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CONFORMED COPY
LOAN NUMBER 4147 BR
Loan Agreement
(Land Reform and Poverty Alleviation Pilot Project)
between
FEDERATIVE REPUBLIC OF BRAZIL
and
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
Dated July 29, 1997
LOAN NUMBER 4147 BR
LOAN AGREEMENT
AGREEMENT, dated July 29, 1997, between FEDERATIVE REPUBLIC OF BRAZIL (the 
Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank).
WHEREAS (A) the Borrower, having been satisfied as to the feasibility and 
priority of the Project described in Schedule 2 to this Agreement, has requested the 
Bank to assist in the financing of the Project;
WHEREAS (B)
 Parts C and D of the Project will be carried out by the 
Participating States (as hereinafter defined) with the Borrower’s assistance and, as 
part of such assistance, the Borrower will make available to the Participating States 
proceeds of the Loan as provided in this Agreement; and
WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to 
extend the Loan to the Borrower upon the terms and conditions set forth in this 
Agreement and in the Project Agreements of even date herewith between the Bank and 
each Participating State;
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 
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Agreements" of the Bank, dated January 1, 1985, with the modifications set forth below 
(the General Conditions) constitute an integral part of this Agreement:
(a)
The last sentence of Section 3.02 is deleted.
(b)
The second sentence of Section 5.01 is modified to read:
"Except as the Bank and the Borrower shall otherwise agree, no 
withdrawals shall be made: 
(a) on account of expenditures in the territories of 
any country which is not a member of the 
Bank or for goods produced in, or 
services supplied from, such territories; or (b) for the 
purpose of any 
payment to persons or entities, or for any import of goods, if such payment or 
import, to the knowledge of the Bank, is prohibited by a decision of the United 
Nations Security 
Council taken under Chapter VII of the Charter of the United 
Nations."
(c)
In Section 6.02, subparagraph (k) is relettered as subparagraph (l) and a 
new subparagraph (k) is added to read:
"(k) An extraordinary situation shall have arisen under which any further 
withdrawals 
under the Loan would be inconsistent with the provisions of 
Article III, Section 3 of the Bank's 
Articles of Agreement."
(d)
Section 6.03 is modified to read:
“Section 6.03.  Cancellation by the Bank.  If (a) the right of the 
Borrower to make 
withdrawals from the Loan Account shall have been suspended 
with respect to any amount of the 
Loan for a continuous period of thirty 
days, or (b) at any time, the Bank determines, after 
consultation with the 
Borrower, that an amount of the Loan will not be required to finance the 
Project's costs to be financed out of the proceeds of the Loan, or (c) at any time, 
the Bank 
determines, with respect to any contract to be financed out of the 
proceeds of the Loan, that 
corrupt or fraudulent practices were engaged 
in by representatives of the Borrower or, of a 
beneficiary of the Loan 
during the procurement or the execution of such contract, without the 
Borrower having taken timely and appropriate action satisfactory to the Bank to remedy 
the 
situation, and establishes the amount of expenditures in respect of such 
contract which would 
otherwise have been eligible for financing out of the 
proceeds of the Loan, or (d) at any time, 
the Bank determines that the procurement 
of any contract to be financed out of the proceeds of 
the Loan is 
inconsistent with the procedures set forth or referred to in the Loan Agreement and 
establishes the amount of expenditures in respect of such contract which would 
otherwise have 
been eligible for financing out of the proceeds of the Loan, 
or (e) after the Closing Date, an 
amount of the Loan shall remain 
unwithdrawn from the Loan Account, or (f) the Bank shall have 
received 
notice from the Guarantor pursuant to Section 6.07 with respect to an amount of the 
Loan, the Bank may, by notice to the Borrower and the Guarantor, terminate the 
right of the 
Borrower to make withdrawals with respect to such amount.  Upon 
the giving of such notice, such 
amount of the Loan shall be cancelled.”
Section 1.02. Unless the context otherwise requires, the several terms defined 
in the General Conditions have the respective meanings therein set forth and the 
following additional terms have the following meanings:
(a)
“Banco Central” means Banco Central do Brasil, the Borrower’s Central 
Bank;
(b)
“Beneficiary” means any civil association (associação civil) duly 
established in the Borrower's territory in accordance with the Borrower’s laws, which: 
(i) has been selected to carry out a Community Subproject or Community Subprojects (as 
hereinafter defined) in accordance with the selection criteria prescribed in the 
Operational Manual (as hereinafter defined); and (ii) has obtained a Land Loan (as 
hereinafter defined) to purchase the necessary land for the carrying out of a 
aCommunity Subproject or Community Subprojects;
(c)
“Community Subproject” means any investment referred to in Part B of the 
Project to be carried out by a Beneficiary utilizing the proceeds of a Grant (as 
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hereinafter defined) and which meets the eligibility criteria set forth in the 
Operational Manual (as hereinafter defined);
(d)
“CSFA” means Community Subproject Financial Agent, the financial 
institution referred to in Section 3.01 (b) (iv) of this Agreement, appointed by the 
Borrower to act as its financial agent in respect of Part B of the Project;
(e)
“CSFA Arrangements” means the arrangements referred to in Section 3.01 
(b) (iv) of this Agreement;
(f)
“Grant” means a grant to be made or proposed to be made by the Borrower 
to a Beneficiary out of the proceeds of the Loan for the purposes of financing not 
more than 90% of the cost of a Community Subproject;
(g)
“Grant Agreement” means each of the agreements, to be entered into among 
the CSFA, a Participating State (as hereinafter defined) and a Beneficiary, for the 
provision of a Grant;
(h)
“Land Account” means the account referred to in Section 3.01 (b) (i) of 
this Agreement out of which Land Loans (as hereinafter defined) will be made available 
to the Beneficiaries;
(i)
“Land Loans” means the loans referred to in Section 3.01 (b) (iii) (A) of 
this Agreement;
(j)
“Land Loan Agreement” means each of the agreements, to be entered into 
between the LLFA (as hereinafter defined) and a Beneficiary, for the provision of a 
Land Loan;
(k)
“LLFA” means Land Loan Financial Agent, the financial institution 
referred to in Section 3.01 (b) (iii) of this Agreement, appointed by the Borrower to 
act as its financial agent in respect of Part A of the Project;
(l)
“LLFA Arrangements” means the arrangements referred to in Section 3.01 
(b) (iii) of this Agreement;
(m)
“NEAD” means Núcleo de Estudos Agrários e Desenvolvimento, the Borrower’s 
Nucleus for Agrarian and Development Studies established pursuant to MEPF’s (as 
hereinafter defined) Portaria No. 002 of March 6, 1997;
(n)
“MEPF” means Ministro de Estado Extraordinário de Política Fundiária, the 
Borrower’s Minister of Land Policy;
(o)
“Operational Manual” means each manual issued by the relevant 
Participating State and the Borrower, satisfactory to the Bank, describing the 
priority areas to benefit from Project activities, and containing, inter alia, the 
overall operating procedures for the execution of the Project, including: (i) the 
operating procedures for regulating the functioning of the Land Account and the 
acquisition of land under Part A of the Project; (ii) the procedures and criteria 
related to training, technical assistance, environmental protection and other 
activities to be carried out under the Project; (iii) the criteria and procedures for 
the selection, and the procedures for the carrying out, of the Community Subprojects; 
and (iv) the standard form of a Grant Agreement; as such Operational Manual may be 
amended from time to time by agreement between the Bank, the Borrower and the 
Participating States (as hereinafter defined);
(p)
“Participation Arrangements” means any of the arrangements referred to in 
Section 3.01 (b) (v) of this Agreement;
(q)
“Participating State” means the State of Bahia, Ceará, Maranhão, Minas 
Gerais, or Pernambuco; and “ Participating States” means all such States collectively;
(r)
“Project Agreement” means any of the agreements between the Bank and each 
Participating State of even date herewith, as the same may be amended from time to 
time, and such term includes all schedules and agreements supplemental to the Project 
Agreement; and “Project Agreements” means all such Agreements collectively;
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(s)
“Project Monitoring Letter” means the letter dated July 23, 1997 
delivered by the Borrower’s Minister of Land Policy to the Bank, setting forth the 
indicators and targets to be used in monitoring the progress of the implementation of 
the Project and in evaluating its results; 
(t)
“State Annual Operating Plan” means any of the plans referred to in 
Section  2.05 of the Project Agreements;
(u)
“Special Account” means the account referred to in Section 2.02 (b) of 
this Agreement; and 
(v)
“STU” means the technical coordination unit referred to in Section 2.04 
of each of the Project Agreements.
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 the Loan Agreement, various currencies that 
shall have an aggregate value equivalent to the amount of ninety million dollars 
($90,000,000), being the sum of withdrawals of the proceeds of the Loan, with each 
withdrawal valued by the Bank as of the date of such withdrawal.
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 and services required for the Project described in Schedule 2 to this Agreement 
and to be financed out of the proceeds of the Loan.
(b)
The Borrower may, for the purposes of the Project, open and maintain in 
dollars a special deposit account in a commercial bank on terms and conditions 
satisfactory to the Bank, including appropriate protection against set-off, seizure or 
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 June 30, 2001 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 commitment charge at the rate 
of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the 
Loan not withdrawn from time to time.
Section 2.05. (a)  The Borrower shall pay interest on the principal amount of 
the Loan withdrawn and outstanding from time to time, at a rate for each Interest 
Period equal to the Cost of Qualified Borrowings determined in respect of the 
preceding Semester, plus one-half of one percent (1/2 of 1%).  On each of the dates 
specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued 
on the principal amount outstanding during the preceding Interest Period, calculated 
at the rate applicable during 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 determined in respect of such 
Semester.
(c)
For the purposes of this Section:
(i)
“Interest Period” means a six-month period ending on the date 
immediately preceding 
each date specified in Section 2.06 of this 
Agreement, beginning with the Interest 
Period in which this Agreement is 
signed.
(ii)
“Cost of Qualified Borrowings” means the cost, as reasonably 
determined by the Bank 
and expressed as a percentage per annum, of 
the outstanding borrowings of the Bank 
drawn down after June 30, 1982, 
excluding such borrowings or portions thereof as 
the Bank has 
allocated to fund: (A) the Bank's investments; and (B) loans which may 
be made by the Bank after July 1, 1989 bearing interest rates determined otherwise 
Page  5
than as provided in paragraph (a) of this Section.
(iii)
“Semester” means the first six months or the second six months of  
a calendar year.
(d)
On such date as the Bank may specify by no less than six months' notice 
to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to 
read as follows:
“(a)
The Borrower shall pay interest on the principal amount of the 
Loan withdrawn and 
outstanding from time to time, at a rate for each Quarter 
equal to the Cost of Qualified 
Borrowings determined in respect of the 
preceding Quarter, plus one-half of one percent (1/2 of 
1%).  On each of the dates 
specified in Section 2.06 of this Agreement, the Borrower shall pay 
interest accrued on the principal amount outstanding during the preceding Interest 
Period, 
calculated at the rates applicable during such Interest Period.”
“(b)
As soon as practicable after the end of each Quarter, the Bank 
shall notify the 
Borrower of the Cost of Qualified Borrowings determined in 
respect of such Quarter.”
“(c)
(iii) ‘Quarter’ means a three-month period commencing on January 
1, April 1, July 1 
or October 1 in a calendar year.”
Section 2.06. Interest and other charges shall be payable semiannually on May 1 
and November 1 in each year.
Section 2.07. The Borrower shall repay the principal amount of the Loan in 
accordance with the amortization schedule set forth in Schedule 3 to this Agreement.
Section 2.08. The MEPF of the Borrower, and the person or persons designated in 
writing by such Minister, are designated as representatives of the Borrower for the 
purposes of taking any action required or permitted to be taken under the provisions 
of Section 2.02 (a) of this Agreement and Article V of the General Conditions.
ARTICLE III
Execution of the Project
Section 3.01. (a) The Borrower declares its commitment to the objectives of the 
Project as set forth in Schedule 2 to this Agreement, and, to this end, without any 
limitation or restriction upon any of its other obligations under this Agreement, 
shall, under the coordination of the MEPF:
(i)
carry out Parts A and B of the Project with the participation of 
the Participating 
States; and (ii) carry out Part E of the Project; all 
with due diligence and 
efficiency, in conformity with the 
provisions of the Operational Manual and 
appropriate 
administrative, financial, environmental and land management practices, 
and substantially in accordance with the corresponding targets set forth in the 
Project Monitoring Letter, and shall provide, promptly as needed, 
the funds (except 
as provided in paragraph (b) (i) below), facilities, 
services and other resources 
required for such Parts of the 
Project.
(ii)
take all necessary steps in order to ensure that each 
Participating State performs 
in accordance with the provisions of the 
relevant Project Agreement all the 
obligations of such 
Participating State therein set forth.
(iii)
not take or permit to be taken any action which would prevent or 
interfere with the 
performance of such obligations by each Participating 
State.  
(b)
The Borrower, under the coordination of the MEPF, shall: 
(i)
pursuant to arrangements satisfactory to the Bank and for the 
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purposes of providing 
funds for Part A of the Project, open and 
thereafter operate and maintain, in the 
LLFA, an account 
(the Land Account) under terms and conditions satisfactory to the 
Bank, 
including that the Land Account shall: (A) be operated in accordance with the 
operating procedures set forth in the Operational Manual; (B) receive an annual 
deposit of not less than $15,000,000 equivalent by March 31 
(except in respect of 
the first year of Project 
implementation, as provided in subparagraph (ii) below) 
of 
each year of Project implementation, up to an aggregate amount equivalent to 
$45,000,000; and (C) have its proceeds withdrawn solely for the purposes 
of 
providing funds for Part A of the Project.
(ii)
in respect of the first year of Project implementation, and 
without limitation to 
the provisions of subparagraphs (i) (A) 
and (i) (C) above, deposit into the Land 
Account, in addition 
to the deposit referred to in Section 6.01 (b) of this 
Agreement, two installments of $5,000,000 each by not later than two and four 
months, respectively, after the Effective Date. 
(iii)
enter into arrangements satisfactory to the Bank (the LLFA 
Arrangements), with a 
financial institution acceptable to the 
Bank (the LLFA), such arrangements to 
provide, inter alia, that 
LLFA shall:
(A)
serve as the financial agent of the Borrower for purposes of 
making loans 
(the Land Loans) to 
Beneficiaries under 
Part A of the Project with the 
proceeds of the Land 
Account;
(B)
enter into loan agreements with each Beneficiary (the Land 
Loan Agreements) 
providing for Land Loans only upon receiving 
the relevant STU’s concurrence 
referred to in Section 2.04 (a) 
(ii) of the Project Agreements,  such Land 
Loan 
Agreements to have terms and conditions satisfactory to the Bank, 
including, inter alia, provisions entitling LLFA to suspend or terminate the 
right of the Beneficiary to use the proceeds of the Land Loan upon 
failure 
by such Beneficiary to perform any of its 
obligations under the Land Loan 
Agreement; and 
(C)
enter into each Participation Arrangements pursuant to 
paragraph (v) below.
(iv)
enter into arrangements satisfactory to the Bank (the CSFA 
Arrangements), with a 
financial institution acceptable to the 
Bank (the CSFA), such arrangements to 
provide, inter alia, that 
CSFA shall:
(A)
serve as the financial agent of the Borrower for purposes of 
making grants 
(the Grants) to Beneficiaries under Part 
B of the Project with the proceeds 
of the Loan; 
(B)
enter into a grant agreement with each of the Beneficiaries 
(the Grant 
Agreement), and the relevant Participating 
State through the STU, to finance 
up to ninety percent of 
the costs of a Community Subproject which shall be 
carried out by the Beneficiary, such Grant Agreement to have the terms and 
conditions set forth in the standard form included in the 
Operational Manual; 
and
(C)
enter into each Participation Arrangements pursuant to 
paragraph (v) below.
(v)
enter into arrangements, satisfactory to the Bank, with each 
Participating State, 
CSFA and LLFA (the Participation 
Arrangements) for the purposes of:
(A)
providing for the relationship and collaboration between 
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each Participating 
State, CSFA, and LLFA in respect of the 
carrying out of Parts A and B of the 
Project, respectively, as 
provided in the Operational Manual; and
(B)
making available, to each Participating State the proceeds 
of the Loan 
required for the carrying out of such 
Participating State’s activities under 
Parts C and D of the 
Project.
(c)
The Borrower shall exercise its rights and comply with its obligations 
under the CSFA Arrangements, the LLFA Arrangements and each Participation Arrangements 
and each Grant Agreement in such a manner as to protect the interests of the Borrower 
and the Bank, and, except as the Bank shall otherwise agree, the Borrower shall not 
amend, suspend, abrogate, waive or fail to enforce any such arrangements or agreement, 
as the case may be, 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 Bank and the Borrower hereby agree that the obligations set 
forth in Sections 9.04, 9.05, 9.06, 9.07 (a) and (b), 9.08 and 9.09 of the General 
Conditions (relating to insurance, use of goods and services, plans and schedules, 
records and reports, maintenance and land acquisition, respectively) in respect of 
Parts C and D of the Project shall be carried out by each Participating State pursuant 
to Section 2.03 of the relevant Project Agreement.
Section 3.04. The Borrower, under the coordination of the MEPF, shall, in a  
month fourteen months after the Effective Date, furnish to the Bank a report on the 
overall progress in the implementation of the Borrower’s activities under Parts A, B 
and E of the Project.
Section 3.05. The Borrower, under the coordination of MEPF, shall participate in 
the reviews referred to in Section  2.06 (c) and (d) of the Project Agreements.
Section 3.06. The Borrower shall maintain, during Project implementation, a 
nucleus for agrarian and development studies (the NEAD) with staff in adequate numbers 
and with adequate qualifications, and with responsibilities, structure and functions 
satisfactory to the Bank.
Section 3.07. For the purposes of Section 9.08 of the General Conditions and 
without limitation thereto, the Borrower shall, with the assistance of the 
Participating States:
(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 Borrower and the Bank, the Borrower a plan for 
the future operation of the Project; and
        (b)
afford the Bank a reasonable opportunity to exchange views with the 
Borrower on said plan.
ARTICLE IV
Financial Covenants
Section 4.01. (a) The Borrower shall maintain or cause to be maintained records 
and separate accounts adequate to reflect in accordance with sound accounting 
practices the operations, resources and expenditures, in respect of Parts A, B and E 
of the Project, of the departments or agencies of the Borrower responsible for the 
carrying out of such Parts of the Project.
(b)
The Borrower shall:
(i)
have the records and accounts referred to in paragraph (a) of this 
Section and the 
records and accounts for the Special Account for each 
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fiscal year audited, in 
accordance with appropriate auditing 
principles 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 six months 
after the end of each such year, the report of 
such audit by said auditors, of such 
scope and in such detail as the 
Bank shall have reasonably requested; and
(iii)
furnish to the Bank such other information concerning said records 
and accounts, 
and the audit thereof as the Bank shall 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:
(i)
maintain, or cause to be maintained, in accordance with paragraph 
(a) of this 
Section, records and accounts reflecting such 
expenditures;
(ii)
retain, or cause to be retained, until at least one year after the 
Bank has 
received the audit report for the fiscal year in 
which the last withdrawal from the 
Loan Account or payment out of 
the Special 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 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.
ARTICLE V
Remedies of the Bank
Section 5.01. Pursuant to Section 6.02 (1) of the General Conditions, the 
following additional events are specified:
(a)
any Participating State shall have failed to perform any of its 
obligations under the relevant Project Agreement; and
(b)
as a result of events which have occurred after the date of the Loan 
Agreement, an extraordinary situation shall have arisen which shall make it improbable 
that any Participating State will be able to perform any of its obligations under the 
respective Project Agreement.
Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the 
following additional event is specified, namely, that any event specified in paragraph 
(a) of Section 5.01 of this Agreement shall occur and shall continue for a period of 
sixty days after notice thereof shall have been given by the Bank to the Borrower.
ARTICLE VI
Effective Date; Termination
Section 6.01. The following events are specified as additional conditions to the 
effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the 
General Conditions:
(a)
that the CSFA Arrangements, the LLFA Arrangements and the Participation 
Page  9
Arrangements have become effective;
(b)
that the Land Account has been established and an initial deposit of at 
least $5,000,000 equivalent has been made therein;
(c)
that each Operational Manual has been adopted by the Borrower and by the 
respective Participating State; and
(d)
that the Loan Agreement has been duly registered by Banco Central.
Section 6.02. The following is specified as an additional matter, 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 Loan Agreement has been duly registered by Banco CentralCentral 
Bank of Brazil; and
(b)
that each Project Agreement has been duly authorized or ratified by, and 
is legally binding upon, the respective Participating State in accordance with its 
terms.
Section 6.03. The date October 29, 1997 is hereby specified for the purposes of 
Section 12.04 of the General Conditions.
ARTICLE VIII
Representative of the Borrower; Addresses
Section  7.01. Except as provided in Section 2.08 of this Agreement, 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 7.02.  The following addresses are specified for the purposes of Section 
11.01 of the General Conditions:
For the Borrower:
Ministério da Fazenda
Procuradoria-Geral da Fazenda Nacional
Esplanada dos Ministérios - Bloco “P” - 8° andar
70048-900, Brasília, D.F.
Brazil
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:
INTBAFRAD
248423 (MCI) or
Washington, D.C.
 64145 (MCI)
With copies to:
Ministério do Planejamento e Orçamento
Secretaria de Assuntos Internacionais
Esplanada dos Ministérios, Bloco “K” - 5º andar
70040-906, Brasília, D.F.
Brazil
Page  10
Ministro de Estado Extraordinário de Política Fundiária
SBN - Palácio do Desenvolvimento 18º andar
70057-900, Brasília - D.F.
Brazil
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized 
representatives, 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.
FEDERATIVE REPUBLIC OF BRAZIL
By /s/ Paulo Tarso Flecha de Lima
Authorized Representative
INTERNATIONAL BANK FOR
  RECONSTRUCTION AND DEVELOPMENT
By /s/ Shahid Javed Burki
Regional Vice President
Latin America and the Caribbean
WITNESS:
/s/ Raul Belens Jungmann
SCHEDULE 1
Withdrawal of the Proceeds of the Loan
1.
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
     % of
                    (Expressed in         Expenditures
Category
            Dollar Equivalent)
 to be Financed
(1)
Grants
                 75,900,000 
 100% of  the amounts 
              disbursed
(2)
Consultants’ Services
     4,000,000
 100%
and publicity and training 
expenditures under Parts C 
and D of the Project
(3)
Consultants’ Services
     6,000,000
 100%
under Part E of the Project
(4)
Administrative Costs:
(a)
incremental costs
     1,100,000
 20%
(b)
Project supervision
     1,500,000
 50%
costs
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(5)
Unallocated
                  1,500,000
TOTAL
    90,000,000
2.
For the purposes of this Schedule:
(a)
the term “incremental costs” means costs incurred by each STU in 
connection with the carrying out of its respective activities under the Project, such 
as land title verification, environmental analyses of Community Subprojects, computer 
services and office equipment; and
(b)
the term Project supervision costs means costs incurred by each STU in 
connection with the field supervision of Community Subprojects, such as travel 
expenses and per diems.
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 
$300,000, may be made in respect of Category 3 on account of payments made for 
expenditures made before that date but after January 20, 1997 a date which is latter 
than or a date twelve months before the date of this Agreement, whichever is later;
(b)
payments under a Grant unless the respective Grant Agreement shall have 
been entered into between the parties thereto; and
(c)
unless the Bank shall otherwise agree, payments under a Grant for a 
Community Subproject estimated to cost more than the equivalent of $50,000.
4.
The Bank may require withdrawals from the Loan Account to be made on the basis 
of statements of expenditure for expenditures under contracts for: (a) goods and works 
costing less than the equivalent of $100,000 each; (b) services of individual 
consultants costing less than the equivalent of $50,000; and (c) services of 
consulting firms costing less than the equivalent $100,000; all under such terms and 
conditions as the Bank shall specify by notice to the Borrower.
SCHEDULE 2
Description of the Project
The objectives of the Project are: (a) the reduction of rural poverty by 
providing the Participating States’ rural poor with access to land and funds for other 
investments; and (b) the gathering and evaluation of experience derived from Project 
Implementation.
The Project consists of the following parts, subject to such modifications 
thereof as the Bank and the Borrower may agree upon from time to time to achieve such 
objectives:
Part A:
Land Acquisition
Provision of loans for land acquisition by the Beneficiaries for the carrying 
out of Community Subprojects. 
Part B:
Community Subprojects
Financing of small scale community investments, including technical assistance, 
consisting, inter alia, of: (a) infrastructure investments such as rural water supply, 
electrification, local road improvements and construction of small bridges; (b) social 
investments such as construction and rehabilitation of schools and health posts; and 
(c) other investments such as small-scale community agro-processing, purchase of 
agricultural equipment, development of minor irrigation schemes, transportation, and 
purchase of building materials.
Page  12
Part C:
Community Development Support and Project Dissemination at the 
Participating State Level
Strengthening of the quality and effectiveness of Project activities through: 
1.
Provision of technical assistance and training for Beneficiaries and potential 
Beneficiaries in, inter alia, community mobilization and organization, preparation of 
Community Subprojects, and operation and maintenance of investments.
2.
Design and carrying out of information campaigns within the Participating 
States’ territory to disseminate information about the Project, through, inter alia, 
posters, radio spots, leaflets and videos.
Part D:
Project Administration at the Participating State Level
Strengthening of the capacity of the STUs, their field offices and other 
agencies of the Participating States in respect of Project coordination, supervision 
and monitoring through the provision of technical assistance, training and office 
equipment and the financing of incremental costs.
Part E:
Project Evaluation and Dissemination at the Borrower’s Level
1.
Carrying out of an evaluation study of the impact of specific land reform 
programs (including an evaluation of the impact of the Project) conducted at the State 
and at the national levels.
2.
Carrying out of studies relating to land policy issues, including, inter alia, 
analysis of land prices, availability of lands for sale, land holdings by commercial 
banks, the effect of a market-assisted land reform on land markets, and institutional 
and financial options for the Borrower’s land reform program.
3.
Carrying out of seminars and training to document and disseminate Project 
results. 
4.
Supporting of the activities to be carried out by the NEAD through the provision 
of consultants’ services and data processing services.
*    *    *
The Project is expected to be completed by December 31, 2000.
SCHEDULE 3
Amortization Schedule
Payment of Principal 
Date Payment Due
    (expressed in dollars)
On each May 1 and November 1
beginning November 1, 2002
       through May 1, 2004
  4,500,000
Page  13
___________________________
*
The figures in this column represent dollar equivalents determined as of the 
respective dates of 
withdrawal. See General Conditions, Sections 3.04 and 4.03.
Premiums on Prepayment
Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on 
the principal amount of any maturity of the Loan to be prepaid shall be the percentage 
specified for the applicable time of prepayment below:
Time of Prepayment
Premium
The interest rate (expressed as a 
percentage per annum 
applicable to 
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 not
0.87
more than thirteen years
before maturity
More than thirteen years
1.00
SCHEDULE 4
Procurement and Consultants' Services
Section I.
Procurement of Goods and Works
Part A:
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 (the Guidelines) and the 
following provisions of this Section, as applicable.
Part B:
Procurement Procedures
1.
National Competitive Bidding
Except as provided in Parts B.2, B.3 and B.4 hereof, goods and works shall be 
procured under contracts awarded in accordance with the provisions of paragraphs 3.3 
and 3.4 of the Guidelines.  In the procurement of goods and works in accordance with 
this Part B.1, bidding documents in a standardized form for the Project shall be used.
Without limitation to any other provisions set forth in this Schedule or the 
Guidelines, the following shall apply to the procurement of goods and/or works to be 
undertaken pursuant to this Part B.1:
Page  14
(a)
contracts shall be awarded to the bidder whose bid has been determined to 
be the lowest evaluated bid, such evaluation to be based on price and, whenever 
appropriate, to also take into account factors similar to those referred to in 
paragraph 2.51 of the Guidelines, provided, however, that the bid evaluation shall 
always be based on factors that can be quantified objectively, and the procedure for 
such quantification shall be disclosed in the invitation to bid.
(b)
whenever required by the Bank, the invitation to bid shall be advertised 
for at least three consecutive days in a newspaper of wide circulation in Brazil.
(c)
the arrangements, under the invitation to bid, for a joint-venture 
(consórcio) of Brazilian and foreign firms shall be approved in advance by the Bank in 
each case.
(d)
the invitation to bid shall not establish, for purposes of acceptance of 
bids, minimum or maximum amounts for the contract prices.
(e)
the purchaser shall not, without the Bank's prior approval, issue any 
change order under a contract which would increase or decrease by more than 15% the 
quantity of goods (and related services) without any change in the unit prices or 
other terms and conditions of sale.
2.
National Shopping
Except as provided in Part B.4 hereof, goods estimated to cost less than 
$100,000 equivalent per contract, up to an aggregate amount equivalent to $2,400,000, 
may be procured under contracts awarded on the basis of national shopping procedures 
in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines.
3.
Procurement of Small Works
Except as provided in Part B.4 hereof, works estimated to cost less than 
$100,000 equivalent per contract, up to an aggregate amount equivalent to $1,500,000, 
may be procured under lump sum, fixed price contracts awarded on the basis of 
quotations obtained from three qualified domestic contractors in response to a written 
invitation.  The invitation shall include a detailed description of the works, 
including basic specifications, the required completion date, a basic form of 
agreement acceptable to the Bank, and relevant drawings, where applicable.  The award 
shall be made to the contractor who offers the lowest price quotation for the required 
work, and who has the experience and resources to successfully complete the contract. 
4.
Community Participation
Goods and works, financed by Grants under Part B of the Project for Community 
Subprojects of up to $50,000 equivalent, to be procured by a Beneficiary, may be 
procured in accordance with procedures acceptable to the Bank as provided in paragraph 
3.15 of the Guidelines (including direct contracting in accordance with the provisions 
of paragraph 3.7 of the Guidelines) as detailed in the Operational Manual.
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 and works shall be undertaken in accordance with 
such procurement plan as shall have been approved by the Bank, and with the provisions 
of said paragraph 1.
2.
Prior Review
With respect to each contract to be awarded pursuant to the provisions of Part 
B.1 of this Section, the procedures set forth in paragraphs 2 and 3 of Appendix 1 to 
the Guidelines shall apply.
3.
Post Review
Page  15
With respect to each contract not governed by paragraph 1 of this Part, the 
procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply.
Section II.
Employment of Consultants
1.
Consultants’ services shall be procured under contracts awarded in accordance 
with the provisions 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 Consultant Guidelines).  For complex, time-based assignments, the Borrower 
shall employ such consultants under contracts using the standard form of contract for 
consultants' services issued by the Bank for the use of its borrowers, with such 
modifications as shall have been agreed by the Bank.  Where no relevant standard 
contract documents have been issued by the Bank, the Borrower shall use other standard 
forms agreed with the Bank.
2.
Notwithstanding the provisions of paragraph 1 of this Section, the provisions of 
the Consultant Guidelines requiring prior Bank review or approval of budgets, short 
lists, selection procedures, letters of invitation, proposals, evaluation reports and 
contracts shall not apply to: (a) contracts for the employment of consulting firms 
estimated to cost less than $100,000 equivalent each; or (b) contracts for the 
employment of individuals estimated to cost less than $50,000 equivalent each.  
However, this exception to prior Bank review shall not apply to: (a) the terms of 
reference for such contracts; (b) single-source selection of consulting firms; (c) 
assignments of a critical nature, as reasonably determined by the Bank; (d) amendments 
to contracts for the employment of consulting firms raising the contract value to 
$100,000 equivalent or above; or (e) amendments to contracts for the employment of 
individual consultants raising the contract value to $50,000 equivalent or above.
SCHEDULE 5
Special Account
1.
For the purposes of this Schedule:
(a)
the term "eligible Categories" means Categories (1) through (4) set forth 
in the table in paragraph 1 of Schedule 1 to this Agreement;
(b)
the term "eligible expenditures" means expenditures in respect of the 
reasonable cost of goods and services required for the Project and to be financed out 
of the proceeds of the Loan allocated from time to time to the eligible Categories in 
accordance with the provisions of Schedule 1 to this Agreement; and
(c)
the term "Authorized Allocation" means an amount equivalent to 
$15,000,000, or such other amount as the Bank shall establish, to be withdrawn from 
the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of 
this Schedule.
2.
Payments out of the Special Account shall be made exclusively for eligible 
expenditures in accordance with the provisions of this Schedule.
3.
After the Bank has received evidence satisfactory to it that the Special Account 
has been duly opened, 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 Borrower shall furnish 
to the Bank a request or requests for a deposit or deposits which do not exceed the 
aggregate amount of the Authorized Allocation.  On the basis of such request or 
requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account 
and deposit in the Special Account such amount or amounts as the Borrower shall have 
requested.
(b)
(i)
For replenishment of the Special Account, the Borrower shall 
furnish to the Bank 
requests for deposits into the Special 
Account at such intervals as the Bank shall 
specify.
(ii)
Prior to or at the time of each such request, the Borrower shall 
Page  16
furnish to the 
Bank the documents and other evidence required 
pursuant to paragraph 4 of this 
Schedule 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 
Borrower, withdraw from the Loan Account and deposit into the Special Account 
such 
amount as the Borrower 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.
All such deposits shall be withdrawn by the Bank from the Loan Account under the 
respective eligible Categories, and in the respective equivalent amounts, as shall 
have been justified by said documents and other evidence.
4.
For each payment made by the Borrower out of the Special Account, the Borrower 
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.
5.
Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall 
not be required to make further deposits into the Special Account:
(a)
if, at any time, the Bank shall have determined that all further 
withdrawals should be made by the Borrower directly from the Loan Account in 
accordance with the provisions of Article V of the General Conditions and paragraph 
(a) of Section 2.02 of this Agreement;
(b)
if the Borrower 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 the records and accounts for the Special Account;
(c)
if, at any time, the Bank shall have notified the Borrower of its 
intention to suspend in whole or in part the right of the Borrower to make withdrawals 
from the Loan Account pursuant to the provisions of Section 6.02 of the General 
Conditions; or
(d)
once the total unwithdrawn amount of the Loan allocated to the eligible 
Categories, less the amount of any outstanding special commitment entered into by the 
Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, 
shall equal the equivalent of twice the amount of the Authorized Allocation.
Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of 
the Loan allocated to the eligible Categories shall follow such procedures as the Bank 
shall specify by notice to the Borrower.  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.
6.
(a)
If the Bank shall have determined at any time that any payment out of the 
Special Account: (i) was made for an expenditure or in an amount not eligible pursuant 
to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished 
to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such 
additional evidence as the Bank may request; or (B) 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 or the portion thereof not so eligible or justified.  Unless the Bank 
shall otherwise agree, no further deposit by the Bank into the Special Account shall 
be made until the Borrower has provided such evidence or made such deposit or refund, 
as the case may be.
(b)
If the Bank shall have determined at any time that any amount outstanding 
in the Special Account will not be required to cover further payments for eligible 
expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the 
Bank such outstanding amount.
(c)
The Borrower may, upon notice to the Bank, refund to the Bank all or any 
portion of the funds on deposit in the Special Account.
Page  17
(d)
Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of 
this Schedule shall be credited to the Loan Account for subsequent withdrawal or for 
cancellation in accordance with the relevant provisions of this Agreement, including 
the General Conditions.