Global Environment Facility Trust Fund Grant Agreement. (Andean Region Conservation and Sustainable Use of Biodiversity Project) between

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1 Public Disclosure Authorized CONFORMED COPY GEF TRUST FUND GRANT NUMBER Public Disclosure Authorized Public Disclosure Authorized Global Environment Facility Trust Fund Grant Agreement (Andean Region Conservation and Sustainable Use of Biodiversity Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT acting as an Implementing Agency of the Global Environment Facility and INSTITUTO DE INVESTIGACION DE RECURSOS BIOLOGICOS ALEXANDER VON HUMBOLDT Dated March 29, 2001 GEF TRUST FUND GRANT NUMBER GLOBAL ENVIRONMENT FACILITY TRUST FUND GRANT AGREEMENT Public Disclosure Authorized AGREEMENT, dated March 29, 2001, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank), acting as an implementing agency of the Global Environment Facility (GEF) in respect of grant funds provided to the GEF Trust Fund by certain members of the Bank as participants of the GEF, and INSTITUTO DE INVESTIGACION DE RECURSOS BIOLOGICOS ALEXANDER VON HUMBOLDT (the Recipient). WHEREAS (A) the Bank, pursuant to Resolution No of March 14, 1991 of the Executive Directors of the Bank, established the GEF to assist in the protection of the global environment and promote thereby environmentally sound and sustainable economic development; (B) following the restructuring of the GEF, such arrangements continued in place on the basis set forth in Resolution No. 94-2, dated May 24, 1994, of the Executive Directors of the Bank which, inter alia, established the GEF Trust Fund and appointed the Bank as trustee of the GEF Trust Fund (Resolution No. 94-2); (C) the second replenishment of the GEF Trust Fund was approved on the basis set forth in Resolution No. 98-2, dated July 14, 1998, of the Executive Directors of the Bank (Resolution No. 98-2);

2 (D) the Recipient, having satisfied itself as to the feasibility and priority of the project described in Schedule 2 to this Agreement (the Project), has requested assistance from the resources of the GEF Trust Fund for funding the Project, and said request having been approved in accordance with the provisions of the Instrument for the Establishment of the Restructured Global Environment Facility approved under Resolution 94-2; (E) (i) the Project will be co-financed by the Government of the Netherlands pursuant to a grant agreement to be entered into between such Government and the Recipient (the Dutch Grant Agreement) providing for a grant in an amount equivalent to $4,750,000 (the Dutch Grant); and (ii) Corporaciones Autónomas Regionales, the Regional Autonomous Corporations of the Government of Colombia (the CARs), will carry out certain components of Parts A, B and C of the Project, and, for that purpose, will provide the funds required for the carrying out of such components, estimated to be in an aggregate amount equivalent to $8,000,000; (F) the Republic of Colombia, through the letter to the Bank dated September 2000 from its Minister of the Environment, has requested that the grant provided in Article II of this Agreement (the Grant) be made to the Recipient; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Grant to the Recipient upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01 (a) The following provisions of the General Conditions Applicable to Loan and Guarantee Agreements for Single Currency Loans of the Bank, dated May 30, 1995 (as amended through October 6, 1999), with the modifications set forth in paragraph (b) of this Section (the General Conditions) constitute an integral part of this Agreement: (i) Article I; (ii) Section 2.01, paragraphs 1, 2, 3, 4, 5, 7, 8, 14, 15, 16, 18 and 21, and Sections 2.02 and 2.03; (iii) Section 3.01; (iv) Sections 4.01 and 4.06; (v) Article V; (vi) Sections 6.01, 6.02 (c), (e), (f), (g), (h), (i), (l), (m), (n), (o) and (p), 6.03, 6.04 and 6.06; (vii) Section 8.01 (b); (viii) Sections 9.01 (a) and (c), 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09; (ix) the second sentence of Section 10.01, and Section 10.03; (x) Article XI; and (xi) Sections 12.01, 12.02, and (b) The General Conditions shall be modified as follows: (i) as SDR mean Monetary Fund in a new paragraph shall be added to the end of Section 2.01 to read follows: the term Special Drawing Rights and the symbol special drawing rights as valued by the International accordance with its Articles of Agreement ;

3 (ii) than in Bank acting as an the term Bank, wherever used in the General Conditions, other Sections 5.01 (a) and 6.02 (f) thereof, means the implementing agency of the GEF; means the (iii) the term Borrower, wherever used in the General Conditions, Recipient; (iv) Conditions, means the term Loan Agreement, wherever used in the General this Agreement; the Grant; (v) the term Loan, wherever used in the General Conditions, means (vi) means the in the name of is credited; and the term Loan Account, wherever used in the General Conditions, Grant Account, the account opened by the Bank on its books the Recipient to which the amount of the Grant (vii) a new paragraph (q) is added to Section 6.02 of the General Conditions, as follows: (q) an extraordinary situation shall have arisen in which any further disbursement under the Grant would exceed the resources available for disbursement from the GEF. Section Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) Andean Region means the region in the territory of Colombia, with an area of about 305,000 square kilometers, located in or adjacent to the Andean mountains; (b) Cooperation Agreement means any of the agreements referred to in Section 3.03 (c) of this Agreement; (c) Eligible Categories means Categories (1) through (5) set forth in the table in Part A.1 of Schedule 1 to this Agreement; (d) Eligible Expenditures means the expenditures for goods and services referred to in Section 2.02 of this Agreement; (e) First Phase Conservation Zones means the following geographic areas in the Andean Region: (i) Northeastern páramos and moist forests; (ii) Alto Putumayo; (iii) Dagua Calima-Paraguas Corridor; (iv) Altiplano Cundiboyacence: and (v) Los Nevados Park and neighboring coffee-growing area, as such areas are identified in the map to be included in the Operational Manual, or any other conservation zone in the Andean Region that may, with the agreement of the Bank, replace any of the conservation zones listed above; (f) First Phase Protected Areas means the following protected areas (as defined in Law 99/93 of the Republic of Colombia): (i) Cocuy; (ii) Tamá; (iii) Pisba; (iv) Los Nevados; (v) Otun-Quimbaya; and (vi) Isla de la Corota, or any other protected area in the Andean Region that may, with the agreement of the Bank, replace any of the protected areas listed above; (g) Fund means the fund referred to in Part B.5 (a) of the Project; (h) Fund Operational Manual means the manual referred to in Part A.3 (b) of Schedule 1 to this Agreement; (i) Agreement; Fund Subgrant means any grant to be provided under a Fund Subgrant (j) Fund Subgrant Agreement means any of the agreements referred to in Section 3.03 (b) of this Agreement;

4 (k) Fund Subproject means any of the projects referred to in Part B.5 (a) of the Project which fulfills the criteria set forth in the Fund Operational Manual to be financed by a Fund Subgrant; (l) Fund Subproject Implementing Entity means any entity which carries out a Fund Subproject, after being selected in accordance with the eligibility criteria set forth in the Fund Operational Manual to carry out a Fund Subproject; (m) Operational Manual means the manual referred to in Section 7.01 (a) of this Agreement; (n) Agreement; (o) POA means any of the plans referred to in Section 3.05 (a) of this PCU means the unit referred to in Section 3.04 of this Agreement; (p) Project Management Report means each report prepared in accordance with Section 4.02 of this Agreement; (q) Second Phase Conservation Zone means any of the following geographic areas in the Andean Region which has been selected by the Recipient, with the agreement of the Bank, to be included in Parts A.1, A.2 and B of the Project: (i) Cuchila de los Cobardes and Chicamocha canyon; (ii) Rusia paramo and Quercus forest of Santander; (iii) Patía valley and neighboring western Andes chain mountain forests; (iv) Carare-Opón; (v) Tatacoa desert; and (vi) Dry forests of the Cauca canyon in Antioquia, as such zones are identified in the map to be included in the Operational Manual, or any other conservation zone in the Andean Region that may, with the agreement of the Bank, replace any of the conservation zones listed above; (r) Second Phase Protected Areas means any existing protected area in a Second Phase Conservation Zone, or any new protected areas which may be established pursuant to the conservation plans referred to in Part A.2 of the Project, and which are included, with the agreement of the Bank, in Part A.3 of the Project; (s) Special Account means the account referred to in Part B of Schedule 1 to this Agreement; (t) Subgrant means any grant to be provided under a Subgrant Agreement; (u) Subgrant Agreement means any of the agreements referred to in Section 3.03 (a) of this Agreement; (v) Subproject means any of the activities under the Project, to be carried out by a Subproject Implementing Entity, which fulfills the criteria set forth in the Operational Manual to be financed by a Subgrant; and (w) Subproject Implementing Entity means any entity (other than a CAR) which carries out a Subproject, after being selected in accordance with the eligibility criteria set forth in the Operational Manual to carry out a Subproject. ARTICLE II The Grant Section The Bank agrees to make available to the Recipient, on the terms and conditions set forth or referred to in this Agreement, a grant in an amount in various currencies equivalent to eleven million eight hundred thousand Special Drawing Rights (SDR 11,800,000). Section The amount of the Grant may be withdrawn from the Grant 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 Grant. Section The Closing Date shall be December 31, 2007 or such later date as the Bank shall establish. The Bank shall promptly notify the Recipient of such later

5 date. ARTICLE III Execution of the Project Section (a) The Recipient declares its commitment to the objectives of the Project, and, to this end, shall, subject to the provisions of Section 3.08 (b) of this Agreement: (i) carry out the components of the Project under its responsibility; (ii) cause, through the Subgrant Agreements, the Subproject Implementing Entities to carry out their respective Subprojects; and (iii) cause CARs, through the Cooperation Agreements, to carry out the components of Parts A, B and C of the Project under their responsibility, all with due diligence and efficiency and in conformity with appropriate administrative, financial, social, ecological and environmental standards and practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project (other than in respect of the Project components under CARs responsibility). (b) Without limitation to the provisions of paragraph (a) above, the Recipient shall carry out, and shall cause the Subproject Implementing Entities to carry out, the Project in accordance with the applicable provisions of the Operational Manual (except with respect to Part B.5 of the Project), the Fund Operational Manual (with respect to Fund Subgrants and Fund Subprojects) and the POAs. (c) The Recipient shall not carry out, or cause to be carried out, any Project activity in any Second Phase Protected Area or any Second Phase Conservation Zone until the Bank shall have notified the Recipient, after the review to be held pursuant to Section 3.08 of this Agreement, that the Bank is satisfied with the progress 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 Grant shall be governed by the provisions of Schedule 3 to this Agreement. Section (a) The Recipient shall enter into an agreement, satisfactory to the Bank (the Subgrant Agreement), with each Subproject Implementing Entity providing, inter alia, for: (i) the transfer by the Recipient, on a grant basis, to such Subproject Implementing Entity of the proceeds of the Grant or the Dutch Grant, as the case may be, allocated to finance the Subproject under the responsibility of such Subproject Implementing Entity; and (ii) the obligation of such Subproject Implementing Entity to: (A) carry out such Subproject as set forth or referred to in this Agreement, including, when applicable, taking all the environmental and social protection measures set forth in the Operational Manual, and (B) keep separate records and accounts in respect of such Subproject, and provide all information and documents to the Recipient as shall be required by the Recipient to comply with its obligations under this Agreement. (b) In operating the Fund, the Recipient shall make grants to Fund Subproject Implementing Entities under agreements, satisfactory to the Bank (the Fund Subgrant Agreements), whereby the Fund Subproject Implementing Entities shall, inter alia, undertake to: (i) carry out their respective Fund Subprojects as set forth or referred to in this Agreement and in the Fund Operational Manual; and (ii) keep separate records and accounts in respect of such Fund Subprojects, and provide all information and documents to the Recipient as shall be required by the Recipient to comply with its obligations under this Agreement. (c) The Recipient shall enter into an agreement, satisfactory to the Bank (the Cooperation Agreement), with each CAR carrying out a component of Part A, B or C of the Project whereby such CAR shall undertake, inter alia, to: (i) carry out such component with due diligence and efficiency and in conformity with appropriate administrative, financial, social, ecological and environmental standards and practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for such component; (ii) without limitation to the provisions of (i) above, comply with the corresponding POAs and with the environmental and social protection provisions set forth in the Operational Manual; (iii) ensure that no

6 activity will be carried out under its component of the Project which may cause any involuntary resettlement of population; and (iv) provide all information and documents to the Recipient in respect of such component as shall be required by the Recipient to comply with its obligations under this Agreement. (d) The Recipient shall exercise its rights and comply with its obligations under the Subgrant Agreements, the Fund Subgrant Agreements and the Cooperation Agreements in such manner as to protect the interests of the Recipient and the Bank and to accomplish the objectives of the Project, and, except as the Bank shall otherwise agree, the Recipient shall not assign, amend, abrogate or waive such agreements or any provision thereof. Section The Recipient shall maintain, during the execution of the Project, a unit (the PCU) responsible for Project coordination and management, such unit to have a structure and functions satisfactory to the Bank, and to have qualified staff in adequate numbers as required to carry out its responsibilities, including a coordinator, a financial management specialist and a procurement officer with qualifications, experience and terms of reference satisfactory to the Bank. Section The Recipient shall, not later than September 30 of each year during the execution of the Project, furnish to the Bank: (a) a plan, satisfactory to the Bank (the POA), detailing the Project activities to be carried out during the calendar year following the date of such plan, including expected Project outputs, detailed budgets for each activity and a procurement plan; and (b) evidence that the Recipient and CARs have entered into Cooperation Agreements in respect of the activities to be carried out by such CARs under the Project during the following calendar year. Section The Recipient shall: (a) cause the plan, set forth in the Recipient s letter to the Bank dated November 30, 2000, for the development of indigenous peoples located in the Andean Region to be carried out in accordance with its terms; (b) not start, or cause to be started, the implementation of any plan for a conservation zone under Part A.2 of the Project, unless the Bank shall have approved such plan; and (c) ensure that no activity will be carried out under the Project which may cause any involuntary resettlement of population. Section The Recipient shall: (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with the indicators set forth in the Operational Manual, the carrying out of the Project and the achievement of the objectives thereof; (b) prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, on or about March 31 and September 30 of each year during the execution of the Project, a report integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section on the progress achieved in the carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and (c) review with the Bank, by April 30 and October 31 of each year during the execution of the Project, or such later date as the Bank shall request, the relevant report referred to in paragraph (b) of this Section, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of said reviews and the Bank s views on the matter.

7 Section (a) The Bank and the Recipient shall, not later than the 36th month after the Effective Date, undertake an in-depth review of the progress of the Project to evaluate the Project s implementation arrangements and its on-the-ground effectiveness based on the targets set forth in Schedule 4 to this Agreement. For that purpose, the Recipient shall, not later than one month before the date of such review, prepare, with the assistance of an independent consultant acceptable to the Bank under terms of reference satisfactory to the Bank, and furnish to the Bank, a report on the progress in the carrying out of all components of the Project, the achievement of such targets, and on lessons learned therefrom. (b) If, after such review, the Bank is not satisfied with the progress of the Project and the targets set forth in Schedule 4 to this Agreement have not been achieved, the Bank may, by notice to the Recipient at any time after such review, withdraw its support to the carrying out of any new activities under the Project, and cancel the unwithdrawn amount of the Grant which has been allocated to finance such activities. Section For the purposes of Section 9.08 of the General Conditions and without limitation thereto, the Recipient shall: (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 Recipient and the Bank, a plan for the future operation of the Project; and (b) afford the Bank a reasonable opportunity to exchange views with the Recipient on said plan. ARTICLE IV Financial Covenants Section (a) The Recipient shall maintain a financial management system, including records and accounts, and prepare financial statements, all in accordance with accounting standards acceptable to the Bank consistently applied, adequate to reflect its operations and financial condition and to register separately the operations, resources and expenditures related to the Project. (b) The Recipient shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) and the records and accounts for the Special Account for each fiscal year audited, in accordance with auditing standards acceptable to the Bank, 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 four months after the end of each such year, (A) certified copies of the financial statements referred to in paragraph (a) of this Section, for such year as so audited, and (B) an opinion on such financial statements, records and accounts and a report of such audit, by said auditors, of such scope and in such detail as the Bank shall have reasonably requested (including, as part of the information to be provided in each such report, a management letter concerning the Recipient s internal controls); and (iii) furnish to the Bank such other information concerning such records, accounts and financial statements, and the audit thereof, and concerning said auditors, as the Bank may from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Grant Account were made on the basis of Project Management Reports or statements of expenditure, the Recipient shall: (i) maintain or cause to be maintained, in accordance with paragraph

8 (a) of reflecting such expenditures; this Section, records and separate accounts (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Grant 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 (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the Project Management Reports or statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section (a) Without limitation upon the provisions of Section 4.01 of this Agreement, the Recipient shall carry out a time-bound action plan acceptable to the Bank for the strengthening of the financial management system referred to in paragraph (a) of said Section 4.01 in order to enable the Recipient, not later than one year after the Effective Date, or such later date as the Bank shall agree, to prepare quarterly Project management reports, acceptable to the Bank, each of which: (i) (A) sets forth actual sources and applications of funds for the Project, both cumulatively and for the period covered by said report, and projected sources and applications of funds for of the Project for the six-month period following the period covered by said report; and (B) shows separately expenditures financed out of the proceeds of the Grant during the period covered by said report and expenditures proposed to be financed out of the proceeds of the Grant during the six-month period following the period covered by said report; (B) explains implementation (ii) (A) describes physical progress in Project implementation, both cumulatively and for the period covered by said report; and variances between the actual and previously forecast targets; and (iii) sets forth the status of procurement under the Project and expenditures under contracts financed out of the proceeds of the Grant, as at the end of the period covered by said report. (b) Upon the completion of the action plan referred to in paragraph (a) of this Section, the Recipient shall prepare, in accordance with guidelines acceptable to the Bank, and furnish to the Bank not later than 45 days after the end of each calendar quarter a Project Management Report for such period. ARTICLE V Remedies of the Bank Section Pursuant to Section 6.02 (p) of the General Conditions, the following additional events are specified: (a) The right of the Recipient to withdraw the proceeds of the Dutch Grant shall have been suspended, canceled or terminated in whole or in part, pursuant to the terms of the Dutch Grant Agreement. However, this provision shall not apply if the Recipient establishes to the satisfaction of the Bank that: (A) such suspension, cancellation or termination is not caused by the failure of the Recipient to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Recipient from other sources on terms and conditions consistent with the obligations of the Recipient under this Agreement.

9 (b) Any of the CARs has failed to perform any of its obligations under its respective Cooperation Agreement, and such failure has materially and adversely affected the achievement of the objective of the Project. In such case, the Bank may decide to exercise its right to suspend disbursements from the Grant Account only with respect to activities to be carried out in the area of jurisdiction of such CAR. ARTICLE VI Arbitration Section Any dispute arising out of or relating to this Agreement which is not settled by agreement of the parties shall be finally settled by arbitration in accordance with the UNCITRAL Arbitration Rules in force on the date of this Agreement. The place of arbitration shall be Washington, D.C., United States of America. ARTICLE VII Effectiveness; Termination Section The following events are specified as additional conditions to the effectiveness of this Agreement within the meaning of Section (c) of the General Conditions: (a) the Recipient has issued a manual, satisfactory to the Bank (the Operational Manual), setting forth specific rules and procedures for implementation of the Project, including, inter alia, the criteria for selection of Subproject Implementing Entities and approval of Subprojects, the model form of Subgrant Agreements, the environmental and social protection provisions applicable to the Project, procedures for procurement (including standard bidding documents), disbursement of Grant funds, and financial management under the Project, and the indicators to be used in the monitoring of the progress of the Project and the achievement of its objective; (b) the PCU s coordinator, financial management specialist and procurement officer have been selected as provided in Section 3.04 of this Agreement; (c) the Dutch Grant Agreement has become effective; (d) Cooperation Agreements have been entered into between the Recipient and CARs providing for the carrying out of activities with an aggregate cost of at least $500,000 equivalent; and (e) progress, satisfactory to the Bank, has been made in the carrying out of the action plan referred to in Section 4.02 (a) of this Agreement. Section The date June 29, 2001 is hereby specified for the purposes of Section of the General Conditions. Section This Agreement shall continue in effect until the Grant has been fully disbursed and the parties to this Agreement have fulfilled their obligations hereunder. ARTICLE VIII Representative of the Recipient; Addresses Section 8.01 The Director-General of the Recipient is designated as representative of the Recipient for the purposes of Section of the General Conditions. Section 8.02 The following addresses are specified for the purposes of Section of the General Conditions: For the Bank: International Bank for

10 Reconstruction and Development 1818 H Street, N.W. Washington, D.C United States of America Cable address: Telex: Facsimile: For the Recipient: INTBAFRAD (MCI) (202) Washington, D.C (MCI) Instituto de Investigación de Recursos Biológicos Alexander Von Humboldt Calle 37 No Santa Fe de Bogotá, Colombia Facsimile: (571) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in Santa Fe de Bogotá, Colombia, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT as an implementing agency of the Global Environment Facility By /s/ Alberto Chueca Mora Authorized Representative Latin America and the Caribbean INSTITUTO DE INVESTIGACION DE RECURSOS BIOLOGICOS ALEXANDER VON HUMBOLDT By /s/ Cristián Samper Authorized Representative SCHEDULE 1 Withdrawal of the Proceeds of the Grant A. General 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Grant, the allocation of the amounts of the Grant to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Grant Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Goods (other than 240,000 85% those financed by Subgrants and Fund Subgrants)

11 (2) Consultants services, 5,170, % including audits, and training (other than those financed by Subgrants and Fund Subgrants) (3) Operating costs 1,250,000 85% (4) Subgrants 3,680, % of amounts disbursed (5) Fund Subgrants 630, % of amounts disbursed (6) Unallocated 830,000 TOTAL 11,800, For the purposes of this Schedule: (a) the term "training" includes reasonable expenditures for training materials, training facilities rentals, and reasonable travel, room, board, and per diem expenditures incurred by trainees; (b) the term "operating costs" includes reasonable expenditures incurred by the Recipient for the management of the Project, such as salaries of non-consultant personnel employed by the PCU, travel costs, rentals, maintenance of facilities, consumable materials and supplies, and utilities, which would not have been incurred absent the Project; and (c) the term "Subgrants" does not include Subgrants made out of the proceeds of the Dutch Grant. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of SDR 390,000, may be made on account of payments made for expenditures incurred within one year prior to the date of this Agreement but after September 1, 2000; and (b) expenditures under Category (5) of the table in paragraph 1 above, unless the Recipient has issued a manual, satisfactory to the Bank (the Fund Operational Manual), setting forth detailed rules and procedures for the operation of the Fund, including, inter alia, the criteria for selection of Fund Subproject Implementing Entities and approval of Fund Subprojects, the model form of Fund Subgrant Agreements, and the environmental and social protection provisions applicable to Fund Subprojects. 4. The Bank may, under such terms and conditions as the Bank shall specify by notice to the Recipient, require withdrawals from the Grant Account to be made on the basis of statements of expenditure for expenditures for items not subject to Bank prior review pursuant to Section I, Part C.2 and Section II, Part D.2 of Schedule 3 to this Agreement, as well as for training expenditures, operating costs, Subgrants and Fund Subgrants. 5. If the Bank shall have determined at any time that any payment made from the Grant Account was used for any expenditure not consistent with the provisions of this Agreement, the Recipient shall, promptly upon notice from the Bank, refund to the Bank for deposit into the Grant Account an amount equal to the amount so used or the portion thereof as specified by the Bank. B. Special Account 1. The Recipient shall open and maintain in Dollars a special deposit account in a commercial bank acceptable to the Bank, on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure and attachment.

12 2. After the Bank has received evidence satisfactory to it that the Special Account has been opened, withdrawals from the Grant Account of amounts to be deposited into the Special Account shall be made as follows: (a) until the Bank shall have received: (i) the first Project Management Report referred to in Section 4.02 of this Agreement; and (ii) a request from the Recipient for withdrawal on the basis of Project Management Reports, withdrawals shall be made in accordance with the provisions of Annex A to this Schedule 1; and (b) upon receipt by the Bank of a Project Management Report pursuant to Section 4.02 of this Agreement, accompanied by a request from the Recipient for withdrawal on the basis of Project Management Reports, all further withdrawals shall be made in accordance with the provisions of Annex B to this Schedule Payments out of the Special Account shall be made exclusively for Eligible Expenditures. For each payment made by the Recipient out of the Special Account, the Recipient shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for Eligible Expenditures. 4. Notwithstanding the provisions of Part B.2 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if the Bank determines at any time that any Project Management Report does not adequately provide the information required pursuant to Section 4.02 of this Agreement; (b) if the Bank determines at any time that all further withdrawals should be made by the Recipient directly from the Grant Account; or (c) if the Recipient shall have failed to furnish to the Bank within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Bank pursuant to said Section in respect of the audit of: (A) the records and accounts for the Special Account; or (B) the records and accounts reflecting expenditures with respect to which withdrawals were made on the basis of Project Management Reports. 5. The Bank shall not be required to make further deposits into the Special Account in accordance with the provisions of Part B.2 of this Schedule if, at any time, the Bank shall have notified the Recipient of its intention to suspend in whole or in part the right of the Recipient to make withdrawals from the Grant Account pursuant to Section 6.02 of the General Conditions. Upon such notification, the Bank shall determine, in its sole discretion, whether further deposits into the Special Account may be made and what procedures should be followed for making such deposits, and shall notify the Recipient of its determination. 6. (a) If the Bank determines at any time that any payment out of the Special Account was made for an expenditure which is not an Eligible Expenditure, or was not justified by the evidence furnished to the Bank, the Recipient shall, promptly upon notice from the Bank, provide such additional evidence as the Bank may request, or 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. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Recipient has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank determines at any time that any amount outstanding in the Special Account will not be required to cover payments for Eligible Expenditures during the six-month period following such determination, the Recipient shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Recipient 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 subparagraph (a), (b) or (c) of this paragraph 6 shall be credited to the Grant Account for subsequent withdrawal or for cancellation in accordance with the provisions of this Agreement.

13 Annex A to SCHEDULE 1 Operation of Special Account When Withdrawals Are Not Made On the Basis of Project Management Reports 1. For the purposes of this Annex, the term Authorized Allocation means the amount of $800,000 to be withdrawn from the Grant Account and deposited into the Special Account pursuant to paragraph 2 of this Annex; provided, however, that unless the Bank shall otherwise agree, the Authorized Allocation shall be limited to the amount of $400,000 until the aggregate amount of withdrawals from the Grant Account, plus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions shall equal or exceed the equivalent of SDR 940, 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 Recipient shall furnish to the Bank a request or requests for deposit into the Special Account of an amount or amounts which in the aggregate do not exceed the Authorized Allocation. On the basis of each such request, the Bank shall, on behalf of the Recipient, withdraw from the Grant Account and deposit into the Special Account such amount as the Recipient shall have requested. (b) For replenishment of the Special Account, the Recipient shall furnish to the Bank requests for deposit into the Special Account at such intervals as the Bank shall specify. Prior to or at the time of each such request, the Recipient shall furnish to the Bank the documents and other evidence required pursuant to Part B.3 of Schedule 1 to this GEF Grant Agreement 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 Recipient, withdraw from the Grant Account and deposit into the Special Account such amount as the Recipient 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. Each such deposit into the Special Account shall be withdrawn by the Bank from the Grant Account under one or more of the Eligible Categories. 3. The Bank shall not be required to make further deposits into the Special Account, once the total unwithdrawn amount of the Grant minus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Grant Account of the remaining unwithdrawn amount of the Grant shall follow such procedures as the Bank shall specify by notice to the Recipient. 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. Annex B to SCHEDULE 1 Operation of Special Account When Withdrawals Are Made On the Basis of Project Management Reports 1. Except as the Bank may otherwise specify by notice to the Recipient, all withdrawals from the Grant Account shall be deposited by the Bank into the Special Account in accordance with the provisions of Schedule 1 to this Agreement. Each such deposit into the Special Account shall be withdrawn by the Bank from the Grant Account under one or more of the Eligible Categories. 2. Each application for withdrawal from the Grant Account for deposit into the Special Account shall be supported by a Project Management Report. 3. Upon receipt of each application for withdrawal of an amount of the Grant, the Bank shall, on behalf of the Recipient, withdraw from the Grant Account and deposit into the Special Account an amount equal to the lesser of: (a) the amount so requested; and (b) the amount which the Bank has determined, based on the Project

14 Management Report accompanying said application, is required to be deposited in order to finance Eligible Expenditures during the six-month period following the date of such report; provided, however, that the amount so deposited, when added to the amount indicated by said Project Management Report to be remaining in the Special Account, shall not exceed the equivalent of $1,500,000. SCHEDULE 2 Description of the Project The objective of the Project is to increase conservation, knowledge, and sustainable use of globally important biodiversity in the Andean Region. The Project consists of the following parts, subject to such modifications thereof as the Bank and the Recipient may agree upon from time to time to achieve such objective: Part A: Conservation Zones and Protected Areas 1. Preparation of conservation plans for First Phase Conservation Zones and Second Phase Conservation Zones, through, inter alia, the carrying out of technical studies, and workshops, meetings, and other participatory processes with stakeholders in such zones. 2. Implementation of conservation plans for First Phase Conservation Zones and Second Phase Conservation Zones, including, inter alia, establishment of national and regional protected areas and private reserves, through the carrying out of technical studies and a participatory process involving workshops with stakeholders in such zones. 3. Strengthening the management of First Phase Protected Areas and Second Phase Protected Areas, through, inter alia, the carrying out of biological and social assessments, the design of management plans, as well as the carrying out of area demarcation, zoning, infrastructure improvements, surveillance, outreach and educational programs, and an assessment of personnel needs. Part B: Conservation and Sustainable Use of Biodiversity in Rural Landscapes 1. Carrying out of biodiversity and socioeconomic assessments of environment conservation opportunities in rural landscapes in First Phase Conservation Zones and Second Phase Conservation Zones. 2. Development of management tools for biodiversity conservation in rural landscapes in First Phase Conservation Zones and Second Phase Conservation Zones, which will include: (a) habitat corridors; (b) enrichment of grassland in dry environments; (c) structurally complex production systems such as shade coffee; and (d) live fencerows. 3. Development of management plans for threatened species. 4. Dissemination of the management tools referred to in paragraph 2 above in First Phase Conservation Zones and Second Phase Conservation Zones, through local workshops, specialized workshops for natural resource managers, agricultural technical manuals, publications, videos and other means of communication. 5. (a) Design, establishment and operation of a fund within the Recipient (the Fund) to finance projects for the promotion of markets for biodiversity goods and services, adapting existing non-market incentives for conservation and sustainable use of goods (the Fund Subprojects). (b) Carrying out of a program to disseminate the Fund s activities. 6. Identification and promotion of markets for biodiversity goods and services. 7. Assessment and design of a system of economic and institutional incentives for the Andean Region.

15 Part C: Knowledge Base for Decision Making, Monitoring and Evaluation 1. Strengthening of the regional capacity in taxonomy and collections management to improve Colombia s capacity to generate a biodiversity inventory of the Andean Region, including training of staff, carrying out of field biodiversity assessments and developing biodiversity collection and monitoring protocols. 2. Establishment of a biodiversity information system for the Andean Region, designed as a decentralized network of institutional databases. 3. Carrying out of a program to disseminate information on biodiversity in the Andean Region to different audiences, such as decision-makers, scientists, school students and the general public, according to their different information requirements and using different communications strategies. 4. Development of an indicator system of biological and socioeconomic information to monitor the current status of biodiversity in the Andean Region, the changing pressures to which such biodiversity is subjected, and the effect on biodiversity of national policy and Project measures. Part D: Intersectoral Coordination Carrying out of studies and training for the benefit of relevant government agencies and private sector entities to promote the inclusion of biodiversity goals in sector development plans for the Andean Region. These activities will require: (a) carrying out of workshops on biodiversity, sectoral biodiversity impacts and intersectoral planning for government ministries and sector associations to strengthen the concept of biodiversity amongst different sectors and institutions; (b) a consultative process with relevant ministries, associations, economic conglomerates and other key stakeholders on the inclusion of environmental licensing procedures at the Ministry of Environment level to introduce relevant biodiversity variables on environmental guidelines for infrastructure, mining and agricultural projects; and (c) monitoring biodiversity trends in large-scale development projects. Part E: Project Management and Monitoring 1. Strengthening of the capacity of the PCU to manage and coordinate the Project, including carrying out of external audits as set forth in Section 4.01 of this Agreement. 2. Development and implementation of a system to monitor the carrying out of the Project. * * * The Project is expected to be completed by June 30, SCHEDULE 3 Procurement Section I. Part A: Procurement of Goods and Works General Goods and works shall be procured in accordance with the provisions of Section I of the Guidelines for Procurement under IBRD Loans and IDA Credits published by the Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999 (the Guidelines) and the following provisions of Section I of this Schedule. Part B: Procurement Procedures 1. National Competitive Bidding Goods (other than those under Subprojects and Fund Subprojects) shall be procured under contracts awarded in accordance with competitive procedures advertised

16 nationally pursuant to standard bidding documents, satisfactory to the Bank, set forth in the Operational Manual. 2. Shopping Goods (other than those under Subprojects and Fund Subprojects) estimated to cost less than $50,000 equivalent per contract, up to an aggregate amount of $200,000 equivalent, may be procured under contracts awarded on the basis of international or national shopping procedures, at the option of the Recipient, in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines. 3. Procurement under Subprojects and Fund Subprojects Goods and works under Subprojects and Fund Subprojects shall be procured in accordance with commercial procedures acceptable to the Bank, including price quotations from three qualified suppliers, as such procedures are detailed in the Operational Manual and the Fund Operational Manual, respectively. Part C: Review by the Bank of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods shall be undertaken in accordance with such procurement plan as shall have been approved by the Bank, and with the provisions of said paragraph Prior Review (a) The procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply to the first contract to be awarded pursuant to Part B.1 of this Section. (b) The following procedures shall apply to the first contract for goods to be awarded pursuant to Part B.2 of this Section: (i) prior to the selection of any supplier, the Recipient shall provide to the Bank a report on the comparison and evaluation of quotations received; (ii) provide to the draft contract; and (iii) Appendix 1 to prior to the execution of the contract, the Recipient shall Bank a copy of the specifications and the the procedures set forth in paragraphs 2(f), 2(g) and 3 of the Guidelines shall apply. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply. Section II. Part A: Employment of Consultants General Consultants services shall be procured in accordance with the provisions of the Introduction and Section IV of the Guidelines: Selection and Employment of Consultants by World Bank Borrowers published by the Bank in January 1997 and revised in September 1997 and January 1999 (the Consultant Guidelines) and the following provisions of this Section II. Part B: Quality- and Cost-based Selection Except as otherwise provided in Part C of this Section, consultants services

17 shall be procured under contracts awarded in accordance with the provisions of Section II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to quality- and cost-based selection of consultants. Part C: Other Procedures for the Selection of Consultants 1. Selection Based on Consultants Qualifications Consultants services, other than those referred to in Part C.2 and 3 below, estimated to cost less than $80,000 equivalent per contract, up to an aggregate amount of $2,600,000 equivalent, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.7 of the Consultant Guidelines. 2. Least-cost Selection Consultants services for assignments of a standard or routine nature, estimated to cost less than $80,000 equivalent per contract, up to an aggregate amount of $1,000,000 equivalent, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.6 of the Consultant Guidelines. 3. Individual Consultants Consultants services for tasks that meet the requirements set forth in paragraph 5.1 of the Consultant Guidelines shall be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines. Part D: Review by the Bank of the Selection of Consultants 1. Selection Planning Prior to the issuance to consultants of any requests for proposals, the proposed plan for the selection of consultants under the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Consultant Guidelines. Selection of all consultants services shall be undertaken in accordance with such selection plan as shall have been approved by the Bank, and with the provisions of said paragraph Prior Review (a) With respect to each contract for the employment of consulting firms pursuant to Part B of this Section, the procedures set forth in paragraphs 1, 2 (other than the third subparagraph of paragraph 2(a)) and 5 of Appendix 1 to the Consultant Guidelines shall apply. (b) With respect to the first two contracts for the employment of consulting firms pursuant to Part C.1 of this Section, the procedures set forth in paragraphs 1, 2 (other than the second subparagraph of paragraph 2(a)) and 5 of Appendix 1 to the Consultant Guidelines shall apply. (c) With respect to each contract for the employment of individual consultants estimated to cost the equivalent of $50,000 or more, the qualifications, experience, terms of reference and terms of employment of the consultants shall be furnished to the Bank for its prior review and approval. The contract shall be awarded only after the said approval shall have been given. 3. Post Review With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall apply, provided, however, that the terms of reference for the respective assignments shall be subject to the Bank s prior review and approval. SCHEDULE 4 Targets Referred to in