August 8, Exmo. Sr. Ministro Pedro Sampaio Malan Ministério da Fazenda Esplanada dos Ministérios Bloco P 8o. andar Brasília, D.F.

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1 Public Disclosure Authorized Public Disclosure Authorized Exmo. Sr. Ministro Pedro Sampaio Malan Ministério da Fazenda Esplanada dos Ministérios Bloco P 8o. andar Brasília, D.F. Ilmo. Sr. Lúcio Evangelista Departamento Nacional de Estradas de Rodagem (em extinção) SAAN, Quadra 3, Lote A Brasília, D.F Ilmo. Sr. Luiz Francisco Silva Marcos Departamento Nacional de Infra-Estrutura de Transportes SAAN, Quadra 3, Lote A Brasília, D.F August 8, 2002 Public Disclosure Authorized Public Disclosure Authorized Dear Sirs: Re: Loan No BR (Federal Highway Rehabilitation and Decentralization Project) Amendment Please refer to the Loan Agreement, dated December 10, 1997, between the Federative Republic of Brazil and the International Bank for Reconstruction and Development (the Bank), and to the Project Agreement of the same date between the Bank and Departamento Nacional de Estradas de Rodagem (DNER) for the above Project. We are pleased to inform you that the Bank agrees with the proposed restructuring of the Project, as requested in SEAIN s letter dated March 6, 2002 to the Bank, to reflect the recent restructuring of the transport sector administration, and taking into account the Project s restructuring and transition arrangements specified in Interim Minister Alderico Lima s letter dated February 7, 2002, and the revised monitoring indicators specified in Minister João Henrique de Almeida Sousa s letter dated June 10, The proposed restructuring of the Project has been discussed between representatives of the Ministry of Transport, Departamento Nacional de Infra-Estrutura de Transportes (DNIT), Agência Nacional de Transportes Terrestres (ANTT), Agência Nacional de Transportes Aquaviários (ANTAQ), DNER (em extinção), the Secretariat of International Affairs of the Ministry of Planning, Budget and Management, and recent Bank missions. In order to formalize the restructuring of the Project, we propose to amend the Loan and Project Agreements as follows:

2 AMENDMENTS TO THE LOAN AGREEMENT 1. Whereas (B), in the Preamble, is amended to read as follows in its entirety: (B) the Borrower s transport sector administration is being restructured as determined by: (i) Law No of June 5, 2001 and by Medida Provisoria No of September 4, 2001; and (ii) the following Presidential Decrees, all dated February 13, 2002: No , determining the closing of the Departamento Nacional de Estradas de Rodagem (hereinafter referred to as DNER (em extinção) or DNER, as the case may be), and regulating the inventory and transfer of such entity s rights, obligations and assets; No , approving the organizational structure of the Departamento Nacional de Infra-Estrutura de Transportes (hereinafter referred to as DNIT); No approving the regulations of the Agência Nacional de Transportes Terrestres (hereinafter referred to as ANTT) ; and No , approving the regulations of the Agência Nacional de Transportes Aquaviários (hereinafter referred to as ANTAQ); and, in consequence, the Project will be carried out by DNIT, ANTT and ANTAQ, as provided in Section 3.01 of this Agreement, with the Borrower s assistance, and the Borrower will make available to DNIT, ANTT and ANTAQ, as the case may be, the proceeds of the Loan as provided in this Agreement; 2. In Section 1.02, paragraphs (f), (k), (l) and (m) are amended to read as follows in their entirety: (f) Federal Rehabilitation Subproject means any of the projects referred to in Part C.4 of the Project; (k) ANTT Agreement means the agreement to be entered into between the Borrower, ANTT and DNIT pursuant to Section 3.01 (d) of this Agreement; (l) ANTAQ Agreement means the agreement to be entered into between the Borrower, ANTAQ and DNIT pursuant to Section 3.01 (d) of this Agreement; (m) Project Monitoring Letter means the letter, dated June 10, 2002, delivered by the Borrower s Minister of Transport to the Bank, setting forth the indicators and targets to be used in monitoring the progress in the implementation of the Project and the achievement of its objectives and in evaluating its results. 3. In Section 1.02, the following paragraphs (q) and (r) are added to read as follows: (q) Cooperation Agreement means the agreement between DNIT and DNER (em extinção), dated May 28, 2002, setting forth the transition arrangements between DNER (em extinção) and DNIT by which DNER (em extinção) will assist DNIT to carry out the activities and responsibilities (including activities under the Project) that have been transferred to DNIT pursuant to the legislation referred to in Whereas Clause (B); (r) Federal Rehabilitation and Maintenance Subproject means any of the projects referred to in Part C.5 of the Project. 4. The term DNER is replaced by DNIT wherever it appears in the Loan Agreement, except in Sections 1.02 (e), (g), and (h), 6.01 and 6.02 of, and paragraph 4 (a) of Schedule 1 to, the Loan Agreement.

3 5. Section 3.01 is amended to read as follows in its entirety: 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, without any limitation or restriction upon any of its obligations under the Loan Agreement, shall, through its Ministry of Transport: (i) cause DNIT to perform in accordance with the provisions of the Project Agreement all the obligations therein set forth; (ii) cause ANTT and ANTAQ to carry out Parts B and D of the Project, respectively, with due diligence and efficiency and in conformity with the Operational Manual, and appropriate administrative, financial and transport regulatory practices; (iii) take or cause to be taken all action, including the provision of funds, facilities, services and other resources necessary or appropriate to enable DNIT, ANTT and ANTAQ to carry out the Parts of the Project under their respective responsibility: and (iv) not take or permit to be taken any action which would prevent or interfere with the performance of DNIT, ANTT and ANTAQ of their respective obligations in respect of the Project. (b) The Borrower shall make available to DNIT the proceeds of the Loan allocated to finance Parts A and C of the Project (as well as the required counterpart funds) through annual budgetary allocations as required to ensure the timely execution of such Parts of the Project. (c) The Borrower shall cause DNIT and DNER (em extinção) to comply with their respective obligations under the Cooperation Agreement, until such time that DNIT has demonstrated, in a manner satisfactory to the Bank, that it has the administrative, financial and technical capacity to carry out its obligations under the Project Agreement or until DNER (em extinção) has been extinguished. (d) For purposes of the carrying out of Parts B and D of the Project, the Borrower, through its Ministry of Transport, shall enter into agreements, satisfactory to the Bank, with ANTT and DNIT in respect of Part B of the Project (the ANTT Agreement) and ANTAQ and DNIT in respect of Part D of the Project (the ANTAQ Agreement), whereby: (i) ANTT or ANTAQ, as the case may be, shall undertake to: (A) carry out their respective Parts of the Project, comply with the applicable procurement, disbursement and Project reporting procedures set forth or referred to in the Loan Agreement and the Project Agreement, and assist the Borrower and DNIT as required by the Borrower and DNIT to comply with their respective obligations under the Loan Agreement and the Project Agreement; and (B) maintain records and separate accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures of ANTT or ANTAQ, as the case may be, in respect of their respective Parts of the Project, and to have such records and accounts for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) ANTT shall undertake to tender concessions for federal highway sections in accordance with the indicators and targets set forth in the Project Monitoring Letter; (iii) the Borrower shall undertake to transfer to ANTT or ANTAQ, as the case may be, the funds required for the carrying out of their respective Parts of the Project; and (iv) the Borrower shall authorize ANTT or ANTAQ, as the case may be, to communicate directly with the Bank with respect to procurement procedures applicable to their respective Project activities. (e) The Borrower shall exercise its rights and comply with its obligations under the ANTT Agreement and the ANTAQ Agreement in such a manner as to protect the interests of the Bank and the Borrower and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate, waive or fail to enforce such agreements, or any provision thereof.

4 6. Section 3.03 is amended to read as follows in its entirety: 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, 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 Parts A and C of the Project shall be carried out by DNIT pursuant to Section 2.10 of the Project Agreement. 7. Section 7.02 is amended to read as follows in its entirety: Section The following addresses are specified for the purposes of Section of the General Conditions: For the Borrower: Ministério da Fazenda Procuradoria-Geral da Fazenda Nacional Esplanada dos Ministérios, Bloco "P" - 8º andar Brasília, D.F. Brazil With copies to: Ministério do Planejamento, Orçamento e Gestão Secretaria de Assuntos Internacionais Esplanada dos Ministérios, Bloco "K" - 5º andar Brasília, D.F. Brazil Departamento Nacional de Estradas de Rodagem DNER (em extinção) SAAN Quadra 3 Lote A Edifício Núcleo dos Transportes, 4 andar Brasília, D.F. Brazil Departamento Nacional de Infra- Estrutura de Transportes SAAN, Quadra 3, Lote A Brasília, D.F. Brazil Agência Nacional de Transportes Terrestres Explanada dos Ministerios, Bloco R Edifício Anexo, Ala Oeste - 4 andar Brasília, D.F. Brazil Agência Nacional de Transportes Aquaviários SAAN Quadra 3, Bloco N/O - 2 andar

5 Edificio Núcleo dos Transportes Brasília, D.F. Brazil 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: (MCI); or (MCI) 8. In Schedule 1: (a) the table in paragraph 1 is amended to read as follows in its entirety: Category Amount of the Loan Allocated (Expressed in Dollars) % of Expenditures to be Financed (1) Civil works: 80% (a) under Part A.2 of the Project (State Rehabilitation Subprojects) (b) under Part C.4 of the Project (Federal Rehabilitation Subprojects) (c) under Part C.5 of the Project (Federal Rehabilitation and Maintenance Subprojects) (2) Goods: (a) under Part B.1 of the Project 57,000, ,000,000 80,000, , % of foreign expenditures, 100% of local expenditures (ex-factory cost) and 80% of local expenditures for other items procured locally

6 (b) under Part C of the Project 1,000,000 (c) under Part D of the Project 500,000 (3) Consultants services under Parts A.2, C.4 and C.5 of the Project (4) Consultants services and training under Parts A.1, C.1 through C.3 of the Project (5) Consultants services and training under Part B.1 of the Project (6) Consultants services under Part B.2 of the Project (7) Consultants services and training under Part D of the Project 11,500,000 80% 11,500, % 2,000, % 5,000,000 80% 2,000, % (8) Unallocated 9,000,000 TOTAL 300,000,000 ========= (b) paragraph 3 (d) is amended to read as follows in its entirety: (d) expenditures under a Federal Rehabilitation Subproject or a Federal Rehabilitation and Maintenance Subproject, unless the Bank has approved such Subproject; (c) in paragraph 3, the following sub-paragraph (e) is added to read as follows: (e) expenditures under Categories (2) (a), (5) and (6) or (2) (c) and (7) of the table in paragraph 1 hereof, unless the ANTT Agreement or the ANTAQ Agreement, as the case may be, has been entered into between the respective parties thereto. 9. Schedule 2 is amended to read as follows in its entirety: SCHEDULE 2 Description of the Project The objective of the Project is to improve and maintain the Borrower s highway network for purposes of, inter alia, reducing highway transport costs, by: (a) maintaining and rehabilitating highways under the Borrower s jurisdiction; (b) decentralizing highway responsibilities to

7 Participating States; (c) increasing the participation of the private sector in the management and financing of highways through concessions and maintenance management contracts; and (d) strengthening capabilities of the transport sector entities resulting from the restructuring of the Borrower s transport sector administration, to ensure an adequate and efficient management and regulation of transport infrastructure and services at the federal level. Part A: Highway Decentralization 1. Provision of technical assistance and training to the staff of DNIT and DERs for purposes of strengthening the capacity of those entities to carry out their respective obligations under, or referred to in, the Decentralization and, if applicable, Delegation Agreements. 2. Carrying out of projects which meet the eligibility criteria set forth in the Operational Manual, consisting of rehabilitation (including resurfacing, operational and safety improvement, and environmental rehabilitation works) of segments of highways in a Participating State, as specified in the Decentralization Agreements and, if applicable, in the Delegation Agreements, and related engineering, economic and environmental studies and supervision services. Part B: Strengthening of ANTT 1. Provision of equipment, technical assistance and training to the staff of ANTT, to strengthen the capacity of ANTT to prepare and promote land transport infrastructure and service concessions, to supervise and monitor the operation of such concessions, and to establish adequate regulatory framework and arbitration mechanisms applicable to the concessions awarded. 2. Carrying out of concession studies, including engineering studies, economic and environmental assessments, and provision of project finance services for specific land transport infrastructure concession activities. Part C: Institutional Strengthening and Rehabilitation and Maintenance of the Borrower s Highway Network 1. Provision of equipment, technical assistance and training to the staff of DNIT, to strengthen DNIT s capacity to implement the policies related to the administration of the Sistema Federal de Viação, the Borrower s transport system defined in the Borrower s Law No , dated June 6, Provision of goods, technical assistance and training to the staff of DNIT for purposes of strengthening DNIT s capacity to carry out: (a) the contracting of rehabilitation and maintenance of an increasing portion of the non-concessioned highway network through performance-based contracts; and (b) coordination, supervision and technical evaluation activities and highway network surveys related to Project implementation. 3. Provision of goods, technical assistance and training to the staff of the Borrower s Ministry of Transport, to assist in the reorganization of said Ministry.

8 4. Carrying out of projects which meet the eligibility criteria set forth in the Operational Manual, consisting of rehabilitation (including resurfacing, operational and safety improvement, and environmental rehabilitation works) of segments of the Borrower s highway network which have remained under the Borrower s jurisdiction and are not part of the Highway Concession Program, and related engineering, economic and environmental studies and supervision services. 5. Under long-term performance-based contracts, carrying out of projects which meet the eligibility criteria set forth in the Operational Manual, consisting of maintenance and rehabilitation (including resurfacing, operational and safety improvement, and environmental rehabilitation works) of segments of the Borrower s highway network which have remained under the Borrower s jurisdiction and are not part of the Highway Concession Program, and related engineering, economic and environmental studies and supervision services. Part D: Strengthening of ANTAQ 1. Provision of goods, technical assistance and training to the staff of ANTAQ to strengthen ANTAQ s capacity to prepare and promote concessions related to ports and water transportation infrastructure and services, to supervise and monitor the operation of such concessions, and to regulate port activities and water transportation, updating and/or establishing an adequate regulatory framework and arbitration mechanisms applicable to concessions. 2. Support for carrying out concession studies, including engineering studies, economic, environmental and safety assessments, and provision of project finance services for ports and water transportation infrastructure concessions. * * * The Project is expected to be completed by December 31, In Schedule 4, paragraph 1 (a) is amended to read as follows in its entirety: (a) the term eligible Categories means Categories (1) through (7) set forth in the table in paragraph 1 of Schedule 1 to this Agreement;. AMENDMENTS TO THE PROJECT AGREEMENT 1. The term DNER is replaced by DNIT wherever it appears in the Project Agreement, except in Sections 2.01 (b), 2.05, 2.08 and 2.09 (a) of, and Part D.2 of Section I of the Schedule to, the Project Agreement. 2. In Section 2.01: (a) paragraph (a) (i) is amended to read as follows: (i) carry out Parts A.1 and C of the Project; (b) the following paragraph (c) is added to read as follows:

9 (c) DNIT shall comply with its obligations under the ANTT Agreement, the ANTAQ Agreement and the Cooperation Agreement. 3 In Section 2.02: (a) paragraph (a) is deleted; (b) paragraph (b) is amended to read as follows in its entirety: (b) maintain, until completion of the Project, the DNIT s Gerência de Restauração e Manutenção with structure, functions and responsibilities satisfactory to the Bank, including staff in number and with qualifications satisfactory to the Bank, for the purposes of carrying out: (i) overall coordination and supervision of the execution of Parts A and C of the Project; and (ii) supervision of the procurement of goods and works and the selection of consultants under Parts A and C of the Project; (c) paragraph (c) is deleted; (d) paragraph (d) is modified to read as follows in its entirety: (d) by not later than December 31, 2002, adapt the Project s computerized management system developed initially by DNER (em extinção) in a manner satisfactory to the Bank, so as to assist in the monitoring and reporting activities related to the implementation of Parts A and C of the Project, in areas including procurement, financial management, disbursements and physical progress. 4. Section 2.06 is deleted. 5. Section 2.10 is amended to read as follows in its entirety: Section DNIT shall carry 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 to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of Parts A and C of the Project. 6. Section 2.12 (a) is amended to read as follows in its entirety: (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 Bank and DNIT, a plan for the future operation of Parts A and C of the Project; and 7. Section 3.01 (a) is amended to read as follows in its entirety: Section (a) DNIT 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, of DNIT (in respect of Parts A and C of the Project), and the Participating DERs (in respect of Part A.2 of the Project). DNIT shall also consolidate all records and accounts (including those for ANTT and ANTAQ) for the Project as a whole.

10 To facilitate the reading of the Loan and Project Agreements, as amended, we are attaching, as Attachments I and II to this letter, consolidated versions of the Loan and Project Agreements which incorporate the proposed amendments. If you agree with the foregoing, please sign the four originals of this letter in the space provided below, and return one of them to us. This amendment shall enter into effect on the date of receipt by the Bank of one original of this letter signed by the authorized representatives of the Borrower, DNER (em extinção) and DNIT. AGREED: Sincerely, /s/ Vinod Thomas Director Brazil Country Management Unit Latin America and the Caribbean Region FEDERATIVE REPUBLIC OF BRAZIL: By /s/ Ana Lúcia Gatto de Oliveira Authorized Representative DEPARTAMENTO NACIONAL DE ESTRADAS DE RODAGEM (em extinção) By /s/ Lúcio Evangelista Authorized Representative DEPARTAMENTO NACIONAL DE INFRA-ESTRUTURA DE TRANSPORTES By /s/ Luiz Francisco Silva Marcos Authorized Representative Copied to: Exmo. Sr. Ministro João Henrique de Almeida Sousa, Ministry of Transport Ilmo. Sr. Dr. Jose Alexandre Nogueira de Resende, Diretor-Geral, ANTT Ilmo. Sr. Eng. Carlos Alberto Wanderley Nobrega, Diretor-Geral, ANTAQ Ilmo. Sr. Dr. Lúcio Evangelista, Inventariante, DNER (em extinção) Ilmo. Sr. Dr. Eduardo Guardia, Secretário, STN, Ministério da Fazenda Ilmo. Sr. Dr. Dante Coelho de Lima, Secretário, Secretaria de Assuntos Internacionais, Ministério do Planejamento, Orçamento e Gestão Ilmo. Sr. Dr. Almir Martins Bastos, Procurador-Geral da Fazenda Nacional, Ministério da Fazenda Illma. Sra. Dra. Sônia Portella, Coordenadora-Geral, Operações Financeiras da União, PGFN, Ministério da Fazenda Attachment I

11 LOAN NUMBER 4188-BR Loan Agreement (Federal Highway Rehabilitation and Decentralization Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and FEDERATIVE REPUBLIC OF BRAZIL Dated December 10, 1997, as amended LOAN AGREEMENT LOAN NUMBER 4188-BR AGREEMENT, dated December 10, 1997 between FEDERATIVE REPUBLIC OF BRAZIL (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank), as amended. 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) the Borrower s transport sector administration is being restructured as determined by: (i) Law No of June 5, 2001 and by Medida Provisoria No of September 4, 2001; and (ii) the following Presidential Decrees, all dated February 13, 2002: No , determining the closing of the Departamento Nacional de Estradas de Rodagem (hereinafter referred to as DNER (em extinção) or

12 DNER, as the case may be), and regulating the inventory and transfer of such entity s rights, obligations and assets; No , approving the organizational structure of the Departamento Nacional de Infra-Estrutura de Transportes (hereinafter referred to as DNIT); No approving the regulations of the Agência Nacional de Transportes Terrestres (hereinafter referred to as ANTT) ; and No , approving the regulations of the Agência Nacional de Transportes Aquaviários (hereinafter referred to as ANTAQ); and, in consequence, the Project will be carried out by DNIT, ANTT and ANTAQ, as provided in Section 3.01 of this Agreement, with the Borrower s assistance, and the Borrower will make available to DNIT, ANTT and ANTAQ, as the case may be, the proceeds of the Loan as provided in this Agreement; (C) the Borrower intends to receive from the Inter-American Development Bank (the IDB) a loan (the IDB Loan) in an amount equivalent to $300,000,000 to assist in financing the Project on the terms and conditions set forth in an agreement (the IDB Loan Agreement) to be entered into between the Borrower and the IDB; and (D) the Borrower intends to receive additional loans from the Bank and the IDB in amounts equivalent to $200,000,000 each loan, to further assist in financing the Project; 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 the Project Agreement of even date herewith between the Bank and DNIT (the Project 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 May 30, 1995, with Section 6.03 thereof modified to read as set forth below (the General Conditions), constitute an integral part of this Agreement: "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

13 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 have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Annual Rehabilitation and Maintenance Program" means any of the programs referred to in Section 2.07 of the Project Agreement; (b) "Decentralization Agreement" means any of the agreements (Protocolos de Intenções) referred to in Section 3.04 (a) of this Agreement; (c) "Delegation Agreement" means any of the agreements (Convênios de Delegação de Obras) referred to in Section 2.04 (a) of the Project Agreement; (d) "DER" means the agency of a Participating State in charge of highways in such State; (e) "Environmental Manual" means the manual issued by DNER in August 1996, entitled Corpo Normativo Ambiental para Empreendimentos Rodoviários, containing the environmental guidelines and instructions applicable to highway engineering, works and supervision contracts; (f) the Project; "Federal Rehabilitation Subproject" means any of the projects referred to in Part C.4 of (g) "Highway Concession Program" means the Borrower s program, described in Relatório das Atividades da Diretoria de Concessões Rodoviárias do DNER no Exercício de 1996 (report of activities of DNER s concession department in 1996), aimed at transferring operation, maintenance and other responsibilities on sections of the Borrower s highways to private operators, as such program may be amended from time to time; (h) "Operational Manual" means the operational manual issued by DNER on July, 1997 containing procedures, guidelines, methodologies and standard documents applicable to the activities under the Project, as the same may be amended from time to time by agreement between the Bank and DNIT; (i) "Participating DER" means any of the DERs of the States of Bahia, Ceará, Goiás, Minas Gerais, Paraná, Rio Grande do Sul, Rio de Janeiro, and of any other Participating State as may be approved by the Bank, which has entered into a Delegation Agreement not later than eighteen months after the Effective Date;

14 (j) "Participating State" means any of the states of the Borrower where a State Rehabilitation Subproject will be carried out; (k) ANTT Agreement means the agreement to be entered into between the Borrower, ANTT and DNIT pursuant to Section 3.01 (d) of this Agreement; (l) ANTAQ Agreement means the agreement to be entered into between the Borrower, ANTAQ and DNIT pursuant to Section 3.01 (d) of this Agreement; (m) Project Monitoring Letter means the letter, dated June 10, 2002, delivered by the Borrower s Minister of Transport to the Bank, setting forth the indicators and targets to be used in monitoring the progress in the implementation of the Project and the achievement of its objectives and in evaluating its results. (n) "SMU" means the unit referred to in Secion 2.04 (a) (i) of the Project Agreement; (o) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (p) Project; "State Rehabilitation Subproject" means any of the projects referred to in Part A.2 of the (q) Cooperation Agreement means the agreement between DNIT and DNER (em extinção ), dated May 28, 2002, setting forth the transition arrangements between DNER (em extinção) and DNIT by which DNER (em extinção) will assist DNIT to carry out the activities and responsibilities (including activities under the Project) that have been transferred to DNIT pursuant to the legislation referred to in Whereas Clause (B); and (r) Federal Rehabilitation and Maintenance Subproject means any of the projects referred to in Part C.5 of the Project. ARTICLE II The Loan Section The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, an amount equal to three hundred million dollars ($300,000,000). 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 and to be financed out of the proceeds of the Loan. (b) The Borrower may, for the purposes of the Project, open and maintain in dollars a special deposit account in a commercial bank on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure or attachment. Deposits into and payments out of, the

15 Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section The Closing Date shall be December 31, 2002 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 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. (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 (ii) "Interest Payment Date" means any date specified in Section 2.06 of this Agreement 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 (6) 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.

16 Section each year. Interest and other charges shall be payable on March 15 and September 15 in 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 Borrower s Minister of Transport, or the person or persons designated by such Minister, are designated as representatives of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. 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, without any limitation or restriction upon any of its obligations under the Loan Agreement, shall, through its Ministry of Transport: (i) cause DNIT to perform in accordance with the provisions of the Project Agreement all the obligations therein set forth; (ii) cause ANTT and ANTAQ to carry out Parts B and D of the Project, respectively, with due diligence and efficiency and in conformity with the Operational Manual, and appropriate administrative, financial and transport regulatory practices; (iii) take or cause to be taken all action, including the provision of funds, facilities, services and other resources necessary or appropriate to enable DNIT, ANTT and ANTAQ to carry out the Parts of the Project under their respective responsibility: and (iv) not take or permit to be taken any action which would prevent or interfere with the performance of DNIT, ANTT and ANTAQ of their respective obligations in respect of the Project. (b) The Borrower shall make available to DNIT the proceeds of the Loan allocated to finance Parts A and C of the Project (as well as the required counterpart funds) through annual budgetary allocations as required to ensure the timely execution of such Parts of the Project. (c) The Borrower shall cause DNIT and DNER (em extinção) to comply with their respective obligations under the Cooperation Agreement, until such time that DNIT has demonstrated, in a manner satisfactory to the Bank, that it has the administrative, financial and technical capacity to carry out its obligations under the Project Agreement or until DNER (em extinção) has been extinguished. (d) For purposes of the carrying out of Parts B and D of the Project, the Borrower, through its Ministry of Transport, shall enter into agreements, satisfactory to the Bank, with ANTT and DNIT in respect of Part B of the Project (the ANTT Agreement) and ANTAQ and DNIT in respect of Part D of the Project (the ANTAQ Agreement), whereby: (i) ANTT or ANTAQ, as the case may be, shall undertake to: (A) carry out their respective Parts of the Project, comply with the applicable procurement, disbursement and Project reporting procedures set forth or referred to in the Loan Agreement and the Project Agreement, and assist the Borrower and DNIT as required by the Borrower and DNIT to comply with their respective obligations under the Loan Agreement and the Project Agreement; and (B) maintain records and separate accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures of ANTT or ANTAQ, as the case may be, in respect of their respective Parts of the Project, and to have such records and accounts for each fiscal year audited, in

17 accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) ANTT shall undertake to tender concessions for federal highway sections in accordance with the indicators and targets set forth in the Project Monitoring Letter; (iii) the Borrower shall undertake to transfer to ANTT or ANTAQ, as the case may be, the funds required for the carrying out of their respective Parts of the Project; and (iv) the Borrower shall authorize ANTT or ANTAQ, as the case may be, to communicate directly with the Bank with respect to procurement procedures applicable to their respective Project activities. (e) The Borrower shall exercise its rights and comply with its obligations under the ANTT Agreement and the ANTAQ Agreement in such a manner as to protect the interests of the Bank and the Borrower and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate, waive or fail to enforce such agreements, 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 the Schedule to the Project Agreement. 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, 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 Parts A and C of the Project shall be carried out by DNIT pursuant to Section 2.10 of the Project Agreement. Section The Borrower, through its Ministry of Transport, shall: (a) enter into an agreement, satisfactory to the Bank, with each Participating State (the Decentralization Agreement), providing for the transfer of highway responsibilities from the Borrower to such Participating State, including the terms and conditions of such transfers, and the actions to be taken by such State to strengthen its capacity to prepare and carry out highway network maintenance strategies and programs in accordance with appropriate technical and economic criteria; and (b) exercise its rights and comply with its obligations under the Decentralization Agreements in such a 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, waive or fail to enforce the Decentralization Agreements or any provision thereof. Section Without limitation upon the provisions of Section 3.01 (a) of this Agreement, the Borrower shall provide, promptly as needed, the funds that may be required during the period for an emergency highway maintenance contingency program that may be required to be carried out in the event some or all proposed concessions under the Highway Concession Program do not enter into effect. Section The Borrower, through its Ministry of Transport, shall participate in the review referred to in Section 2.11 of the Project Agreement.

18 ARTICLE IV Financial Covenants Section (a) 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 sound accounting practices, records and separate accounts reflecting such expenditures; (ii) ensure that all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures are retained 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; and (iii) enable the Bank s representatives to examine such records. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) (i) of this Section and 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, including 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; 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.

19 ARTICLE V Remedies of the Bank Section Pursuant to Section 6.02 (l) of the General Conditions, the following additional events are specified, provided, however, that, if any of the events referred to in paragraphs (d) and (e) below shall have occurred and be continuing, the suspension of the Borrower s right to make withdrawals from the Loan Account may be limited to withdrawals in respect of Project expenditures related to the Participating State or Participating DER in question: (a) DNIT shall have failed to perform any of its obligations under the Project Agreement. (b) 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 DNIT will be able to perform its obligations under the Project Agreement. (c) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of DNIT or for the suspension of its operations before the completion of the Project, and no other arrangements, satisfactory to the Bank, shall have been made to ensure the timely completion of the Project and the attainment of its objectives. (d) Any Participating State or any Participating DER shall have failed to perform any of its respective obligations under the relevant Decentralization or Delegation Agreement, as the case may be. (e) 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 any Participating State or Participating DER will be able to perform any of its respective obligations under the relevant Decentralization or Delegation Agreement, as the case may be. (f) The IDB Loan Agreement shall have failed to become effective by December 31, 1998, or such later date as the Bank may agree; provided, however, that the provisions of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that 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. (g) (i) Subject to subparagraph (ii) of this paragraph: have pursuant to the terms maturity (A) (B) the right of the Borrower to withdraw the proceeds of the IDB Loan shall been suspended, canceled or terminated in whole or in part, of the IDB Loan Agreement, or the IDB Loan shall have become due and payable prior to the agreed thereof. the (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to satisfaction of the Bank that adequate funds for the Project are available

20 to the Borrower with the obligations of the from other sources on terms and conditions consistent Borrower under this Agreement. Section events are specified: Pursuant to Section 7.01 (h) of the General Conditions, the following additional (a) Any event specified in paragraph (a) or (d) 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. (b) Any event specified in paragraph (c) of Section 5.01 of this Agreement shall occur. (c) The event specified in paragraph (g) (i) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (g) (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) this Agreement has been duly registered by the Central Bank of Brazil; and(b) the consulting firm referred to in Section 2.02 (c) of the Project Agreement has been employed by DNER. 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 this Agreement has been duly registered by the Central Bank of Brazil; and (b) that the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, DNER, and is legally binding upon DNER in accordance with its terms. Section The date March 10, 1998 is hereby specified for the purposes of Section of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section Except as provided in Section 2.08 of this Agreement, the Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section of the General Conditions.

21 Section General Conditions: The following addresses are specified for the purposes of Section of the For the Borrower: Ministério da Fazenda Procuradoria-Geral da Fazenda Nacional Esplanada dos Ministérios, Bloco "P" - 8º andar Brasília, D.F. Brazil With copies to: Ministério do Planejamento, Orçamento e Gestão Secretaria de Assuntos Internacionais Esplanada dos Ministérios, Bloco "K" - 5º andar Brasília, D.F. Brazil Departamento Nacional de Estradas de Rodagem DNER (em extinção) SAAN Quadra 3 Lote A Edifício Núcleo dos Transportes, 4 andar Brasília, D.F. Brazil Departamento Nacional de Infra- Estrutura de Transportes SAAN, Quadra 3, Lote A Brasília, D.F. Brazil Agência Nacional de Transportes Terrestres Explanada dos Ministerios, Bloco R Edifício Anexo, Ala Oeste - 4 andar Brasília, D.F. Brazil Agência Nacional de Transportes Aquaviários SAAN Quadra 3, Bloco N/O - 2 andar Edificio Núcleo dos Transportes Brasília, D.F. Brazil For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C

22 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 Brasília, D.F., Brazil as of the day and year first above written. FEDERATIVE REPUBLIC OF BRAZIL By /s/ Luiz Carlos Sturzenegger Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Gobind T. Nankani Authorized Representative WITNESSES: Min. Elizeu Padilha Min. Antonio Kandir SCHEDULE l 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: Category Amount of the Loan Allocated (Expressed in Dollars) % of Expenditures to be Financed

23 (1) Civil works: 80% (a) under Part A.2 of the Project (State Rehabilitation Subprojects) (b) under Part C.4 of the Project (Federal Rehabilitation Subprojects) (c) under Part C.5 of the Project (Federal Rehabilitation and Maintenance Subprojects) (2) Goods: (a) under Part B.1 of the Project 57,000, ,000,000 80,000, , % of foreign expenditures, 100% of local expenditures (ex-factory cost) and 80% of local expenditures for other items procured locally (b) under Part C of the Project 1,000,000 (c) under Part D of the Project 500,000 (3) Consultants services under Parts A.2, C.4 and C.5 of the Project (4) Consultants services and training under Parts A.1, C.1 through C.3 of the Project (5) Consultants services and training under Part B.1 of the Project (6) Consultants services under Part B.2 of the Project (7) Consultants services and training under Part D of the Project 11,500,000 80% 11,500, % 2,000, % 5,000,000 80% 2,000, % (8) Unallocated 9,000,000