World Bank 1818 H Street N.W. (202) 477-1234 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS December 23, 2002 His Excellency u9 u i' r 44 rr 3?O t- y Ing. Alcides Jimenez Minister of Finance Ministry of Finance Asunci6n, Paraguay RE: PARAGUAY: Loan Number 3708-PA (Natural Resources Management Project) Sixth Amendment to the Loan Agreement Excellency: Please refer to the Loan Agreement between the Republic of Paraguay (the Borrower) and the International Bank for Reconstruction and Development (the Bank), dated June 8, 1994, as amended. In response to the Borrower's request of December 16, 2002 to amend the Loan Agreement, the Bank hereby agrees to amend the Loan Agreement as follows: 1. Section 3.05 is hereby amended to read in its entirety as follows: "Section 3.05. (a) The Borrower, within MAG, shall establish, operate and maintain during the execution of the Project a: (i) rural research and training center (CICAR); (ii) regional environmental center (CRAE); and (iii) an executive directorate (DEP), all with a budget and functions and responsibilities satisfactory to the Bank. (b) The Borrower shall ensure that CICAR, CRAE and DEP are headed by qualified professionals and assisted by competent staff. (c) The Borrower, through MAG/DEP, shall establish and thereafter maintain, until the completion of the Project, a regional operations committee (the Regional Operations Committee) with functions and responsibilities satisfactory to the Bank, including, inter alia, the provision of advice to DEP in carrying out its functions." Ing. Alcides Jimenez - 2 - December 23, 2002 2. Section 3.07 is hereby amended to read in its entirety as follows: "Section 3.07. (a) With respect to Part A.4 of the Project and without limitation to the provisions of Section 3.01 (a) (i) of this Agreement, the Borrower shall establish a fund for the conservation of natural resources (FOCORN) in accordance with the terms of the UNDP Agreement. (b) The Borrower shall, in accordance with the terms of the UNDP Agreement, provide the necessary funds to be disbursed under Part A.4 of the Project, as set forth in the Operational Manual and in each POA. (c) The Borrower, through MAG/DEP, shall enter into a subgrant agreement, with each Beneficiary, under terrns and conditions satisfactory to the Bank, including, inter alia, those set forth in the Operational Manual." 3. Section 3.19 is hereby amended to read in its entirety as follows: "Section 3.19. (a) The Borrower shall establish within DEP, and thereafter operate and maintain during the implementation of Part F of the Project, an admninistrative and executing unit (the UAT) with functions and responsibilities satisfactory to the Bank, including, inter alia, the responsibility to assist the Borrower in the coordination, administration and implementation of such Part of the Project. (b) The Borrower shall ensure at all times that the UAT is headed by a manager and assisted by staff in adequate numbers, including a financial specialist, all with qualifications acceptable to the Bank." 4. Paragraph (b) of Section 4.01 is hereby amended to read in its entirety as follows: "The Borrower shall and shall cause CAH to: (i) have records and accounts including those for the Special Accounts and CAH's financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year: (A) a certified copy of the report of such audits by said auditors, of such scope and in such detail as then Bank shall have reasonably requested; and (B) certified copies of CAH' financial statements for such year as so audited, and (iii) furnish to the Bank such other inforrnation concerning said records and accounts and the audits thereof as the Bank shall from time to time reasonably request." * Ing. Alcides Jimenez - 4 - December 23, 2002 ATTACHMENT 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 10,700,000 30% (2) Goods (a) for Parts A, B, C, 3,200,000 95% D and E.2 of the Project (b) for Part F.2 60,000 95% of the Project (3) Consultants' services, Training and Studies (a) for Parts A, B, C, 9,900,000 97% D and E.2 of the Project (b) for Part F.2 1,140,000 97% of the Project Ing. Alcides Jimenez - 5 - December 23, 2002 Amount of the Loan Allocated % of (Expressed in Expenditures "Category Dollar Equivalent! to be Financed (4) Subloans 2,400,000 100% of amounts disbursed under a Subloan (5) Subgrants 6,700,000 100% of amounts disbursed under a Subgrant (6) Incremental 4,800,000 100% until Operating withdrawals under Costs this Category have for the Project reached an aggregate (other than Part F amount of $1,750,000 of the Project) equivalent; 75% until withdrawals under this Category have reached an aggregate amount of$3,600,000 equivalent; and 50% thereafter. (7) Pilot Subgrants 10,600,000 100% of amounts disbursed under a Pilot Subgrant (8) Incremental 500,000 100% Operating Costs for Part F of the Project TOTAL 50,000,000