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CONFORMED COPY
LOAN NUMBER 4310-BR
Project Agreement
(Federal Water Resources Management Project)
between
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
and
STATE OF PIAUÍ
Dated June 3, 1998
LOAN NUMBER 4310-BR 
PROJECT AGREEMENT
AGREEMENT, dated June 3, 1998, between INTERNATIONAL BANK FOR RECONSTRUCTION AND 
DEVELOPMENT (the Bank) and the STATE OF PIAUÍ (PIAUÍ);
WHEREAS (A) by the Loan Agreement of even date herewith between Federative 
Republic of Brazil (the Borrower) and the Bank, the Bank has agreed to make available 
to the Borrower an amount in various currencies equivalent to one hundred ninety eight 
million dollars ($198,000,000), on the terms and conditions set forth in the Loan 
Agreement, but only on condition that PIAUÍ agree to undertake such obligations toward 
the Bank as are set forth in this Agreement;
(B)
by an Institutional Development Agreement and one or more Subproject 
Agreements to be entered into between the Borrower and PIAUÍ, a portion of the 
proceeds of the loan provided for under the Loan Agreement will be transferred to 
PIAUÍ on the terms and conditions set forth in said agreements; and
WHEREAS PIAUÍ, in consideration of the Bank's entering into the Loan Agreement 
with the Borrower, has agreed to undertake the obligations set forth in this 
Agreement;
NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
Definitions
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Section 1.01. Unless the context otherwise requires, the several terms defined 
in the preamble to this Agreement, the Loan Agreement and the General Conditions (as 
so defined) have the respective meanings therein set forth.
ARTICLE II
Execution of the Project
Section 2.01. PIAUÍ declares its commitment to the objectives of the Project as 
set forth in Schedule 2 to the Loan Agreement, and, to this end, shall, through UEGP, 
carry out its corresponding activities under Parts A.2, B and D.2 of the Project, all 
with due diligence and efficiency and in conformity with: (i) the Institutional 
Development Agreement or the relevant Subproject Agreement, as applicable; (ii) the 
Operational Manual; (iii) the relevant State Annual Operating Plan; (iv) the State 
Implementation Plan; and (v) appropriate administrative, financial, engineering, 
environmental and land management practices; and shall provide, or cause to be 
provided, promptly as needed, the funds, facilities, services and other resources 
required for the carrying out of its corresponding activities under Parts A.2, B and 
D.2 of the Project.
Section 2.02. 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 the 
Loan Agreement.
Section 2.03. PIAUÍ shall carry out 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 its corresponding 
activities under Parts A.2, B and D.2 of the Project.
Section 2.04. PIAUÍ shall maintain, during Project implementation, with adequate 
facilities and equipment, a management unit (the UEGP)  housed within PIAUÍ’s 
Secretariat of Environment and Water Resources with staff in adequate numbers and with 
adequate qualifications, and with responsibilities, structure and functions 
satisfactory to the Bank, including, the responsibility for the overall coordination 
and monitoring of PIAUÍ’s participation in the implementation of Parts A.2, B and D.2 
of the Project.
Section 2.05. Without limitation to the generality of Section 2.01 (a) of this 
Agreement and whenever a Subproject includes the construction of a dam which is 
fifteen meters or more in height, or which is between ten and fifteen meters in height 
and presents, in the reasonable opinion of the Bank, special design complexities, 
PIAUÍ shall: (A) establish and thereafter maintain during the design and initial 
operation of such Subproject, a Dam Safety Review Panel under terms of reference and 
arrangements acceptable to the Bank; (B) cause the relevant dam, reservoir and related  
structures to be periodically inspected by independent qualified professionals under 
terms of reference acceptable to the Bank, in order to determine whether there are any 
deficiencies in the condition of such structures, or in the quality and adequacy of 
maintenance or methods of operation of the  same, which may endanger their safety; (C) 
furnish to the Bank for its review the periodic reports of the Dam Safety Review Panel 
(to be issued in accordance with its terms of reference) and of the professionals 
referred to in subparagraph (B) above, together with PIAUÍ’s own comments; and (D) no 
later than six months before the expected completion of the relevant dam, reservoir 
and related structures, propose to the Bank for its review and approval, appropriate 
arrangements for their operation and maintenance.
Section 2.06. (a) Whenever a Subproject requires the undertaking of 
environmental protection measures and/or resettlement of population pursuant to 
Section 3.02 (b) (viii) of the Loan Agreement, PIAUÍ shall carry out the mitigation 
measures provided in the corresponding environmental assessment and/or carry out the 
resettlement action plan in a manner and within a timetable satisfactory to the Bank; 
(b) Whenever a Subproject requires the undertaking of measures to ensure the 
development and protection of indigenous peoples pursuant to Section 3.02 (b) (ix) of 
the Loan Agreement, PIAUÍ shall carry out the IPDP in a manner and within a timetable 
satisfactory to the Bank.
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Section 2.07. PIAUÍ shall, in the month of October  of each year during Project 
implementation, furnish to SRH/MMA an annual plan (a State Annual Operating Plan), 
describing, inter alia, the Project activities to be carried out during the next 
calendar year, including the costs thereof.
Section 2.08. Without limitation upon the provisions of Section 9.01 (a) and 
9.07 of the General Conditions, PIAUÍ shall:
(a)
Beginning two months after the date of this Agreement, during each year 
of Project implementation furnish to the SRH/MMA quarterly reports on the progress in 
the implementation of PIAUÍ’s activities under Parts A.2, B and D.2 of the Project 
during the previous three months which shall be based on the targets and indicators 
set forth in the State Implementation Plan and in the Project Monitoring Letter, 
respectively, such reports to be of such scope and in such detail as the Bank shall 
reasonably request; and
(b)
in the months of March and September of each year during Project 
implementation hold reviews jointly with the Borrower and the Bank (the review to take 
place in the eighteenth month after the date of this Agreement or when disbursements 
from the Loan Account have reached 40% of the amount of the Loan, whichever is 
earlier, to be the mid-term review), such reviews to be based on the reports referred 
to in paragraph (a) above and, thereafter, take or cause to be taken all such action 
which shall have been agreed upon by PIAUÍ, the Borrower and the Bank during the 
reviews referred to in this paragraph, as necessary for the efficient execution of its 
corresponding activities under the Project or the achievement of its objectives, such 
action to be taken in the manner and within the timetable agreed upon during such 
reviews.
Section 2.09. PIAUÍ shall carry out  the plan referred to in Section 3.02 (b) 
(iii) of the Loan Agreement in accordance with its own terms, including the timetable 
set forth therein.
Section 2.10. PIAUÍ shall assist the Borrower in the preparation of the plan 
referred to in Section 3.06 of the Loan Agreement and the report referred to in 
Section 9.07 (c) of the General Conditions.
Section 2.11. PIAUÍ shall exercise its rights and comply with its obligations  
under its respective Institutional Development Agreement and under each Subproject 
Agreement in such a manner as to protect the interests of the Borrower and the Bank, 
and, except as the Bank shall otherwise agree, PIAUÍ shall not amend, suspend, 
abrogate, waive or fail to enforce the Institutional Development Agreement or each 
Subproject Agreement, or any provision thereof.
Section 2.12. PIAUÍ shall promptly inform the Bank and the Borrower of any 
condition which interferes or threatens to interfere with the progress in the carrying 
out of its activities under the Project, the accomplishment of the purposes of the 
Loan, or the performance by PIAUÍ of its obligations under this Agreement, the 
Institutional Development Agreement and under each Subproject Agreement.
ARTICLE III
Financial Covenants
Section 3.01 (a) PIAUÍ shall maintain records and separate accounts adequate to 
reflect in accordance with sound accounting practices the operations, resources and 
expenditures, in respect of its activities under Parts A.2, B and D.2 of the Project, 
of the departments or agencies of PIAUÍ responsible for the carrying out of such 
activities.
(b)
PIAUÍ shall:
(i)
have the records and accounts referred to in paragraph (a) above 
for each 
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 
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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.
ARTICLE IV
Effective Date; Termination;
Cancellation and Suspension
Section 4.01. This Agreement shall come into force and effect on the date upon 
which the Loan Agreement becomes effective.
Section 4.02. This Agreement and all obligations of the Bank and of PIAUÍ 
thereunder shall terminate on the date on which the Loan Agreement shall terminate in 
accordance with its terms, and the Bank shall promptly notify PIAUÍ thereof.
Section 4.03. All the provisions of this Agreement shall continue in full force 
and effect notwithstanding any cancellation or suspension under the General 
Conditions.
ARTICLE V
Miscellaneous Provisions
Section 5.01. Any notice or request required or permitted to be given or made 
under this Agreement and any agreement between the parties contemplated by this 
Agreement shall be in writing. Such notice or request shall be deemed to have been 
duly given or made when it shall be delivered by hand or by mail, telegram, cable, 
telex or radiogram to the party to which it is required or permitted to be given or 
made at such party's address hereinafter specified or at such other address as such 
party shall have designated by notice to the party giving such notice or making such 
request. The addresses so specified are:
For the Bank:
International Bank for
  Reconstruction and Development
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
INTBAFRAD
248423 (MCI) or
Washington, D.C.
 64145 (MCI)
For PIAUÍ:
Secretaria do Meio Ambiente e dos Recursos Hídricos 
do Estado do Piauí
Rua Desembargador Freitas, 1599 - Ed. Paulo VI
Centro 
64.000-240, Teresina, Piauí
Brazil
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
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Ministério do Meio Ambiente, 
Recursos Hídricos e Amazônia Legal
Secretaria de Recursos Hídricos
SGAN Quadra 601, Lote 1, 4° andar
70830-901, Brasília - D.F.
Brazil
Section 5.02. Any action required or permitted to be taken, and any document 
required or permitted to be executed, under this Agreement on behalf of PIAUÍ may be 
taken or executed by the Governor of PIAUÍ or such other person or persons as such 
Governor shall designate in writing, and PIAUÍ shall furnish to the Bank sufficient 
evidence of the authority and the authenticated specimen signature of each such 
person.
Section 5.03. This Agreement may be executed in several counterparts, each of 
which shall be an original, and all collectively but one instrument.
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized 
representatives, have caused this Agreement to be signed in their respective names in 
Brasilia, D.F., Brazil, as of the day and year first above written.
INTERNATIONAL BANK FOR
  RECONSTRUCTION AND DEVELOPMENT
By /s/ Robert Schneider 
Authorized Representative
STATE OF PIAUÍ
By /s/ Francisco de Assis de Moraes Souza 
Authorized Representative