(Highways Management and Rehabilitation Project) between FEDERATIVE REPUBLIC OF BRAZIL. and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Transcription

1 Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 3169 BR Public Disclosure Authorized (Highways Management and Rehabilitation Project) Public Disclosure Authorized between FEDERATIVE REPUBLIC OF BRAZIL and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized Dated April 30, 1991 LOAN AGREEMENT LOAN NUMBER 3169 BR AGREEMENT, dated April 30, 1991, between FEDERATIVE REPUBLIC OF BRAZIL (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). ARTICLE I General Conditions; Definitions Section The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "DNER" means Departamento Nacional de Estradas de Rodagem, an autarquia

2 of the Borrower s Ministry of Infrastructure (the Ministry), under its National Transport Secretariat (the Secretariat) designated by the Borrower to act on its behalf as the agency charged with the execution of most of the Project; (b) "GEIPOT" means Empresa Brasileira de Planejamento de Transportes an agency of the Ministry that will assist the Ministry in the carrying out of Part A.1, Part A.3 and Part A.5 (a) and (e) of the Project; (c) "Prior Loan Agreement" means the Loan Agreement between the Borrower and the Bank (Federal Highways Sector Project) for Loan 2446-BR, dated July 30, 1984, and the term includes all schedules and agreements supplemental thereto, all as amended from time to time, and "Prior Project" means the project described in Schedule 2 to the Prior Loan Agreement; (d) "State" means any of the political sub-divisions of the Borrower and "State Agency" means the Road Department of a State; (e) Institute; "IPR" means Instituto de Pesquisas Rodoviarias, DNER s Highway Research (f) "Highway Rehabilitation Sub-project" means a specific highway project proposed to be carried out under Part B.1 of the Project, consisting mainly of one or more of the following works: pavement overlay, strengthening and rehabilitation, bituminous surface treatment and improvement of roadside drainage; (g) "Approved Highway Rehabilitation Sub-project" means a Highway Rehabilitation Sub-project, as so defined, which has been approved by the Bank for financing under the Loan; (h) "Engineering Sub-project" means a specific engineering project proposed to be carried out under Part B.2 of the Project, consisting of detailed engineering for a Highway Rehabilitation Sub-project; (i) "Approved Engineering Sub-project" means an Engineering Sub-project, as so defined, which has been approved by the Bank for financing under the Loan; (j) "Road Safety Sub-project" means a specific road safety project proposed to be carried out under Part C.2 of the Project, consisting of improvement of high accident locations in the federal highway system in order to reduce the number and severity of traffic accidents; (k) "Approved Road Safety Sub-project" means a Road Safety Sub-project, as so defined, which has been approved by the Bank for financing under the Loan; (l) "Pavement Marking and Striping Sub-project" means a specific pavement marking and striping project proposed to be carried out under Part C.5 of the Project, consisting of restriping the road pavement, including the central line, pavement edges and no-passing indications; (m) "Approved Marking and Striping Sub-project" means a Pavement Marking and Striping Sub-project, as so defined, which has been approved by the Bank for financing under the Loan; (n) "Pavement Repair Sub-project" means a specific pavement repair project to be carried out under Part D of the Project, consisting of patching, seal coats and localized overlays on partly deteriorated pavements, with a maximum estimated cost of $25,000 equivalent per km. (o) "Approved Pavement Repair Sub-project" means a Pavement Repair Sub-project, as so defined, which has been approved by the Bank for financing under the Loan; (p) "Special Account" means either of the Accounts to be opened and maintained pursuant to paragraphs (b), (c) and (d) of Section 2.02 of this Agreement, unless otherwise required by the context; "CESA" and "FESA" means each of the Special Accounts referred to in paragraphs (b) and (c), respectively, of Section 2.02 of this Agreement; and "Account Bank" means the bank referred to in paragraph (c) of Section

3 2.02 of this Agreement; (q) "Plano de Aplicacao" means the annual plan, agreed to at the beginning of each fiscal year between DNER, through the Ministry, and the Borrower s Departamento do Tesouro Nacional (the Treasury), in respect of the timetable for the release of funds for expenditures under the Project; (r) "cruzeiro" means the currency unit of the Borrower; (s) "Pavement Management System" means the pavement management system for resealing, strengthening and rehabilitation of paved federal highways established under Part E of the Prior Project and set forth in DNER s Service Instruction 3/84 dated April 4, 1984; (t) "Control Legislation" means the Borrower s legal provisions concerning size and control of vehicles using federal highway network including the Borrower s Decreto Lei No. 117 of January 31, 1967, as amended up to the date herewith and supplemented by the Lei No of September 21, 1966 (CNT) and its regulations through the Decreto No / RCNT, as amended by Decretos No /78, /83 and /90 and by the Lei No of November 25, 1985; and (u) "FSRMM" means Adicional ao Frete Para a Renovacao da Marinha Mercante - AFRMM, the Borrower s Freight Surcharge for the Renewal of the Merchant Marine established by Decree Law of December 30, 1970, as amended to December 31, 1987, or any other tax, levy or charge that, in the opinion of the Bank, may substitute it, in whole or in part, after January 1, 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, various currencies that shall have an aggregate value equivalent to the amount of three hundred ten million dollars ($310,000,000) being the sum of withdrawals of the proceeds of the Loan with each withdrawal valued by the Bank as of the date of such withdrawal. 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 shall, for the purposes of the Project, open, or cause DNER to open on behalf of the Borrower, and thereafter maintain in dollars a special account in the Borrower s Central Bank (Central Bank) on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, this special account (hereinafter called CESA) shall be made exclusively to meet expenditures in cruzeiros incurred in respect of the reasonable cost of goods and services required to carry out the Project and to be financed by the Bank pursuant to paragraph (a) above. (c) The Borrower shall for the purposes of the Project, open, or cause DNER to open on behalf of the Borrower, and maintain thereafter in a bank acceptable to the Bank (the Account Bank), a special account in dollars on terms and conditions satisfactory to the Bank. Deposits into, and payments out of this special account (hereinafter called FESA) shall be made exclusively to meet expenditures in currencies other than cruzeiros incurred in respect of the reasonable cost of goods and services required to carry out the Project and to be financed by the Bank pursuant to paragraph (a) above. (d) Deposits into, and payments out of, the CESA and the FESA shall be made in accordance with the provisions of Schedule 5 to this Agreement. The Borrower, through the Central Bank and DNER, shall furnish to the Bank each month certified statements of the CESA and the FESA, respectively.

4 Section The Closing Date shall be December 31, 1995 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 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 the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as rasonably determined by the Bank and expressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings or portions thereof as the Bank has allocated to fund: (A) the Bank s investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. a calendar (iii) "Semester" means the first six months or the second six months of year. (d) On such date as the Bank may specify by no less than six months notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(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 Quarter equal to the Cost of Qualified Borrowings determined in respect of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Quarter." April 1, "(c) (iii) Quarter means a three-month period commencing on January 1, July 1 or October 1 in a calendar year." Section Interest and other charges shall be payable semiannually on April 15 and 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. Section The Minister of Infrastructure of the Borrower or the person or persons designated by said Minister are designated as representatives of the Borrower for the purposes of taking any action required or permitted to be taken under the

5 provisions of Section 2.02 of this Agreement and Article V of the General Conditions. 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, through the Ministry of Infrastructure, carry out or cause, as provided in paragraph (b) below, the Project to be carried out with due diligence and efficiency and in conformity with appropriate engineering, administrative, road safety, maintenance and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall, not later than 90 days after the date of this Agreement, enter into contractual arrangements, satisfactory to the Bank, with DNER and GEIPOT for the purpose of ensuring the assistance of DNER and GEIPOT in the carrying out of the Project, such arrangements to provide, inter alia, that: (i) DNER and GEIPOT shall participate in the carrying out the Project with due observance of the requirements referred to in paragraph (a) above; and (ii) DNER and GEIPOT shall enter into an agreement, satisfactory to the Bank, to provide for the administrative, financial and operational arrangements required for GEIPOT s participation in Parts A.1, A.3 and A.5 (a) and (e) of the Project, such agreement not to be, except as the Bank shall otherwise agree, assigned, abrogated, amended or waived. (c) The Borrower shall exercise its rights under the contractual arrangements referred to in paragraph (b) of this Section 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, abrogate, amend or waive such arrangements, or any provision thereof. (d) The Borrower shall, without limiting the generality of paragraph (a) above and for purposes of the execution of Part A.2 (b) (iii), Part A.2 (b) (vi), Part A.5, Parts C.1 and C.2, and Part C.4 of the Project, respectively: (i) appoint a pavement engineer by not later than ninety days after the date of this Agreement and start the execution of Part A.2 (b) (vi) of the Project by not later than ninety days after the date of this Agreement; (ii) before undertaking any research activity under Part A.2 (b) (vi) of the Project, seek and obtain the approval of the Bank of each proposal concerning each such activity, such proposal to contain the objectives, relevance, scope, estimated costs and intended application and dissemination of, and resources necessary for, carrying out the research activity in question; (iii) complete the execution of Parts A.5 (b) and Part A.5 (d) of the Project by not later than December 31, 1992, and of Parts A.5 (a) and A.5 (c) of the Project by not later than June 30, 1991, and begin to execute Part A.5 (e) of the Project by not later than ninety days after the date of this Agreement with respect to DNER developed guidelines; (iv) furnish to the Bank by not later than ninety days after the date of this Agreement, evidence that arrangements satisfactory to the Bank have been put into effect for coordinating the identification of high frequency accident locations, the design of their improvement and the implementation of the works under Road Safety Sub-projects; and (v) not undertake any activity under Part C.4 of the Project, unless the Borrower and the Bank have agreed on the information to be collected thereunder and the methods of incorporating such information into the Borrower s highway information system. (e) Without limiting or restricting the generality of paragraph (a) above, the Borrower shall: (i) exchange views with the Bank not later than June 30, 1991, June 30, 1992 and December 31, 1992, or, if earlier, promptly upon their completion, on the final report and recommendations deriving from the studies included in Part A.3, Part A.4 (a) and Part A.4 (b) through (d) of the Project, respectively; and (ii) afford the Bank a reasonable opportunity to comment and exchange views on the findings and recommendations of each study before putting into effect the recommendations deriving from each such study. (f) Without limitation to or restriction upon the provision of paragraph (a) above, the Borrower shall cause its Treasury to make available to DNER, through the

6 Ministry, all funds for expenditures, to be financed by the Borrower or from the proceeds of the Loan, required to carry out the Project in accordance with, and within the time periods set forth in, the relevant Plano de Aplicacao. Section (a) 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. (b) The Borrower shall establish single registries of contractors and suppliers for purposes of the Project to meet local registration requirements for procurement made pursuant to the provisions of paragraph C.1 of Schedule 4 to this Agreement. (c) Not later than January 31 of each year, starting not later than ninety days after the date of this Agreement, the Borrower shall publish advertisements in two newspapers of wide national circulation in Brazil, acceptable to the Bank, in the Borrower s Diario Oficial and in Development Business or other specialized international publication, acceptable to the Bank, containing information, satisfactory to the Bank, about the Project, the types and amounts of contracts expected to be awarded under the Project in the next two years and requirements to be met for inclusion in the registry referred to in paragraph (b) of this Section. (d) The Borrower shall establish a time period of at least 30 days from the date of the last advertisement for the submission of bids for contracts procured in accordance with the provisions of paragraph C.1 of Schedule 4 to this Agreement. Section (a) When presenting to the Bank a Highway Rehabilitation Sub-project for approval, the Borrower shall furnish to the Bank through DNER an application in a form satisfactory to the Bank containing: (i) a description and analysis of the respective Sub-project including: (1) design standards; (2) final cost estimates; (3) average daily traffic by vehicle type; (4) final implementation schedule; and (5) economic evaluation; and (ii) such other information as the Bank shall reasonably request. (b) When presenting to the Bank an Engineering Sub-project for approval, the Borrower shall furnish to the Bank through DNER an application in a form satisfactory to the Bank, containing: (i) a description and analysis of the respective Sub-project including: (1) information concerning the rationale for Sub-project identification and alternatives considered; (2) average daily traffic by vehicle type; (3) recommended design standards; (4) preliminary cost estimates; (5) tentative implementation schedule; and (6) preliminary economic evaluation; and (ii) such other information as the Bank shall reasonably request. (c) The Borrower shall, when presenting a Road Safety Sub-project to the Bank for approval, furnish to the Bank through DNER applications in a form satisfactory to the Bank, containing: (i) at a preliminary stage, a report including analysis of high accident location points, included in the respective Sub-project, an economic evaluation of improvements proposed to be executed and the engineering design proposed to be financed at this preliminary stage; and (ii) upon completion of the engineering design works referred to in (i) above: (1) a description of the works to be carried out in the respective Sub-project; (2) a detailed engineering design; and (3) the definitive economic justification, including the priority rank of the proposed Sub-project in respect of other Road Safety Sub-projects; and (iii) such other information as the Bank shall reasonably request. (d) The Borrower shall, when presenting a Pavement Marking and Striping Sub-project to the Bank for approval, furnish to the Bank through DNER an application in a form satisfactory to the Bank, containing: (1) average daily traffic by vehicle type, (2) rehabilitation and overlay plans for the road in question, (3) the estimated cost and type of striping, (4) a schedule for the striping, and (5) such other information as the Bank shall reasonably request. (e) The Borrower shall, when presenting a Pavement Repair Sub-project to the Bank for approval, furnish to the Bank through DNER an application in a form satisfactory to the Bank, containing (i) a description of the respective Sub-project including: (1) identification and localization of works; (2) estimates of quantity and

7 cost of works; (3) average daily traffic; and (4) implementation schedule; and (ii) such other information as the Bank shall reasonably request. (f) Except as the Bank shall otherwise agree, the Borrower shall present to the Bank for its approval, only Highway Rehabilitation Sub-projects or Road Safety Sub-projects which are in accordance with the priorities of the Pavement Management System but which shall, in no case, have an economic rate of return of less than 12%, such rate of return to be calculated in accordance with a method satisfactory to the Bank. (g) Except as the Bank shall otherwise agree, the Borrower undertakes not to change the terms or scope of an Approved Highway Rehabilitation Project or an Approved Engineering Project or an Approved Road Safety Sub-project or an Approved Marking and Striping Sub-project or an Approved Pavement Repair Sub-project. Section The Borrower shall, through DNER: (a) adopt adequate organizational arrangements and procedures for developing and implementing the Pavement Management System, as enhanced under Part A.2 (b) (iii) of the Project, for resealing, strengthening, rehabilitation, routine maintenance and paving of federal highways. (b) Prepare its annual and pluriannual highway programs, including the program for the works referred to in paragraph (a) of this Section, in accordance with policies and economic criteria satisfactory to the Bank and annually exchange views with the Bank on such programs. Section Not later than, ninety days after the date of this Agreement and June 30 of each year thereafter, the Borrower shall exchange views with the Bank, on the execution of Part A.2 of the Project, particularly in respect of Part A.2 (a) and (b) (i) thereof, on the transference of responsibilities to the State Agencies, and on the results of the research program to be carried out under Part A.2 (b) (vi) of the Project and the incorporation of the recommendations of said research into DNER s design norms and manuals. Section The Borrower shall take, or cause to be taken, all reasonable action required for the issuance of such import and other permits and licenses as shall be necessary for the acquisition and importation of goods and services required for the carrying out of the Project. ARTICLE IV Financial and Other Covenants Section (a) The Borrower shall maintain or cause to be maintained on behalf of the Borrower by DNER and GEIPOT separate records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have or cause DNER and GEIPOT, both on behalf of the Borrower, to have the records and accounts referred to in paragraph (a) of this Section (including those for the Special Accounts) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish or cause DNER and GEIPOT, both on behalf of the Borrower, to 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 to furnish (iii) furnish or cause DNER and GEIPOT, both on behalf of the Borrower, to the Bank such other information concerning said records

8 and accounts and reasonably request. the audit thereof as the Bank shall from time to time (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 on behalf of the Borrower by DNER and GEIPOT, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain or cause DNER and GEIPOT, both on behalf of the Borrower, to 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) to enable the enable or cause DNER and GEIPOT, both on behalf of the Borrower, Bank s representatives to examine such records; and (iv) ensure or cause DNER and GEIPOT, both on behalf of the Borrower, to ensure that such records and 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. Section The Borrower shall continue to take appropriate measures to ensure that the provisions of the Control Legislation, regarding the limitation on the size and weight of vehicles using the Borrower s federal highway network are fully enforced. Section (a) The Borrower shall: (i) cause the highways included in its federal highway network to be adequately maintained and all necessary repairs, strengthening and rehabilitation thereof to be made promptly, all in accordance with sound engineering practice; (ii) cause all DNER s road maintenance, workshop and research equipment and facilities to be adequately maintained and all necessary repairs and renewals thereof to be made, all in accordance with appropriate technical and engineering practices; and (iii) provide or cause to be provided, the funds, facilities, services and other resources required for the foregoing. (b) Without limiting the generality of the foregoing, the Borrower shall, through DNER: (i) adopt methods for determining adequate maintenance levels, methods for cost accounting, and funding procedures for maintaining federal highways, such methods and procedures to be satisfactory to the Bank; and (ii) (A) continue applying its current maintenance standards and related costs in terms satisfactory to the Bank, unless their revision is warranted; and (B) maintain the system for the updating of such maintenance standards and relative prices of inputs every two years, which was established by DNER pursuant to Section 4.05 (b) (iii) (B) of the Prior Loan Agreement. (c) Without limiting the generality of paragraph (a) above, the Borrower shall present to the Bank, through DNER, not later than July 1 of each year, annual and pluriannual highway programs, including those for the strengthening and rehabilitation of its federal highway network and a budget proposal in that respect for the following calendar year, and exchange views with the Bank thereon. (d) The provisions of this Section supersede the provisions of Section 4.05 of the Prior Loan Agreement. Section The Borrower shall continue to maintain facilities to collect and record systematically such data as are required to assess the technical, economic and financial aspects of the highway system included in the Borrower s territories.

9 Section The Borrower shall, upon the taking of any decision by the Borrower s Legislative Branch, or by the Borrower s Executive Branch or any administrative subdivision thereof, on any aspect related to the following up of Part A.2 (a), or Part A.3 or Part A.4 of the Project, furnish to the Bank a plan of action for the implementation of the decision in question, including a time-table therefor, and afford the Bank a reasonable opportunity to express its views on the matter before any implementation action is taken. ARTICLE V 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 counterpart funds required to carry out the first year of the Project shall have been allocated in terms consistent with the estimated costs therefor in the 1991 budget of the Borrower; (b) that the Loan Agreement has been duly registered by the Borrower s Central Bank; and (c) that all necessary acts, consents and approvals to be performed or given by the Borrower, its political subdivisions or agencies, by any agency thereof, or otherwise to be performed or given in order to authorize the carrying out of the Project and to enable the Borrower to perform its obligations pursuant to this Agreement, together with all necessary powers and rights in connection therewith, have been performed or given. Section The following are specified as additional matters, within 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 Loan Agreement has been duly registered by the Central Bank; and (b) that all necessary acts, consents and approvals to be performed or given by the Borrower, its agencies and administrative subdivisions, or otherwise to be performed or given in order to authorize the carrying out of the Project and to enable the Borrower to perform its obligations pursuant to this Agreement together with all necessary powers and rights in connection therewith, have been performed or given. Section The date of July 30, 1991 is hereby specified for the purposes of Section of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section The Minister of Economy, Finance and Planning 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 da Economia, Fazenda e Planejamento Esplanada dos Ministerios, Bloco P, 8o andar Brasilia, D.F. Brazil Cable address: Telex: MINIFAZ

10 With copies to: Brasilia, Brazil Ministry of Infrastructure Secretaria Nacional dos Transportes Esplanada dos Ministerios Bloco R, 5o Andar Brasilia, D.F. Brazil Telex: Departamento Nacional de Estradas de Rodagem Ed. Nucleo dos Transportes SAN, Quadra 3, Lote A Brasilia, D.F. Brazil Telex: Empresa Brasileira de Planejamento de Transportes - GEIPOT Ed. Nucleo dos Transportes SAN-Bloco A-Quadra 3, 2o andar Brasilia, D.F. Brazil Telex: Departamento de Assuntos Internacionais do Ministerio da Economia, Fazenda e Planejamento Esplanada dos Ministerios Bloco K, 5o Andar Brasilia, D.F. Brazil Cable address: Telex: For the Bank: DEAIN Brasilia, Brazil 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: (TRT) (RCA) (WUI) or (FTCC)

11 IN WITNESSES WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. FEDERATIVE REPUBLIC OF BRAZIL By /s/ Zelia Maria Cardoso de Mello Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S. Shahid Husain Regional Vice President Latin America and the Caribbean /s/ Eduardo Texeira /s/ Jose Henrique D Amorin de Figuereido 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 Dollar Equivalent) to be Financed (1) Works under 179,500,000 40% Parts B and C of the Project (2) Works under 50,000,000 75% Part D of the Project (3) Goods 800, % of foreign expenditures and 40% of local expenditures (4) Consultants services for: (a) Parts B, C 15,800,000 40% of local and D of expenditures for the Project, services of conincluding sultants residing engineering within the terriand super- tory of the vision Borrower and

12 100% of foreign expenditures for other consultants (b) Training 4,300,000 50% of local and high- expenditures for way research services of consultants domiciled with-in the territory of the Borrower and 100% of foreign expenditures for services of other consultants and 50% of other training expenditures (5) Consultants 5,280,000 80% of local services for expenditures for technical consultants assistance residing within under Part A the territory of of the Project the Borrower and 100% of foreign expenditures for other consultants (6) Overseas 300, % of foreign fellowships expenditures (7) Unallocated 54,020,000 TOTAL 310,000, 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 payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $30,000,000, may be made in respect of Categories 1, 2 and 4 (a) of the table set forth in paragraph 1 above on account of payments made for expenditures under Part B and Part D of the Project and in respect of Category 5 of the said table on account of payments made for expenditures under Part A (2) (b) (iv), Part A.3, Part A.4, and Part A.5 of the Project, before that date but after October 1, SCHEDULE 2 Description of the Project The objectives of the Project are: (a) to help in redefining the highway network under the Borrower s jurisdiction and the responsibilities of the Borrower s and States Agencies in respect thereof, and in gradually transferring to the States new responsibilities in respect of highway management and rehabilitation; (b) to assist in restructuring DNER and strengthening its role as the Borrower s national road agency; (c) to continue maintaining rehabilitating and improving roads in the major transport corridors of Brazil; (d) to improve policy formulation, strategic planning and coordination for the transport sector; and (e) to develop environmental

13 standards in the transport sector and to improve compliance therewith. The Project consist of the following Parts: Part A: Institutional Strengthening and Policy Reforms Plans This part of the Project comprises the following: 1. Sector-Wide Planning and Coordination. Strengthening of the Ministry s capabilities on sector-wide planning and formulation, including clearer policy and budgetary guidelines for transport sector for, and enhancing the supervision and reviewing by the Ministry of, GEIPOT s work, and preparation by GEIPOT of medium term strategic plans for the development and operation of three major transport corridors to be selected in agreement between the Borrower, acting through the Ministry and the Bank. 2. Reform and Strengthening of Highways Subsector Administration. (a) Transferring responsibility on management and rehabilitation of some roads currently under the Borrower s jurisdiction to the States and consequential reorganization of DNER so as to strengthen DNER s role, as national road agency, to coordinate the strategic development of Brazil road network, and to provide technological leadership to the road subsector and standarized rules and procedures in order to avoid the inconsistencies, that in these areas, could accompany the aforesaid transference of responsibility, all in accordance with the chart set forth in Annex 1 hereto. The aforesaid will also include overseeing and analyzing the said reorganization of the subsector and recommending the necessary changes as the reorganization proceeds, and the creation of a new Planning Unit in DNER and establishing its planning and coordination roles for the highways subsector as a whole and developing relevant procedures and methods. (b) The aforesaid will be accompanied by the following measures, which, independently from those required to be taken as a consequence of (a) above, will permit DNER to strengthen its current role, as national road agency, to coordinate the strategic development of Brazil road network, and to provide technological leadership to the road subsector and standardized rules and procedures for the subsector: (i) detailing of areas of DNER s operations which are not sufficiently clear now, such as job description and accountability, and analyzing in detail DNER s recruitment needs; (ii) developing the 1991 to 1995 pluriannual highway plan and budget proposals for the Ministry and training the staff of the aforesaid DNER s Unit on highway planning and pluriannual budgeting and policy formulation activity; (iii) enhancing the Pavement Management System by strengthening DNER s capabilities for reviewing and improving the design of the information to be collected under, and the diagnostic and interpretative stages of, the Pavement Management System; (iv) improving and modernizing traffic engineering by DNER and developing norms for road widening; (v) enhancing DNER s ability to train its own staff and to contribute effectively toward the training of staff of the States Agencies by means of: (A) developing a sound training policy and program which emphasizes both technical, managerial and administrative training for DNER staff; (B) expanding DNER s existing training facilities; and (C) providing adequate and qualified manpower resources to train staff, including overseas and domestic training for DNER staff both in the technical and managerial areas, and acquisition for and utilization by DNER of training equipment; (vi) execution of a research program by DNER consisting of: (A) pavement performance research linked with the international highway pavement research program (SHRP) aimed at re-evaluating pavement design methods and performance; (B) development of new standards and procedures for pavements and overlays; (C) review and adaptation of management systems for structures; (D) development of the hydrological data base; (E) monitoring of slope estability; (F) investigations of asphalt quality requirements and properties of asphalt additives; (G) additional research into the use of the highway design model (HDM); and (H) other research on roadway characteristics and driver behavior in Brazil to be agreed between the Borrower and the Bank; and (vii) strengthening of DNER capabilities to assist the State Agencies in preparing their respective road rehabilitation and maintenance programs. 3. Highway Cost Recovery

14 Formulation and execution of policy reforms aimed at ensuring for the Borrower s government sound highway cost recovery policies and regimes and adequate monitoring systems for updating the charges. The aforesaid will include: (i) formulating a highways cost recovery policy, based on studies to be carried out with the assistance of GEIPOT which will enable the application of road-user charges which: (A) will have levels which will permit at least the recovery of short-term marginal costs; (B) will be free of distortions detrimental to proper fuel conservation practices; and (C) will be subject to updating in a timely fashion as required to achieve (A) and (B); (ii) reviewing the new structure and levels of road-user charges and recommending modifications thereto in light of the policy to be formulated under (i) above and recent development and changes in Brazil s constitutional and fiscal laws; and (iii) designing and establishing a system to monitor the adequacy of road-user charges. The aforesaid methods of adjustments to the road-user charges system will reflect changes in road work costs and prices of the major user-charge components. 4. Review of Transport Regulations Formulation and execution of plans of action, geared towards a better understanding of the characteristics and status of the trucking industry and the removal of unwarranted regulations which may harm said industry s development or performance, including: (a) reviewing the enforcement of vehicle weight controls and preparing recommendations in connection thereto; (b) executing an in-depth study of the trucking industry to analyze the impact of current regulations on minimum net haulage capacity and area for parking, storage and repairs; (c) reviewing measures to encourage investments in trucking capacity; and (d) establishing an appropriate system for monitoring the performance of the trucking industry. 5. Improvement in Environmental Control Formulation and execution of a plan of action aimed at developing and putting into effect appropriate environmental guidelines for the sector and at introducing effective monitoring mechanisms of compliance therewith, including: (a) environmental guidelines for application thereof by DNER and GEIPOT for the roads and other transport modes, respectively; (b) strengthening DNER s recently established environmental unit; (c) establishing within the Ministry a transport environmental unit and adequately staffing thereof; (d) establishing procedures that will require the reviewing by DNER, from an environmental view-point and in a timely fashion, of selected major road projects; and (e) training of staff of the Ministry, GEIPOT, DNER and State Agencies engaged in environmental control activities. Part B: Highway Rehabilitation 1. Execution of Approved Rehabilitation Sub-projects in the federal highway system which have a high priority for the economic and social development of Brazil. 2. Execution of Approved Engineering Sub-projects for the maintenance and rehabilitation of the federal highway system. Part C: Highway Safety 1. Analysis of high frequency accident locations on federal highways and detailed engineering of proposed road safety improvement for such locations. 2. Execution of Approved Road Safety Sub-projects in the federal highway system. 3. Continuation of the Highway Safety education program and public campaign initiated under Part B of the Prior Project. 4. A program for surveying and re-surveying about 20,000 kilometers of roads by the various directorates of DNER by means of an advanced visual survey methodology. 5. Execution of Approved Pavement Marking and Striping Sub-projects in the federal highways system. 6. Review, and if warranted, revision of DNER s safety design standards. Part D: Pavement Repair

15 Execution of Approved Pavement Repair Sub-projects on sections of the federal highway system which have an average daily traffic higher than 1,500 vehicles. * * * The Project is expected to be completed by June 30, ANNEX 1 Schedule for actions under Part A.2 of the Project 1. Preparation of concrete technical proposals, based on the updating of the functional classification of roads in the National Road Network submitted to the Ministry by DNER on May 31, 1989 and the new tax system established by the Borrower s Constitution, in order to achieve the transference of responsibilities in road management and rehabilitation to be negotiated under 2 below. To be completed by not later than ninety days after the date of this Agreement. 2. Submission to the Borrower s Congress, on or before December 31, 1991, of the legislation required to be enacted in respect of the carrying out of Part A.2 (a) of the Project, and negotiation with the States to achieve preliminary agreement on or before December 31, 1991 on the newly acquired State Agencies responsibilities pursuant to the transference referred to under paragraph 1 above and the reformulation of the National Roads Network and of the functional classification thereunder. The agreement with the States will be subject to and formalized by, the enactment of the corresponding legislation by the Borrower s Congress. 3. Training of the staff involved will take place throughout the entire period referred to above and will continue during the remainder of the period of Project execution. SCHEDULE 3 Amortization Schedule Date Payment Due Payment of Principal (expressed in dollars)* On each April 15 and October 15 beginning April 15, 1996 through October 15, ,500,000

16 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and Premiums on Prepayment Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: applicable to Time of Prepayment Premium The interest rate (expressed as a percentage per annum) the Loan on the day of prepayment multiplied by: Not more than three years 0.20 before maturity More than three years but 0.40 not more than six years before maturity More than six years but 0.73 not more than eleven years before maturity More than eleven years but not 0.87 more than thirteen years before maturity More than thirteen years before 1.00 maturity SCHEDULE 4 Procurement and Consultants Services Section I. Part A: Procurement of Goods and Works International Competitive Bidding 1. Except as provided in Part C hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. Contracts for works and goods shall be grouped, to the extent possible, so as to form bidding packages estimated to cost the equivalent of more than $7,500,000 and $250,000, respectively. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A 1 hereof, goods manufactured in Brazil 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 would 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 two groups:

17 (1) Group A: bids offering goods manufactured in Brazil if the bidder shall have established to the satisfaction of the Borrower and the Bank that such goods contain components manufactured in Brazil equal to at least 50% of the value of the complete goods. (2) Group B: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest evaluated bid is a bid from group B, all group B bids shall be further compared with the lowest evaluated bid from group A after adding: (i) to the C.I.F. bid price of goods to be imported in each group B bid an amount equal to the smaller of: (A) 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 B bid; or (B) 15% of the C.I.F. bid price of such goods, and (ii) to the ex-factory bid price of goods supplied domestically offered in each group B bid an amount equal to the smaller of: (A) the amount of customs duties and other import taxes which would be levied on the goods offered in such group B if they originated from the same foreign country as the bid included in group B which enjoys the lowest customs duties and other import taxes, or (B) 15% of the ex-factory bid price of such goods. If, as a result of this comparison, the bid from group A is the lowest, it shall be selected for the award; if not, the lowest evaluated bid from group B, as determined under paragraph 3 above, shall be selected for the award. Part C: Other Procurement Procedures 1. Contracts for: (a) civil works estimated to cost the equivalent of $7,500,000 or less; and (b) subject to the provision of paragraph 2 below, goods estimated to cost less than the equivalent of $250,000, may be awarded under competitive bidding procedures advertised only in Brazil to the extent that the procedures under which any such contract has been awarded are satisfactory to the Bank. 2. Contracts for goods estimated to cost less than the equivalent of $50,000, up to an aggregate amount not exceeding the equivalent of $1,000,000, may be awarded to the lowest evaluated quotation following evaluation and comparison of quotations furnished by at least three (3) suppliers eligible under the Guidelines. Part D: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to: (i) each contract for goods and civil works estimated to cost the equivalent of more than $100,000 and 7,500,000, respectively, and (ii) contracts for civil works awarded pursuant to the provisions of Part C above, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply; provided, however, that should the first 2 sets of bidding documents for contracts under (ii) above and award recommendations thereon be satisfactory to the Bank, the provisions of this paragraph shall, unless otherwise determined by the Bank, cease to govern contracts awarded pursuant to (ii) above. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, said procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Bank pursuant to said paragraph 3 shall be furnished