Public Disclosure Authorized Public Disclosure Authorized O DOCUMENTS Project Agreement LOAN NUMBER 2451-0 PE AAL 72451-1 PE (Lima Metropolitan Development Project) Public Disclosure Authorized between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and MUNICIPALITY OF LIMA Public Disclosure Authorized Dated, 1985
LOAN NUMBER 2451-0 PE 2451-1 PE PROJECT AGREEMENT AGREEMENT, dated, 1985, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and the MUNICIPALITY OF LIMA (hereinafter called the Municipality). WHEREAS (A) by the Loan Agreement of even date herewith between Republic of Peru (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to eighty-two million five hundred thousand dollars ($82,500,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Punicipality agree to undertake such obligations toward the Bank as, are hereinafter set forth; (B) by an agreement to be entered into between the Borrower and the Municipality, part of the proceeds of the loan provided for under the Loan Agreement will be made available to the Municipality on the terms and conditions therein set forth; and WHEREAS the Municipality, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) The Municipality declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and to this end shall carry out Parts A, C and D of the Project, described in said Schedule, through the
entities and subdivisions- specified in the Schedule to this Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and management practices and shall provide, promptly as needed, the funds, facilities, services and other resources required for the carrying out of Part A, C and D of the Project, including the funds set forth in Section 3.01 (b) (ii) of the Loan Agreement. (b) The Municipality shall: (i) establish and thereafter maintain in the Account Bank until the Closing Date, on terms and conditions satisfactory to the Bank, a Project Account for the use of the Municipality in meeting expenditures in Soles for Parts A, C and D of the Project; (ii) deposit therein an amount equivalent to $400,000; (iii) promptly replenish such Project Account in respect of amounts withdrawn from such account for the carrying out of such parts of the Project; and (iv) ensure that: (A) the aggregate amounts available in the Project Account do not fall below the amount of counterpart funds required by the Municipality to meet, together with the proceeds of the Loan, two months of such estimated expenditures for the Project; and (B) the Project Account is at all times operated in accordance with rules and guidelines satisfactory to the Bank. (c) Without limitation to the provisions of paragraph (a) above, the Municipality shall: (i) establish, and thereafter maintain, an urban transport unit within the Municipality with functions and responsibilities satisfactory to the Bank, and issue any such operating guidelines as shall be required for the carrying out of such functions; and (ii) appoint and thereafter maintain: (A) a subproject coordinator for purposes of Parts A, C and D of the Project; and (B) a subproject director for each of Parts A and C of the Project all with qualifications and responsibilities satisfactory to the Bank. -2- Section 2.02. In order to assist the Municipality in carrying out Parts A.1, A.2, A.3, A.4 (c), A.4 (e), A.4 (f), C.6 and D of the Project, the Municipality shall employ consultants and experts, including two procurement experts, one highway design engineer and a road maintenance specialist, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, such consultants and experts to 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 1981.
-3- Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and civil works required for Parts A, C and D of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to the Loan Agreement. Section 2.04. (a) The Municipality undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan made available to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Municipality to replace or repair such goods. (b) The Municipality shall cause all goods and services financed out of the proceeds of the Loan made available to it by the Borrower to be used exclusively for the purposes of the Project. Section 2.05. (a) The Municipality shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for Parts A, C and D of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Municipality: (i) shall maintain records and procedures adequate to record and monitor the progress of Parts A, C and D of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in such parts of the Project; (ii) shall enable the Bank's representatives to visit the facilities and construction sites included in Parts A, C and D of the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank, through CMC, at regular intervals all such information as the Bank shall reasonably request concerning Parts A, C and D of the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Upon the award by the Municipality of any contract for goods, works or services to be financed out of the proceeds of
-4- the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Municipality and the Bank, the Municipality shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of Parts A, C and D of the Project, its cost and the benefits derived and to be derived from it, the performance by the Municipality and the Bank of their respective obligations under the Municipality Project Agreement and the accomplishment of the purposes of the Loan. (e) The Municipality shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of the Municipality and any relevant records and documents. Section 2.06. The Municipality shall duly perform all its obligations under the Financing Agreement. Except as the Bank shall otherwise agree, the Municipality shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Financing Agreement or any provision thereof. Section 2.07. (a) The Municipality shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Parts A, C and D of the Project, the performance of its obligations under this Agreement, the Financing Agreement, and other matters relating to the purposes of the Loan. (b) The Municipality shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Parts A, C and D of the Project, the accomplishment of the purposes of the Loan, or the performance by the Municipality of its obligations under this Agreement, and under the Financing Agreement. Section 2.08. Unless otherwise agreed by the Bank, the Municipality shall furnish or cause to be furnished to the Bank for its comments:
-5- (a) not later than September 30, 1986, its recommendations for a program for road maintenance for the Municipality (including, inter alia, the institutional and financial arrangements therefor); (b) upon completion of the final designs to be made under Parts A.1, A.2, A.3 (b), A.4 (a) and A.4 (b) of the Project, the recommendations and conclusions derived therefrom; (c) not later than June 30, 1986, its recommendations on the utilization of the installations which shall cease to be operated for wholesale marketing pursuant to the provisions of Section 2.12 of this Agreement; (d) not later than March 30 of each year, furnish to the Bank for its review and comments, the investment program, including the operating budgets, for solid waste management for ESMLL and for the municipal districts not included under the ESMLL's jurisdiction, for that calendar year, showing that service charges are increasingly capable of recovering at least ESMLL's recurrent service expenditures; and (e) (i) not later than September 30, 1985, a review of ESMLL's operational and financial performance; and (ii) not later than September 30, 1986, its recommendations to strengthen the operational efficiency and self-financing capacity of ESMLL, including the schedule thereof; (f) (i) not later than September 30, 1985, an assessment of the measures proposed to be taken to improve the financial autonomy of the Municipality; and (ii) not later than September 30, 1986, its recommendations, which shall have been approved by the Borrower on a detailed plan of action, including the schedule thereof, for all such measures which shall be taken by the Municipality to achieve such financial autonomy; and (g) not later than September 30, 1987 the results of the study to be carried out under Part D.5 of the Project. Section 2.09. The Municipality shall carry out the recommendations referred to in paragraphs (a) and (f) and in subparagraph (e) (ii) of Section 2.08 of this Agreement, taking into account the comments, if any, made by the Bank.
-6- Section 2.10. The Municipality shall take or cause to be taken all such action as shall be necessary to acquire, not later than September 30, 1985, all such land and rights in respect of land as shall be required for the construction (and operation) of the facilities included in Part C.3 of the Project and shall furnish to the Bank, promptly after such acquisition, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. Section 2.11. The Municipality shall, not later than September 30, 1985, make arrangements satisfactory to the Bank with the Guardia Civil, for purposes of assisting the Borrower in carrying out of Part A.4 (e) of the Project which shall include, inter alia, the appointment of a Project Manager, and that the equipment to be acquired under such Part of the Project will remain the property of the Municipality and be used only for traffic control and traffic safety purposes. Section 2.12. The Municipality shall, not later than September 30, 1987, or such other date as the Bank shall agree, in coordination with EMMSA, take all necessary steps to discontinue wholesale marketing activities in the markets located in La Victoria District and adjacent areas in such district. ARTICLE III Management and Operations of the Municipality Section 3.01. The Municipality shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and engineering practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. The Municipality shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and management practices. Section 3.03. The Municipality shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice.
-7- ARTICLE IV Financial Covenants Section 4.01. (a) The Municipality shall maintain separate accounts and records adequate to reflect in accordance with consistently maintained appropriate accounting practices the operation, resources and expenditures, in respect of Parts A, C and D of the Project including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure. (b) The Municipality shall retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure, and shall enable the Bank's representatives to examine such records. Section 4.02. The Municipality shall: (a) have the accounts referred to in Section 4.01 (a) of this Agreement and the Project Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (b) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year a certified copy of the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested, including, without limitation to the foregoing, separate opinions by said auditors in respect of the expenditures and records referred to in Section 4.01 (b) of this Agreement, as to whether the proceeds of the Loan made available to it and withdrawn from the Loan Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (c) furnish to the Bank such other information concerning said separate accounts, records and expenditures, as well as the audit thereof, as the Bank shall from time to time reasonably request.
-8- Section 4.03. (a) Except as the Bank shall otherwise agree, the Municipality shall cause ESMLL not to incur any capital expenditures for purposes of solid waste operations other than those agreed upon with the Bank as of the date of this Agreement or those necessary for repairs or replacements essential to operations, in excess of an aggregate amount of the equivalent of $200,000 in any one fiscal year. (b) For purposes of this Section, the term "capital expenditures" means all expenditures incurred on account of fixed assets, including interest charged to construction, related to operations. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of the Municipality thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify the Municipality thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have
-9- designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. Telex: 440098 (ITT) 248423 (RCA) or 64145 (WUI) For the Municipality: Palacio Municipal Plaza de Armas Lima 1, Peru Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of the Municipality may be taken or executed by the Mayor of the Municipality of Lima or such other person or persons as the Municipality shall designate in writing, and the Municipality shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument.
- 10 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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/6/ /''t,f ~( --'v~ Regional Vice President Latin America and the Caribbean MUNICIPALITY OF LIMA By A Authorized Representative
- 11 - SCHEDULE The different wholly-owned or controlled entities, and a trust fund of the Municipality, which will participate in the carrying out of Parts A, C and D of the Project under the supervision of CMC are as follows: Parts A,C All procurement INVERMET and D Part A Execution and supervision INVERMET Transport Planning Public Transport Regulation and Traffic Engineering OMTU Part C Execution and Supervision ESMLL Part D Execution and Supervision OPDM Cadastre Office Budget Unit Revenue Office
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Bank for Reconstruction and Development. In witness whereof I have signed this Certificate and affixed the Seal of the Bank thereunto this -S -day of F_8 AfY198 7 FOR SECRETARY