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CONFORMED COPY
Loan Number 7211-CH
Loan Agreement
(Social Protection Technical Assistance Project)
between
REPUBLIC OF CHILE
and
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
Dated May 10, 2004
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LOAN NUMBER 7211-CH
LOAN AGREEMENT
AGREEMENT, dated May 10, 2004, between the REPUBLIC OF CHILE (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank).
WHEREAS (A) the Borrower is implementing a program of actions, objectives and policies designed to achieve structural adjustment of its social protection system (the Program) and intends to contract from the Bank a loan in an amount of two hundred million Dollars (the Social Protection Loan) in support of the Program during the execution thereof;
WHEREAS (B) the Borrower, having satisfied itself as to the feasibility and priority of the project described in Schedule 2 to this Agreement (the Project), has requested the Bank to assist in the financing of the Project;
WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower, in support of the Project, upon the terms and conditions set forth in this Agreement; and
NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
General Conditions; Definitions
Section 1.01. The “General Conditions Applicable to Loan and Guarantee Agreements for Fixed-Spread Loans” of the Bank dated September 1, 1999 (the General Conditions), constitute an integral part of this Agreement.
Section 1.02. Unless the context otherwise requires, the several terms defined in the Preamble to this Agreement and in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings:
(a)“Chile Solidario” means the social protection system referred to in Decree No. 144;
(b)“Decree No. 144” means the Borrower’s Presidential Decree on social protection published in the Borrower’s Official Gazette on August 19, 2002;
(c)“DIPRES” means the Borrower’s Budget Directorate within its Ministry of Finance;
(d)“Fiscal Year” means the Borrower’s fiscal year which commences January 1;
(e)“FMR” means each report prepared in accordance with Section 4.02 of this Agreement;
(f)“IPDP” means the plan set forth in a letter from MIDEPLAN and DIPRES to the Bank dated October 30, 2003 setting forth measures and strategies to ensure the ethnic and cultural appropriateness of Chile Solidario;
(g)“MIDEPLAN” means the Borrower’s Ministry of Planning and Cooperation;
(h)“Operational Manual” means the manual referred to in Section 3.03 of this Agreement;
(i)“Performance Indicators” means the indicators set forth in the Operational Manual;
(j)“PIU” means the Project implementation unit referred to in Section 3.01 (b) (i) of this Agreement;
(k)“Special Account” means the account referred to in Section 2.02 (b) of this Agreement;
(l)“Technical Unit” means any unit referred to in Section 3.01 (b) (ii) of this Agreement;
(m)“Training Coordination Agency” means the Borrower’s social investment fund established pursuant to the Borrower’s Law No. 18989 published in the Borrower’s Official Gazette on July 19, 1990 or any other agency, satisfactory to the Bank, for purposes of coordinating the training to be carried out under Part B.2 of the Project; and
(n)“Training Coordination Agreement” means the agreement referred to in Section 3.01 (c) of this Agreement.
ARTICLE II
The Loan
Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, an amount equal to ten million seven hundred ten thousand Dollars ($10,710,000), as such amount may be converted from time to time through a Currency Conversion in accordance with the provisions of Section 2.09 of this Agreement.
Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods, works and services required for the Project and to be financed out of the proceeds of the Loan and in respect of the front-end fee referred to in Section 2.04 of this Agreement and any premium in respect of an Interest Rate Cap or Interest Rate Collar payable by the Borrower in accordance with Section 4.04 (c) of the General Conditions.
(b)The Borrower may, for purposes of the Project, open and maintain in Dollars a separate special deposit account in its Central Bank, or a commercial bank acceptable to the Bank, on terms and conditions satisfactory to the Bank, including in the event it is opened in a commercial bank, appropriate protection against set-off, seizure and attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement.
Section 2.03. The Closing Date shall be September 30, 2007, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date.
Section 2.04. The Borrower shall pay to the Bank a front-end fee in an amount equal to one percent (1%) of the amount of the Loan. On or promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan account and pay to itself the amount of such fee.
Section 2.05. The Borrower shall pay to the Bank a commitment charge on the principal amount of the Loan not withdrawn from time to time, at a rate equal to: (i) eighty five one-hundredths of one per cent (0.85%) per annum from the date on which such charge commences to accrue in accordance with the provisions of Section 3.02 of the General Conditions to but not including the fourth anniversary of such date; and (ii) seventy five one-hundredths of one per cent (0.75%) per annum thereafter.
Section 2.06. The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, in respect of each Interest Period at the Variable Rate; provided, that upon a Conversion of all or any portion of the principal amount of the Loan, the Borrower shall, during the Conversion Period, pay interest on such amount in accordance with the relevant provisions of Article IV of the General Conditions.
Section 2.07. Interest and other charges shall be payable semiannually in arrears on June 15 and December 15 in each year.
Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the provisions of Schedule 3 to this Agreement.
Section 2.09. (a) The Borrower may at any time request any of the following Conversions of the terms of the Loan in order to facilitate prudent debt management:
(i)a change of the Loan Currency of all or any portion of the principal amount of the Loan, withdrawn or unwithdrawn, to an Approved Currency;
(ii)a change of the interest rate basis applicable to all or any portion of the principal amount of the Loan from a Variable Rate to a Fixed Rate, or vice versa; and
(iii)the setting of limits on the Variable Rate applicable to all or any portion of the principal amount of the Loan withdrawn and outstanding by the establishment of an Interest Rate Cap or Interest Rate Collar on said Variable Rate.
(b)Any conversion requested pursuant to paragraph (a) of this Section that is accepted by the Bank shall be considered a “Conversion”, as defined in Section 2.01(7) of the General Conditions, and shall be effected in accordance with the provisions of Article IV of the General Conditions and of the Conversion Guidelines.
(c)Promptly following the Execution date for an Interest Rate Cap or Interest Rate Collar in respect of which the Borrower has requested that the premium be paid out of the proceeds of the Loan, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amounts required to pay any premium payable in accordance with Section 4.04 (c) of the General Conditions up to the amount allocated from time to time for such purpose in the table in paragraph 1 of Schedule 1 to this Agreement.
ARTICLE III
Execution of the Project
Section 3.01. (a) The Borrower declares its commitment to the objective of the Project and, to this end, shall carry out the Project through MIDEPLAN, with the assistance of the Training Coordination Agency in respect of Part B.2 of the Project, all with due diligence and efficiency and in conformity with appropriate economic, administrative, financial, environmental and social practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project.
(b)The Borrower shall, during the implementation of the Project maintain in MIDEPLAN:
(i)a Project implementation unit (PIU) with functions and responsibilities satisfactory to the Bank; and
(ii)technical units for implementation of the Project, with composition and functions satisfactory to the Bank, as set forth in the Operational Manual.
(c)The Borrower shall, through MIDEPLAN, enter into an agreement with the Training Coordination Agency, under terms and conditions satisfactory to the Bank, to set forth their respective responsibilities in the implementation and coordination of Part B.2 of the Project.
(d)The Borrower shall exercise its rights and carry out its obligations under the Training Coordination Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate, suspend, waive, terminate or fail to enforce the Training Coordination Agreement or any provision thereof.
Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants’ services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement.
Section 3.03. The Borrower shall, through MIDEPLAN, carry out the Project in accordance with an operational manual, satisfactory to the Bank, said manual to include, inter alia, the procedures for the carrying out, monitoring and evaluation of the Project (including the procurement, financial and disbursement requirements thereof and the performance indicators). In case of any conflict between the terms of the Operational Manual and those of this Agreement, the terms of this Agreement shall prevail.
Section 3.04. The Borrower shall:
(a)maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with the Performance Indicators, the carrying out of the Project and the achievement of the objective thereof;
(b)through MIDEPLAN prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, not later than twelve months after the Effective Date and yearly thereafter during the period of Project implementation, a report integrating the results of the 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 such report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objective thereof during the period following such date; and
(c)(i) review with the Bank, within no more than two months after each such report’s preparation, the reports referred to in paragraph (b) of this Section; and
(ii)thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objective thereof, based on the conclusions and recommendations of the said reports and the Bank's views on the matter.
Section 3.05. The Borrower shall carry out the IPDP in accordance with its terms.
ARTICLE IV
Financial Covenants
Section 4.01. (a) The Borrower shall establish and maintain in MIDEPLAN a financial management system, including records and accounts, and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Bank, adequate to reflect the operations, resources and expenditures related to the Project.
(b)The Borrower shall:
(i)have the financial statements referred to in paragraph (a) of this Section for each fiscal year (or other period agreed to by the Bank), audited, in accordance with consistently applied auditing standards acceptable to the Bank, by independent auditors acceptable to the Bank;
(ii)furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year (or such other period agreed to by the Bank): (A) certified copies of the financial statements referred to in paragraph (a) of this Section for such year (or other period agreed to by the Bank), as so audited; and (B) an opinion on such statements by said auditors, in scope and detail satisfactory to the Bank; and
(iii)furnish to the Bank such other information concerning such records and accounts, and the audit of such financial statements, 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 Loan Account were made on the basis of statements of expenditure, the Borrower shall through MIDEPLAN:
(i)retain, until at least one year after the Bank has received the audit report for, or covering, the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures;
(ii)enable the Bank’s representatives to examine such records; and
(iii)ensure that such statements of expenditure are included in the audit for each fiscal year (or other period agreed to by the Bank), referred to in paragraph (b) of this Section.
Section 4.02. (a) Without limitation upon the Borrower’s progress reporting obligations set out in Section 3.04 of this Agreement, the Borrower shall through MIDEPLAN prepare and furnish to the Bank a financial monitoring report, in form and substance satisfactory to the Bank, which:
(i)sets forth sources and uses of funds for the Project, both cumulatively and for the period covered by said report, showing separately funds provided under the Loan, and explains variances between the actual and planned uses of such funds;
(ii)describes physical progress in Project implementation, both cumulatively and for the period covered by said report, and explains variances between the actualand planned Project implementation; and
(iii)sets forth the status of procurement under the Project, as at the end of the period covered by said report.
(b) The first FMR shall be furnished to the Bank not later than 45 days after the end of the first calendar quarter after the Effective Date, and shall cover the period from the incurrence of the first expenditure under the Project through the end of such first calendar quarter; thereafter, each FMR shall be furnished to the Bank not later than 45 days after each subsequent calendar quarter, and shall cover such calendar quarter.
ARTICLE V
Effective Date; Termination
Section 5.01. 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 MIDEPLAN has adopted the Operational Manual.
Section 5.02. The date August 9, 2004 is hereby specified for the purposes of Section 12.04 of the General Conditions.
ARTICLE VI
Representative of the Borrower; Addresses
Section 6.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions.
Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions:
For the Borrower:
Ministry of Finance
Teatinos 120
Santiago, Chile
Facsimile: (56-2) 698-8903
For the Bank:
International Bank for
Reconstruction and Development
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:Telex:Facsimile:
INTBAFRAD248423 (MCI) or(202) 477-6391
Washington, D.C. 64145 (MCI)
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in Buenos Aires, Argentina, as of the day and year first above written.
REPUBLIC OF CHILE
By /s/ Juan Gabriel Valdez
Authorized Representative
INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
By /s/ Axel Van Trotsenburg
Acting Regional Vice President
Latin America and the Caribbean
Countersigned on behalf of the
Treasurer General of the Republic of Chile
By:/s/ Juan Gabriel Valdez
Authorized Representative
Countersigned on behalf of the
Controller General of the Republic of Chile
By:/s/ Juan Gabriel Valdez
Authorized Representative
SCHEDULE 1
Withdrawal of the Proceeds of the Loan
The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category:
Amount of the
Loan Allocated
(Expressed in% of Expenditures
CategoryDollars)to be Financed
(1)Works196,00080% of local
expenditures
(2)Goods (including computers,1,042,000100% of foreign
office equipment and supplies)expenditures, 100% of
local expenditures
(ex-factory cost) and
80% of local
expenditures for other
items procured locally
(3)Consultants’ and other services6,910,00095%
(4)Training)100%
(a)for Part B.1 of the1,132,400)
Project)
)
(b)for Part B.2 of the Project573,600)
(5) Incremental Operational180,00070% of expenditures
Costsmade until twelve
months after the
Effective Date and not
exceeding in the
aggregate $100,000;
and 30% thereafter
(6)Unallocated568,100
Amount of the
Loan Allocated
(Expressed in% of Expenditures
CategoryDollars)to be Financed
(7)Front-End Fee107,100Amount due under
Section 2.04 of this
Agreement
(8)Premia for Interest Rate0Amount due under
Caps and Interest Rate CollarsSection 2.09 (c) of
this Agreement
______
TOTAL10,710,000
2.For the purposes of this Schedule:
(a)the term “foreign expenditures” means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower;