Loan Agreement

OyinA NUMWER 2163 B&

Loan Agreement

(Amazonas Agricultural Development Project)

between

FEDERATIVE REPUBLIC OF MAZIL

and

INTERNATIONAL BANK FOR RECONSTRUCTION AND IZVELOPMEMT

Dated JA5 1982 LOAN NUMBER 2163 BR

LOAN AREENT

AGREEMENT, dated JA . 2- , 1982, betiween FEDERATIVE REPUBLIC OF BRAZIL (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank).

WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided;

(B) the Project will be carried out by the State of Amazonas with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the State of Amazonas the proceeds of the Loan as hereinafter provided; and

WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in the Project Agreement of even date herewith between the Bank and the State of Amazonas;

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 Agreements of the Bank being hereinafter called the General Conditions).

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 additional terms have the following meanings:

(a) "Project Agreement" means the agreement between the Bank and the State of Amazonas of even date herewith, as the same may be amended from time to time, and such term includes all -2- schedules to the Project Agreement and all agreiments supplemental to the Project Agreement.

(b) "Project Area" means an area of about 16,000 square kilometers including part of the territories of the municipalities of Tefe, Careiro, Manacapuru, Urucara, Barreirinha and Parintins.

(d) "Special Account" means the account referred to in Sections 2.02 (b) of this Agreement and "Account Bank" means the Banco Central do Brasil.

(e) "cruzeiro" means the currency of the Borrower.

(f) "Executing Entities" means the entities listed in Schedule 2 to the Project Agreement.

(g) "CEASA-AM" means the Centrais de Abastecimento de Amazonas, S.A., the Central Marketing Organization of Amazonas.

(h) "CEPA-AM" means the Comissao Estadual de Planejamento Agricola de Amazonas, the State's Commission for Agricultural Planning.

(i) "CNPSD" means the Centro Nacional de Pesquisas da Seringueira e Dende, the National Center for Rubber and Oil Palm Research, part of EMBRAPA.

(j) "CODEAGRO" means the Companhia de Desenvolvimento Agropecuario, the State Agricultural Development Company.

(k) "CODEAMA" means the Centro de Desenvolvimento, Pesquisa e Tecnologia, the State's Center for Study, Research and Develop- ment.

(1) "COSAMA" means the Companhia de Saneamento do Amazonas, the State's Water Supply Company.

(m) "DER-AM" means the Departamento de Estradas de Rodagem de Amazonas, the State's Highway Department.

(n) "EMADE" means the Empresa Amazonense de Dende, the Amazonas Oil Palm Company. -3-

(o) "EMATER-AM" means the Empresa de Assistencia Tecnica e Extensao Rural do Estado de Amazonas, the State's Rural Extension Company.

(p) "EMBRAPA" means the Empresa Brasileira de Pesquisa Agropecuaria, the Federal Company for Agricultural Research.

(q) "FSESP" means Fundaqao de Servigo Especial de Saude Publica, the Foundation for Special Public Health Services.

(r) "IBDF" means Instituto Brasileiro de Desenvolvimento Florestal, the Brazilian Institute for Forestry Development.

(s) "INCRA" means the Instituto Nacional de Colonizacao e Reforma Agraria, the Federal Institute for Colonization and Agrarian Reform.

(t) "INPA" means the Instituto Nacional de Pesquisas da Amazonia, the National Institute for Amazon Research.

(u) "ITERAM" means the Instituto de Terras do Estado de Amazonas, the State's Land Institute.

(v) "SEDUC" means the Secretaria de Educacao e Cultura do Estado de Amazonas, the State Secretariat for Education and Culture.

(w) "SEMA" means the Secretaria Especial do Meio Ambiente do Ministerio do Interior, the Special Secretariat for the Environment of the Ministry of the Interior.

(x) SEPLAN-AM" means the Secretaria de Planejamento do Estado de Amazonas, the State's Secretariat of Planning.

(y) "SEPROR" means the Secretaria de Producao Rural do Estado de Amazonas, the State's Secretariat of Rural Production.

(z) "SESAU" means the Secretaria de Saude do Estado de Amazonas, the State's Secretariat for Health.

(aa) "SETRAN" means the Secretaria de Transportes do Estado de Amazonas, the State's Secretariat for Transport.

(bb) "UEPAE-AM" means 'Tnidade Estadual de Pesquisas Agropecuarias no Estado de Amazonas, the Agricultural Research Unit in the State, part of EMBRAPA. -4-

to (cc) "Community Development Fund" means the fund referred in paragraph (k) of Section 2.01 of the Project Agreement. of (dd) "TELEAMAZON" means the telecommunications company the State.

ARTICLE II

The Loan

on Section 2.01. The Bank agrees to lend to the Borrower, or the terms and conditions in the I an Agreement set forth tc referred to, an amount in various currencies equivalent twenty-six million fcur hundred thousand dollars ($26,400,UOO).

Section 2.02. (a) The amount of the Loan may be withdrawn of from the Loan Account in accordance with the provisions amended Schedule 1 to this Agreement, as such Schedule may be from time to time by agreement between the Borrower and the Bank, to be for expenditures made (or, if the Bank shall so agree, services made) in respect of the reasonable cost of goods and Agree- required for the Project described in Schedule 2 to this ment and to be financed out of the proceeds of the Loan.

(b) The Borrower shall cause to be opened and thereafter maintained a Special Account in the Account Bank on terms and conditions satisfactory to the Bank. Payments out of the Special Account shall be made exclusively to pay the reasonable cost of be goods and services required to carry out the Project and to the financed by the Bank under this Agreement in accordance with provisions of this Section and Schedule 1 hereto.

(c) The Bank may, after the Effective Date and at the request of the Borrower, withdraw on behalf of the Borrower from in the Loan Account and deposit in the Special Account an amount dollars of up to $2,000,000. In the event that the amount of such initial deposit into the Special Account is less than $2,000,000, the Borrower may from time to time request th-_ Bank to withdraw from the Loan Account and make one or more additional initial deposits into the Special Account, but in no event shall the amount of such initial deposits exceed in the aggregate $2,000,000. At the request of the Borrower, the Bank shall further withdraw from the Loan Account and deposit in the Special Account such amounts as shall be required to replenish the Special Account with amounts equal to payments made out of the -5-

Special Account for expenditures for the Project eligible for financing under this Agreement, but only to the extent that the amount of any such deposit, together with any amount remaining on deposit in the Special Account as of the date of such request, shall not exceed $2,000,000. Except as the Bank shall otherwise determine, each such deposit after the initial deposits shall be withdrawn by the Bank from the Loan Account under the same categories set forth in paragraph 1 of Schedule 1 to this Agree- ment, and in the same respective amounts, as have been justified by the documentation for the request for such deposit furnished pursuant to paragraph (e) of this Section.

(d) Prior to or at the time of each request for a withdrawal by the Borrower from the Special Account, the Borrower shall furnish to the Account Bank in respect of each payment made by the Borrower an application for withdrawal from the Special Account on the basis of certificates of expenditures showing that the payment was made on account of the reasonable cost of goods or services required for the Project and to be financed out of the proceeds of the Loan in accordance with paragraph (a) above. The Account Bank shall authorize the Borrower to withdraw from the Special Account an amount in cruzeiros determined on the basis of the foregoing evidence, and shall debit the Special Account with the dollar equivalent of such amount in cruzeiros determined on the basis of the rate of exchange between the dollar and the cruzeiro in effect at the time each payment was made.

(e) Prior to or at the time of each request for a deposit by the Bank into the Special Account, the Account Bank shall furnish to the Bank in respect of each withdrawal from the Special Account an application for withdrawal from the Loan Account on the basis of: (i) the certificate of expenditures referred to in paragraph (d) of this Section; and (ii) the estimated expenditures in respect of the payments to be made in the following calendar quarter for the reasonable cost of goods or services required for the Project and to be financed out of the proceeds of the Loan in accordance with paragraph (a) above.

(f) If the Bank shall have determined that any payment out of the Special Account (i) was made for any expenditure or in any amount not eligible for financing by withdrawal from the Loan Account, or (ii) was not justified by the certificates of expenditure furnished pursuant to paragraph (e) of this Section, the Borrower shall, promptly upon notice from the Bank and, -6- unless otherwise determined by the Bank, prior to any further deposit in the Special Account by the Bank, deposit in the Special Account an amount equal to the amount of such payment or the portion thereof not so eligible or justified.

(g) Notwithstanding the provision of paragraph (d) of this Section, no further deposit in the Special Account shall be made by the Bank when the Bank shall have determined, after consul- tation with the Borrower, that all further withdrawals from the Loan Account may be made directly by the Borrower from the Loan Account pursuant to paragraph (a) above, or when the total amount withdrawn from the Loan Account plus the amount of any qualified agreement to reimburse made by the Bank and of any special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions, shall have reached the equivalent of $22,000,000, whichever shall be sooner. Withdrawal from the Loan Account of the remaining amount of the Loan for the Project shall follow such procedures as shall be agreed between the Borrower and the Bank and shall be made only to the extent that the Bank shall be satisfied by the evidence submitted in support of the applications for such withdrawal that all payments by the Borrower out of the Special Account were made on account of the reasonable cost of goods or services required for the Project and to be financed out of the proceeds of the Loan in accordance with paragraph (a) of this Section.

Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 1 to the Project 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 notifl the Borrower of such later date.

Section 2.05. Not later than the Effective Date, the Borrower shall pay to the Bank a fee equivalent to three hundred ninety thousand one hundred forty eight dollars ($390,148). The fee shall be payable in such currency or currencies as the Bank shall specify. In the event that the Bank shall not have received full payment of the fee by the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount required for the full payment of the fee in the currency or currencies specified for the purpose. -7-

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

Section 2.07. The Borrower shall pay interest at the rate of eleven and three-fifths per cent (11-3/5%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time.

Section 2.08. Interest and other charges shall be payable semiannually on June 1 and December I 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.

Section 2.10. Banco Central do Brasil is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions.

ARTICLE III

Execution of the Project

Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable the State to perform in accordance with the provisions of the Project Agreement all of the State's obligations therein set forth and shall not take or permit to be taken any action which would prevent or interfere with such performance.

(b) The Borrower shall make the proceeds of the Loan available to the State under arrangements satisfactory to the Bank.

(c) The Borrower shall cause EMBRAPA to enter into the agreement referred to in Section 2.01 (b) of the Project Agree- ment with the State, and shall cause EMBRAPA to perform all of EMBRAPA's obligations under such agreement as therein set forth. -8-

(d) The Borrower shall cause INCRA to enter into the (i) of the agreement with ITERAM referred to in Section 2.01 (g) Project Agreement.

ARTICLE IV

Other Covenants

Section 4.01. (a) It is the policy of the Bank, in making seek, in loans to, or with the guarantee of, its members not to concerned normal circumstances, special security f:om the member priority but to ensure that no other external debt shall have of over its loans in the allocation, realization or distribution benefit of foreign exchange held under the control or for the on any such member. To that end, if any lien shall be created for any public aseets (as hereinafter defined), as security for the external debt, which will or might result in a priority allocation, benefit of the creditor of such external debt in the lien shall, realization or distribution of foreign exchange, such at no cost unless the Bank shall otherwise agree, ipso facto and of, and to the Bank, equally and ratably secure the principal in interest and other charges on, the Loan, and the Borrower, shall make creating or permitting the creation of such lien, that, if for express provision to that effect; provided, however, cannot be any constitutional or other legal reason such provision any of its made with respect to any lien created on assets of shall political or administrative subdivisions, the Borrower of, and promptly and at no cost to the Bank secure the principal lien on interest and other charges on, the Loan by an equivalent other public assets satisfactory to the Bank. (i) any (b) The foregoing undertaking shall not apply to: solely lien created on property, at the time of purchase thereof, property; as security for payment of the purchase price of such of banking and (ii) any lien arising in the ordinary course than one year transactions and securing a debt maturing not more after its date. means (c) As used in this Section, the term "public assets" administrative assets of the Borrower, of any political or by, or subdivision thereof and of any entity owned or controlled or any such operating for the account or benefit of, the Borrower held by subdivision, including gold and foreign exchange assets central bank or any institution performing the functions of a -9- exchange stabilization fund, or similar functions, for the Borrower.

Section 4.02. The Borrower shall, for the purpose of carrying out Part A.2 of the Project: (a) take all necessary action to enable EMBRAPA to retain by December 31, 1983, not less than 12 additional research staff with adequate qualifications and experience for its UEPAE-AM; and (b) arrange for EMBRAPA to publish each year the results of the research being carried out by its UEPAE-AM for purposes of the Project.

Section 4.03. The Borrower shall take or cause to be taken all necessary action for the carrying out of the 5,000 hectare oil palm development program to be initiated under Part D of the Project, including the provision of funds therefor.

Section 4.04. The Borrower and the Bank agree that access to rural, marketing, and working capital credit for Project beneficiaries is essential to the successful carrying out of the Project. To this end, the Borrower shall take or cause to be taken all necessary action to ensure adequate and timely ava.il- ability of funds for the provision of the following financial assistance to Project beneficiaries:

(a) on-farm investment credit to small-scala farmers for the planting of permanent crops, purchasing of small livestock and on-farm improvements and equipment;

(b) seasonal credit for the production of annual and bi-annual crops; and

Section 4.05. (a) The Borrower shall have the Special Account audited annually by independent auditors acceptable to the Bank and, promptly after the audit and not later than four months after the close of the Account Bank's fiscal year, the Bank shall be furnished with certified copies of such audit, together with a certified copy of the auditor's report, including a description of the audit procedures;

(b) the Borrower shall cause to have furnished to the Bank each month certified statements of the Special Account, and from time to time such other information concerning such Special - 10 -

shall Account and such certificates of expenditures as the Bank reasonably request; and

(c) furnish to the Bank such other information concerning the Special 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 have pursuant to paragraph (k) thereof, that the State shall failed to perform any of its obligations under the Project Agreement.

Section 5.02. For the purposes if Section 7.01 of the General Conditions, the following additional event is specified in pursuant to paragraph (h) thereof, namely the event specified 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 and the State.

ARTICLE VI

Effective Date; Termination

Section 6.01. The following event is specified as additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the Loan Agreement has been duly regi.tered by Banco Central do Brasil.

Section 6.02. The following are specified as additional matters, 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 Project Agreement has been duly authorized or ratified by the State, and is legally binding upon the State in accordance with its terms;

(b) that the Loan Agreement has been duly registered by Banco Central do Brasil; and (c) that all necessary acts, consents, and approvals to be performed or given by the Borrower, the State, their political subdivisions or agencies, in order to authorize the carrying out of the Project and to enable the Borrower and the State to perform all of their respective obligations pursuant to this Agreement and the Project Agreement, together with all necessary powers and rights in connection therewith, have been performed or given.

Section 6.03. The date 5f 4 /2, is hereby specified for the purposes of Section lf.C4 of the General Conditions.

ARTICLE VII

Representatives of the Borrower; Addresses

Section 7.01. The Ministro da Fazenda 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:

Ministerio da Fazenda Esplanada dos Ministerios Blocos - 5 0 andar 70048 Brasila, D.F. Brazil

Cable address: Telex:

MINIFAZ 611142 M FAZ BR Brasilia, Brasil 611506 DFGN BR

With copies to:

Banco Central do Brasil Diretoria de Credito Rural Edificio Sede do Banco Central do Brasil 40 Andar Setor de Autarquias Sul 70.070 Brasilia, D.F. Brazil - 12 -

Cable address: Telex:

BANCENTRAL 061-41344 Brasilia, 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 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI)

IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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 Authorized Representative

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

By ByA Regional Vice President Latin!America and the Caribbean - 13 -

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 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) Goods and services 350,000 33% for Part A.1 of the Project, except consultant's services (Natural Resource Research)

(2) Consultant's 240,000 .100% services for Part A.1

(3) Goods and services 1,440,000 33% for Part A.2 of the Project (Adaptive Research)

(4) Goods and services 3,320,000 33% for Part A.3 of the Project (Extension Services)

(5) Goods and services 80,000 33% for Part A.4 of the Project (Seed Supply) - 14 -

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

(6) Goods and services 820,000 33% for Part A.5 of the Project (Marketing)

(7) Goods and services 2,030,000 33% for Part B of the Project (Land Tenure Services)

(8) Goods and services 3,350,000 33% for Part C.1 of the Project (Transport)

(9) Goods and services 240,000 33% for Part C.2 of the Project (Tele- communications)

(10) Goods and services 1,840,000 33% for Part C.3 of the Project (Educa- tion Services)

(11) Goods and services 1,340,000 33% for Part C.4 of the Project (Health Sanitation and Water Supply Services)

(12) Goods and services 280,000 33% for Part C.5 of the Project (Com- munity Development Fund) - 15 -

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

(13) Goods and services 3,560,000 33% for Part D of the Project, except consultant's services (Oil Palm Development)

(14) Consultant's ser- 670,000 100% vices for Part D of the Project

(15) Goods and services 1,110,000 33% for Part E of the Project (Administra- tion)

(16) Goods and services 330,000 33% for Part F of the Project (Evaluation)

(17) Initial deposit 2,000,000 pursuant to Section 2.02 (c) of this Agreement

(18) Fee 390,148 Amount due

(19) Unallocated 3,009,852

TOTAL 26,400,000

2. 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 - 16 - 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. disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank.

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

(a) prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $700,000, may be made on account of payments made for such expenditures before that date but after April 1, 1982;

(b) for Part C.1 of the Project, unless the Bank has been furnished evidence, satisfactory to the Bank, that the State has appointed as members of the coordination unit described under Part C.1 (g) of the Project, officials with adequate qualifications and experience;

(c) for Part C.3 of the Project, unless the Bank has been furnished evidence, satisfactory to the Bank, that the State has appointed as members of the coordination unit described under Part C.3 (f) of the Project, officials with adequate qualifications and experience;

(d) for Part C.4 of the Project, unless the Bank has been furnished evidence, satisfactory to the Bank, that the State has appointed as members of the coordination unit described under Part C.4 (h) of the Project, officials with adequate qualifications and experience;

(e) for Part D of the Project, unless the Bank has been furnished evidence, satisfactory to the Bank, that (i) EMADE has appointed for its senior management positions described under Part D (vii) of the Project, three officials with adequate qualifications and experience, (ii) EMADE has appointed a senior field management adviser pursuant to Section 2.01 (1) (vi) of the Project Agreement, and (iii) the State and EMADE have entered into the contractual arrangements referred to in Section 2.01 (1) (iv) of the Project Agreement;

(f) in respect of each Part of the Project listed in Schedule 2 to the Loan Agreement, unless the State shall have - 17 - furnished to the Bank, evidence satisfactory to the Bank that it has entered into the agreements referred to in Section 2.03 of the Project Agreement with the respective Executing Entity and that the coordinator for such Part of the Project has been appointed by the respective Executing Entity.

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

5. If the Bank shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 13 -

SCHEDULE 2

Description of the Project

The Project is to be carried out in the Project Area and has as its basic objectives: (i) improving socio-economic conditions of about 9,500 families operating farms of up to 100 hectares; (ii) increasing food production and promoting a rational development of agricultural production; (iii) improving production support activities, social infrastructure and services; and (iv) improving the State's capacity to carry out similar rural development projects in other areas.

The Project consists of the following:

Part A: Agricultural Development

1. Natural resource research program.

A research program to improve the data available on the natural resources available in the Project Area, such program to include, inter alia: (i) preparation of topographical maps of about 4,000 square kilometers; (ii) preparation of soil and agricultural aptitude maps of about 4,000 square kilometers; (iii) preparation of geomorphological maps of the Project Area; (iv) preparation of vegetation and land-use maps of about 3,000 square kilometers; (v) preparation of detailed soil and contour maps of about 400 square kilometers of selected areas, (vi) preparation of hydrological maps of about 2,000 square kilometer of varzea area; (vii) establishment and operation of about five hydro- climatological observation stations; (viii) identification of about 1,600 square kilometers of biological reserve areas and 20,000 hectares of forest reserve areas; and (ix) establishment and operation of a coordination unit under CODEAMA.

2. Adaptive research program.

(a) An adaptive research program designed to improve cul- tivation practices on basic crops such as cow pea, maize, rice, cassava, jute, malva, guarana and other fruit trees.

(b) Establishment and operation of two applied research posts to be located in the municipalities of Manacapuru and Parintins, including the construction of offices, warehouses, - 19 - staff housing, provision of water and power supply and the acquisition and utilization of vehicles and equipment therefor.

(c) Strengthening of UEPAE-AM by the hiring of about 50 additional research and support staff including a coordinator for Part A.2 of the Project, the provision of the incremental resources necessary to carry out the research program described in (a) above and the acquisition and utilization of radio equipment.

3. Extension services.

(a) Establishment, equipping and operation of three local offices including, inter alia, the construction of four lodging facilities for field ane support staff.

(b) The addition of about 32 senior extensionist and subject-matter specialist staff and of about 96 field agricultural and social extensionist staff.

(d) A training program for extensionist staff and farmers.

(e) Establishment and operation of about 400 demonstration plots to disseminate the results of the adaptive research activities.

(f) Provision of technical assistance to EMATER-AM on farmer organization and rural extension methodology.

4. Seed supply services.

(a) A pilot program to develop improved seed supply, including the construction and equipment of five small seed storage units located in the municipalities of Barreirinha, Urucara, Manacapuru and two in Manaus.

(b) Strengthening of CODEAGRO by means of hiring a coordinator for Part A.4 of the Project and three additional technical staff and providing training to such technicians on improved seed supply. - 20 -

5. Marketing services.

(a) A training and technical assistance program to put into effect in the Project Area a system to provide basic consumer goods to small farmers.

(b) A program to improve marketing systems for the Project Areas's subsistence food production.

(c) Equipping of workshops in the Project Area, and provision of technical assistance, to test and produce agricultural tools.

(d) A program to improve existing market channels for the fruit and vegetable production in the Project Area, including improvements in producers' markets and in the market information service.

(e) A study on existing private and public small cargo transport services in the Project Area and measures to improve such services, including a program to assure basic truck and boat small cargo transport services to market agricultural production in the Project Area, including the establishment and operation of a lease/purchase system for acquisition of cargo boats by farmer groups.

(f) Establishment and operation of a coordination unit for Part A.5 of the Project and provision of technical assistance to CODEAGRO to improve its capacity to carry out its reorganization plan and coordinate the activities described above.

(g) Provision of technical, management and marketing assistance to cooperatives in the Project Area.

Part B: Land Tenure Services

(a) Settlement and regularization, through the process of discriminacao administrativa, of land claims in the municipalities included in the Project Area.

(b) Provision of property or other appropriate titles to land to about 9,500 small-scale farmers, including demarcation of about 6,000 kilometers of property boundaries.

(c) Demarcation and control of the biological and forest reserve areas described in Part A.1 (viii) of the Project. - 21 -

(d) Provision of incremental staff, equipment and vehicles to ITERAM for the carrying out of Part B of the Project and provision of technical assistance to ITERAM in further developing its land policies and procedures.

Part C: Physical and Social Infrastructure Development

1. Transport.

(a) Construction of about 24 floating storage-in-transit platforms along navigated waterways.

(b) Studies on the economic and technical feasibility to clear obstructed creeks to allow transportation in small boats, and thereafter, experimental clearing of about 30 kilometers of such obstructed creeks.

(c) Acquisition and utilization of light maintenance equipment for mainly manual maintenance of roads and minor waterways.

(d) Training of municipal works foremen on maintenance of transport infrastructure.

(e) Construction or improvement of about 400 kilometers of farm tracks, including surveys and detailed engineering therefor.

(f) Rehabilitation and construction of about 100 kilometers of feeder roads, including surveys and detailed engineering therefor.

(g) Establishment and operation of a coordination unit for Part C of the Project comprised of a coordinator, two engineers and two assistant engineers.

(h) Provision of technical assistance to SETRAN to improve its capacity to plan, engineer and supervise the construction, rehabilitation and maintenance activities described above.

2. Telecommunications.

(a) Installation of one public payphone in about 50 selected communities in the Project Area with a population of at least 50 families each. - 22 -

(b) Expansion of the interurban telephone system to all municipalities in the Project Area located in the Medio-Amazonas region.

(d) Acquisition and utilization of portable communication equipment.

(e) A training program for telephone operators in the communities.

3. Education services.

(a) Preparation, application and evaluation of a revised rural primary school curriculum and production and publishing of teachers manuals therefor.

(b) A training program on educational matters, including about 850 courses and seminars to teachers, literacy trainers, administrative assistants and supervisory staff.

(d) Improvement or expansion of about 50 schools or class- rooms.

(e) Evaluation studies of the formal and non-formal pro- grams to allow readjustments during the project implementation period.

(f) Strengthening of SEDUC supervisory staff and establishment and operation of a coordinating unit comprising a coordinator and an expert in non-formal education, including the acquisition and utilization of vehicles and equipment therefor.

(g) Provision of technical assistance to SEDUC to improve its capacity to carry out the activities described above.

4. Health, sanitation and water supply services.

(a) A training program for about 60 health post attendants, 60 midwives, 5 supervisory health officers and 5 sanitation officers to improve the quality of primary health services. - 23 -

(b) Establishment and operation of a permanent educational and training system on health care and administration.

(c) Acquisition and utilization of standarized sets of equipment and supplies to be provided to health attendants and midwives.

(d) Improvement of the patient referral system and of the supervision and logistical support system.

(e) Construction and equipment of primary health facilities in the municipality of Tefe to benefit the farm families participating in Part D of the Project.

(f) A program to improve the State's immunization activities in the Project Area.

(g) Construction of about 3,200 sanitary installations and about 47 small-scale water supply and 10 purification systems.

(h) Strengthening of SESAU by means of increasing and training its supervisory staff and establishment and operation of a coordinating unit comprising a coordinator and a sanitary engineer to coordinate Project activities, including the acquisition of vehicles and equipment therefor.

(i) Provision of technical assistance to SESAU to improve its capacity to carry out the activities described above.

5. Community Development Fund.

Establishment and operation of Community Development Fund to assist in the financing of community development projects.

Part D: Oil Palm Development

The first stage of a program to develop an oil palm plantation of an aggregate of about 5,000 hectares divided into about 625 lots of about 8 hectares each to be assigned to selected farm families, an administrative/processing center including the construction and operation of an oil mill with a capacity of about 26 tons of fresh fruit bunches per hour and port facilities on the Solimoes River. The first stage of such program is to consist of: (i) final survey of about 30,000 hectares; (ii) construction of about 20 kilometers of access roads; (iii) acquisition of -24- imported high yielding hybrid seeds; (iv) plantation of about 1,800 hectares of oil palm; (v) settlement of about 225 farmers and their familiies; (vi) construction of the administrative/ processing center including office, warehouse, workshop, housing for about 100 permanent staff, milling facilities with a capacity of about 5 tons of fresh fruit bunches per hour and a floating dock; (vii) staffing of EMADE including a project manager assisted by, at an early stage, two, and at a later stage, four assistant managers; and (viii) provision of technical assistance to EMADE to improve its capacity to carry out the activities described above.

Part E: Project Administration

Establishment and operation of a Project management unit responsible for the monitoring, administration and coordination of Project activities, including provision of technical assistance to municipalities in the Project Area to improve their administrative procedures and the acquisition and utilization of vehicles and equipment therefor.

Part F: Project Evaluation

Studies to evaluate Project execution and specific Project related activities and provision of training and technical assistance to CODEAMA to improve its capacity to carry out the evaluation activities. - 25 -

SCHEDULE 3

Amortization Schedule

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

On each June 1 and December 1

beginning December 1, 1985 ending June 1, 1997 $1,100,000

* The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04. - 26 -

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

Not more than three years before maturity 2.30%

More than three years but not more than six years before maturity 4.65%

More than six years but not more than eleven years before maturity 8.50%

More than eleven years but not more than thirteen years before maturity 10.05%

More than thirteen years before maturity 11.60% INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

CERTIFICATE

I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment.

In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunte

this 306 day of J2 , 1981.

FOR SECRETARY