Guarantee Agreement. (Second Contractual Savings Development Program Adjustment Loan) between UNITED MEXICAN STATES. and

Transcription

1 Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 4343-ME Guarantee Agreement Public Disclosure Authorized (Second Contractual Savings Development Program Adjustment Loan) between UNITED MEXICAN STATES and Public Disclosure Authorized INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated September 14, 1998 GUARANTEE AGREEMENT LOAN NUMBER 4343-ME AGREEMENT, dated September 14, 1998, between UNITED MEXICAN STATES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). Public Disclosure Authorized WHEREAS (A) the Bank has received a letter dated May 13, 1998 from the Guarantor describing a program of actions, objectives and policies designed to achieve restructuring and development of the Guarantor s social insurance system (the Program), declaring the Guarantor s commitment to the execution of the Program, and requesting assistance from the Bank in support of the Program during the execution thereof; (B) the Guarantor has carried out the measures and taken the actions described in the Schedule to this Agreement to the satisfaction of the Bank; (C) on the basis, inter alia, of the foregoing, the Bank has decided, in support of the Program, to provide such assistance to the Guarantor by making a loan in an amount equal to four hundred million Dollars ($400,000,000) to Banco Nacional de Obras y Servicios Públicos, S.N.C. (the Borrower), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan and to undertake other obligations as provided in this Agreement; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the

2 Borrower and to undertake such other obligations as hereinafter provided; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section The "General Conditions Applicable to Loan and Guarantee Agreements for Single Currency Loans" of the Bank, dated May 30, 1995, as amended through December 2, 1997 and with the modifications set forth in Section 1.01 of the Loan 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 and Section 1.02 of the Loan Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) AFOREs means Administradores de Fondos para el Retiro, limited liability companies for the administration of SIEFOREs (as hereinafter defined); (b) AFORE Maquiladora means the activities performed by the AFOREs relating to record-keeping and the provision of information on behalf of Banco de México for workers who have not yet selected an AFORE; (c) CNSF means Comisión Nacional de Seguros y Fianzas, the Guarantor s National Insurance and Bonding Commission; (d) CONSAR means Comisión Nacional del Sistema de Ahorro para el Retiro, the Guarantor s National Commission of the Retirement Savings System; (e) IMSS means Instituto Mexicano del Seguro Social, the Guarantor s Social Security Institute; (f) ISSSTE means Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado, the Guarantor s Institute of Security and Social Services for Government Workers; (g) SAR92 means the Sistema de Ahorro para el Retiro, the Guarantor s Retirement Savings System introduced in 1992 pursuant to the Guarantor s Ley del Seguro Social (Social Security Law); (h) SHCP means Secretaría de Hacienda y Crédito Público, the Guarantor s Secretariat of Finance and Public Credit; and (i) SIEFOREs means Sociedades de Inversiones Especializadas de Fondos para el Retiro, specialized limited liability companies for the investment of retirement funds. ARTICLE II Guarantee; Transfer of Loan Proceeds Section Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan, and the punctual performance of all the other obligations of the Borrower, all as set forth in the Loan Agreement. Section The Guarantor shall enter into the contractual arrangements with the Borrower referred to in Section 3.01 (a) of the Loan Agreement and, unless the Bank shall otherwise agree, shall not change or fail to enforce any provision of such contractual arrangements. ARTICLE III

3 Other Covenants Section (a) The Guarantor and the Bank shall from time to time, at the request of either party, exchange views on the progress achieved in carrying out the Program. (b) Prior to each such exchange of views, the Guarantor shall furnish to the Bank for its review and comment a report on the progress achieved in carrying out the Program, in such detail as the Bank shall reasonably request. (c) Without limitation upon the provisions of paragraph (a) of this Section, the Guarantor shall exchange views with the Bank on any proposed action to be taken after the disbursement of the Loan which would have the effect of materially reversing the objectives of the Program or any action taken under the Program, including any action specified in Section 5.01 (d), (e) and (f) of the Loan Agreement and any action specified in the Schedule to this Agreement. ARTICLE IV Representative of the Guarantor; Addresses Section The Director General de Crédito Público of the Guarantor is designated as representative of the Guarantor 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 Guarantor: Dirección General de Crédito Público Secretaría de Hacienda y Crédito Público Insurgentes Sur 826 (Piso 9) Colonia del Valle México, D.F. México For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C United States of America Telex: SHOCME Cable address: INTBAFRAD Washington, D.C. Telex: (MCI) or (MCI) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have cause 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. UNITED MEXICAN STATES

4 By /s/ Jesús Reyes Heroles Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1. Regulatory Framework: By /s/ Shahid Javed Burki Regional Vice President Latin America and the Caribbean SCHEDULE Actions Referred to in Whereas Clause (B) of the Preamble Issuance of key regulations by CONSAR with respect to: (a) Disclosure: Circular 19-1 dated November 17, 1997 (general information from system entities to CONSAR); Circulars 12-1 dated April 16, 1997 and 12-4 dated March 11, 1998 (accounting and balance sheet information of AFOREs and SIEFOREs); Circular 25-1 dated December 11, 1997 (monthly reporting by AFOREs); Circular 9-1 dated January 10, 1997 (general information from AFOREs to affiliates and the public); Circulars 10-1 dated January 14, 1997 and 10-2 dated June 30, 1997 (SIEFORE prospectus); Circular 8-2 dated February 12, 1998 (individual statements for workers on financial performance and balances in AFORE and INFONAVIT accounts); and Circular 23-1 dated December 2, 1997 (confidentiality of individual account information). (b) Administration of individual retirement accounts still in the central account at Banco de México: Circular 27-1 dated February 20, 1998 (information to workers on funds in the central account and operation of the AFORE Maquiladora); Circular 29-1 dated February 27, 1998 (fees for AFORE Maquiladora services). 2. Operation and Efficiency of the New Pension System: (a) Authorization of AFOREs: Profiles of authorized fund managers as published by CONSAR, March (b) Affiliation of workers: Circular 11-1 dated February 18, 1997 (general rules for affiliation contracts); affiliation with AFOREs of at least 60% of workers registered with IMSS as officially documented in CONSAR s Informe de Actividades de la Presidencia a la Junta del Gobierno, January/February (c) Rules on switching: Circulars 24-1 dated December 10, 1997 and 28-1 dated January 8, 1998 (switching of accounts among AFOREs). (d) Centralized collection and record-keeping: Circulars 7-1 dated January 1, 1997, 16-1 dated June 30, 1997, 20-1 dated November 11, 1997, 22-1 dated December 10, 1997, and 20-2 dated March 2, 1998 (administration of the centralized system of record keeping through a privately managed data collection firm (PROCESAR) and collection of contributions through authorized banks (Entidades Receptoras)). (e) Account individualization through allocation of unique identification numbers for at least 25% of potential affiliates. (f) Computerized reporting system for employers ( SUA ) in operation. (g) Reducing of administrative costs through establishment of fee limits, and reducing delay between time of contribution and receipt of deposit in AFORE accounts and allocation of the float: Circular 14-1 dated June 27, 1997 (maximum fees). (h) Completion of a study on comparability of AFORE commissions.

5 3. Transfer of SAR92 Balances: (a) Establishment of procedures for transfer of accumulated contributions in SAR92 accounts to AFOREs: Circular 24-1 dated December 10, 1997; SHCP Oficio No. 305 dated December 10, 1997; Banco de México, Oficio /97 dated December 10, (b) Actual transfer of at least 20% of accumulated contributions in SAR92 accounts to AFOREs. 4. Investment Policies and Risk Management: (a) Flexibilization of investment management regime with respect to investments in inflation-indexed bonds, cash holdings, investment in repurchase agreements and asset valuation: Circular 15-2 dated October 29, (b) Operation of separate committees by CONSAR for risk analysis and valuation in accordance with the Guarantor s Ley de Sistemas de Ahorro para el Retiro (Law of the Retirement Savings Systems). 5. Supervision and Enforcement: Establishment of a methodology for the valuation of eligible investment instruments: Circular 21-1 dated November 11, 1997 (financial data on SIEFORE investments). 6. Disability and Life Insurance: Improvement of the system of disability and life insurance by CNSF by: (a) Provision of annuities by private insurance companies: Circular S-22.1 dated February 13, 1997 (operational rules); Circular S-22.4 dated March 31, 1997 (insurance company disclosure requirements); Circular S dated June 13, 1997 (format of offer); Circular S dated November 13, 1997 (additional benefits that may be provided by insurance companies); Circular S dated January 8, 1998 (marketing rules). (b) Establishment of a department in charge of supervision of pension-related insurance: Reglamento Interior of CNSF published in the Official Gazette of March 5, Update of Fiscal Cost of the Transition: Updating of the 1997 data and incorporation of pension related transition costs in the 1998 budget of the Guarantor. 8. INFONAVIT: (a) Agreement signed on March 27, 1998 among INFONAVIT, SHCP and CNBV, and approved by the INFONAVIT Board on March 30, 1998, to restore INFONAVIT to financial health within a five year period through the carrying out of a major operational and financial restructuring program. (b) Acceptance by INFONAVIT of new accounting standards to be issued by CNBV consistent with the rules applicable to commercial banks for mortgage loans: Agreement of March 27, 1998 referred to in paragraph (a) above. (c) Cessation of accrual of and creation of provisions against, interest on, and indexation of, non-performing loans: balance sheet for December 31, (d) Provisioning against non-performing loans as required by CNBV in accordance with reports by external auditors and the findings of CNBV s inspections: balance sheet for December 31, Preparatory Work for the Reform of Public and State Pension Systems: (a) Finalization of actuarial and financial evaluation of ISSSTE and

6 initiation of a detailed evaluation of the feasibility and fiscal costs of alternative reform strategies of the pension system for federal workers. (b) Finalization of an initial survey of data bases and the actuarial and financial situation of the state pension systems for all states of the Guarantor and the Federal District and approval by SHCP of a standard valuation format.