request of the Bank, exchange views with the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Convenios, and other matters relating to the purposes of the Loan. (b) EBTU shall promptly inform the Bank of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by EBTU of its obligations under this Agreement and under the Convenios. ARTICLE III Management and Operations of EBTU Section EBTU shall at all times manage its affairs and carry on its operations, all in accordance with appropriate administrative, financial, engineering and urban transport policies and practices. Section (a) EBTU shall operate under qualified and experienced management as shall be required to further the objectives of the Project. (b) EBTU shall, not later than July 1, 1978 or such later date as the Bank shall agree, establish a procurement unit in order to assist the Executing Entities in the procurement of goods and civil works for the Project. (c) EBTU shall: (i) prepare through the procurement unit referred to in paragraph (b) of this Section semiannual reports on the bid evaluation and award of all contracts for civil works and equipment under the equivalent of $1,500,000, let by the Executing Entities during the preceding six months; and (ii) furnish to the Bank for its review these reports not later than three months after the end of each such six-month period.

6 -5- Section Except as the Bank shall otherwise agree, EBTU shall: (i) not later than June 30, 1979, review and, if necessary, modify, with the assistance as required of the experts referred to in Section 2.04 of this Agreement, its guidelines for the preparation and evaluation of urban transport projects; (ii) not later than December 31, 1979, furnish such guidelines to the Bank for its comments; and (iii) develop procedures for such guidelines' application, by a date not later than June 30, 1980, to urban transport projects for which EBTU's financial assistance is requested. Section EBTU shall furnish to the Bank, during the first quarter of each of the years 1979 through 1982, a statement of its operations during the preceding year for the Bank's comments. Section EBTU shall use its best efforts to obtain CTU's agreement to modify the policy tying, the issuance of new bus permits (permiss5es) to CTU's share of the total bus fleet in Recife. Section EBTU shall establish, not later than September 30, 1978 or such later date as the Bank shall agree, a monitoring program for each of Parts A through E of the Project satisfactory to the Bank. ARTICLE IV Financial Covenants Section (a) EBTU shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. (b) Without limitation upon the generality of paragraph (a) of this Section, EBTU shall also maintain a consolidated Project account to reflect the operations, resources and expenditures, in respect of all parts of the Project, of EBTU and of the Executing Entities and their departments and agencies responsible for carrying out the Project or any part thereof. Section (a) EBTU shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii)

7 -6- 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 copies of its financial statements for such year as so audited and (B) 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 the accounts and financial statements of EBTU and the audit thereof as the Bank shall from time to time reasonably request. a (b) EBTU shall: (i) have the accounts and financial statements of the Executing Entities and their departments and agencies, related to the Project or any part thereof, for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; and (ii) furnish to the Bank upon the Bank's request the report of such audit by said auditors and other related information, of such scope and in such detail as the Bank shall have reasonably requested. Section EBTU shall, during the execution of the Project: (i) inform the Bank of any major urban transport investment proposed for EBTU financing in the metropolitan regions of Belo Horizonte, Porto Alegre, Recife and Salvador and in the city of Curitiba; (ii) provide information on the impact of such investment upon the Project; and (iii) afford the Bank a reasonable opportunity to comment on such investment. For purposes of this Section, the term "major urban transport investment" means any single investment of more than the equivalent of $10,000,000. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section This Agreement and all obligations of the Bank and of EBTU thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify EBTU thereof.

8 -7- Section All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: 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) For EBTU: Empresa Brasileira dos Transportes Urbanos - Edificio Toufic Brasilia, D.F. Brazil EBTU Cable address: Telex: EBTU Brasilia

9 -8 - Section Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of EBTU, or by EBTU on behalf of the Borrower under the Loan Agreement, may be taken or executed by its President or such other person or persons as he shall designate in writing, and EBTU shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 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 City of Brasilia, D. F., Federative Rejpublic of Brazil, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Humayun Mirza Authorized Representative EMPRESA BRASILEIRA DOS TRANSPORTES URBANOS - EBTU By /s/ Alberto Silva Authorized Representative By Is! Gil Cesar Moreira Abreu Authorized Representative

10 - 9 - SCHEDULE 1 Description of Part F of the Project Technical Assistance 1. Provision of experts to EBTU with the objective of strengthening the capacity of EBTU and such other agencies as may be appropriate to design, evaluate and supervise urban transport projects. 2. Execution of studies to: (a) monitor the results of the Project, with particular em,thasis on the exclusive bus lanes and the interaction of land use and transport; (b) determine the effects of transport deficiencies on the low-income urban population; (c) analyze and evaluate the concept and development of Metropolitan Urban Transport Companies (EMTU's) in Brazil; and (d) determine the potential for introducing road pricing in Brazilian cities. 3. Provision of educational visits for personnel of EBTU, the Executing Entities and, if necessary of other agencies as the Bank shall agree, to cities outside of Brazil where new approaches to urban transport are being utilized.

11 SCHEDULE 2 Financing Plan Funds from Proceeds FDTU Executing of the Loan resources Entities $ equivalent Part A of the Project 15,700,000 15,800,000 13,500,000 (Belo Horizonte) Part B of the Project 20,800,000 20,800,000 17,900,000 (Curitiba) Part C of the Project 18,000,000 18,000,000 15,500,000 (Porto Alegre) Part D of the Project 15,600,000 15,600,000 13,300,000 (Recife) Part E of the Project 15,600,000 15,600,000 13,300,000 (Salvador)

12 SCHEDULE 3 Guidelines for the Appraisal of Part A of the Project The objective of the appraisal of Part A of the Project will be to demonstrate that such Part of the Project is technically and economically feasible and justified, and that it will directly benefit the urban poor. The appraisal report will cover the following topics: 1. Planning Context. Explanation of how the proposed Part A of the Project fits into the context of urban planning or urban transport planning for the city or metropolitan region of Belo Horizonte, and of how Part A of the Project will contribute to achieve urban transport goals (for example, increased use of public transport or reduced energy consumption). 2. Project Design and Description. A description of Part A of the Project that permits a non-technical reader to understand what is being proposed and where it will be located. The minimum level of detail required corresponds approximately to that of preliminary engiaeering design. 3. Costs. The costs of each component of Part A of the Project will be estimated to within plus or minus percent. 4. Technical Feasibility. Explanation of all technical solutions considered and justification of the selection of the one proposed for Part A of the Project. 5. Benefits. A statement showing all the benefits expected from Part A of the Project, including any undesirable results, quantifying such benefits as much as possible, and showing the distribution of such benefits over the population, including the proportion of such benefits benefiting the urban poor. 6. Economic Analysis. The benefits of Part A of the Project for which monetary values can be estimated will be expressed in monetary terms so that an economic analysis can be carried out by calculating present values, cost-benefit ratios, and internal rates of return.

13 Complementary Policies. A description will be included of any complementary policies or institutional changes that are expected to strengthen Part A of the Project. 8. Risks. A realistic assessment wlll be made of any factors that might compromise the success of any component of Part A of the Project.