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CONFORMED COPY 
 
LOAN NUMBER 7306-BR 
 
Loan Agreement
 
(
Programmatic Loan for Sustainable and Equitable 
Growth: Housing Sector Reform) 
 
between 
 
FEDERATIVE REPUBLIC OF BRAZIL 
 
and 
 
INTERNATIONAL BANK FOR RECONSTRUCTION 
AND DEVELOPMENT 
 
Dated April 11, 2006 
 
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LOAN NUMBER 7306-BR 
LOAN AGREEMENT 
AGREEMENT, dated April 11, 2006, between the FEDERATIVE REPUBLIC 
OF BRAZIL (the Borrower) and the INTERNATIONAL BANK FOR 
RECONSTRUCTION AND DEVELOPMENT (the Bank). 
WHEREAS (A) the Bank has received a letter, dated May 6, 2005, from the 
Borrower: (i) describing its macroeconomic framework and a program of actions, 
objectives, and policies designed to promote growth and achieve sustainable reductions in 
poverty, more specifically to support policy reforms in the housing sector and particularly 
regarding low income housing, aimed at increasing housing affordability and improving 
urban development (the Program), which Program consists of actions that have already 
been taken as described in Schedule 2 to this Agreement (the First Phase of the Program), 
and actions and policies that the Borrower intends to take and adopt in the near future; (ii) 
declaring the Borrower’s commitment to the execution of the Program; and (iii) 
requesting assistance from the Bank in support of the Program during the execution 
thereof; 
(B) 
the Program is part of the Borrower’s overall growth and 
competitiveness agenda, which is also supported by other loans from the Bank; and 
(C) 
on the basis, inter alia, of the foregoing, the Bank has decided in support 
of the First Phase of the Program to provide such assistance to the Borrower by making 
the loan provided for in Article II of this Agreement (the Loan) as hereinafter provided; 
NOW THEREFORE the parties hereto hereby agree as follows: 
ARTICLE I 
General Conditions; Definitions 
Section 1.01. The “General Conditions Applicable to Loan and Guarantee 
Agreements for Fixed-Spread Loans” of the Bank dated September 1, 1999 (as amended 
through May 1, 2004), with the modifications set forth below (the General Conditions) 
constitute an integral part of this Agreement: 
(a) 
Section 2.01, paragraph 41, is modified to read: 
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2
“‘Project’ means the first phase of the program, referred to in the 
Preamble to the Loan Agreement, in support of which the Loan is made.”; 
(b) 
Section 5.01 is modified to read: 
“The Borrower shall be entitled to withdraw the proceeds of the Loan 
from the Loan Account in accordance with the provisions of the Loan Agreement 
and of these General Conditions.”; 
(c) 
the last sentence of Section 5.03 is deleted; 
(d) 
Section 9.07 (c) is modified to read: 
“(c) 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 reasonably request, on the execution of the first 
phase of the program referred to in the Preamble to the Loan Agreement, the 
performance by the Borrower and the Bank of their respective obligations under 
the Loan Agreement and the accomplishment of the purposes of the Loan.”; and 
(e) 
Section 9.05 is deleted in its entirety and Sections 9.06, 9.07 (as modified 
above), 9.08 and 9.09 are renumbered, respectively, Sections 9.05, 9.06, 9.07 and 9.08. 
Section 1.02. 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) “FGTS” 
means 
Fundo de Garantia do Tempo de Serviço
,
the fund 
created by the Borrower’s Law No. 5107/1966 to provide severance payments to workers 
on account of their time of service, and to finance urban development, being 60% of such 
financing earmarked for housing programs, according to the Borrower’s Law No. 
8036/1990; 
(b) “MOC” 
means 
Ministério das Cidades
,
the Borrower’s Ministry of the 
Cities; and 
(c) 
“Resolution 3259” means Resolution No. 3259, of the Borrower’s 
Conselho Monetário Nacional
 (National Monetary Council), which provides for an 
increase in the mandatory use of funds from savings accounts for housing finance by the 
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3
institutions forming part of 
Sistema Brasileiro de Poupança e Empréstimo
,
the Brazilian 
savings and loans system. 
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 Agreement, an amount equal to five hundred two 
million five hundred twenty thousand Dollars ($502,520,000), as such amount may be 
converted from time to time through a Currency Conversion in accordance with the 
provisions of Section 2.09 of this Agreement. 
Section 2.02. (a) Subject to the provisions of paragraphs (b), (c) and (d) of this 
Section, the Borrower shall be entitled to withdraw the amount of five hundred million 
seven thousand four hundred Dollars ($500,007,400) from the Loan Account in support 
of the First Phase of the Program. 
(b) 
Except as the Bank may otherwise agree: (i) all withdrawals from the 
Loan Account shall be deposited by the Bank into an account designated by the Borrower 
and acceptable to the Bank; and (ii) the Borrower shall ensure that upon each deposit of 
an amount of the Loan into said account, an equivalent amount is accounted for in the 
Borrower’s budget management system, in a manner acceptable to the Bank. 
(c) 
The Borrower undertakes that the proceeds of the Loan shall not be used 
to finance expenditures excluded pursuant to the provisions of Schedule 1 to this 
Agreement. If the Bank determines at any time that an amount of the Loan was used to 
make a payment for an expenditure so excluded, the Borrower shall, promptly upon 
notice from the Bank, refund an amount equal to the amount of said payment to the Bank. 
Amounts refunded to the Bank upon such request shall be cancelled. 
Section 2.03. The Closing Date shall be June 30, 2006, or such later date as the 
Bank shall establish. The Bank shall promptly notify the Borrower of such later date. 
Section 2.04. The Borrower shall pay to the Bank a fee in an amount equal to one 
percent (1%) of the amount of the Loan, subject to any waiver of a portion of such fee as 
may be determined by the Bank from time to time. On or promptly after the Effective 
Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and 
pay to itself the amount of said fee. 
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Section 2.05. The Borrower shall pay to the Bank a commitment charge on the 
principal amount of the Loan not withdrawn from time to time, at a rate equal to: (i) 
eighty five one-hundredths of one per cent (0.85%) per annum from the date on which 
such charge commences to accrue in accordance with the provisions of Section 3.02 of 
the General Conditions to but not including the fourth anniversary of such date; and (ii) 
seventy five one-hundredths of one per cent (0.75%) per annum thereafter. 
Section 2.06. The Borrower shall pay interest on the principal amount of the 
Loan withdrawn and outstanding from time to time, in respect of each Interest Period at 
the Variable Rate; provided, that upon a Conversion of all or any portion of the principal 
amount of the Loan, the Borrower shall, during the Conversion Period, pay interest on 
such amount in accordance with the relevant provisions of Article IV of the General 
Conditions. 
Section 2.07. Interest and commitment charges shall be payable semiannually in 
arrears on June 15 and December 15 in each year. 
Section 2.08. 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 2.09. (a) The Borrower may at any time request any of the following 
Conversions of the terms of the Loan in order to facilitate prudent debt management: 
(i) 
a change of the Loan Currency of all or any portion of the 
principal amount of the Loan, withdrawn or unwithdrawn, to an 
Approved Currency; 
(ii) 
a change of the interest rate basis applicable to all or any portion 
of the principal amount of the Loan from a Variable Rate to a 
Fixed Rate, or vice versa; and 
(iii) 
the setting of limits on the Variable Rate applicable to all or any 
portion of the principal amount of the Loan withdrawn and 
outstanding by the establishment of an Interest Rate Cap or 
Interest Rate Collar on said Variable Rate. 
(b) 
Any conversion requested pursuant to paragraph (a) of this Section that 
is accepted by the Bank shall be considered a “Conversion”, as defined in 
Section 2.01 (7) of the General Conditions, and shall be effected in accordance with the 
provisions of Article IV of the General Conditions and of the Conversion Guidelines. 
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ARTICLE III 
Particular Covenants 
Section 3.01. (a) The Borrower and the Bank shall from time to time, at the 
request of either party, exchange views on the progress achieved in carrying out the 
Program. 
(b) 
Prior to each such exchange of views, the Borrower shall furnish to the 
Bank for its review and comment a report on the progress achieved in carrying out the 
Program, in such detail as the Bank shall reasonably request. 
(c) 
The Borrower shall exchange views with the Bank on any proposed 
action to be taken after the disbursement of the Loan which would have the effect of 
materially reversing the objectives of the Program, or any action specified in Schedule 2 
to this Agreement. 
Section 3.02. Without limitation upon the provisions of Section 9.01 (a) of the 
General Conditions, the Borrower shall promptly furnish to the Bank such information 
relating to the provisions of Article II of this Agreement as the Bank may, from time to 
time, reasonably request. 
ARTICLE IV 
Additional Events of Suspension 
Section 4.01. Pursuant to Section 6.02 (p) of the General Conditions, the 
following additional events are specified: 
(a) 
The Borrower’s macroeconomic policy framework has become 
inconsistent with the objectives of the First Phase of the Program. 
(b) 
An action has been taken or a policy has been adopted to reverse any 
action or policy under the Program, including any action listed in Schedule 2 to this 
Agreement, in a manner that would, in the opinion of the Bank, adversely affect the 
achievement of the objectives of the First Phase of the Program. 
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ARTICLE V 
Effective Date; Termination 
Section 5.01. The following is specified as an additional matter, within the 
meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or 
opinions to be furnished to the Bank, namely, that this Agreement has been validly 
registered with the Central Bank. 
Section 5.02. The date July 11, 2006, is hereby specified for the purposes of 
Section 12.04 of the General Conditions. 
ARTICLE VI 
Representative of the Borrower; Addresses 
Section 6.01. The Minister of Finance of the Borrower is designated as 
representative of the Borrower for the purposes of Section 11.03 of the General 
Conditions. 
Section 6.02. The following addresses are specified for the purposes of Section 
11.01 of the General Conditions: 
 
For the Borrower: 
 
Ministério da Fazenda 
 
Procuradoria Geral da Fazenda Nacional 
 
Esplanada dos Ministérios, Bloco “P” - 8
°
andar 
 
70048-900 Brasília, D.F. 
 
Brazil 
 
Facsimile: (011-55-61) 412-1740 
 
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With copy to: 
 
Ministério do Planejamento, Orçamento e Gestão 
 
Secretaria de Assuntos Internacionais 
 
Esplanada dos Ministérios, Bloco "K" - 5
°
andar 
 
70040-906 Brasília, D.F. 
 
Brazil 
 
Facsimile: (011-55-61) 225-4022 
 
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: 
  Facsimile: 
 
INTBAFRAD 
 
 
248423 (MCI) or 
(202) 477-6391 
 
Washington, D.C. 
 
  64145 (MCI) 
 
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IN WITNESS WHEREOF, the parties hereto, acting through their duly 
authorized representatives, have caused this Agreement to be signed in their respective 
names in Brasilia, Brazil, as of the day and year first above written. 
 
FEDERATIVE REPUBLIC OF BRAZIL 
 
By /s/ Suely Dib de Sousa e Silva 
Authorized Representative 
 
INTERNATIONAL BANK FOR 
 
RECONSTRUCTION AND DEVELOPMENT 
 
By /s/ John Briscoe 
Authorized Representative 
 
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SCHEDULE 1 
Excluded Expenditures 
 
For purposes of Section 2.02 (c) of this Agreement, the proceeds of the Loan 
shall not be used to finance any of the following expenditures: 
1. 
expenditures for goods or services supplied under a contract which any national 
or international financing institution or agency other than the Bank or the Association 
shall have financed or agreed to finance, or which the Bank or the Association shall have 
financed or agreed to finance under another loan, credit, or grant; 
2. 
expenditures for goods included in the following groups or subgroups of the 
Standard International Trade Classification, Revision 3 (SITC, Rev.3), published by the 
United Nations in Statistical Papers, Series M, No. 34/Rev.3 (1986) (the SITC), or any 
successor groups or subgroups under future revisions to the SITC, as designated by the 
Bank by notice to the Borrower: 
 Group
Subgroup
Description of Items
112 - 
 
Alcoholic 
beverages 
 121 
- 
 
Tobacco, 
unmanu- 
 
factured, tobacco 
 
refuse 
 
122 
- 
 
Tobacco, manufactured  
 
(whether or not 
 
containing tobacco 
 
substitutes) 
 
525 
- 
 
Radioactive and  
 
associated materials 
 
667 
- 
 
Pearls, precious and 
 
semiprecious 
 
stones, unworked 
 
or
worked 
 
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Group
Subgroup
Description of Items
718  
718.7 
 
Nuclear reactors, and  
 
parts thereof; fuel  
 
elements (cartridges), 
 
non-irradiated, for 
 
nuclear reactors 
 
728  
728.43 
 
Tobacco processing 
 
machinery  
 
897  
897.3 
 
Jewelry of gold,  
 
silver or platinum 
 
group metals (except 
 
watches and watch 
 
cases) and 
 
goldsmiths’ or  
 
silversmiths’ 
 
wares (including  
 
set gems) 
 
971  
- 
 
Gold, non-monetary 
 
(excluding gold 
 
ores and concentrates) 
 
3. 
expenditures for goods intended for a military or paramilitary purpose or for 
luxury consumption; 
4. 
expenditures for environmentally hazardous goods (for purposes of this 
paragraph the term “environmentally hazardous goods” means goods, the manufacture, 
use or import of which is prohibited under the laws of the Borrower or international 
agreements to which the Borrower is a party; 
5. 
expenditures on account of any payment to persons or entities, or any import of 
goods, if such payment or import is prohibited by a decision of the United Nations 
Security Council taken under Chapter VII of the Charter of the United Nations; and 
6.  
expenditures under a contract in respect of which the Bank determines that 
corrupt, fraudulent, collusive or coercive practices were engaged in by representatives of 
the Borrower or of a beneficiary of the Loan during the procurement or execution of such 
contract, without the Borrower having taken timely and appropriate action satisfactory to 
the Bank to remedy the situation. 
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SCHEDULE 2 
First Phase of the Program 
1. 
A national housing policy (
Política Nacional de Habitação
)
was issued by MOC 
and approved by the Borrower’s Council of Cities (C
onselho das Cidades
)
in November 
2004, defining principles, guidelines and general objectives for the housing sector, and 
presenting proposals for the formulation of a national housing plan, to be discussed 
within the Borrower’s government, which includes goals, investment plans and 
performance indicators for the housing sector.  
2. 
The Borrower's Ministers of Finance and of Cities have agreed to create an inter-
ministerial working group to monitor the impact of Resolution 3259 and other housing 
market-based instruments, and to elaborate proposals to rationalize the Borrower's 
housing subsidy programs. 
3. 
Bill of Law PLC No. 36/2004, which provides for the creation of the national 
social interest housing fund (
Fundo Nacional de Habitação de Interesse Social
)
to 
coordinate transfers, subsidies and funding structures for low income housing 
beneficiaries, was approved by the Borrower’s House of Representatives (
Câmara dos 
Deputados
)
on June 3, 2004.  
4. 
The Borrower’s Law No. 10.931/2004 was enacted to strengthen the Borrower’s 
housing credit regulatory framework by: (a) regulating real estate credit instruments; (b) 
establishing that the land and the structures or improvements thereon under any real 
estate development are assets separate from those of the real estate developer (
patrimônio 
de afetação)
,
introducing more efficient means of inspection of the real estate 
development, and making feasible the continuity of construction works in case of 
bankruptcy of the developer; (c) simplifying the tax regime of the assets referred to in (b) 
above; and (d) establishing a more efficient procedure for judicial resolution of disputes 
between real estate developers and purchasers of real estate units.
 
5. 
Resolution 3259 revised prior regulations dealing with the mandatory use of 
savings account funds for housing financing to bring them in line with the capacity of the 
institutions in the housing and finance sectors, and created incentives for housing 
financing for the low income population.   
6. 
Resolution No. 460, of FGTS 
Conselho Curador
 (Managing Council), dated 
December 14, 2004, was approved to improve the targeting and transparency of the 
FGTS interest rate subsidy program by: (a) including the creation of an explicit upfront 
subsidy differentiated by income group; (b) establishing that, by 2008, all FGTS 
resources will benefit households with a monthly income equivalent to less than 10 
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minimum wages; and (c) increasing the amount of credit available for households with a 
monthly income equivalent to less than six minimum wages in 2005. 
7. 
The Borrower’s Law No. 10998, of December 15, 2004, revised the 
Programa de 
Subsídio à Habitação Social
,
a
transparent upfront housing subsidy program financed 
from the Borrower’s budget, which now may be implemented through schemes that may 
or may not include additional credit lines. 
8. 
A framework was established by MOC for the monitoring and evaluation system 
of the Borrower’s housing program, with particular attention to the subsidies component.  
9. 
The Borrower issued, in 2003, a national policy for sustainable urban land tenure 
regularization (
política nacional de regularização fundiária sustentável - 
 
Programa 
Papel Passado
)
to secure land titles to the poor, and has been implementing such policy 
in a satisfactory manner.  
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SCHEDULE 3 
Amortization Schedule 
1. 
The following table sets forth the Principal Payment Dates of the Loan and the 
percentage of the total principal amount of the Loan payable on each Principal Payment 
Date (Installment Share). If the proceeds of the Loan shall have been fully withdrawn as 
of the first Principal Payment Date, the principal amount of the Loan repayable by the 
Borrower on each Principal Payment Date shall be determined by the Bank by 
multiplying: (a) the total principal amount of the Loan withdrawn and outstanding as of 
the first Principal Payment Date; by (b) the Installment Share for each Principal Payment 
Date, such repayment amount to be adjusted, as necessary, to deduct any amounts 
referred to in paragraph 4 of this Schedule, to which a Currency Conversion applies. 
 
Payment Date
Installment Share 
(Expressed as a %)
On each June 15 and December 15 
 
 
Beginning June 15, 2010 
 
 
through June 15, 2021 
4.17% 
 
On December 15, 2021 
 
4.09% 
 
2. 
If the proceeds of the Loan shall not have been fully withdrawn as of the first 
Principal Payment Date, the principal amount of the Loan repayable by the Borrower on 
each Principal Payment Date shall be determined as follows: 
(a) 
To the extent that any proceeds of the Loan shall have been withdrawn as 
of the first Principal Payment Date, the Borrower shall repay the amount withdrawn and 
outstanding as of such date in accordance with paragraph 1 of this Schedule. 
(b) 
Any withdrawal made after the first Principal Payment Date shall be 
repaid on each Principal Payment Date falling after the date of such withdrawal in 
amounts determined by the Bank by multiplying the amount of each such withdrawal by 
a
fraction, the numerator of which shall be the original Installment Share specified in the 
table in paragraph 1 of this Schedule for said Principal Payment Date (the Original 
Installment Share) and the denominator of which shall be the sum of all remaining 
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Original Installment Shares for Principal Payment Dates falling on or after such date, 
such repayment amounts to be adjusted, as necessary, to deduct any amounts referred to 
in paragraph 4 of this Schedule, to which a Currency Conversion applies. 
3. 
(a) 
Withdrawals made within two calendar months prior to any Principal 
Payment Date shall, for the purposes solely of calculating the principal amounts payable 
on any Principal Payment Date, be treated as withdrawn and outstanding on the second 
Principal Payment Date following the date of withdrawal and shall be repayable on each 
Principal Payment Date commencing with the second Principal Payment Date following 
the date of withdrawal. 
(b) 
Notwithstanding the provisions of sub-paragraph (a) of this paragraph 3, 
if at any time the Bank shall adopt a due date billing system under which invoices are 
issued on or after the respective Principal Payment Date, the provisions of such sub-
paragraph shall no longer apply to any withdrawals made after the adoption of such 
billing system. 
4. 
Notwithstanding the provisions of paragraphs 1 and 2 of this Schedule, upon a 
Currency Conversion of all or any portion of the withdrawn principal amount of the Loan 
to an Approved Currency, the amount so converted in said Approved Currency that shall 
be repayable on any Principal Payment Date occurring during the Conversion Period, 
shall be determined by the Bank by multiplying such amount in its currency of 
denomination immediately prior to said Conversion by either: (a) the exchange rate that 
reflects the amounts of principal in said Approved Currency payable by the Bank under 
the Currency Hedge Transaction relating to said Conversion; or (b) if the Bank so 
determines in accordance with the Conversion Guidelines, the exchange rate component 
of the Screen Rate. 
5. 
If the principal amount of the Loan withdrawn and outstanding from time to time 
shall be denominated in more than one Loan Currency, the provisions of this Schedule 
shall apply separately to the amount denominated in each Loan Currency, so as to 
produce a separate amortization schedule for each such amount.