CREDIT NUMBER 31 ES Development Credit Agreement (Third Highway Project) BETWEEN REPUBLIC OF EL SALVADOR AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED NOVEMBER 2, 1962 CREDIT NUMBER 31 ES Development Credit Agreement (Third Highway Project) BETWEEN REPUBLIC OF EL SALVADOR AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED NOVEMBER 2, 1962 wotrlopment (Trrbit Ag~rummut AGREEMENT, dated November 2, 1962, between RE- PUBLIC OF EL SALVADOR (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). ARTICLE I Credit Regulations SECTION 1.01. The parties hereto accept all the provi- sions of Development Credit Regulations No. 1 of the Association dated June 1, 1961, with the same force and effect as if they were fully set forth herein. ARTICLE II The Credit SECTION 2.01. The Association agrees to make available to the Borrower, on the terms and conditions in this Agreement set forth or referred to, a development credit in an amount in various currencies equivalent to eight million dollars ($8,000,000). SECTION 2.02. The Association shall open a Credit Ac- count on its books in the name of the Borrower and shall credit to such Account the amount of the Credit. The amount of the Credit may be withdrawn from the Credit Account as provided in, and subject to the rights of cancellation and suspension set forth in, this Agreement and the Regulations. SECTION 2.03. Except as the Borrower and the Associ- ation shall otherwise agree, the Borrower shall be entitled, subject to the provisions of this Agreement, to withdraw from the Credit Account (i) such amounts as shall have been expended for the reasonable foreign exchange cost 4 of Parts B and C of the Project; (ii) the equivalent of a percentage or percentages to be established from time to time by agreement between the Borrower and the As- sociation of such amounts as shall have been expended by the Borrower for the reasonable cost of goods required for carrying out Part A of the Project; and (iii) if the Association shall so agree, such amounts as shall be re- quired by the Borrower to meet the reasonable cost of the foregoing; provided, however, that no withdrawals shall be made on account of expenditures prior to October 1, 1962. SECTION 2.04. Withdrawals from the Credit Account shall be in such freely convertible currency or currencies as the Association shall from time to time reasonably select. SECTION 2.05. The Borrower shall pay to the Associ- ation a service charge at the rate of three-fourths of one per cent (3/4 of 17o) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. The Borrower shall also pay to the Association a service charge at the same rate on the principal amount outstanding from time to time of any special commitment entered into by the Association pursuant to Section 4.02 of the Regulations. SECTION 2.06. Servic charges shall be payable semi- annually on May 1 and November 1 in each year. SECTION 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual instalments payable on each May 1 and November 1 commencing November 1, 1972 and ending May 1, 2012, each instalment to and in- cluding the instalment payable on May 1, 1982 to be one- half of one per cent ( of 1%) of such principal amount, and each instalment thereafter to be one and one-half per cent (1 //) of such principal amount. 5 ARTICLE III Use of Proceeds of the Credit SECTION 3.01. The Borrower shall cause the proceeds of the Credit to be applied exclusively to financing the cost of goods required to carry out the Project described in the Schedule to this Agreement. The specific goods to be financed out of the proceeds of the Credit and the methods and procedures for procurement of such goods shall be determined by agreement between the Borrower and the Association, subject to modification by further agreement between them. SECTION 3.02. Except as the Borrower and the Associ- tion shall otherwise agree, the Borrower shall cause all goods financed out of the proceeds of the Credit to be used in the territories of the Borrower exclusively in the carrying out of the Project. ARTICLE IV Particular Covenants SECTION 4.01. (a) The Borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with sound engineering and financial practices. (b) Except as the Association shall otherwise agree, in the carrying out of the Project the Borrower shall employ or cause to be employed engineering consultants acceptable to, and upon terms and conditions satisfactory to, the Borrower and the Association. (c) Except as the Association shall otherwise agree, the Borrower shall cause the Project to be carried out by contractors satisfactory to the Borrower and the Associ- ation employed under contracts satisfactory to the Bor- rower and the Association. (d) The general design standards and the type of sur- facing (including pavement) to be used for the Project 6 shall be as determined by agreement between the Borrower and the Association, subject to modification by further agreement between them. (e) Upon request from time to time by the Association, the Borrower shall promptly furnish or cause to be fur- nished to the Association the plans, specifications and work schedules for the Project and any material modifi- cations subsequently made therein, in such detail as the Association shall request. (f) The Borrower shall at all times make available by appropriation or otherwise, for disbursement promptly as they are needed, all sums which shall be required for the carrying out of the Project. (g) The Borrower shall adopt before 1963 an extraordi- nary budget pursuant to Article 125 of the Constitution of El Salvador appropriating an aggregate amount of not less than 12,000,000 colones to be used in the carrying out of Parts A and C of the Project. The minimum amounts to be appropriated in such budget for the calendar years 1963 through 1966 for the execution of Parts A and C of the Project are as follows: 1963 2,000,000 colones 1964 3,500,000 " 1965 4,000,000 " 1966 2,500,000 " If the sum expended for carrying out Parts A and C of the Project in one calendar year exceeds the amount appropriated for such year, the difference will be deducted from the amount appropriated for the calendar year 1966, provided that such deduction would not interfere with the proper carrying out of Parts A and C of the Project. In addition an aggregate amount of 1,750,000 colones shall be made available as a separate item in the Highway Maintenance Budget for Part B of the Project. This amount shall be made available in equal sums during the calendar years 1963 to 1966. 7 Any sums appropriated as provided herein shall be used only for the purpose for which they were appropriated, and if not completely expended in one calendar year shall be carried over to the next calendar year or years and shall be used only for such purpose. The obligation contained in this sub-paragraph (g) shall be without prejudice to the general obligations set forth in Sections 4.01(a), 4.01(f) and 4.05 of this Agreement. (h) The Borrower shall maintain or cause to be main- tained records adequate to identify the goods financed out of the proceeds of the Credit, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of the agency or agencies of the Borrower responsible for the carrying out of the Project or any part thereof; shall enable the Association's representatives to inspect the Project, the goods and any relevant records and docu- ments; and shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the expenditure of the pro- ceeds of the Credit, the Project, the goods and the opera- tions and financial condition of the agency or agencies of the Borrower responsible for the carrying out of the Project or any part thereof. SECTION 4.02. (a) The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reason- ably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and eco- nomic conditions in the territories of the Borrower. (b) The Borrower and the Association shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Credit 8 and the maintenance of the service thereof. The Borrower shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accor .plishment of the purposes of the Credit or the main- tenanee of the service thereof. (c) The Borrower shall afford all reasonable opportu- nity for accredited representatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit. SECTION 4.03. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes or fees imposed under the laws of the Borrower or laws in effect in its territories and free from all restrictions imposed under the laws of the Bor- rower or laws in effect in its territories. SECTION 4.04. This Agreement shall be free from any taxes or fees that shall be imposed under the laws of the Borrower or laws in effect in its territories on or in connection with the execution, issue, delivery or regis- tration thereof. SECTION 4.05. The Borrower 8hall cause the roads in its highway system to be maintained at all times in accord- ance with sound engineering standards. To this end, the Borrower shall engage such technical personnel as shall be necessary and shall establish and maintain an adequate number of maintenance field shops. ARTICLE V Remedies of the Association SECTION 5.01. (i) If any event specified in paragraph (a) or paragraph (c) of Section 5.02 of the Regulations shall occur and shall continue for a period of thirty days, or (ii) if any event specified in paragraph (b) of Section 5.02 of the Regulations shall occur and shall continue for 9 a period of sixty days after notice thereof shall have been given by the Association to the Borrower, then at any subsequent time the Association, at its option, may declare the principal of the Credit then outstanding to be due and payable immediately, and upon any such declaration such principal shall become due and payable immediately, anything in this Agreement to the contrary notwith- standing. ARTICLE VI Effective Date; Termination SECTION 6.01. The following events are specified as ad- ditional conditions to the effectiveness of this Agreement within the meaning of Section 8.01 (b) of the Regulations: (a) any action necessary to enable the Borrower to employ the engineering consultants referred to in Section 4.01 (b) of this Agreement shall have been taken, and such con- sultants shall have been employed; and (b) an extraordi- nary budget shall have been adopted as provided in Section 4.01 (g) of this Agreement. SECTION 6.02. The following are specified as additional matters, within the meaning of Section 8.02 (c) of the Regulations, to be included in the opinion or opinions to be furnished to the Association: (a) that all action neces- sary to enable the Borrower to employ the engineering consultants referred to in Section 4.01 (b) of this Agree- ment has been taken; and (b) that all action necessary for the adoption of an extraordinary budget as provided in Section 4.01 (g) of this Agreement has been duly and validly taken. SECTIONx 6.03. A date 90 days after the (late of this Agreement is hereby specified for the purposes of Section 8.04 of the Regulations. 10 ARTICLE VII Miscellaneous SECTION 7.01. The Closing Date shall be May 1, 1967, or such other date as may from time to time be agreed between the Borrower and the Association. SECTION 7.02. The following addresses are specified for the purposes of Section 7.01 of the Regulations: For the Borrower: Ministro de Obras Publicas Palacio Nacional San Salvador El Salvador and Ministro de Hacienda 3a Avenide Norte y 13a Calle Poniente San Salvador El Salvador Alternative addresses for cablegrams and radiograms: Ministro de Obras Publicas San Salvador and Ministro de Hacienda San Salvador For the Association:. International Development Association 1818 H Street, N.W. Washington 25, D. C. United States of America Alternative address for cablegrams and radiograms: Indevas Washington, D. C. 11 SECTION 7.03. The Minister of Finance of the Borrower is designated for the purposes of Section 7.03 of the regulations. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Development Credit Agreement to be signed in their respective iames and delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF EL SALVADOR By /s/ H. BERNAL H. Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ J. BURKE KNAPP Vice President 12 SCHEDULE Description of Project The Project consists of: A. The improvement, construction or reconstruction of seven trunk roads and four feeder roads totaling about 364 km in length. The general location and design classification of the roads are as listed below: Trunkc Roads Design Estimated Length Standard Km 1. San Salvador-Acajutla Primary 85 2. Santa Tecla-La Libertad " 23 3. Sonzacate-San Jorge Secondary 26 4. Sitio Del Nino-Apopa " 28 5. San Miguel-Agua Salada Primary 50 6. El Poy-Tejutla Secondary 40 7. El Jobo-Ahuachapan Primary 16 Feeder Roads 1. Juayua-Los Arenales Tertiary 9 2. Teotepeque-Santa Tecla " 36 3. Santo Tomas-Cojutepeque " 36 4. San Ramon-Inter-American Highway 15 364 B. The reorganization, equipping and training of the or- ganization charged with the maintenance of the Coastal Highway so that it will be effectively and efficiently maintained, and the provision of three suitable work- shops along the Coastal Highway. C. Engineering services for the construction and recon- struction of the roads under Part A,.and for the main- tenance program for the Coastal Highway under Part B.