(Industrial Restructuring and Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT. and BANCO DE LA REPUBLICA

Transcription

1 Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 3321 CO Public Disclosure Authorized Public Disclosure Authorized (Industrial Restructuring and Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO DE LA REPUBLICA Dated January 22, 1992 LOAN NUMBER 3321 CO LOAN AGREEMENT Public Disclosure Authorized AGREEMENT, dated January 22, 1992, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and BANCO DE LA REPUBLICA (the Borrower). WHEREAS (A) REPUBLIC OF COLOMBIA (the Guarantor) and the Borrower, having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, have requested the Bank to assist in the financing of the Project; (B) by an agreement (the Guarantee Agreement) of even date herewith between the Guarantor and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower in respect of the Loan and to undertake such other obligations as set forth in the Guarantee Agreement; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows:

2 ARTICLE I General Conditions Section The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications set forth in Schedule 6 to this Agreement (the General Conditions) constitute an integral part of this Agreement. Section Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth, and the following additional terms have the following meanings: (a) "Account Bank" means Banco de la Republica; (b) "CAR" means Corporacion Autonoma Regional de las Cuencas de los Rios Bogota, Ubate y Suarez; (c) "CFC" means each Compania de Financiamiento Comercial which is a financial institution providing medium and short-term credit established and operating under the laws and regulations of the Guarantor; (d) "Corporaciones Financieras" means financial institutions duly established under the laws of the Guarantor; (e) "DNP" means Departamento Nacional de Planeacion, the Guarantor s National Planning Department; (f) "DTF" means an annual interest rate equal to the average interest rate offered by private Corporaciones Financieras, CFCs, and commercial banks in Colombia on their 90-days Certificados de Deposito a Termino (term certificates of deposit) calculated and communicated by the Borrower on a weekly basis; (g) Social; "CONPES" means the Guarantor s Consejo Nacional de Politica Economica y (h) "SENA" means the Guarantor s Servicio Nacional de Aprendizaje, established by the Guarantor s Legislative Decree 0118 published in issue 29,441 of the Guarantor s Official Journal of July 24, 1957 and governed by the Guarantor s Legislative Decree 0164 of August 6, 1957 published in issue 29,475 of such Journal of August 31, 1957; (i) "Estatutos" means the by-laws of the Borrower issued by its Junta Directiva and approved by the Guarantor s Resolucion Ejecutiva No. 105 of 1982, as may be amended from time to time; (j) "FONDOS Regulation" means the Resolucion 44 issued by the Guarantor s Junta Monetaria on October 6, 1990 as may be amended from time to time; (k) "Industrial Enterprise" means an enterprise, duly established under the laws of the Guarantor, engaged in manufacturing, agroindustry or mining activities or in associated services (as defined in the Credit Regulations); (l) "Investment" means an equity investment made or proposed to be made by a Participating Financial Intermediary or an Investor in an Industrial Enterprise for a Subproject which meets the terms and conditions set forth in Schedule 8 to this Agreement and the Credit Regulations; (m) "Investor" means a person or an entity with a legal capacity to contract, other than a Participating Financial Intermediary, to which a Participating Financial Intermediary has made or proposes to make a Sub-Loan to finance an Investment; (n) "ISIC" means the International Standard Industrial Classification as approved by the United Nations in U.N. Statistical Papers, International Standard Industrial Classification of All Economic Activities, Third Revision, series M, No. 4, Rev. 3 (1990), pages 147 and

3 155; (o) "Labor Adjustment Program" means the program set forth in Document DNP-UDIT2510 of February 15, 1991, approved by CONPES on the same date for purposes of providing services to workers affected by the restructuring of the industrial sector; (p) "Labor Amendments" means the Guarantor s Labor Regime Law No. 50 of December 28, 1990 and published in the Official Gazette on January 1, 1991, and including the implementing regulations therefor; (q) "Labor Assistance Agreements" means each of the agreements to be entered into between SENA and each of the Participating Industrial Enterprises for purposes of the implementation of Part B (1) of the Project and pursuant to Section 3.01 (b) of the Guarantee Agreement; (r) "MED" means the Guarantor s Ministry of Economic Development; (s) "Quantitative Restrictions" means any form of restrictions established by the Guarantor on the quantity of imports, including import prohibitions and prior license requirements, other than those required under public health, safety control or National Security regulations; (t) "Participation Agreement" means an agreement to be entered into between the Borrower and a Participating Financial Intermediary providing for a Subsidiary Loan (as hereinafter defined); (u) "Participating Financial Intermediary" means each of the financial institutions, including commercial banks and Corporaciones Financieras, qualified by the Borrower and the Bank to participate in the Project and which, inter alia: (i) complies with the requirements of the Superintendency of Banks in Colombia in respect of its overall operating policies and practices, financial condition and reporting requirements; and (ii) has entered into a Participation Agreement (as hereinafter defined) with the Borrower; (v) "Participating Industrial Enterprises" means each of the Industrial Enterprises which meet the criteria set forth in the Labor Adjustment Program and participate in the implementation of Part B (1) of the Project; (w) "PCSU" means the Pollution Control Support Unit within DNP in charge, among other functions, of advising on, and implementing environmental assessments of industrial investments; (x) "pesos" means the currency of the Guarantor; (y) "PMSU" means the Project Management Support Unit within MED in charge, among other functions, of: (i) developing an information system for purposes of monitoring the performance of the industrial sector during the restructuring process; and (ii) providing advisory services to assist in the implementation of the Project; (z) "Preparatory Activities" means the activities, including studies and technical assistance, for purposes of the preparation of a Subproject; (aa) "Regional Development Corporations" means the entities at the regional level, known as Corporaciones Regionales, responsible for integrated natural resource management and environmental protection in their respective areas of jurisdiction, and "CORNARE" means Corporacion Autonoma Regional Rionegro-CORNARE, one of such Corporations established by the Guarantor s Law 60 of 1983 (December 28) and governed by the Guarantor s Decree 2295 of 1987, acting on its own behalf, or acting on behalf of DNP under the applicable Part B Contractual Arrangements to be entered into pursuant to paragraph (c) of Section 3.01 of the Guarantee Agreement for purposes of the carrying out of Part B (2) (e) of the Project when activities under such Part of the Project may involve Regional Development Corporations other than CORNARE; (bb) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (cc) "Credit Regulations" means the lending regulations for the purposes of

4 this Project and approved by the Borrower pursuant to Section 6.01 of this Agreement; (dd) "Subloan" means a loan made or proposed to be made by a Participating Financial Intermediary partly out of the proceeds of the Loan to: (a) an Investor for purposes of financing an Investment, or (b) an Industrial Enterprise for a Subproject or for Preparatory Activities, as the case may be, and which Subloan meets the terms and conditions set forth in Schedule 8 to this Agreement and the Credit Regulations; (ee) "Subproject" means a specific development project aimed at sustaining or increasing the international competitiveness of an Industrial Enterprise and such development project may include expenditures in goods, works and services related thereto such as, investments in physical plant of an Industrial Enterprise, including plant construction, relocation, expansion, improvement or acquisition of production equipment or machinery, expenditures for technology improvement, working capital, research and development expenses, marketing expenses and worker retraining and relocation expenses. Excluded from such expenditures are the transfer of assets, acquisition of land, severance payments and refinancing of existing debt; (ff) "Subsidiary Loan" means a loan made or proposed to be made by the Borrower out of the proceeds of the Loan to a Participating Financial Intermediary under a Participation Agreement for the purpose of financing (together with the Participating Financial Intermediary) one or more Subloans or Investments; (gg) "Contractual Arrangements" means the arrangements to be entered between the Borrower and the Guarantor pursuant to the provisions of Section 3.02 (b) of the Loan Agreement; and the term "Part B Contractual Arrangements" means the arrangements to be entered into by the Guarantor with each of SENA, FONADE and CORNARE and, if so required, by CORNARE, on behalf of the Guarantor, with one or more Regional Development Corporations, all pursuant to the provisions of Section 3.01 (c) of the Guarantee Agreement; (hh) Guarantor; "Superintendency of Banks" means the Superintendencia Bancaria of the (ii) "Final Tariff Targets" means the following targets to be achieved by December 1993, adopted by the Guarantor: (a) a maximum import tariff rate (including import surcharges) of 23% (excluding the automotive industry which will have a maximum tariff rate of 50%) as decided by the Guarantor s Consejo Nacional de Politica Aduanera as set forth in its Acta 08 dated November 6, 1990, (hereinafter referred to as Acta 08); (b) an average tariff rate of 16% (including import surcharges) as decided by the CONPES, as set forth in Documento DNP 2494, dated October 29, 1990, (hereinafter CONPES Decision); and (c) a reduction of import tariff rate categories to four categories (excluding the category rate for automobiles) as set forth in the CONPES Decision; (jj) "Executing Entities" means SENA, in respect of Part B (1) of the Project; DNP, acting through FONADE in respect of Parts B (2) (a) through (d), of the Project; DNP acting through CORNARE or through CORNARE and one or more other Regional Development Corporations, as the case may be, in respect of Part B (2) (e) of the Project; and MED in respect of Part B (3) of the Project; and (kk) "Fondo de Fomento" means industrial lines of credit including all BR s Fondo Financiero Industrial y Comercial, Fondo para Inversiones Privadas and Fondo de Capitalizacion Empresarial, all as referred to in the FONDOS Regulation, and any other domestic industrial line of credit which may be established for similar purposes, other than those which in the opinion of the Guarantor and the Bank are established for social or emergency purposes. 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 two hundred million dollars ($200,000,000), 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.

5 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: (i) amounts paid (or, if the Bank shall so agree, to be paid) by the Borrower on account of withdrawals made by an Industrial Enterprise under a Subloan or Investment to meet the reasonable cost of goods and services required for the Subproject in respect of which the withdrawal from the Loan Account is requested; and (ii) 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 Part B of the Project and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars or other convertible currency acceptable to the Bank a special deposit account in the Account Bank on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section The Closing Date shall be December 31, 1996 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor 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 and the Guarantor 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 reasonably 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."

6 "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower and the Guarantor 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 semi-annually on May 15 and November 15 in each year. Section The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project; Management and Operations of the Borrower Section 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 carry out Part A of the Project, with the assistance of the Participating Financial Intermediaries, and conduct its operations and affairs in accordance with sound financial, administrative, industrial and engineering standards and practices, with qualified management and personnel, and in accordance with the Estatutos and the Credit Regulations. Section (a) The Borrower shall relend the proceeds of the Loan allocated for the execution of Part A of the Project to the Participating Financial Intermediaries under Participation Agreements, satisfactory to the Bank, which shall include, inter alia, the terms and conditions set forth in Schedule 7 to this Agreement. (b) The Borrower shall enter into arrangements, satisfactory to the Bank, with the Guarantor, for purposes of making available to the Guarantor the proceeds of the Loan allocated for the execution of Part B of the Project, which shall be distributed among the respective Executing Entities under the Part B Contractual Arrangements. (c) The Borrower shall exercise its rights under each Participation Agreement and the Contractual Arrangements 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 may otherwise agree, the Borrower shall not amend, abrogate, assign, waive or fail to enforce any Participation Agreement, the Contractual Arrangements or any provision thereof. (d) The Borrower shall utilize the proceeds accrued to the Borrower from repayments under Participation Agreements, which are not required for purposes of repayment of the Loan, exclusively for making loans to Participating Financial Intermediaries for similar purposes, and under similar terms and conditions as those set forth in this Agreement. Section (a) The Borrower shall cause the Participating Financial Intermediaries to make available the proceeds of the Loan allocated for the execution of Part A of the Project to the Industrial Enterprises in accordance with the procedures, terms and conditions for Subloans and Investments set forth or referred to in Schedule 8 to this Agreement and in the Credit Regulations. (b) The Borrower shall exercise its rights in relation to each Participating Financial Intermediary and each Subproject in such manner as to: (i) protect the interests of the Bank and the Borrower; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of the Project. 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

7 shall be governed by the provisions of Schedule 4 to this Agreement. Section Without limitation or restriction to Section 9.07 of the General Conditions, the Borrower shall submit to the Bank semiannual reports, in such detail as the Bank shall reasonably request, containing an analysis of performance data on the implementation of Part A of the Project. ARTICLE IV Financial Covenants Section The Borrower shall maintain, or cause to maintain, procedures and separate records and accounts adequate to monitor and record the progress of the Project and of each Investment Subproject (including its cost and the benefits to be derived from it) and to reflect in accordance with consistently maintained sound accounting practices the operations resources and expenditures in respect of the Project and of each Subproject. Section (a) The Borrower shall: (i) have the records and accounts referred to in Section 4.01 of this Agreement and the records and accounts for the Special Account for each fiscal year audited in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank, as soon as available but in any case not later than six months after the end of each such year the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the said records, accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request. (b) 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 Section 4.01 of this Agreement, records and accounts reflecting such expenditures; (ii) retain, or cause to be 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, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank s representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (a) 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. ARTICLE V Remedies of the Bank Section Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified provided, however, that if any of the events specified in paragraphs (b), (c), (e) or (f) below shall have occurred and be continuing and such event relates only to one or more Participating Financial

8 Intermediary, the suspension of the Borrower s rights to make withdrawals from the Loan Account may be limited by the Bank to withdrawals related to such Participating Financial Intermediary: (a) The Estatutos or the Credit Regulations shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely, in the Bank s opinion, the ability of the Borrower to carry out the Project or to perform any of its obligations under this Agreement or each of the Participation Agreements. (b) A resolution shall have been passed for the dissolution or liquidation of a Participating Financial Intermediary. (c) The Guarantor or any other authority having jurisdiction shall have taken any action which, in the opinion of the Bank: (i) materially and adversely affects the financial condition or operations of a Participating Financial Intermediary; or (ii) suspends a Participating Financial Intermediary s operations. (d) The Borrower shall have ceased to calculate or communicate the DTF on a weekly basis or the DTF shall have, in the Bank s opinion, failed to reflect the average interest rate offered by private Corporaciones Financieras and CFCs and commercial banks in Colombia on their 90 day Certificados de Deposito a Termino or any event shall have occurred which would make the application of interest rates based on the DTF inapplicable, unenforceable or illegal in Colombia. (e) A default shall occur in the performance of any obligation on the part of any Participating Financial Intermediary under the respective Participation Agreement. (f) As a result of events which have occurred after the date of this Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that one or more of the Participating Financial Intermediaries will be able to perform its obligations in respect of the Project. (g) The Guarantor shall have increased the coverage of quantitative restrictions on manufactured items to more than five percent (5%) of the total production of items manufactured in Colombia, such coverage and production to be calculated in accordance with methods and assumptions satisfactory to the Bank, provided, however, that such limitation to increases of quantitative restrictions shall be exempted from the provisions of this paragraph if, in the opinion of the Bank, any increase above the limit set forth above is required exclusively as a temporary means to prevent or detain a fall in the Guarantor s international reserves caused by an extreme and unexpected disequilibrium in the Guarantor s balance of payments, provided further that such exemption shall only apply if and as long as the Guarantor, within 120 days from the imposition of the respective quantitative restriction or restrictions, prepares an action plan, satisfactory to the Bank, for the substantial elimination of the quantitative restrictions exempted from the limitations set forth in this paragraph and puts such plan into effect within 180 days from such imposition. (h) The Guarantor shall have taken any action which shall have the effect of: (i) increasing average tariff rates or the number of tariff rate categories set forth as Final Tariff Targets in the CONPES Decision; (ii) increasing the maximum tariff set forth as Final Tariffs Targets in the Acta 08; or (iii) extending the deadline (December, 1993) for the achievement of the Final Tariff Targets. (i) The FONDOS Regulation shall have been amended, suspended, repealed, waived or abrogated to the extent which, in the opinion of the Bank, shall materially and adversely affect the implementation of the Project. (j) The Labor Amendments shall have been totally or partially abrogated, amended, suspended, repealed or waived so as to, in the opinion of the Bank, materially and adversely affect the implementation of the Project. (k) That the interest rate charged by the Borrower on funds lent under the Fondos de Fomento to financial institutions, including commercial banks and

9 Corporaciones Financieras, is reduced to less than the DTF rate or the maximum interest rate such financial institutions are allowed to charge, on funds onlent to the beneficiaries out of credits provided by the Borrower under the Fondos de Fomento, is reduced to less than the DTF rate plus six percentage points. Exempted from the above shall be interest rates charged on funds lent to industrial enterprises in frontier zones as provided in the FONDOS Regulation and funds which in the opinion of the Guarantor and the Bank are lent for social or emergency purposes. Section Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified, namely, the event specified in paragraphs (a), (b), (c), (d), (e), or (i) of Section 5.01 to this Agreement shall occur. 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) that the Borrower shall have issued the Credit Regulations in form and substance satisfactory to the Bank; and (b) that the Borrower and the Guarantor have entered into the Contractual Arrangements. Section The following is specified as an additional matter, within the meaning of Section (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank, namely, that the Contractual Arrangements has been duly authorized or ratified by, and executed and delivered on behalf of the Guarantor and the Borrower and is legally binding upon the Guarantor and the Borrower in accordance with its terms. Section The date of April 22, 1992 is hereby specified for the purposes of Section of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section The General Manager 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 Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C United States of America Cable address: Telex: For the Borrower: INTBAFRAD (RCA) Washington, D.C (FTCC) (WUI) or (TRT) Banco de la Republica Carrera Septima No

10 Colombia Cable address: Telex: REDESBANCO Bogota IN WITNESS 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. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Rainer B. Steckhan Acting Regional Vice President Latin America and the Caribbean BANCO DE LA REPUBLICA By /s/ Luis Fernando Ramirez Authorized Representative 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) Subloans and 192,000,000 70% of amounts Investments disbursed by under Part A Participating of the Project Financial Intermediaries under peso denominated Subloans and Investments and 100% of amounts disbursed by Participating Financial Intermediaries under dollar denominated Subloans and Investments (2) Goods and 8,000, % services under Part B of the Project

11 TOTAL 200,000,000 =========== 2. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) a Subloan or Investment unless the Subloan or Investment has been made in accordance with the procedures and on the terms and conditions set forth or referred to in Schedule 8 to this Agreement and the Credit Regulations; (b) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not to exceed $20,000,000, may be made on account of payments made for expenditures before that date but after January 31, 1991; (c) Subloans or Investments made by a Participating Financial Intermediary, unless the Bank shall have received a duly certified copy of the Participation Agreement entered into by such Participating Financial Intermediary and the Borrower together with a legal opinion or opinions satisfactory to the Bank showing that such Participation Agreement has been duly authorized or ratified by such Participating Financial Intermediary and the Borrower and is legally binding upon the Borrower and the respective Participating Financial Intermediary in accordance with its terms; (d) Subloans or Investments made by a Participating Financial Intermediary to an Industrial Enterprise in the textile or clothing industry subsector for purposes of a Subproject related to the manufacturing of cotton products included in any of the classifications 3211 through 3220 of the ISIC, unless the Bank has received evidence, satisfactory to the Bank, that the Guarantor has taken the necessary measures to convert price controls on domestic cotton production into a price stabilization scheme acceptable to the Bank; (e) Subloans or Investments to an Industrial Enterprise in the vehicle assembly or vehicle parts industries subsector and for purposes of a Subproject related to the manufacturing of products included in any of the classifications 3843 of the ISIC, unless the Bank has received evidence, satisfactory to the Bank, that the Guarantor has established a deregulation system, satisfactory to the Bank, applicable to the vehicle assembly and vehicle parts industries subsector; (f) a Subloan denominated in dollars or an Investment denominated in dollars unless the amount of the proceeds of the Loan to be disbursed under the respective Subloan or Investment shall not exceed fifty percent (50%) of the total cost of the Subproject; (g) expenditures under Part B (1) of the Project by a Participating Industrial Enterprise unless the Guarantor and SENA shall have entered into the respective Part B Contractual Arrangements and such Participating Industrial Enterprise shall have entered into the respective Labor Assistance Agreement; (h) expenditures under Parts B (2) (a) through (d) of the Project by FONADE or expenditures under Part B (2) (e) of the Project by, or in respect of, CORNARE, unless the applicable Executing Entity shall have entered with the Guarantor into the respective Part B Contractual Arrangements; and (i) expenditures under Part B (2) (e) of the Project by, or in respect of, any of the Regional Development Corporations other than CORNARE, unless CORNARE shall have entered with such Corporation into the additional Contractual Arrangements referred to in paragraph (c) (iii) of Section 3.01 of the Guarantee Agreement. SCHEDULE 2 Description of the Project The objective of the Project is to increase the international competitiveness of the industrial sector in Colombia through the renovation, expansion and/or reduction

12 of industrial production capacity. The Project consists of the following Parts, subject to such modifications thereof as the Bank and the Borrower may agree upon from time to time to achieve such objectives: Part A: Part B: Carrying out of Subprojects. Technical assistance consisting of: (1) consultants services acquisition of equipment and training to support the implementation of the Labor Adjustment Program including: (a) assistance in skills assessment, career and employment counseling; (b) employment search and referral programs; (c) employment retraining programs for basic skill requirements; and (d) entrepeneurship programs for purposes of preparing feasibility studies and business plans; (2) assistance in environmental pollution control including: (a) the establishment and operation of the PCSU; (b) a training program for staff of the PCSU and Regional Development Corporations in areas such as air pollution, water pollution, hazardous waste, risk analysis and bio-essays; (c) redesign of the permit system; (d) review of procedures for collection of water use charges and establishment of a billing system; and (e) acquisition and utilization of equipment required for the implementation of environmental assessments, permit and billing systems and other requirements of the PCSU and Regional Development Corporations; and (3) operation of the PMSU. * * * The Project is expected to be completed by June 30, SCHEDULE 3 Amortization Schedule Date Payment Due Payment of Principal (expressed in dollars)* On each May 15 and November 15 beginning November 15, 1996 through November 15, ,335,000 and on May 15, ,295,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03.

13 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: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.18 before maturity More than three years but 0.35 not more than six years before maturity More than six years but 0.65 not more than 11 years before maturity More than 11 years but not 0.88 more than 15 years before maturity More than 15 years before 1.00 maturity SCHEDULE 4 Procurement and Consultants Services Section I. Part A: Procurement of Goods and Works International Competitive Bidding 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). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in Colombia may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Other Procurement Procedures 1. Part A of the Project Contracts for goods and works estimated to cost the equivalent of $5,000,000 or less may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Bank. 2. Part B of the Project (a) Contracts for works and goods estimated to cost $250,000 equivalent or less, but more than $50,000 equivalent may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures

14 satisfactory to the Bank. (b) Contracts for works and goods estimated to cost $50,000 equivalent or less, may be procured under contracts awarded on the basis of comparison of price quotations solicited from a list of at least three qualified contractors or suppliers, as the case may be, eligible under the Guidelines, in accordance with procedures acceptable to the Bank. Part D: Without limitation upon the provision of the Guidelines, in respect of procurement of goods and works made: 1. Pursuant to Part A of this Schedule: (a) (b) (c) (d) no requirements of local agents for foreign bidders shall be made; no prior registration of foreign bidders shall be required; no provision regarding minimum number of bidders shall be applied; bids for goods shall be evaluated on a C.I.F. basis; and (e) freight costs quoted freely by each bidder shall be used for purposes of bid evaluation. 2. Pursuant to Part A or Part C of this Schedule: Part E: (a) Awards shall be made to the lowest evaluated bidders. 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 or works estimated to cost the equivalent of $5,000,000 or more under Part A of the Project; (ii) each contract for goods or works estimated to cost more than $250,000 equivalent under Part B of the Project; and (iii) the first two contracts for goods and works procured under the procedures referred to in Part C.2 (a) of this Schedule, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. 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 to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 5 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which the Bank has authorized withdrawals on the basis of statements of expenditure. 2. The figure of 20% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants In order to assist the Borrower, the Guarantor and the Industrial Enterprises in carrying out the Project, the Borrower, the Guarantor and the Industrial Enterprises shall employ consultants whose qualifications, experience and terms and conditions of employment

15 shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August For the purposes of this Schedule: SCHEDULE 5 Special Account (a) the term "eligible Categories" means Categories (1) and (2) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement, provided, however, that notwithstanding the provisions of paragraph 2 (b) of Schedule 8 to this Agreement, payments for expenditures to be financed out of the proceeds of Free-limit Subloans may be made out of the Special Account before the Bank shall have authorized withdrawals from the Loan Account in respect thereof. Such expenditures, however, shall qualify as eligible expenditures only if the Bank shall subsequently authorize such withdrawals; and (c) the term "Authorized Allocation" means an amount equivalent to $17,000,000 to be withdrawn from the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such

16 documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Loan allocated to the eligible Categories, less the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. SCHEDULE 6 Modifications of the General Conditions For purposes of this Agreement, the provisions of the General Conditions are modified as follows: (1) The last sentence of Section 3.02 is deleted. (2) The words "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" set forth at the end of Section 6.03 are deleted and the following is substituted therefor: "or (f) by the date specified in paragraph 2(c) of Schedule 8 to the Loan Agreement, the Bank shall, in respect of any portion of the Loan: (i) have received no applications or requests permitted under subparagraphs (a) or (b) of said paragraph; or (ii) have denied any such applications or requests, the Bank may, by notice to the Borrower and the Guarantor, terminate the right to submit such applications or approvals or to make withdrawals from the Loan Account, as the case may be, with respect to such amount or portion of the Loan. Upon the giving of such

17 notice, such amount or portion of the Loan shall be cancelled." SCHEDULE 7 Terms and Conditions of the Participation Agreements Participation Agreements shall include, inter alia, the following terms and conditions: 1. Currency denomination Dollars or Pesos 2. Interest Rate: For peso-denominated Subsidiary loans, at least the DTF rate plus a margin adequate to cover administrative costs and foreign exchange risks. For dollar-denominated Subsidiary loans, a rate at least equivalent to that one set forth in Section 2.05 of this Agreement plus a margin adequate to cover (i) admini-strative costs, and (ii) the cross currency risk. 3. Amortization and Periods equal to the periods Grace Periods: of the Sub-loans for which the proceeds are used. In case the proceeds are utilized for Investments, the amortization period shall not exceed more than ten years with a grace period of not more than 3 years. 4. On-lending: Subsidiary Loans shall be made exclusively for the purpose of making Subloans and Investments and each Subloan and Investment shall be made in accordance with the terms and conditions set forth in Schedule 8 to this Agreement. 5. Each Participating Financial Intermediary shall be under an obligation to maintain an adequate overall financial condition, to employ an adequate number of staff capable of managing the Investments or Subloans made by it and to ensure proper control and supervision of Industrial Enterprises arrears under the Subloans. 6. (a) Participating Financial Intermediaries shall maintain adequate records to accurately reflect their operations and financial situation, in accordance with sound accounting practices and principles, in a form satisfactory to the Borrower and the Bank. Such records shall include separate records in respect of each Subproject, which shall be audited annually by independent auditors acceptable to the Bank and the Borrower. (b) Within six months of the end of its fiscal year each Participating Financial Intermediary shall submit to the Bank, through the Borrower, its records in respect of each Investment Subproject, together with copies of financial statements and institutional audit information as required by Colombia s Superintendency of Banks, including, inter alia, opinions as to the reliability of the statement of expenditure supporting claims for disbursement and expenditures properly eligible for disbursement under the Project. 7. Participating Financial Intermediaries shall maintain until the Borrower has prepared and furnished to the Bank the report referred to in Section 9.07 (c) of the