OFFICIAL              f
DOCMENTS LOAN vUMBER 2014 PA
Loan Agreement
(Second Rural Water Supply and Sanitation Project)
between
REPUBLIC OF PARAGUAY
and
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
Dated                              , 1981


��L O A N   N U M B E R   2 0 1 4   P A 
L O A N   A G R E E M E N T 
A G R E E M E N T ,   d a t e d                                     /                     ,   1 9 8 1 ,   b e t w e e n 
R E P U B L I C   O F   P A R A G U A Y   ( h e r e i n W   t e r   d ( l l e d   t h e   B o r r o w e r )   a n d   I N T E R - 
N A T I O N A L   B A N K   F O R   R E C O N S T R U C T I O N   A N D   D E V E L O P M E N T   ( h e r e i n a f t e r 
c a l l e d   t h e   B a n k ) . 
A R T I C L E   1 
G e n e r a l   C o n d i t i o n s ;   D e f i n i t i o n s 
S e c t i o n   1 . 0 1 .   T h e   p a r t i e s   t o   t h i s   A g r e e m e n t   a c c e p t   a l l 
t h e   p r o v i s i o n s   o f   t h e   G e n e r a l   C o n d i t i o n s   A p p l i c a b l e   t o   L o a n 
a n d   G u a r a n t e e   A g r e e m e n t s   o f   t h e   B a n k ,   d a t e d   O c t o b e r   2 7 ,   1 9 8 0 , 
w i t h   t h e   s a m e   f o r c e   a n d   e f f e c t   a s   i f   t h e y   w e r e   f u l l y   s e t   f o r t h 
h e r e i n   ( s a i d   G e n e r a l   C o n d i t i o n s   A p p l i c a b l e   t o   L o a n   a n d   G u a r a n t e e 
A g r e e m e n t s   o f   t h e   B a n k   b e i n g   h e r e i n a f t e r   c a l l e d   t h e   G e n e r a l 
C o n d i t i o n s ) . 
S e c t i o n   1 . 0 2 .   W h e r e v e r   u s e d   i n   t h i s   A g r e e m e n t ,   u n l e s s   t h e 
c o n t e x t   o t h e r w i s e   r e q u i r e s ,   t h e   s e v e r a l   t e r m s   d e f i n e d   i n   t h e 
G e n e r a l   C o n d i t i o n s   h a v e   t h e   r e s p e c t i v e   m e a n i n g s   t h e r e i n   s e t 
f o r t h   a n d   t h e   f o l l o w i n g   a d d i t i o n a l   t e r m s   h a v e   t h e   f o l l o w i n g 
m e a n i n g s : 
( a )   " S E N A S A "   m e a n s   S e r v i c i o   N a c i o n a l   d e   S a n e a m i e n t o   A m b i e n - 
t a l ,   a s   i t   h a s   b e e n   e s t a b l i s h e d   b y   t h e   B o r r o w e r ' s   L a w   3 6 9 / 7 2 , 
d a t e d   D e c e m b e r   1 ,   1 9 7 2   ( h e r e i n a f t e r   c a l l e d   " S E N A S A ' s   L a w " ) , 
a n d   t h e   t e r m   i n c l u d e s   a n y   s u c c e s s o r   t h e r e t o ; 
( b )   " J u n t a "   m e a n s   a n y   o f   t h e   J u n t a s   d e   S a n e a m i e n t o   e s t a b - 
l i s h e d   i n   a c c o r d a n c e   w i t h   C h a p t e r   V   o f   S E N A S A ' s   L a w   a n d   w i t h 
t h e   B o r r o w e r ' s   D e c r e e   N o .   8 9 1 0   d a t e d   S e p t e m b e r   1 0 ,   1 9 7 4 ,   w h i c h   h a s 
e n t e r e d   o r   p r o p o s e s   t o   e n t e r   w i t h   S E N A S A   i n t o   a   C o n t r a t o ;   s u c h 
S E N A S A ' s   L a w   a n d   D e c r e e   h e r e i n a f t e r   c a l l e d   c o l l e c t i v e l y   " t h e 
R e g u l a t i o n s " ; 
( c )   " C o n t r a t o "   m e a n s   a   c o n t r a c t   e n t e r e d   i n t o ,   o r   t o   b e 
e n t e r e d   i n t o ,   b e t w e e n   S E N A S A   a n d   a   J u n t a   f o r   p u r p o s e s   o f   c a r r y i n g 
o u t   a n   A p p r o v e d   S u b - p r o j e c t ,   a s   r e q u i r e d   b y   S e c t i o n   3 . 0 3   o f   t h i s 
A g r e e m e n t ; 
( d )   " S u b - p r o j e c t "   m e a n s   t h e   c o n s t r u c t i o n   o f   a   w a t e r   s u p p l y 
s y s t e m ,   t o   b e   i n c l u d e d   i n   P a r t   A   o f   t h e   P r o j e c t ,   w h i c h   t h e   B o r - 
r o w e r   p r o p o s e s   t o   f i n a n c e   o r   h a s   f i n a n c e d   o u t   o f   t h e   p r o c e e d s   o f 


﻿-2-
the Loan; and the term will include, if such is the case, Sanitary
Units;
(e) "Approved Sub-project" means a Sub-project which
has been approved by the Bank as provided in Section 3.02 of this
Agreement and in respect of which the Borrower has provided,
through SENASA, any additional documentation and information
required under Section 2.05 of this Agreement;
(f) "Sanitary Units" means the sanitary units included in
Part B of the Project, if the construction of such units is
included in the applicable Sub-project;
(g) "Banco Central" means the Borrower's Central Bank
or any successor thereto;
(h) "SENASA's Revolving Fund" means the Fondo Rotatorio
de SENASA referred to in Article 40 of SENASA's Law, held in
Banco Central;
(i) "Project Area" means the area included in the following
Departamentos of the Borrower: Alto Parana, Itapu'a, Misiones,
Caaguaz', Neembuc', Guaira and Caazapa;
(j) "Project Community" means a village in the Project
Area where an Approved Sub-project is to be carried out;
(k) "Purchase Program" means each of the purchase programs
referred to in Section 3.06 of this Agreement which has been
approved by the Bank;
(1) "Users" means usuarios, as such term is defined in
Article 7 of the Borrower's Decree No. 8910, dated September 10,
1974; and
(m) "guarani" and the symbol "0" mean the currency of
the Borrower.
ARTICLE II
The Loan
Section 2.01. The Bank agrees to lend to the Borrower,
on the terms and conditions in the Loan Agreement set forth
or referred to, an amount in various currencies equivalent to
eleven million eight hundred thousand dollars ($11,800,000).


﻿-3-
Section 2.02. The amount of the Loan may be withdrawn from
the Loan Account in accordance with the provisions of Schedule 1
to this Agreement, as such Schedule may be amended from time to
time by agreement between the Borrower and the Bank, for expendi-
tures 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 described in Schedule 2 to this Agreement or for an
Approved Sub-project and to be financed out of the proceeds of
the Loan.
(b) On each of the semiannual interest payment dates
specified in Section 2.09 of this Agreement, the Bank shall,
on behalf of the Borrower, withdraw from the Loan Account and pay
to itself the amounts required to pay, on such date, interest
and other charges on the Loan accrued and payable on the date
set forth, and up to the amount allocated, in Schedule 1 to this
Agreement, as such Schedule may be amended from time to time
by agreement between the Borrower and the Bank.
Section 2.03. Unless the Bank shall otherwise agree, the
Borrower shall deposit in SENASA's Revolving Fund the equivalent
in guaranies of the proceeds of the Loan withdrawn from the Loan
Account in accordance with Section 2.02 of this Agreement.
Section 2.04. Except as the Bank shall otherwise agree,
contracts for the purchase of goods or for civil works co b-
financed out of the proceeds of the Loan, shall be procured in
accordance with each applicable Purchase Program and with the
provisions of Schedule 4 to this Agreement.
Section 2.05. Before applying to the Bank for withdrawals
of funds for any Sub-project, the Borrower shall, through SENASA,
furnish to the Bank any additional information and documentation
relating thereto as the Bank shall reasonably request, including
appropriate references to such Sub-project and the contracts for
which financing will be requested under the Loan.
Section 2.06. The Closing Date shall be June 30, 1986
or such later date as the Bank shall establish. The Bank shall
promptly notify the Borrower of such later date.
Section 2.07. 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.


﻿-4-
Section 2.08. The Borrower shall pay interest at the rate
of nine and three-fifths per cent (9-3/5%) per annum on the
principal amount of the Loan withdrawn and outstanding from
time to time.
Section 2.09. Interest and other charges shall be payable
semiannually on February 1 and August 1 in each year.
Section 2.10. 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 2.11. The Director of SENASA is designated as repre-
sentative of the Borrower for the purpose 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. The Borrower shall carry out the Project
through SENASA, with due diligence and efficiency and in con-
formity with appropriate administrative, financial, engineering
and public utility practices, and shall provide, promptly as
needed, the funds, facilities, services and other resources
required for the purpose.
Section 3.02. The Borrower, through SENASA, shall:
(a) prepare all Sub-projects included under Part A of the
Project. Each such Sub-project shall include a detailed engineer-
ing design, a socio-economic report, a cost estimate for invest-
ment required for such Sub-project (including the estimated
operating cost and the estimated contribution of the applicable
Junta), and all other information that the Bank may reasonably
request.
(b) Select only Sub-projects that at least meet the follow-
ing criteria: (i) the community where the Sub-project is to be
carried out is located in the Project Area and has a population of
not less than 400 and no more than 4,000 inhabitants; (ii) the
Sub-project has an estimated construction cost per User of less
than $130, in January 1981 prices; (iii) hydrogeologic studies


﻿-5-
demonstrating the possibility of developing, easily and econom-
ically, reliable sources of water have been completed; and (iv) a
Junta has been established.
(c) Not later than December 31, 1981, present to the Bank
for approval all final designs for the Sub-projects to be carried
out under the Project.
Section 3.03. (a) The Borrower, through SENASA, shall before
the commencement of any work to be carried out, or the provision
of any equipment or materials to be furnished, under each Approved
Sub-project, enter into a contract with the Junta corresponding to
the village where such Approved Sub-project will be located.
(b) Each Contrato shall be on terms and conditions satisfac-
tory to the Bank including, inter alia, those set forth in Sched-
ule 5 to this Agreement, as such Schedule may be amended from time
to time by agreement between the Borrower, represented for the
purpose by the Director of SENASA, and the Bank.
(c) Unless the Bank shall otherwise agree, the Borrower
shall exercise its rights in relation to each Contrato in' such
manner as to: (i) protect the interests of the Borrower and the
Bank; (ii) comply with the obligations of the Borrower under this
Agreement; (iii) achieve the purposes of the Project; and (iv)
the Borrower shall not change or fail to enforce any such Contrato.
(d) For purposes of this Section, the Borrower shall take
all necessary steps for the expeditious granting of legal per-
sonality to each Junta as and when it is so requested by the
Director of SENASA in accordance with Article 15 of the Borrower's
Decree No. 8910 dated September 10, 1974.
Section 3.04. In order to assist SENASA in: (i) project
management, including finances, engineering and administration;
(ii) the carrying out of Parts A, B and D of the Project; and
(iii) the carrying out of Part C of the Project in fields other
than those included in (i) and (ii) above, the Borrower shall
employ consultants within SENASA whose qualifications, experience
and terms and conditions of employment shall be satisfactory to
the Bank.
Section 3.05, The Borrower, through SENASA, shall prepare
programs satisfactory to the Bank, providing for comprehensive


﻿-6 -
technical assistance to each Junta for the operation and main-
tenance of the resulting water supply system after construction of
the applicable Approved Sub-project is completed. Each such
program shall incude, inter alia, operation and maintenance
manuals to be furnished to each Junta, coordination of purchase
by, and distribution among the Juntas of, spare parts and supplies
and of assistance in the case of major repairs, supervision of
each Junta's accounting, and training for operators and administra-
tors of each water supply system constructed under an Approved
Subproject.
Section 3.06. Except as the Bank shall otherwise agree,
the Borrower shall, not later than December 31, 1981, and there-
after not less often than once a year until the Project has been
completed, furnish to the Bank, through SENASA, for the Bank's
approval, annual Purchase Programs for the purchase of goods
required for the Project, each such Purchase Program to be pre-
pared on the basis of the number of Approved Sub-projects to be
carried out during the period covered by each such Purchase
Program.
Section 3.07. (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, transpor,ation and delivery thereof
to the place of use or installation, and for such insurance any
indemnity shall be payable in a currency freely usable by the
Borrower to replace or repair such goods.
(b) Except as the Bank shall otherwise agree, all goods
and services financed out of the proceeds of the Loan shall
be used exclusively for the Project until its completion.
Section 3.08. (a) The Borrower, through SENASA, shall furnish
to the Bank, promptly upon their preparation, the plans, specifi-
cations, reports, contract documents and work and procurement
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 in SENASA records and
procedures adequate to record and monitor the progress of the
Project (including its cost and the benefits 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 accredited representatives to visit


﻿-7-
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, through
SENASA, furnish to the Bank at regular intervals all such informa-
tion as the Bank shall reasonably request concerning the Project,
its cost and, where appropriate, 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) Upon 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 national-
ity of the party to whom the contract was awarded and the contract
price.
(d) Promptly after completion of the Project, but in any
event 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, through SENASA, 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 and initial
operation of the Project, its cost and the benefits derived and to
be derived from it, 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.
Section 3.09. The Borrower shall take or cause to be taken
all reasonable measures to ensure that the execution and operation
of the Project are carried out with due regard to health, ecolog-
ical and environmental factors.
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,
in normal circumstances, special security from the member con-
cerned but to ensure that no other external debt shall have
priority over its loans in the allocation, realization or distri-
bution of foreign exchange held under the control or for the
benefit of such member. To that end, if any lien shall be created
on any public assets (as hereinafter defined), as security for
any external debt, which will or might result in a priority for


﻿- 8 -
the benefit of the creditor of such external debt in the alloca-
tion, realization or distribution of foreign exchange, such lien
shall, unless the Bank shall otherwise agree, ipso facto and at no
cost to the Bank, equally and ratably secure the principal of,
and interest and other charges on, the Loan, and the Borrower,
in creating or permitting the creation of such lien, shall make
express provision to that effect; provided, however, that, if for
any constitutional or other legal reason such provision cannot
be made with respect to any lien created on assets of any of
its political or administrative subdivisions, the Borrower shall
promptly and at no cost to the Bank secure the principal of,
and interest and other charges on, the Loan by an equivalent
lien on other public assets satisfactory to the Bank.
(b) The foregoing undertaking shall not apply to: (i)
any lien created on property, at the time of purchase thereof,
solely as security for payment of the purchase price of such
property; and (ii) any lien arising 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
subdivision thereof and of any entity owned or controlled by,
or operating for the account or benefit 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
Borrower.
Section 4.02. (a) The Borrower shall maintain records ade-
quate to reflect in accordance witL consistently maintained
appropriate accounting practices the operations and financial
conditions of SENASA.
(b) The Borrower shall (i) have SENASA's accounts and
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 four months after the end of each such year, (A)
certified copies of its financial statements for such year as so
audited and (B) the report of such audit by said auditors, of such


﻿-9-
scope and in such detail as the Bank shall have reasonably re-
quested; and (iii) furnish to the Bank such other information
concerning the accounts and financial statements of SENASA
and the audit thereof as the Bank shall from time to time reason-
ably request.
Section 4.03. The Borrower shall: (a) not later than Decem-
ber 31, 1981, carry out and furnish to the Bank for comment, a
comparative study of SENASA's remuneration of its professional and
technical staff with the staff of other governmental agencies and
the private sector;
(b) not later than June 30, 1982, prepare a plan of action,
including economic incentives, satisfactory to the Bank, to
attract suitably qualified personnel in sufficient numbers so as
to enable SENASA to carry out its functions and responsibilities,
including the execution of the Project, in a timely and efficient
manner; and
(c) carry out such plan of action in a manner and according
to a timetable satisfactory to the Bank.
Section 4.04. Once a year, the Borrower, through SENASA,
shall audit, in terms satisfactory to the Bank, the accounts and
other financial records and statements of each Junta participating
in the execution of an Approved Sub-project.
Section 4.05. (a) Except as the Bank shall otherwise agree,
the Borrower shall, through SENASA, take, and cause each Junta
to take, all necessary steps to set the tariffs for water supply
and connection to be charged by such Junta to the Users of a
water supply system constructed under an Approved Sub-project, at
such a level that shall permit such Junta to cover:
(i) all operating expenses of such Junta;
(ii) payments of principal of, and interest and other
charges on, any debt owed by such Junta to SENASA;
and
(iii) an adequate provision for major repairs and re-
placement of assets.
(b) For purposes of this Section:


﻿- 10 -
(i) the phrase "all operating expenses" means all
administrative, commercial and operating costs of
such Junta which are reasonably connected with
the operation of the water supply system in ques-
tion, including maintenance costs thereof (other
than the provision referred to in (a) (iii) above)
and taxes (if any) but excluding payments of
principal of, and interest and other charges on,
any debt owed by such Junta to SENASA;
(ii) the phrase "any debt owed by such Junta to SENASA"
means the debt owed by suchJunta to SENASA in
respect of the construction of the water supply
system in question under an Approved Sub-project,
to be paid to SENASA on the terms and conditions
established in the applicable Contrato; and
(iii) the phrase "a provision for major repairs and
replacement of assets" means the funds to be
e'ntrusted by such Junta to SENASA on the terms
and conditions established in the applicable
Contrato to make major repairs to, and acquire
assets to be replaced in (comprising spare parts
and supplies), the water supply system in question,
but other than such repairs and replacement of
assets as required for purposes of the routine
maintenance of such water supply system.
(c) The Borrower shall, through SENASA, review with each
Junta, at least annually, the level of tariffs referred to in
paragraph (a) above, and shall ensure that, promptly after such
review, each Junta makes any adjustment in such level of tariffs
required for purposes of such paragraph (a).
ARTICLE V
Remedies of the Bank
Section 5.01. For the purposes of Section 6.02 of the General
Conditions, the following additional events are specified pursuant
to paragraph (k) thereof:
(a) SENASA shall have failed to perform any of its cove-
nants, agreements or obligations under any Contrato;


﻿- 11 -
(b) an extraordinary situation shall have arisen which
shall make it improbable that SENASA will be able to perform any
of its obligations under any Contrato;
(c) the Borrower or any authority having jurisdiction shall
have taken any action for the dissolution or disestablishment of
.SENASA;
(d) the Borrower or any authority having jurisdiction shall
have divested SENASA of any of the functions or powers vested in
it as of the date of this Agreement, which are necessary for the
efficient carrying out of the Project;
(e) the Regulations shall have been amended, suspended,
abrogated, repealed or waived in such a way as to materially and
adversely affect the ability of (i) SENASA to perform its func-
tions under the Project or (ii) any Junta to carry out the
applicable Approved Sub-project;
(f) the Borrower or any authority having jurisdiction
shall have taken any action for the dissolution or disestablish-
ment of any Junta or for the divestment of any of the functions or
powers vested in any such Junta which are necessary for the
efficient carrying out of an Approved Sub-project; and
(g) an extraordinary situation shall have arisen which
shall make it improbable that a Junta will be able to perform any
of its obligations under the applicable Contrato.
Section 5.02. For the purposes of Section 7.01 of the General
Conditions, the following additional events are specified pursuant
to paragraph (h) thereof:
(a) the events specified in paragraph (a) of Section 5.01
of this Agreement shall occur and shall continue for a period
of 60 days after notice thereof shall have been given by the Bank
to the Borrower; and
(b) any event specified in paragraphs (c) or (d) or (e) or
(f) of Section 5.01 of this Agreement shall occur.


﻿- 12 -
ARTICLE VI
Effective Date; Termination
Section 6.01. The following event is specified as an addi-
tional condition to the effectiveness of the Loan Agreement within
the meaning of Section 12.01 (c) of the General Conditions,
namely, that the.consultants referred to in paragraph (i) of
Section 3.04 of this Agreement have been hired.
Section 6.02. The date 00&/,/, is hereby speci-
fied for the purposes of 'Section 12.04 of the General Conditions.
ARTICLE VII
Representative of the Borrower; Addresses
Section 7.01. Except as provided in Sections 2.09 and 3.03
(b) of this Agreement, the Minister of Public Health and Social
Welfare of the Borrower is designated as representative of the
Borrower for the purposes of Section 11.03 of the General Condi-
tions.
Section 7.02. The following addresses are specified for
the purposes of Section 11.01 of the General Conditions:
For the Borrower:
Ministerio de Salud Piblica
y Bienestar Social
Brasil esq. Pettirossi
Asunci6n, Paraguay
Cable address:.
Ministerio de Salud Pfblica
* Asunci6n, Paraguay
With Copies to:
SENASA
Mariscal Estigarribia esq. Tacuary
Asunci6n, Paraguay


﻿- 13 -
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.
REPUBLIC OF PARAGUAY
By
Authorized Representative
INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
By ~
Regional Vice President
Latin   erica and the Caribbean


﻿- 14 -
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) Materials and equip-           8,090,000       100% of foreign
ment for water sys-                           expenditures
tems; materials and                           and 35% of
equipment for sani-                           local expendi-
tary units                                    tures
(2) Materials and equip-             430,000       100% of foreign
ment other than                               expenditures
those included in                             and 35% of
Category (1) above                            local expendi-
tures
(3)  (a) Management                  735,000       100%
consultants
(b) Training, fellow-            98,000       40%
ships, community
education and
other technical
assistance
(c) Engineering                 147,000       40%
(4) Interest and other             2,300,000       Amounts due
charges on the Loan
accrued on or before
July 31, 1985
TOTAL              11,800,000


﻿- 15 -
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.
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 disbursement 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 for expendi-
tures prior to the date of this Agreement, except that with-
drawals, in an aggregate amount not exceeding the equivalent of
$100,000 may be made in respect of Categories (1) and (2) on
account of payments made for such expenditures before that date
but after May 1, 1981.
5.   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.


﻿-16-
6.   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.


﻿- 17 -
SCHEDULE 2
Description of the Project
The Project consists of the following Parts:
Part A:*  Water Supply Systems
About 49 Approved Sub-projects in the Project Area, each
Approved Sub-project consisting, inter alia, of:
(i) a drilled well, ranging in depth from about 100 to about
200 meters;
(ii) pumping equipment and a chlorination system;
(iii) a storage tank, ranging in capacity from about 10 to
about 100 cubic meters; and
(iv) a distribution network with house connections serving
about 80% of the community's population and standpipes
to serve the remaining 20% of such population.
Part B:   Sanitary Units
Construction of about 2,000 Sanitary Units in the Project
Communities, each Sanitary Unit consisting substantially of a
shower, toilet, lavatory, laundry facilities and a septic tank.
Part C:   Strengthening SENASA
1.   A program for strengthening SENASA in the areas of manage-
ment, operations, financial administration and project preparation
and supervision primarily consisting of in-service training for
the office and field personnel of SENASA and including technical
assistance, courses, seminars and fellowships.
2.   Acquisition and utilization of: (i) equipment and tools
for regional laboratories, well drilling operations and community
repair shops; and (ii) about eight pick-up trucks for construction
supervision.


﻿-18 -
Part D:   Basic Public Health Program
An educational and promotional basic public health program,
including seminars for members of the Juntas on basic administra-
tion, including basic accounting and formulation of tariff struc-
tures, and operation of rural water supply systems; training for
operation of Sub-projects, and pot less than one seminar or
series of lectures on water uses and benefits and basic sanitation
practices, to be conducted for the benefit of housewives and
school children in each Project Community.
The Project is expected to be completed by December 31,
1985.


﻿- 19 -
SCHEDULE 3
Amortization Schedule
Payment of Principal
Date Payment Due                          (expressed in dollars)*
On each February 1 and August 1
beginning February 1, 1986
through   February 1, 1998                   455,000
On August 1, 1998                                 425,000
*    To the extent that any portion of the Loan is repayable in
a currency other than dollars (see General Conditions,
Section 4.04), the figures in this column represent dollar
equivalents determined as for purposes of withdrawal.


﻿- 20 -
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                                     1.70%
More than three years but not
more than six years before
maturity                                            3.40%
More than six years but not
more than eleven years
before maturity                                     6.20%
More than eleven years but not
more than fifteen years
before maturity                                     8.50%
More than fifteen years
before maturity                                     9.60%


﻿- 21 -
SCHEDULE 4
Procurement
A.   International Competitive Bidding
1.   Except as provided in Part C hereof, goods and civil works
shall be procured under contracts awarded. in accordance with
procedures consistent with those set forth in the "Guidelines for
Procurement under World Bank Loans and IDA Credits" published by
the Bank in March 1977, Edition of July 1980 (hereinafter called
the Guidelines), on the basis of international competitive bidding
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 paragraph 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 publication 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 competitive
bidding.
3.   Contracts for the purchase of goods shall be grouped in
accordance with the applicable Purchase Program.
4.   For the purpose of evaluation and comparison of bids for
the supply of goods to be procured on the basis of international
competitive 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
similar taxes levied in connection with the sale or delivery,
pursuant to the bid, of the goods shall not be taken into account
in the evaluation of the bids; and (iii) the cost to the Borrower
of inland freight and other expenditures incidental to the
delivery of goods to the place of their use or installation shall
be included.


﻿- 22 -
B.   Preference for Domestic Manufacturers
In the procurement of goods in accordance with the procedures
described in Part A of this Schedule, goods manufactured in
Paraguay may be granted a margin of preference in accordance with,
and subject to, the following provisions:
1.   All bidding documents for the procurement of goods
shall clearly indicate any preference which will be granted,
the information required to establish the eligibility of a bid
for such preference and the following methods and stages that will
be followed in the evaluation and comparison of bids.
2.   After evaluation, responsive bids will be classified
in one of the following three groups:
(1) Group A: bids offering goods manufactured in
Paraguay if the bidder shall have established to
the satisfaction of the Borrower and the Bank that
the manufacturing cost of such goods includes a
value added in Paraguay equal to at least 20%
of the ex-factory bid price of such goods.
(2) Group B: all other domestic bids.
(3) Group C: bids offering any other goods.
3.   In order to determine the lowest evaluated bid of each
group, all evaluated bids in each group shall first be compared
among themselves, without taking into account customs duties and
other import taxes levied in connection with the importation, and
sales and similar taxes levied in connection with the sale or
delivery, pursuant to the bids, of the goods. Such lowest eva-
luated bids shall then be compared with each other, and if, as a
result of this comparison, a bid from group A or group B is the
lowest, it shall be selected for the award.
4.   If, as a result of the comparison under paragraph
3 above, the lowest bid is a bid from group C, all group C bids
shall be further compared with the lowest evaluated bid from
group A after adding to the evaluated bid price of the imported
goods offered in each group C bid, for the purpose of this further
comparison only, an amount equal to: (i) the amount of customs
duties and other import taxes which a non-exempt importer would
have to pay for the importation of the goods offered in such


﻿- 23 -
group C bid; or (ii) 15% of the c.i.f. bid price of such goods
if said customs duties and taxes exceed 15% of such price. If
the group A bid in such further comparison is the lowest, it
shall be selected for the award; if not, the bid from group
C which as a result of the comparison under paragraph 3 is the
lowest evaluated bid shall be selected.
C.   Other Procurement Procedures
1.   Contracts for the purchase of goods estimated to cost
the equivalent of $10,000 or more but which cannot be grouped in
bid packages estimated to cost the equivalent of $100,000 or more
and contracts for civil works estimated to cost the equivalent of
$10,000 or more but which cannot be grouped in bid packages
estimated to cost equivalent of $200,000 or more, may be procured
on the basis of competitive bidding, locally advertised, conducted
in accordance with procedures satisfactory to the Bank, provided,
however, that the total cost of the items so procured shall not
exceed in the aggregate the equivalent of $2,000,000.
2.   Contracts for goods and for civil works estimated to
cost less than the equivalent of $10,000 may be procured in
accordance with local procurement procedures satisfactory to the
Bank, provided, however, that the total cost of the items so
procured shall not exceed in the aggregate the equivalent of
$100,000.
3.   Contracts for spare parts for equipment used in the
execution of the Project may be procured through negotiated
purchases from established and reliable suppliers, provided,
however, that the total cost of the items so procured shall not
exceed in the aggregate the equivalent of $250,000.
D.   Review of Procurement Decisions by the Bank
1.   Review of invitations to bid and of proposed awards and
final contracts:
With respect to all contracts for: (i) goods estimated to
cost the equivalent of $100,000 or more; and (ii) for civil works
estimated to cost the equivalent of $200,000 or more:
(a) Before bids are invited, the Borrower shall furnish
to the Bank, for its comments, the text of the invitations to
bid and the specifications and other bidding documents, together


﻿-24-
with a description of the advertising procedures to be followed
for the bidding, and shall make such modifications in the said
documents or procedures as the Bank shall reasonably request.
Any further modification to the bidding documents shall require
the Bank's concurrence before it is issued to the prospective
bidders.
(b) After bids have been received and evaluated, the Bor-
rower shall, before a final decision on the award is made, inform
the Bank of the name of the bidder to which it intends to award
the contract and shall furnish to the Bank, in sufficient time for
its review, a detailed report on the evaluation and comparison
of the bids received, and such other information as the Bank
shall reasonably request. The Bank shall, if it determines that
the intended award would be inconsistent with the Guidelines
or this Schedule, promptly inform the Borrower and state the
reasons 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 invited.
(d) Two conformed copies of the contract shall be furuished
to the Bank promptly after its execution and prior to delivery
to the Bank of the first application for withdrawal of funds from
the Loan Account in respect of such contract.
3.   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 delivery to the Bank of the first
application for withdrawal 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.
4.   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
issuing 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


﻿- 25 -
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.


﻿- 26 -
SCHEDULE 5
Terms and Conditions for each Contrato
1.   Each Contrato will include a detailed description of each of
the components of the Sub-project, as well as its quantities and
costs (including the number of sanitary units to be built and the
terms of repayment thereof), and will provide in detail for the
works to be carried out by SENASA, for the Junta's contribution to
the investment for the applicable Approved Sub-project (such
investment hereinafter called the Investment), for the responsi-
bilities for carrying out such Approved Sub-project, and for the
operation and maintenance of the resulting water supply system,
all in accordance with sound financial, administrative, engineer-
ing and public utility practices.
2.   (a) The Junta's total contribution to the Investment
referred to in 1 above will be based on each such Junta's ability
to pay, provided it will amount to not less than 22% of the
Investment. Notwithstanding the aforesaid, particular cases of
villages will be considered and, with the Bank's prior approval,
the said percentage may be lowered.
(b)  (i) Whatever the Junta's total contribution to the
Investment amounts to, the Junta, subject to
paragraph (c) below, will make an initial contri-
bution of not less than 10% of the Investment,
during the period in which the works for the
applicable Approved Sub-project are being carried
out.
(ii) The Junta's initial contribution may be made,
subject to (iii) below, in the form of cash or
provision of labor and materials, or both, pro-
vided, however, that the cash contribution will
not be less than 5% of the Investment.
(iii) The cash portion of the Junta's initial contri-
bution will include a down payment to SENASA which
will amount to not less than 2.5% of the Invest-
ment. (Particular cases of villages will be con-
sidered and, with the Bank's prior approval, the
said percentage may be lowered.)


﻿- 27 -
(c) Payment of the down payment to SENASA referred to in
(iii) of sub-paragraph (b) above will be a condition for the
commencement of the works to be carried out, or the provision of
any equipment or materials to be furnished, under the applicable
Approved Sub-project.
(d) The remainder of each Junta's total contribution after
the initial contribution referred to in sub-paragraph (b) above
has been made, will be paid by such Junta to SENASA in equal
monthly installments with a final maturity, including a grace
period equivalent to the Sub-project's construction period plus
six months, ranging from 15 to 20 years from the date of the
applicable Contrato; each such installment will bear interest at
an annual rate of not less than 9.6% on the unpaid balance of said
total contribution, plus a reasonable penalty interest to cover
defaults in the payments of such installments.
(e) The cost of materials for Sanitary Units will be paid by
each Junta to SENASA in full in equal monthly installments over a
period of three years, each such installment will bear interest at
an annual rate of not less than 9.6% on the unpaid balance of the
said cost, plus a reasonable penalty interest to cover defaults in
the payment of such installments.
3.   (a) Each Contrato will include provisions for setting
up the level of water supply tariffs and connection charges and
said level will be based on each Junta's ability to pay, provided
it will cover at least what is required by Section 4.05 of this
Agreement: (i) the actual cost of operation and maintenance of the
water supply system; (ii) payments of principal of, and interest
and other charges on, any debt owed by the Junta to SENASA in
respect of the unpaid balar-ce of the Junta's contribution for the
applicable Approved Sub-project; and (iii) a provision for major
repairs and replacement of assets.
(b) Except where metering is feasible, SENASA's present
system for setting up said level of tariffs and connection
charges, which consists of assigning weight to every sanitary
fixture and agreeing on the level of tariffs and connection
charges with each Junta, will be followed.
(c) Each Contrato will include provisions for the under-
taking of the Junta to review annually said level of tariffs
and connection charges with the assistance of SENASA and, if
necessary, the adjustment thereof.


﻿- 28 -
4.   Each Contrato will also include provisions ensuring:
(a) the Junta's undertaking to maintain appropriate records
for the carrying out of the applicable Approved Sub-project and
the operation of the resulting water supply system;
(b) the Junta's undertaking to operate and maintain, at
all times, the plants, machinery, equipment and other property
owned or operated by each such Junta, and to make promptly all
necessary repairs and renewals thereof, all in accordance with
sound engineering and public utility practices;
(c) the right of SENASA to inspect, by itself or jointly
with representatives of the Bank, if the Bank shall so request,
the goods financed out of the proceeds of the Loan and the sites,
works, plants and construction included in the applicable -ipproved
Sub-project, the operation thereof, and any relevant records and
documents; and
(d) the right of SENASA: (i) to require that all goods and
services financed out of the proceeds of the Loan will be used
exclusively for the applicable Approved Sub-project; (ii) to
obtain all such information as the Bank shall reasonably request
with regard to the carrying out of the applicable Approved Sub-
project, to the operation and maintenance of the resulting water
supply system and to the administration, operation and financial
condition of the Junta in respect of its Approved Sub-project; and
(iii) to audit the accounts and other financial records and
statements of the Junta.


﻿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 thereunto
this         -day of  i24, 198L.
FOR SECRETARY