Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized OFFICIAL DOCUENTS LOAN NUMBER*3 BR Loan Agreement (Agricultural Credit and Export Development Project) between FEDERATIVE REPUBLIC OF BRAZIL and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized Dated,W1983
LOAN NUMBER BR LOAN AGREEMENT AGREEMENT, dated C, 1983, between FEDERATIVE REPUBLIC OF BRAZIL (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WREREAS (A) the Borrower and the Bank agree that the elimination of rural credit subsidies is essential to create the conditions for sound and sustainable growth of the Borrower's agricultural sector; (B) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 1 to this Agreement by making the Loan as hereinafter provided; (C) Parts A and B of the Project will be carried out by Banco Central do Brasil with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Banco Central do Brasil the proceeds of the Loan as hereinafter provided; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in the Project Agreement of even date herewith between the Bank and Banco Central do Brasil; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated October 27,.1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. 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:
-2- (a) "Project Agreement" means the agreement between the Bank and Banco Central do Brasil of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (b) Central Bank means "Banco Central do Brasil"; (c) "Export Sub-loan" means a loan made or proposed to be made by a Financial Intermediary to an Agricultural Exporter included under Part A of the Project; (d) "Financial Intermediary" means any bank or financial entity which is authorized to ojerate in foreign exchange transactions pursuant to the Brazilian banking regulations and has been approved by *the Central Bank to participate in the carrying out of Part A of the Project; (e) "Advances against Foreign Exchange Contracts" means Adiantamentos sobre Contratos de Cambio, a form of export financing regulated pursuant to Title 5 of Chapter 5 of the Consolidagao das Normas Cambiais issued by the Central Bank; (f) "Eligible Advances against Foreign Exchange Contracts" means Advances against Foreign E ange Contracts relating to export of agricultural or agro-indul4rial products; (g) "Agricultural Export Pre-financing Facility" or "AEPF" means the redliscounting facility referred to in Section 2.01 (c) of the Project Agreement; (h) "Special Account" means the account to be opened by the Borrower pursuant to the provisions of paragraph (d) of Section 2.02 of this Agreement; (i) "AEPF Operating Regulations" means the operating regulations for the AEPF contained in the Comunicado DECAM No. dated issued by the Central Bank; (j) "Agricultural Exporter" means an agricultural or agroindustrial producer or trader entitled to benefit from Eligible Advances against Foreign Exchange Contracts pursuant to the regulations issued by the Central Bank; (k) "Investment Sub-loan" means a loan made or proposed to be made by a Participating Intermediary included under Part B of the project to finance an Investment Project;
-3- (1) "Investment Project" means a specific investment project to be carried out by an Agricultural Enterprise and consisting of one or more of the types of rural investments described in the MCR; (m) "Participating Intermediary" means any bank or financial entity which has been approved by the C'entral Bank for participation under Part B of the Project; (n) "PRO-INVEST" means the Programa de Investimento Agricola (the Agricultural Investment Program) of the Central Bank established by the Borrower's Monetary Council on June 9, 1983; (o) "PRO-INVEST Operating Regulations" means Capitulo 33 of the MCR as amended by Circular No. 809 dated August 11, 1983 issued by the Central Bank; (p) "Agricultural Enterprise" means an enterprise or an individual producer eligible to participate in PRO-INVEST; (q) "MCR" means the Manual de Credito Rural published by the Central Bank, as amended from time to time; (r) "ORTN" means Obrigar,es Reajustaveis do Tesouro Nacional, the adjustable national treasury bonds established under Law No. 4357 dated July 16, 1964 of the Borrower as amended from time to time; and (a) "cruzeiro" means the currency of the Borrower. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to three hundred and three million dollars ($303,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account for amounts paid (or if the Bank shall so agree, to be paid): (i) by the Central Bank on account of payments under an Export Sub-loan to meet disbursements made by a
-4- Financial Intermediary to an Agricultural Exporter in the form of Eligible Advances against Foreign Exchange Contracts; (ii) (iii) (iv) by the Central Bank on account of payments made by a Participating Intermediary to an Agricultural Enterprise under an Investment Sub-loan to meet 35% of disbursements made for the reasonable cost of goods and services required for the carrying out of an Investment Project; provided, however, that (A) in respect of disbursements rvade under Investment Sub-loans for expenditures prior to the date of this Agreement pursuant to sub-paragraph (c) (i) below, the disbursement percentage shall be 30%; and (B) no withdrawal shall be made in respect of an Investment Sub-loan unless the Bank has authorized withdrawals from the Loan Account therefor; by the Borrower on account of expenditures made for the reasonable cost of goods and services required for the carrying out of Part C of the Project; and by the Borrower pursuant to Section 2.04 of this Agreement. (b) The proceeds of the Loan shall be allocated as follows: Category (1) $110,000,000 Category (2) $70,000,000 Equivalent for Export Sub-loans Equivalent for Investment Sub-loans Category (3) $2,244,389 Equivalent for Part C of the Project Category (4) $90,000,000 Category (5) $30,000,000 Initial deposit into AEPF pursuant to paragraph I of Schedule 3 to this Agreement Initial deposit into Special Account pursuant
-5- to paragraph 1 of Schedule 3 to this Agreement Category (6) $755,611 Fee corresponding to amount due under Section 2.04 of this Agreement The foregoing allocation of the proceeds of the Loan shall be subject to change from time to time as determined by the Bank after consultation with the Central Bank. (c) Notwithstanding the provisions in paragraph (a) above, no withdrawals shall be made in respect of: (i) expenditures prior to the date of this Agreement, provided, however, that withdrawals in respect of expenditures made in the carrying out of Part B of the Project in an aggregate amount not exceeding $30,000,000 equivalent may be made prior to that date but after August 11, 1983; (ii) disbursements made by the Central Bank on account of Export Sub-loans in each banking day exceeding thirtyfive per cent (35%) of the total Eligible Advances against Foreign Exchange Contracts made by all the Financial Intermediaries during the course of such banking day. For purposes of this sub-paragraph "banking day" means any day of the year on which banks are open for business in Brazil. (d) The Borrower shall establish, and thereafter maintain, a Special Account on terms and conditions satisfactory to the Bank. Disbursements out of the Special Account shall be made exclusively to pay the reasonable cost of goods and services required to carry out Parts B and C of the Project and to be financed by the Bank pursuant to this Section. (e) Deposits from the Loan Account into the Special Account and the AEPF shall bc made in accordance with the provisions of Schedule 3 to this Agreement. Section 2.03. The Closing Date shall be September 30, 1985 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Bank a fee equivalent to seven hundred fifty-five thousand six hundred eleven dollars ($755,611). (b) On or promptly after the Effectiv. Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account
-6- and pay to itself the amount of the said fee in such currency or currencies as the Bank shall determine. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one half percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.07 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost" of Qualified Borrowings means the cost, expressed as a percentage per annum, as reasonably determined by the Bank, provided that the amount of $8,520.5 million referred to in (iii) (B) hereunder shall be reckoned at a cost of 10.93% per annum. (iii) "Qualified Borrowings" means (A) outstanding borrowings of the Bank drawn down after June 30, 1982; and (B) until July 1, 1985, the amount of $8,520.5 million (representing borrowings of the Bank between July 1, 1981 and June 30, 1982) less any part thereof repaid earlier than July 1, 1985. (iv) "Semester" means the first six months or the second six months of a calendar year. Section 2.07. Interest and other charges shall be payable semiannually on April 15 and October 15 in each year.
-7- Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 2 to this Agreement. Section 2.09. The Central Bank is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this 1,greement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall cause the Central Bank to perform in accordance with the provisions of the Project Agreement all the obligations of the Central Bank therein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable the Central Bank to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) Without limitation to paragraph (a) above, the Borrower shall make available to its Central Bank in a timely manner an amount equivalent to $300,000,000 to enable the Central Bank to carry out PRO-INVEST and Part B of the Project. (c) The Borrower shall carry out, through its Secretaria de Planejamento da Presidencia da Republica, Part C of the Project described in Schedule 1 to the Loan Agreement, with due diligence and efficiency and in conformity with appropriate administrative, agricultural and economic policy practices. (d) In order to assist the Borrower in the carrying out of Part C of the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, such consultants 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. The Borrower shall, for purposes of Part C of the Pro- establish and thereafter maintain, an expert working (e) ject: (i)
-8- group in accordance with terms of reference satisfactory to the Bank; (ii) staff such working group with professionals with adequate qualification and experience and in adequate number and provide such working group with the resources necessary to carry out their functions in an efficient and diligent manner; and (iii) exchange views with the Bank on the appointment of the head coordinator of such working group. (f) The Borrower shall: (i) carry out the studies included in the program described in Part C of the Project in accordance with terms of reference satisfactory to the Bank, such terms of reference to be furnished to the Bank not later than October 31, 1984; and (ii) promptly upon completion of each of the studies referred to in (i) above, exchange views with the Bank on its conclusions and the recommendations for actions deriving therefrom. (g) The Borrower shall make available the proceeds of the Loan allocated to Parts A and B of the Project to the Central Bank on terms and conditions satisfactory to the Bank. The Central Bank shall utilize such proceeds pursuant to the provisions of the Project Agreement in is capacity as financial agent of the Borrower. Section 3.02. The Borrower shall: (i) maintain records and procedures adequate to record and monitor the progress of Part C 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 the carrying out of Part C of the Project; (ii) shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning Part C of the Project, its cost and where appropriate, the benefits to be derived from it, the expenditures of the proceeds of the Loan and the goods and services financed out of such proceeds; (iii) exchange views with the Bank at regular intervals on the progress made in the execution of Part C of the Project and in the activities required to carry out the programs of studies and technical assistance described therein; and (iv) exchange views with the Bank and the Central Bank, not later than September 30, 1986, on the need of maintaining the operation of the AEPF and the eventual transfer of its proceeds, or a portion thereof, for purposes of their utilization in the PRO-INVEST or such other agricultural investment program of the Borrower as may be agreed between the Bank, the Borrower and the Central Bank.
-9- ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property or as security for the payment of debt incurred for the purpose of financing the purchase of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public-assets" means assets of the Borrower, of any political or administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. (a) The Borrower shall take, or cause to be taken, all actions necessary to apply tr all agricultural credit
- 10 - operations included in the Borrower's agricultural credit programs the following minimum conditions: (i) the principal of the credits shall be denominated in cruzeiros and shall be adjusted at least semiannually in accordance with the. actual variation of the ORTN in the percentages set forth below: Percentage of monetary correction expressed as a percentage of the monetary correction of the ORTN Period North/Northeast area - All other areas July 1983 - June 1984 70 85 July 1984 - June 1985 80 95 July 1985 - June 1986 85 100 (ii) the principal of the credits shall be adjusted pursuant to sub-paragraph (i) above to reflect: (A) in respect of investment credits, the variations of the ORTN during the last six-month period; and (B) in respect of short-term credit, the variation of the ORTN from the date of such credit to its date of maturity. For purposes of this sub-paragraph "investment credit" means "credito de investimento" as such term is defined in the MCR; and "short-term credit" means "credito de custeio" and "credito de comercializav,o",,as such terms are defined in the MCR. (iii) interest rate shall be payable at an annual rate of not less than 3% calculated over the principal of the credit adjusted pursuant to (i) and (ii) above and paragraph (b) below. (b) Notwithstanding the provisions of paragraph (a) above: (i) in respect of the agricultural credit programs of Sertanejo, POLONORDESTE, PROHIDRO, PROCANOR, PROBOR, PROTERRA and POLOAMA- ZONIA (as such terms are defined in the MCR) the principal of the credits shall be adjusted at a percentage of monetary correction of the ORTN of not less than 55%, 65% and 70% for the respective periods referred to in (a) (i) above; and (ii) in respect of agricultural investment credits for the financing of equipment, vehicles, forestry and cattle in an amoint exceeding the equivalent of 100 M.V.R., the principal of the credits shall be
- 11 - adjusted at all times at 100% of the monetary correction of the ORTN. (c) The Borrower hereby covenants that, commencing in the fiscal year starting January 1, 1985, any costs associated with the maintenance of the monetary correction of the principal of rural credits for the North/Northeast area below the monetary correction of the ORTN applicable to all other areas pursuant to the table in paragraph (a) above, shall be specifically budgeted in the Borrower's fiscal budget (Orgamento da-uniao) and financed exclusively out of the proceeds of such fiscal budget. (d) For purposes of this Section: (i) the term "North/ Northeast sh 11 mean the jurisdiction areas of the Superintendencia para Desenvolvimento da Amazonia (SUDAM) and Superintendencia para Desenvolvimento do Nordeste (SUDENE) and the Vale do Jequitinhonha, (all as defined in the MCR) and the State of Espirito Santo; (ii) the term M.V.R. means "Maior Valor de Referencia" as defined in Law 6205 dated April 29, 1975. Section 4.03. (a) The Borrower shall have the Special Account audited annually by independent auditors acceptable to the Bank and, promptly after the audit and not later than four months after the close of the Central Bank's fiscal year, the Bank shall be furnished with certified copies of such audit, together with a certified copy of the auditor's report, including a description of the audit procedures; and (b) the Borrower shall cause to have furnished to the Bank each month certified statements of the Special Account, and from time to time such other information concerning such Special Account and the audit thereof as the Bank shall reasonably request. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) The Central Bank shall have failed to perform any of its obligations under the Project Agreement.
- 12 - (b) An extraordinary situation shall have arisen which shall make it improbable that the Central Bank will be able to perform its obligations under the Project Agreement. (c) Law No. 4595 of the Borrower, dated December 31, 1964, shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of the Central Bank to perform any of its obligations under the Project Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Central Bank or for the suspension of its operations. (e) The PRO-INVEST Operating Regulations, the MCR, the AEPF Operations Regulations or the provisions currently regulating the Advances against Foreign Exchange Contracts shall have been amended, waived or abrogated, in a manner which, in the Bank's reasonable opinion, adversely affects the execution of the Project. (f) For three consecutive months (each such month hereinafter called the ORTN month) the adjustments made in the ORTN for the twelve-month period immediately preceding each ORTN month is below the variation in the Indice Geral de Prepos - Disponibilidade Interna issued by the Fundago Getulio Vargas for the twelve-month period ending three months prior to each ORTN month by at least ten percentage points. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) the event specified in paragraph (a) or paragraph (e) of Section 5.01 of this Agreement shall have occurred and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower; and (b) the event specified in paragraph (c) or paragraph (d) of Section 5.01 of this Agreement shall occur.
- 13 - ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions; namely, that the Loan Agreement has been registered by the Central Bank. Section 6.02. The following are specified as additional motters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of the Central Bank, and is legally binding upon the Central Bank in accordance with its terms; (b) that the Loan Agreement has been duly registered by the Central Bank; and (c) that all necessary acts, consents and approvals (including such acts, consents and approvals as are required for the purpose of making available the proceeds of the Loan to the Central Bank) to be performed or given by the Borrower, its political subdivisions or agencies or by any agency of any political subdivision or otherwise to be performed or given in order to authorize the carrying out of the Project and to enable the Borrower and the Central Bank, respectively, to perform all of the covenants, agreements and obligations of the Borrower in the Loan Agreement, and of the Central Bank in the Project Agreement contained, together with all necessary powers and rights in connection therewith, have been performed or given. Section 6.03. The date 51 1, is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. Except as provided in Section 2.09 of this Agreement, the Minister of Finance of the Borrower is designated
14- as representative of the Borrower for thb purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministerio da Fazenda Edificio Ministerio da Fazenda Esplanada dos Ministerios 70048 Brasilia, D.F., Brasil Cable address: MINIFAZ Brasilia, Brasil Telex: 611506 MFAZ BR with copies to: Banco Central do Brasil SBS - Projegao 33-A 180 andar. Brasilia, D.F., Brasil Cable address: Telex: BANCENTRAL 0612149 Brasilia, Brasil 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)
- 15 - 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 Brasilia, Federative Republic-of Brazil, as of the day and year sirst above written. FEDERATIVE REPUBLIC OF BRAZIL ByIS A4 Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Ll Regional Vice President Latin America and the Caribbean
- 16 - SCHEDULE 1 Description of the Project The purposes of the Project are: to assist the Borrower in (i) the adoption of reforms in its agricultural credit system; (ii) the provision of a minimum level of investment resources for the agricultural sector during the years 1983 and 1984; (iii) the provision of working capital financing for exporters in the agricultural sector; (iv) the analysis and formulation of policies to be applied in the agricultural sector; and (v) the strengthening of agricultural sector institutions. Part A: The Project consists of the following: Sub-loans for the financing of the working capital requirements of Agricultural Exporters in the form of Eligible Advances against Foreign Exchange Contracts. Part B: Part C: Sub-loans for the financing of Investment Projects. 1. A program of studies for purposes of reviewing existing, and formulating new, policies in the agricultural sector. 2. A program of technical assistance for strengthening policy formulation and implementation capacity of agricultural sector institutions. * e a The Project is expected to be completed by March 31, 1985.
- 17 - SCHEDULE 2 Amortization Schedule Date of Payment Due Payment of Principal (Expressed in dollars)* On each April 15 and October 15 beginning April 15, 1987 through October 15, 1998 12,625,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04.
- 18 - Prmiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years 0.20 before maturity More than three years but 0.40 not more than six years before maturity More than six years but 0.73 not more than eleven years before maturity More than eleven years but 0.87 not more than thirteen years before maturity More than thirteen years 1.00 before maturity
- 19 - SCHEDULE 3 Agricultural Export Pre-financing Facility and Special Account 1. The Bank may, after the Effective Date, withdraw on behalf of the Borrower from the Loan Account and deposit: (A) in the Agricultural Exports Pre-financing Facility the amount in dollars allocated to Category 4 of paragraph (b) of Section 2.02 of this Agreement; and (B) in the Special Account an amount in dollars allocated to Category 5 of paragraph (b) of Section 2.02 of this Agreement. 2. At the request of the Central Bank, pursuant to Section 2.09 of this Agreement, the Bank shall further withdraw from the Loan Account and deposit in the AEPF or the Special Accounts as the case may be, such amounts as shall be required to replenish the AEPF or the Special Account with amounts equal to payments made out of the AEPF for expenditures for Part A of the Project or from the Special Account for expenditures for Parts B and C of the Project eligible for financing under this Agreement. Except as the Bank shall otherwise determine, each such deposit after the initial deposits shall be withdrawn by the Bank from the Loan Account under Category (1) set forth in paragraph (b) of Section 2.02 of this Agreement in respect of the AEPF or under Categories (2) and (3) of such paragraph in respect of the Special Account, and in the same respective amounts as have been justified by the documentation for the request for such deposit furnished pursuant to paragraph 3 below. 3. Each request for a withdrawal from the AEPF or the Special Account shall be made by the Central Bank, pursuant to Section 2.09 of this Agreement, on the basis of statements of expenditures showing that each payment in respect of which such request is made was made on account of expenditures elegible for financing under Part A of the Project or Parts B and C of the Project, as the case may be, and to be financed out of the proceeds of the Loan in accordance with the provisions of Section 2.02 of this Agreement and this Schedule. The Central Bank shall: (A) withdraw from the AEPF an amount in dollars determined on the basis of the foregoing evidence, and shall cause the Financial Intermediary to convert such amount into cruzeiros determined on the basis of the rate of exchange between the dollar and the cruzeiro in effect at the time each disbursement under an Export Sub-loan is made; and (B) withdraw from the
- 20 - Special Account an amount in cruzeiros determined on the basis of the foregoing evidence, and shall debit the Special Account with the dollar equivalent of such amount in cruzeiros determined on the basis of the rate of exchange between the dollar and the cruzeiro in effect at the time each payment was made. 4. Prior to or at the time of each request for a deposit by the Bank into the AEPF or the Special Account, as the case may be, the Central Bank shall furnish to the Bank in respect of each withdrawal an application for withdrawal from the Loan Account on the basis of the statements of expenditures referred to in paragraph 3 above. 5. If the Bank shall have determined that any payment out of the AEPF or the Special Account (A) was made for any amount not eligible for financing by withdrawal from the Loan Account, or (B) was not justified by the statements of expenditures furnished pursuant to paragraph 2 above, the Borrower shall, promptly upon notice from the Bank and, unless otherwise determined by the Bank, prior to any further deposit in the AEPF and/or the Special Account by the Bank, deposit in the AEPF or in the Special Account, as the case may be, 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. 6. Notwithstanding the provision of paragraph 1 above, no further deposit in the AEPF or in the Special Account may be made by the Bank when the total amount unwithdrawn from the Loan Account: (A) in respect of Part A of the Project shall have reached the equivalent of $110,000,000; or (B) in respect of Parts B and C of the Project shall have reached the equivalent of $60,000,000, respectively. Withdrawals from the Loan Account of the remaining amount of the Loan for purposes of Part A of the Project or Parts B and C of the Project, as the case may be, shall follow such procedures as shall be agreed between the Borrower and the Bank and shall be made only to the extent that the Bank shall be satisfied by the evidence submitted in support of the applications for such withdrawal that all payments by the Borrower out of the AEPF or the Special Account were made in accordance with Section 2.02 of this Agreement and, in respect of the AEPF, of Section 2.01(c) of the Project Agreement. 7. Notwithstanding the provisions regarding the initial deposit set forth in paragraph 1 of this Schedule, the Bank may at the request of and by notice to the Borrower, increase the amount of
- 21 - the initial deposit in order to adjust the level of the AEPF or the Special Account to the disbursement requirements of Part A or Parts B and C of the Project, respectively. In such cases the Bank may also adjust the amounts referred to in paragraph 6 of this Schedule and in Section 2.02 (b) of this Agreement. 8. If the Bank shall have determined at any time that any amount outstanding in the AEPF or Special Account will not be required to cover further payments for expenditures under the Project eligible for financing under the Loan, the Borrower shall promptly upon notice from the Bank and unless otherwise agreed by the Bank, refund to the Bank such outstanding amount.
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 day of Or" slq8 3 FOR SECRETARY