A Public Disclosure Authorized

FFIC UR LOAN NUMBER 2238 FDOCUMENTS OFFICIAL

Loan Agreement

Public Disclosure Authorized (Third Highway Project)

between

REPUBLICA ORIENTAL DEL

and

INTERNATIONAL BANK FOR RECONSTRUCTION

Public Disclosure Authorized AND DEVELOPMENT

Dated March 25, 1983

Second Revision

Dated July,3 , 1986 Public Disclosure Authorized LOAN NUMBER 2238 UR

LOAN AGREEMENT 1_T \

2, 19y3 k"- REPUBLICA ORIENTAL DEL URUGUAY (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). AQ c40(-J-D

WHEREAS the Borrower has requested the Bank to assist in the financing of a pcrtion . the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided;

WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated October 27, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agree- ments of the Bank being hereinafter called the General Condi- tions).

Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following addi- tional terms have the following meanings:

(a) 'MTOP" means the Ministerio de Transporte y Obras Publicas of the Borrower;

(b) "Vialidad" means the Direccion de Vialidad of MTOP;

(c) "DNT" means the Direccion Nacional de Transporte of MTOP; -2-

(d) "National Highways" means roads, the planning, construction, reconstruction, rehabilitation and maintenance of which are under the jurisdiction of MTOP;

(e) the term "nuevo peso" means the unit of currency of the Borrower;

(f) "AFE" means Administracion de los Ferrocarriles del Estado, an entity, wholly owned by the Borrower, established under the Borrower's L., iu. 14.396, dated July 10, 1975; (g) "TPU" means the transport planning unit within MTOP; (h) "Additional Road" means any National HighrAay or section thereof (other than those included under Parts A.1 or B.1 of the Project) which the Borrower proposes to include under Parts A.2 or B.2 of the Project;

(i) "Sub-project" means any project partially financed or to be financed (as the case may be) with the proceeds of the Loan under Part D of the Project and which consists of civil works for the reconstruction or rehabilitation of a road or a section thereof, the maintenance and construction of which is within jurisdiction the of an Intendencia (such road hereinafter called Feeder Road);

(j) "Intendencia" means any Intendencia Municipal, a poli- tical subdivision of the Borrower, which intends to carry out a Sub-project within the National Feeder Roads Program;

(k) "National Feeder Roads Program" means a program for reconstruction or rehabilitation of Feeder Roads, the works under which are to be financed partially by the Intendencia with jurisdiction over the Feeder Road in question and partially, at a percentage not higher than 50, by the Borrower; the details of which program having been set forth in the letters to the Bank from the Borrower's Minister of Transport and Public Works, dated October 26, 1982 and September 16, 1983, and their respective annexes, all as amended from time to time by agreement between the Borrower and the Bank.

(1) "Feeder Road Guidelines" means the guidelines for selection of Sub-projects and inclusion thereof in the National Feeder Road Program, as set forth in the letter and annexes referred to in (k) above; -3-

(m) "Five-Year Investment Program" means the highway in- vestment program of 'MTOP dated November 15, 1982, covering five calendar years, as amended from time to time; (n) "Special Account" means the account to be opened and thereafter maintained pursuant to Section 2.02 (b) of this Agree- ment; (o) "Initial Deposit" means the amount of the proceeds of the Loan withdrawn from the Loan Account through one or more withdrawals under Category 17) of the table set forth in para- graph 1 of Schedule 1 to this Agreement, and deposited in the Special Account pursuant to paragraph 3 of Schedule 5 to this Agreement; (p) "Account Bank" means Banco Central de la Republica Oriental del Uruguay, the Borrower's Central Bank; and (q) "Final Year" means the calendar year in which the Closing Date falls.

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 Agree- ment, an amount in various currencies equivalent to forty-five million dollars ($45,000,000).

Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Sche- dule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, 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 and to be financed out of the proceeds of the Loan.

(b) The Borrower shall, for the purposes of Parts A, B and C of the Project, open and thereafter maintain in the Account Bank a special account in dollars on terms and conditions satis- factory to the Bank. 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. Except as the Bank shall otherwise agree, pro- curement of the goods and civil works required for the Project -4-

and to be financed out of the proceeds of the Loan shall be gov- erned by the provisions of Schedule 4 to this Agreement.

Section 2.04. The Closing Date shall be December 31, 1987 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date.

Section 2.05. (a) The Borrower shall pay to the Bank a fee equivalent to three hundred thirty-four thousand nine hundred eighty-eight dollars ($334,988).

(b) On or promptly after the Effective Date, the BR-nk shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of the said fee in such currency or currencies as the Bank shall determine.

Section 2.06. The Borrower shall pay to the Bank a commit- ment charge at the rate of three-fourths of oae per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time.

Section 2.07. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one half percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period.

(b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester.

(c) For purposes of this Section:

(i) "Interest Period" means the six-month period com- mencing on each date specified in Section 2.08 of this Agreement, including the Interest Period in which this Agreement is signed.

(ii) "Cost" of Qualified Borrowings means the cost, expressed as a percentage per annum, as reasonably determined by the Bank, provided that the amount of $8,520.5 million referred to in (iii) (B) here- under shall be reckoned at a cost of 10.93% per annum. -5-

(iii) "Qualified Borrowings" means (A) outstanding borrowings of the Bank drawn down after June 30, 1982; and (B) until July 1, 1985, the amount of $8,520.5 million (representing borrowings of the Bank between July 1, 1981 and June 30, 1982) less any part thereof repaid earlier than July 1, 1985. (iv) "Semester" means the first six months or the second six months of a calendar year. (d) Notwithstanding paragraph (a) of this Section, the interest rate for all Interess- 1Zriods commencing in 1982 shall be 11.43% per annum. Section 2.08. Interest and other charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement.

ARTICLE III

Execution of the Project

Section 3.01. (a) The Borrower shall carry out the Project through MTOP, with every applicable Intendencia as executing agencies for Part D of the Project, and AFE as executing agency for Part F of the Project, vith due diligence and efficiency, and in conformity with appropriate engineering, administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose (the funds to be provided by the Borrower being on the date hereof estimated to aggregate the equivalent of not less than forty-seven million dollars ($47,000,000)). (b) The Borrower shall enter with AFE into contractual arrangements satisfactory to the Bank whereby, inter alia, the Borrower shall make available to AFE, as an irrevocable grant, the proceeds of the Loan from time to time allocated to Category (5) of the table set forth in paragraph 1 of Schedule 1 to this Agreement. (c) The Borrower shall, on or before June 30 in each year until and including the Final Year, submit to the Bank, the list of additional road sections and bridges to be included under Parts A.2 and B.2 of the Project, if any, together with their economic evaluation. -6-

(d) The Borrower shall submit to the Bank, on or before June 30, in each year until the Final Year, the complete list of Sub-projects proposed to be included in the National Feeder Roads Program together with their economic evaluation in accordance with the Feeder Road Guidelines.

(e) The Borrower shall cause each Intendencia, under appro- priate contractual arrangements, to execute every Sub-project located within the jurisdiction of such Intendencia with due diligence and efficiency, in conformity with appropriate engi- neering, administrative and financial practices and in accordance with the Feeder Road Guidelines, to provide the funds, facilities services and other resources required for the execution of Sub-project, other such than funds provided by the Borrower shall not exceed which 50% of the reasonable cost of required goods and services for the execution of such Sub-project, maintenance and to assure of the roads included in such Sub-project pletion thereof. upon com-

(f) The Borrower shall not undertake works under Part C of the Project unless the plans, specifications and cost estimates therefor have been reviewed by the Bank and found satisfactory by the Borrower and the Bank. Section 3.02. In order to assist the Borrower in the carry- ing out of Parts E.3, E.4 and F of the Project, the Borrower shall employ, and cause AFE, pursuant to the arrangements re- ferred to in paragraph (b) of Section 3.01 of this Agreement, to employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, such consultants to be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guide- lines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the August 1981. Bank in

Section 3.03. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indem- nity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) The Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the purposes of the Project. -7-

Section 3.04. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction or work and procure- ment schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request.

(b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (in- cluding its cost and the be-fits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable the Bank's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reason- ably request conaerning the Project, its cost and, where appro- priate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds.

(c) Without limiting the generality of the preceding para- graph of this Section, and until the Project has been completed, the Borrower shall hold semi-annual meetings with the Bank, starting by September 30, 1983, on transport coordination, land transport investment and subjects related to the carrying out of the Project, particularly Parts E.1 and E.2 thereof, to be deter- mined from time to time by agreement between the Borrower and the Bank.

(d) Upon the award by the Borrower of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price.

(e) Promptly after completion of the Project, but in any e-ent 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 shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall rea- sonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from -8-

it, the performance by the Borrower and the Bank of their respec- tive obligations under the Loan Agreement and the accomplishment of the purposes of the Loan.

Section 3.05. The Borrower shall take all such action as shall be necessary to acquire as and when needed all and rights in respect such land of land as shall be required out the Project. for carrying

Section 3.06. The B---,wr shall furnish to the Bank, July 31, 1983, the by plans of action included in Project together Part E.2 of the with a schedule for the shall afford execution thereof, and the Bank a reasonable opportunity views thereon. to express its Such plans of action shall the future include a decision on location for TPU within MTOP.

ARTICLE IV

Other Covenants

Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, normal circumstances, special in security from the member concerned but to ensure that no other external debt shall have over its loans in the priority allocation, realization or distribution foreign exchange held of under the control or for such member. the benefit of To that end, if any lien public shall be created on any assets (as hereinafter defined), external as security for any debt, which will or might result benefit in a priority for the of the creditor of such external realization debt in the allocation, or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at to the Bank, equally no cost and ratably secure the principal interest and other of, and charges on, the Loan, and creating or the Borrower, in permitting the creation of express such lien, shall make provision to that effect; provided, any constitutional however, that, if for or other legal reason such provision made with respect cannot be to any lien created on assets political or administrative of any of its subdivisions, the Borrower promptly and at no shall cost to the Bank secure the principal interest and other of, and charges on, the Loan by an equivalent other public lien on assets satisfactory to the Bank. (b) The foregoing undertaking shall lien not apply to: (i) any created on property, at the time of purchase thereof, solely 9

as security for payment of the purchase price of such property or as security for the payment of debt incurred for the purpose of financing the purchase of such property; and (ii) any lien aris- ing in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date.

(c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative sub- division thereof and of any entity owned or controlled by, or operating for the account o. .nefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Bor- rower.

Section 4.02. (a) The Borrower shall maintain or cause to be maintained records, including separate accounts reflecting all expenditures under the Project, adequate to reflect in accordance with consistently maintained sound accounting practices the oper- ations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for exe- cution of the Project or any part thereof.

(b) The Borrower shall continue showing separately, in the accounting system of Vialidad, and in accordance with sound accounting practices, all expenditures incurred by it for the construction, reconstruction, rehabilitation, minor and major improvements, and routine and periodic maintenance of roads.

(c) Without limitation on the foregoing, the Borrower shall: (i) maintain or cause to be maintained separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditures; (ii) retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditures; and (iii) enable the Bank's repre- sentatives to examine such records.

(d) The Borrower shall: (i) have the accounts referred to in paragraphs (a) and (c) of this Section 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 - 10 -

case not later than six months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested, including, without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures and records referred to in paragraph (c) of this Section as to whether the proceeds of the Loan withdrawn from the Loan Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (iii) furnish to the Bank such other information -oncerning said separate accounts, records and expenditures and the audit thereof as the Bank shall from time to time reasonably request.

Section 4.03. (a) The Borrower shall: (i) cause all roads of the Borrower to be adequately maintained and cause all neces- sary repairs thereof to be made, all in accordance with appro- priate engineering practices; (ii) cause all road maintenance equipment and workshops to be adequately maintained and cause all necessary repairs and renewals thereof to be made, all in accord- ance with appropriate engineering practices; and (iii) provide, promptly as needed, the funds required for the foregoing; pro- vided, however, that, unless otherwise agreed between the Bor- rower and the Bank, the aggregate of funds to be allocated yearly by the Borrower for the aforesaid purpose shall not be lower, in real terms, than the funds spent for that purpose in 1982.

(b) For purposes of (a) above, "real terms" means the expenditures in nuevos pesos incurred in the year in question for National Highway maintenance purposes adjusted on the basis of a formula satisfactory to the Borrower and to the Bank so as to reflect inflation between the calendar year of 1982 and the calendar year in question.

(c) The Borrower shall, until completion of the Project, annually: (i) exchange views with the Bank on the Borrower's road maintenance program and related budgetary proposals; and (ii) in particular, review with the Bank the adequacy of the Borrower's programs on periodic maintenance for paved roads, renewal and acquisition of road maintenance equipment and assistance to the Intendencias for maintenance of Feeder Roads.

Section 4.04. The Borrower shall take all action, including the granting of all necessary authorizations, import licenses, foreign exchange permits and all other approvals required under the laws of the Borrower, to ensure timely procurement of the goods and services required for the Project.

W - 11 -

Section 4.05. The Borrower shall take all necessary action to: (i) cause the dimensions and weight of the vehicles using the national roads of the Borrower to be kept within the limits pro- vided by the laws and regulations of the Borrower; (ii) ensure permanent and consistent enforcement of such laws and regula- tions; and (iii) consult with the Bank on any proposal to amend or supplement such laws and regulations.

Section 4.06. The Borrower shall cause DNT, in close co- operation with Vialidae, to collect, record and analyze, in accordance with sound statistical methods and procedures, such technical, economic and financial information as shall be re- quired for the proper planning of maintenance, improvement and expansion of the national roads of the Borrower.

Section 4.07. The Borrower shall take all such steps as shall be necessary to ensure that MTOP shall be given the oppor- tunity to comment on each major investment in land transport proposed to be made by the Borrower, any political or administra- tive subdivision thereof or any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, before a commitment on such investment is made.

Section 4.08. The Borrower shall cause the Account Bank to: (i) have the Special Account for each fiscal year audited in accordance with appropriate auditing principles consistently applied by independent auditors acceptable to the Bank; (ii) fur- nish 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 such auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank monthly certified statements of such Special Account and all such other information concerning such Account and the audit thereof as the Bank shall from time to time reasonably request.

ARTICLE V

Remedies of the Bank

Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (k) thereof, namely that the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of AFE or for the suspension of its operations. - 12 -

Section 5.02. The occurrence of the event specified tion 5.01 of this Agreement in Sec- shall entitle the notice provided for Bank to send the in the introductory paragraph of the General of Section 6.09 Conditions only in respect allocated of amounts of the Loan to Category (5) of the of Schedule table set forth in paragraph 1 to the Loan Agreement. I

ARTICLE VI

Effective Date; Termination

Section 6.01. The date November 1, 1983, is hereby for the purposes of Section specified 12.04 of the General Conditions.

ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Ministro de Transporte the Borrower y Obras Plblicas of is designated as representative the purposes of Section of the Borrower for 11.03 of the General Conditions. Section 7.02. The following addresses are purpoces of Section specified for the 11.01 of the General Conditions: For the Borrower: Ministerio de Transporte y Obras Piblicas Rinc"n esquina Ituzaingo , Uruguay

Cable address: Telex: IBF GVMT Montevideo, 22071-UY Uruguay MTOP For the Bank:

International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America - 13 -

Cable address: Telex:

INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI)

their IN WITNESS WHEREOF, the parties hereto, acting through this representatives thereunto duly authorized, have caused Agreement to be signed in their respective names in the District year of Columbia, United States of America, as of the day and first above written.

REPUBLICA ORIENTAL DEL URUGUAY

By /s/ Alejandro Vegh Villegas Authorized Representative

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

By /s/ N. Ardito Barletta Regional Vice President Latin America and the Caribbean

First Revision:

REPUBLICA ORIENTAL DEL URUGUAY

By /s/ Francisco D. Tourreilles Authorized Representative

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

By /s/ Enrique Lerdau Acting Regional Vice President Latin America and the Caribbean - 14 -

Second Revision:

REPUBLICA ORIENTAL DEL UGUAY

By str of Transport and Public Works

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

By Authorized Representative - 15 -

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) Civil works 18,000,000 60% under Parts A and B of the Project

(2) Civil works 2,800,000 60% under Part C of the Project

(3) Sub-projects 15,000,000 644 o amo nts under Part D of paid'hy the the Project Borrower to an Intendencia in respect of the Sub-project in question under the National Feeder Roads Program

(4) Technical assist- 3,500,000 ance (other than that included in Category (5)), training and equipment under Part E.3 of the Project and goods and services related thereto - 16 -

Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed

(a) Consultant 100% of foreign services expenditures and 80% of local expendi- tures

(b) Fellowships 100% of foreign and courses expenditures abroad, and equipment

(5) Consultant ser- 150,000 100% of foreign vices under Part F expenditures of the Project and 80% of local expendi- tures

(6) Fee under 334,988 Amount due Section 2.05 of this Agreement

(7) Initial deposit 4,000,000 into Special Account (8) Unallocated 1,215,012

TOTAL 45,000,000

2. For the purposes of this Schedule:

(a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and

(b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. I

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3. The disbursement percentages have been calculated in com- pliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disb'rsemen_ percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank.

4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made:

(a) for expenditures prior to the date of this Agreement, except that withdrawals in an aggregate amount not to exceed the equivalent of $1,000,000 may be made in respect of Part D of the Project on account of payments made for such expenditures before that date but after January 1, 1983;

(b) for expenditures under Parts A.2 or B.2 of the Project in respect of any of the Additional Roads unless, in addition to the fulfillment by the Borrower of the conditions of disbursement set forth in the preceding paragraph (a), the Bank and the Bor- rower have agreed, on the basis of the data and information to be submitted by the Borrower pursuant to Section 3.01 (c) of this Agreement, that the reconstruction of sections or bridges of such Road, or the rehabilitation thereof, as the case may be, has been shown to be economically justified;

(c) for expenditures under Part D of the Project in respect of any Sub-project, unless the Borrower has furnished to the Bank evidence satisfactory to the Bank that (i) such Sub-project has been included in the National Feeder Roads Programs in accordance with the Feeder Road Guidelines, and (ii) all works under such Sub-project have been completed in accordance with the Feeder Road Guidelines and that the Borrower has paid to the Intendencia in question the full amount of the Borrower's share of the cost of such Sub-project; and

(d) for expenditures under Part F of the Project, unless the Borrower has furnished to the Bank evidence satisfactory to the Bank that the Borrower has entered into the contractual arrangements to be entered into with AFE pursuant to Section 3.01 (b) of this Agreement. 11

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of the Loan 5. Notwithstanding the allocation of an amount table in para- or the disbursement percentages set forth in the that the graph 1 above, if the Bank has reasonably estimated be insuf- amount of the Loan then allocated to any Category will in ficient to finance the agreed percentage of all expenditures (i) that Category, the Bank may, by notice to the Borrower: meet the reallocate to such Catego-v. to the extent required to then allo- estimated shortfall, proceeds of the Loan which are the Bank cated to another Category and which in the opinion of if such are not needed to meet other expenditures; and (ii) reduce reallocation cannot fully meet the estimated shortfall, expenditures the disbursement percentage then applicable to such may conti- in order that further withdrawals under such Category made. nue until all expenditures thereunder shall have been

6. If the Bank shall have reasonably determined that the pro- with the curement of any item in any Category is inconsistent no procedures set forth or referred to in this Agreement, proceeds expenditures for such item shall be financed out of the or of the Loan and the Bank may, without in any way restricting under the limiting any other right, power or remedy of the Bank such amount of Loan Agreement, by notice to the Borrower, cancel the the Loan as, in the Bank's reasonable opinion, represents have been amount of such expenditures which would otherwise eligible for financing out of the proceeds of the Loan. - 19 -

SCHEDULE 2

Description of the Project

Part A: Road Reconstruction and Bridge Construction

1. Reconstruction of certain road sections in National Highways and construction of new bridges to replace existing ones in two international corridors, as follows:

(a) the connection of Montevideo with Argentina through the ferry at Colonia, the bridges at Fray Bentos and Paysandu, and the dam at Salto along Routes 1, 2, 24 and 3 including recon- struction of: (i) realignment of a section of about 9 Kilometers of near Salto; (ii) a section of Route 3, approximately between Trinidad and the Rio Negro; and (iii) construction of new bridges (A) over the Cabalada River on near Colonia and (B) over the Bellaco River on Route 24 between Fray Bentos and Paysandu; and

(b) the eastern connection with Brazil along Routes 9 and 10, including: (i) the reconstruction of a section of approximately between kilometer 107 and kilometer 122, and (ii) the construction of a new bridge on near .

2. A program of road and bridge reconstruction on Additional Roads.

Part B: Road Maintenance and Rehabilitation in National Highways

1. Rehabilitation of priority sections thereof, as follows: (a) sections of Routes 12 and 23 between Cardona and San Jos6 with an aggregate length of about 90 kilometers; (b) a section of northeast of Aigua with an aggre- gate length of about 20 kilometers; (c) a section of. Route 15 northeast of with an aggregate length of about 15 kilometers; and (d) sections of approximately between Paso del Pache and Florida.

2. A program of maintenance and rehabilitation works on Addi- tional Roads. . . I

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Part C: Traffic Safety in National Highways

Construction of safety improvements at high accident loca- tions, provision of horizontal and vertical road signalization or installation of road safety lighting.

Part D: Feeder Roads

Execution of fe--i-r road rehabilitation or reconstruction Sub-projects within the National Feeder Road Program.

Part E: Strengthening of MTOP's capabilities of transport plan- ning, programming and investment

1. Annual updating of the Five-Year Investment Program based on:

(a) a balanced assessment of (i) the needs for maintenance, road and bridge rehabilitation and construction and reconstruc- tion of the National Highways, and (ii) the investment require- ments of the National Feeder Road Program; (b) economic screening and feasibility studies of all the works to be included in the Five-Year Investment Program; and (c) reliable and relevant traffic counts.

2. Preparation of plans of action for the restructuring and strengthening of MTOP, including its training requirements, and execution of such plans.

3. Enhancement of MTOP's capabilities in different fields such as organizational matters, management system approaches to opti- mize maintenance, rehabilitation and construction and reconstruc- tion expenditures, and road safety, and research work in defining sources and quality of construction materials, all by means of utilization of short-term consultant services and scholarships for, and training of, MTOP personnel, and acquisition and utilization of computer, laboratory and field survey equipment.

4. Studies on intermodal transport, including:

(a) review of Borrower's policies and regulations with the objective of recommending measures aiming at increasing the effi- ciency of road and intermodal domestic and international trans- port in Uruguay; and - 21 -

(b) economic, financial and technical justification for the establishment and construction of an intermodal freight consoli- dation center and, if warranted, preparation institutional of regulatory, and financial arrangements and neering. of preliminary engi-

Part F: Strenghthening of AFE

preparation and adoption by AFE of a cost-accounting system. * P *

The Project is expected to be completed by June 30, 1987. - 22 -

SCHEDULE 3

Amortization Schedule

Payment of Principal Date Payment Due (expressed in dollars)*

On each May 1 and November 1

beginning November 1, 1986 through May 1, 1998 1,875,000

* The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04. - 23 -

Premiums on Prepayment

The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions:

Time of Prepayment Premium

The interest rate (ex- pressed as a percentage per annum).applicable to the balance outstanding on the Loan on the day of prepayment multiplied by:

Not more than three years 0.20 before maturity

More than three years but 0.40 not more than six years before maturity

More than six years but 0.73 not more than eleven years before maturity

More than eleven years but 0.87 not more than thirteen years before maturity

More than thirteen years 1.00 before maturity

its 3ee - 24 -

SCHEDULE 4

Procurement

A. International Competitive Bidding

1. Except as provided in Part B hereof, goods and civil works shall be procured under .L1Lracrs awarded in accordance with pro- cedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bid- ding as described in Part A of the Guidelines.

2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraphs 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publica- tion of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international com- petitive bidding.

3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international com- petitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and simi- lar taxes levied in connection with the sale or delivery, pur- suant to the bid, of the goods shall not be taken into account in the evaluation of the bids; and (iii) the cost of inland freight and other expenditures incidental to the delivery of the goods to the place of their use or installation shall be included. - 25 -

B. Other Procurement Procedureb

1. Contracts for civil works for Parts A (1) (a) (iii), A (1) (b) (4+ B and C of the Project may be awarded on the basis of competitive bidding locally advertised under procedures satisfac- tory to the Bank.

2. Work for Sub-projects under Part D of the Project may be carried out by force accoun- of the Intendencia in question.

A 3. Contracts for equipment and goods under Part E.3 of the d Project may be awarded under such procedures, other than international competitive bidding, as the Borrower and the Bank shall agree from time to time.

C. Review of Procurement Decisions by the Bank >f id 1. Review of invitations to bid and of proposed awards and At final contracts: ae ag With respect to all contracts estimated to cost the equiva- in lent of $1,000,000 or more: nk a- (a) Before bids are invited, the Borrower shall furnish to to the Bank, for its comments, the text of the invitations to bid nd and the specifications and other bidding documents, together with .ry a description of the advertising procedures to be followed for ds the bidding, and shall make such modifications in the said docu- >M- ments or procedures as the Bank shall iasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bid- the ders. om- (b) After bids have been received and evaluated, the Bor- eir rower shall, before a final decision on the award is made, inform or the Bank of the name of the bidder to which it intends to award ds, the contract and shall furnish to the Bank, in sufficient time xes for its review, a detailed report on the evaluation and compari- mi- son of the bids received, and such other information as the Bank ur- shall reasonably request. The Bank shall, if it determines that in the intended award would be inconsistent with the Guidelines or .ght this Schedule, promptly inform the Borrower and state the reasons to for such determination.

(c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification was invited. - 26 -

(d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract.

2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for witr.iiwal of funds from the Loan Account in respect of such contract, two conformed copies of such con- tract, together with the analysis of the respective bids, recom- mendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination.

3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issu- ing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 20% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. - 27 -

SCHEDULE 5

Special Account

1. For the purposes of this Schedule:

(a) the term "Categories" means, collectively, Category (1) and Category (2) mentioned in the table in paragraph 1 of Sched- ule 1 to this Agreement, and the term "Category" means any one of them; and

(b) the term "Eligible Expenditures" means expenditures in respect of the reasonable cost of goods and services required for Parts A, B and C of the Project and to be financed out of the proceeds of the Loan allocated from time to time to the Cate- gories in accordance with the provisions of, and in the percen- tages stipulated in, the table set forth in paragraph 1 of Sche- dule 1 to this Agreement.

2. Payments out of the Special Account shall be made exclusive- ly for Eligible Expenditures in accordance with the provisions of this Schedule. The Account Bank shall authorize withdrawals from the Special Account on the basis of the evidence that the Bank shall have reasonably determined. For each such withdrawal so authorized, the Account Bank shall debit the Special Account with c the dollar equivalent of the amount of the Eligible Expenditure in question in nuevos pesos or any other currency other than dol- lars, determined on the basis of the rate of exchange between the dollar and nuevo peso or such currency in effect (i) at the date each payment shall have been made, if the payment has taken place within 60 days before the date on which the withdrawal in ques- tion has been requested; or (ii) at the date each withdrawal shall have been made, if the withdrawal in question refers to: (A) payments made more than 60 days before such withdrawal has been requested, or (B) payments to be made directly from the Spe- cial Account.

3. The Bank shall, at the request of the Borrower, withdraw on behalf of the Borrower from the Loan Account and deposit into the Special Account the Initial Deposit. Thereafter and on the basis of requests by the Borrower furnished to the Bank at such inter- vals as the Bank shall specify, the Bank shall further so with- draw from the Loan Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts equal to payments made out of the Special - 28 -

the extent that Expenditures, but only to Account for Eligible any amount remain- such deposit, together with the amount of any date of such Special Account as of the ing on deposit in the of the in the aggregate the equivalent request, shall not exceed may otherwise agree, each Deposit. Except as the Bank Initial be withdrawn by the after the Initial Deposit shall such deposit Category or Cate- Account under the respective Bank from the Loan have equivalent amounts, as shall gories, and in the respective such suDporting the request for been justified by the evide--,- to paragraph 4 of this Schedule. deposit furnished pursuant request by the Borrower for to or at the time of each 4. Prior after the Initial the Bank into the Special Account a deposit by in respect of shall furnish to the Bank Deposit, the Borrower Account such Borrower out of the Special each payment made by the re- as the Bank shall reasonably documents and other evidence was made for eligible expendi- quest, ,showing that such payment tures. 3 of this Sched- the provisions of paragraph 5. Notwithstanding Special Account a further deposit into the ule, any request for determined (a) when the Bank shall have may be denied by the Bank by withdrawals can be made directly at any time that all further in accordance with the provi- the Borrower from the Loan Account 2.02 of this Agreement, or (b) of paragraph (a) of Section sions the Loan allocated to the total unwithdrawn amount of when the qualified agree- the amount of any outstanding Categories minus of any outstanding entered into by the Bank and ment to reimburse Section 5.02 of made by the Bank pursuant to special commitment shall be respect to the Categories, the General Conditions, with Depo- twice the amount of the Initial equal to the equivalent of Account of the remaining unwith- Withdrawal from the Loan sit. to the Categories shall follow drawn amount of the Loan allocated specify by notice to the Bor- procedures as the Bank shall such shall otherwise agree, be and shall, except as the Bank rower shall have been to the extent that the Bank made only after and deposit in the such amounts remaining on satisfied that all will of such notice have been or Special Account as of the date for Eligible Expenditures. be utilized in making payments determined at any time that: 6. If the Bank shall have Account (i) was made for any payment out of the Special (a) pursuant to para- in any amount not eligible any expenditure or the evi- or (ii) was not justified by graph 2 of this Schedule, the paragraph 4 of this Schedule, dence furnished pursuant to - 29 -

Borrower shall, promptly upon notice from the Bank and, unless otherwise agreed by the Bank, prior to any further deposit into the Special Account by the Bank, 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; or

(b) any amount outst.dig in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, and unless otherwise agreed by the Bank, refund to the Bank such amount then outstanding in the Special Account.

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