Contrato Chile BM (MECE)

7/23/2019 Contrato Chile BM (MECE)

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CONFORMED COPY

LOAN NUMBER 4404-CH

Loan Agreement

(Higher Education Improvement Project)

between

REPUBLIC OF CHILE

and

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Dated January 15, 1999

LOAN NUMBER 4404-CH

LOAN AGREEMENT

AGREEMENT, dated January 15, 1999, between the REPUBLIC OF CHILE (the Borrower)and the INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank).

WHEREAS the Borrower, having satisfied itself as to the feasibility and priorityof the project described in Schedule 2 to this Agreement (the Project), has requestedthe Bank to assist in the financing of the Project; and

WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, toextend to the Borrower the loan set forth in Section 2.01 of this Agreement (the Loan)upon the terms and conditions set forth in this Agreement;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

General Conditions; Definitions

Section 1.01. The “General Conditions Applicable to Loan and GuaranteeAgreements for Single Currency Loans” of the Bank, dated May 30, 1995, as amendedthrough December 2, 1997 (the General Conditions), constitute an integral part of thisAgreement.

Section 1.02. Unless the context otherwise requires, the several terms definedin the General Conditions and in the Preamble to this Agreement have the respectivemeanings therein set forth and the following additional terms have the following



meanings:

(a) “Beneficiary” means any higher education institution in the Borrower’sterritory which is selected, pursuant to the criteria set forth in the OperationalManual, to receive grants under the Competitive Fund (as defined below);

(b) “Competitive Fund” means the fund referred to in Part C.3 of the Project;

(c) “Competitive Fund Unit” means the unit referred to in Section 3.03 (b) ofthis Agreement;

(d) “CONICYT” means Comisión Nacional de Investigación Científica yTecnológica, the autonomous agency established pursuant to the Borrower’s Law No.16.746 published in the Borrower’s Diario Oficial of February 14, 1968 for thepromotion of scientific and technological research;

(e) “DIVESUP” means División de Educación Superior, the higher educationdivision in the MINEDUC (as defined below);

(f) “Education Law” means Law No. 18.962 published in the Borrower’s DiarioOficial on March 10, 1990;

(g) “Grant Agreement” means any of the agreements referred to in Section 3.01

(b) of this Agreement;

(h) “Higher Council for Education” means Consejo Superior de Educación, theautonomous agency established pursuant to the Education Law for the accreditation ofuniversities and other professional institutions;

(i) “MINEDUC” means the Borrower’s Ministry of Education;

(j) “Operational Manual” means the manual for the operation of the Projectreferred to in Section 3.06 of this Agreement;

(k) “Performance Indicators” means the indicators set forth in the letterdated September 29, 1998 from the Borrower to the Bank;

(l) “Project Preparation Advance” means the project preparation advancegranted by the Bank to the Borrower pursuant to the Letter Agreement signed by the

Bank on December 19, 1997, and countersigned by the Borrower on January 16, 1998;

(m) “Special Account” means the account referred to in Section 2.02 (b) ofthis Agreement; and

(n) “Subproject” means a project to be carried out by a Beneficiary,consisting of one or more of the activities set forth in Part C.3 of the Project, andto be financed by the Competitive Fund.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower, on the terms andconditions set forth or referred to in this Agreement, an amount equal to one hundredand forty-five million four hundred and fifty thousand Dollars ($145,450,000).

Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Accountin accordance with the provisions of Schedule 1 to this Agreement for expendituresmade (or, if the Bank shall so agree, to be made) in respect of the reasonable cost ofgoods, works and services required for the Project and to be financed out of theproceeds of the Loan.

(b) The Borrower may, for the purposes of the Project open and maintain inDollars a special deposit account in its Central Bank or a commercial bank acceptableto the Bank on terms and conditions satisfactory to the Bank including, in the eventthe account is opened in a commercial bank, appropriate protection against set-off,



seizure and attachment. Deposits into, and payments out of, the Special Account shallbe made in accordance with the provisions of Schedule 5 to this Agreement.

(c) Promptly after the Effective Date, the Bank shall, on behalf of theBorrower, withdraw from the Loan Account and pay to itself the amount required torepay the principal amount of the Project Preparation Advance withdrawn andoutstanding as of such date and to pay all unpaid charges thereon. The unwithdrawnbalance of the authorized amount of the Project Preparation Advance shall thereupon be

canceled.

Section 2.03. The Closing Date shall be June 30, 2004 or such later date as theBank 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 onepercent (1%) of the amount of the Loan. On or promptly after the Effective Date, theBank shall, on behalf of the Borrower, withdraw from the Loan Account and pay toitself the amount of said fee.

Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rateof three-fourths of one percent (3/4 of 1%) per annum on the principal amount of theLoan not withdrawn from time to time.

Section 2.06. (a) The Borrower shall pay interest on the principal amount of theLoan withdrawn and outstanding from time to time, at a rate for each Interest Period

equal to LIBOR Base Rate plus LIBOR Total Spread.

(b) For the purposes of this Section:

(i) “Interest Period” means the initial period from and including thedate of this Agreement to, but excluding, the first InterestPayment Date occurring thereafter, and after the initialperiod, each period from and including an Interest PaymentDate to, but excluding the next following Interest Payment Date.

(ii) “Interest Payment Date” means any date specified in Section 2.07of this Agreement.

(iii) “LIBOR Base Rate” means, for each Interest Period, the Londoninterbank offered rate for six-month deposits in Dollarsfor value the first day of such Interest Period (or, in the case

of the initial Interest Period, for value the Interest PaymentDate occurring on or next preceding the first day of suchInterest Period), as reasonably determined by the Bank and expressed as a

percentage per annum.

(iv) “LIBOR Total Spread” means, for each Interest Period: (A) threefourths of one percent (3/4 of 1%); (B) minus (or plus) theweighted average margin, for such Interest Period, below (orabove) the London interbank offered rates, or other referencerates, for six-month deposits, in respect of the Bank’s outstanding

borrowings or portions thereof allocated by the Bank to fund single currencyloans or portions thereof made by it that include the Loan; as

reasonably determined by the Bank and expressed as apercentage per annum.

(c) The Bank shall notify the Borrower of LIBOR Base Rate and LIBOR TotalSpread for each Interest Period, promptly upon the determination thereof.

(d) Whenever, in light of changes in market practice affecting thedetermination of the interest rates referred to in this Section 2.06, the Bankdetermines that it is in the interest of its borrowers as a whole and of the Bank toapply a basis for determining the interest rates applicable to the Loan other than asprovided in said Section, the Bank may modify the basis for determining the interestrates applicable to the Loan upon not less than six months’ notice to the Borrower ofthe new basis. The basis shall become effective on the expiry of the notice periodunless the Borrower notifies the Bank during said period of its objection thereto, inwhich case said modification shall not apply to the Loan.



Section 2.07. Interest and other charges shall be payable semiannually inarrears on January 15 and July 15 in each year.

Section 2.08. The Borrower shall repay the principal amount of the Loan inaccordance with the amortization schedule set forth in Schedule 3 to this Agreement.

ARTICLE III

Execution of the Project

Section 3.01. (a) The Borrower declares its commitment to the objectives of theProject as set forth in Schedule 2 to this Agreement, and, to this end, shall:

(i) carry out the Project through MINEDUC; and

(ii) cause the Higher Council for Education and CONICYT to assistMINEDUC in the carrying out of Part B of the Project,

all with due diligence and efficiency and in conformity with appropriateadministrative, educational and financial practices and shall provide, promptly asneeded, the funds, facilities, services and other resources required for the Project.

(b) The Borrower shall, in the carrying out of Part C.3 of the Project,

through MINEDUC, enter into agreements with each Beneficiary, under terms andconditions substantially similar to those of the model form contained in theOperational Manual (the Grant Agreements), such agreements to provide for: (i) thetransfer by the Borrower to such Beneficiary, on a grant basis, of the funds requiredby such Beneficiary to carry out a Subproject; and (ii) the obligation of suchBeneficiary to carry out such Subproject as provided in the Operational Manual.

(c) The Borrower shall exercise its rights under the Grant Agreements in suchmanner as to protect the interests of the Borrower and the Bank and to accomplish thepurposes of the Loan, and, except as the Bank shall otherwise agree, the Borrowershall not assign, amend, abrogate, waive or fail to enforce any Grant Agreement or anyprovision thereof.

Section 3.02. Except as the Bank shall otherwise agree, procurement of the goodsand consultants’ services required for the Project and to be financed out of theproceeds of the Loan shall be governed by the provisions of Schedule 4 to this

Agreement.

Section 3.03. (a) The Borrower shall maintain, during the execution of theProject, a unit in DIVESUP responsible for Project coordination and management, suchunit to have a structure and functions satisfactory to the Bank, and to have qualifiedstaff in adequate numbers as required to carry out its responsibilities.

(b) The Borrower shall establish and maintain a unit in DIVESUP responsiblefor the operation of the Competitive Fund (the Competitive Fund Unit), such unit tohave a structure and functions satisfactory to the Bank, and to have qualified staffin adequate numbers as required to carry out its responsibilities.

Section 3.04. Without limitation to the provisions of Section 9.07 (a) (iii) ofthe General Conditions, the Borrower shall furnish to the Bank, not later than January15 and August 15 of each year during Project implementation, commencing August 15,1999, a report of such scope and in such detail as the Bank may request on theprogress in the carrying out of the Project during the six-month period preceding thedate of such report.

Section 3.05. The Borrower shall:

(a) maintain policies and procedures adequate to enable it to monitor andevaluate on an ongoing basis, in accordance with the Performance Indicators, thecarrying out of the Project and the achievement of the objectives thereof;

(b) prepare, under terms of reference satisfactory to the Bank, and furnishto the Bank, on or about January 15 each year, commencing January 15, 2000, a report



integrating the results of the monitoring and evaluation activities performed pursuantto paragraph (a) of this Section, on the progress achieved in the carrying out of theProject during the period preceding the date of said report and setting out themeasures recommended to ensure the efficient carrying out of the Project and theachievement of the objectives thereof during the period following such date; and

(c) review with the Bank, by January 30 each year, or such later date as theBank shall request, the report referred to in paragraph (b) of this Section, and,

thereafter, take all measures required to ensure the efficient completion of theProject and the achievement of the objectives thereof, based on the conclusions andrecommendations of the said report and the Bank’s views on the matter.

Section 3.06. The Borrower shall carry out the Project in accordance with anoperational manual satisfactory to the Bank, said manual to include, inter alia:

(a) the procedures for the carrying out, monitoring and evaluation of theProject;

(b) criteria for selection of Beneficiaries and Subprojects;

(c) requirements for implementation of Subprojects; and

(d) model forms for the Grant Agreements.

Section 3.07. The Borrower shall:

(a) prepare, on the basis of guidelines acceptable to the Bank, and furnishto the Bank not later than six months after the Closing Date or such later date as maybe agreed for this purpose between the Borrower and the Bank, a plan designed toensure the continued achievement of the objectives of the Project; and

(b) afford the Bank a reasonable opportunity to exchange views with theBorrower on said plan.

ARTICLE IV

Financial Covenants

Section 4.01. (a) The Borrower shall establish and maintain in DIVESUP afinancial management system, including records and accounts, and prepare financial

statements in a format acceptable to the Bank, adequate to reflect the operations,resources and expenditures related to the Project.

(b) The Borrower shall, through DIVESUP:

(i) have the records, accounts and financial statements referred to inparagraph (a) of this Section and the records and accounts forthe Special Account for each fiscal year audited, in accordancewith auditing standards acceptable to the Bank, consistentlyapplied, by independent auditors acceptable to the Bank;

(ii) furnish to the Bank as soon as available, but in any case notlater than six months after the end of each such year: (A)certified copies of the financial statements referred to inparagraph (a) of this Section for such year as so audited; and(B) an opinion on such statements, records and accounts and

report of such audit, by said auditors, of such scope and in such detail asthe Bank shall have reasonably requested; and

(iii) furnish to the Bank such other information concerning such recordsand accounts, and the audit thereof, and concerning saidauditors, as the Bank may from time to time reasonably request.

(c) For all expenditures with respect to which withdrawals from the LoanAccount were made on the basis of statements of expenditure, the Borrower shall:

(i) maintain or cause to be maintained, in accordance with paragraph



(a) of this Section, records and separate accounts reflectingsuch expenditures;

(ii) retain, until at least one year after the Bank has received theaudit report for the fiscal year in which the last withdrawal fromthe Loan Account was made, all records (contracts,orders, invoices, bills, receipts and other documents)evidencing such expenditures;

(iii) enable the Bank’s representatives to examine such records; and

(iv) ensure that such records and accounts are included in the annualaudit referred to in paragraph (b) of this Section and thatthe report of such audit contains a separate opinion by saidauditors as to whether the statements of expendituresubmitted during such fiscal year, together with the proceduresand internal controls involved in their preparation, can be relied upon to

support the related withdrawals.

ARTICLE V

Effective Date; Termination

Section 5.01. The following events are specified as additional conditions to the

effectiveness of this Agreement, within the meaning of Section 12.01 (c) of theGeneral Conditions:

(a) the Competitive Fund Unit has been established as provided in Section3.03 (b) of this Agreement;

(b) the financial management system referred to in Section 4.01 (a) of thisAgreement has been established;

(c) the Operational Manual has been approved by the Bank; and

(d) at least three Grant Agreements have been executed on behalf of theBorrower and Beneficiaries.

Section 5.02. The date April 22, 1999 is hereby specified for the purposes ofSection 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 asrepresentative of the Borrower for the purposes of Section 11.03 of the GeneralConditions.

Section 6.02. The following addresses are specified for the purposes of Section11.01 of the General Conditions:

For the Borrower:

Ministry of FinanceTeatinos 120Santiago, Chile

Telex:

241334 MHDA-CH

For the Bank:

International Bank for Reconstruction and Development1818 H Street, N.W.Washington, D.C. 20433



United States of America

Cable address: Telex:

INTBAFRAD 248423 (MCI) orWashington, D.C. 64145 (MCI)

IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized

representatives, have caused this Agreement to be signed in their respective names inthe District of Columbia, United States of America, as of the day and year first abovewritten.

REPUBLIC OF CHILE

By /s/ José Pablo ArellanoAuthorized Representative

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

By /s/ Shahid Javed BurkiRegional Vice President

Latin America and Caribbean

Countersigned on behalf of the Treasurer General of the Republic of Chile

By /s/ Genaro ArriagadaAuthorized Representative

Countersigned on behalf of the Controller General of the Republic of Chile

By /s/ Genaro ArriagadaAuthorized Representative

SCHEDULE 1

Withdrawal of the Proceeds of the Loan

1. The table below sets forth the Categories of items to be financed out of theproceeds of the Loan, the allocation of the amounts of the Loan to each Category andthe percentage of expenditures for items so to be financed in each Category:

Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollars) to be Financed

(1) Goods for Parts A.2. (e) 400,000 100% of foreignand B (c) of the Project expenditures,

100% of local



expenditures

(ex-factory cost)and 80% of localexpenditures forother items procuredlocally

(2) Consultants’ services 13,100,000 100%

and training (other thanPart C.3 of the Project)and marketing campaign

(3) Operating Expenditures 1,200,000 100%of the PCU

(4) Grants for Subprojects 129,000,000 90% of the amount ofthe Grant providedunder each GrantAgreement

(5) Refunding of Project 300,000 Amounts due pursuantPreparation Advance to Section 2.02 (c) of

this Agreement

(6) Fee 1,450,000 Amount due underSection 2.04 of this

__________ Agreement

TOTAL 145,450,000===========

2. For the purposes of this Schedule:

(a) the term “foreign expenditures” means expenditures in the currency of anycountry other than that of the Borrower for goods or services supplied from theterritory of any country other than that of the Borrower;

(b) the term “local expenditures” means expenditures in the currency of theBorrower or for goods or services supplied from the territory of the Borrower; and

(c) the term “Operating Expenditures of the PCU” means the cost of fixed termstaff consultants’ fees, office supplies and materials, office leasing, utilities andother related costs of the units referred to in paragraph 3.03 of this Agreement.

3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall bemade in respect of payments made for expenditures prior to the date of this Agreement.

4. The Bank may require withdrawals from the Loan Account to be made on the basisof statements of expenditure for expenditures for: (a) goods and works costing,respectively, less than $500,000 and $5,000,000 equivalent per contract, except thoseunder the first two contracts of goods and works to be awarded pursuant to theprovisions of Part C.2 of Section I of Schedule 4 to this Agreement; (b) consultingfirms’ services under contracts costing less than $100,000 equivalent each; (c)individual consultants’ services under contracts costing less than $50,000 equivalenteach; and (d) grants for Subprojects and training, all under such terms and conditionsas the Bank shall specify by notice to the Borrower.

SCHEDULE 2

Description of the Project

The objective of the Project is to improve the performance of the Borrower’shigher education system and, in particular, its quality, coherence, efficiency,relevance, and equity.

The Project consists of the following parts, subject to such modificationsthereof as the Borrower and the Bank may agree upon from time to time to achieve such



objectives:

Part A: Policy Framework and Capacity Building

1. Enhancement of the legal and regulatory framework for the higher educationsubsector, consisting of: (a) development of definitions of the appropriate roles ofthe universities, professional institutes and technical training centers involved inhigher education; (b) establishment of mechanisms to facilitate transfers of students

and graduates among such educational institutions; and (c) preparation of draft lawsand/or regulations, and/or draft amendments to existing laws and/or regulations.

2. Carrying out of a policy and institutional capacity building program consistingof the following activities: (a) development of policies (and appropriate mechanismsfor delivering them) on non-university institutions, on target participation rates forhigher education, on direct contribution by higher education institutions to regionaleconomic development, on higher education student access equity, and on improvedmethods for gathering and conveying information and signals on the future needs of theBorrower’s economy; (b) development of new working procedures and arrangements betweenthe various types of higher education institutions and DIVESUP; (c) building capacityfor strategic planning and management at DIVESUP and other higher education governingbodies; (d) building capacity for strategic planning and management at highereducation institutions; (e) design and implementation of a management informationsystem to provide system-wide information on higher education for stakeholders’decision-making including provision of the equipment required therefor; and (f) design

and implementation of a marketing campaign to promote technical education.

Part B: Quality Assurance

Establishment of a quality assurance system for higher education services,including: (a) consolidation of the national system for higher education qualityassurance; (b) establishment of a qualification framework for study programs; and (c)design and implementation of a higher education quality awareness campaign.

Part C: Institutional Funding and Quality Improvement

1. Establishment of a coherent policy basis for public funding of higher educationactivities.

2. Development of a funding methodology for higher education activities.

3. Operation of a competitive fund to promote quality and relevance in the highereducation subsector (the Competitive Fund), through the provision of grants toBeneficiaries: (a) for undergraduate programs in fields of national priority, such asbasic sciences, health, technology, agronomy and education; (b) for graduate programs,with emphasis on doctoral programs in general, and master and doctoral programsoriented to the productive sectors and to the improvement of higher educationteaching; (c) for technical training programs in fields of high demand from theproductive sectors; and (d) for the improvement of the facilities, equipment and humanresources of Beneficiaries as required to implement the programs referred to inparagraphs (a), (b) and (c) above.

4. Assessment and revision of the Borrower’s student loan and scholarship schemeswith a view to increasing equity in access to, and opportunities for, highereducation.

* * *

The Project is expected to be completed by December 31, 2003.

SCHEDULE 3

Amortization Schedule

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

July 15, 2004 7,275,000



July 15, 2005 7,275,000

July 15, 2006 7,275,000July 15, 2007 7,275,000July 15, 2008 7,275,000July 15, 2009 7,275,000July 15, 2010 7,275,000July 15, 2011 7,275,000July 15, 2012 7,275,000

July 15, 2013 7,225,000

TOTALS

________________________

* The figures in this column represent the amount in Dollars to be repaid, exceptas provided in Section 4.04 (d) of the General Conditions.

SCHEDULE 4

Procurement

Section I. Procurement of Goods and Works

Part A: General

Goods and works shall be procured in accordance with the provisions of Section Iof the "Guidelines for Procurement under IBRD Loans and IDA Credits” published by theBank in January 1995 and revised in January and August 1996 and September 1997 (theGuidelines) and the following provisions of Section I of this Schedule.

Part B: International Competitive Bidding

1. Except as otherwise provided in Part C of this Section, goods and works shall beprocured under contracts awarded in accordance with the provisions of Section II ofthe Guidelines and paragraph 5 of Appendix 1 thereto.

2. The following provisions shall apply to the procurement of goods and works to beprocured under contracts awarded in accordance with the provisions of paragraph 1 ofthis Part B.

(a) Grouping of Contracts

To the extent practicable, contracts shall be grouped in bid packages estimatedto cost $350,000 and $5,000,000 equivalent or more each for goods and works,respectively.

(b) Preference for Domestically Manufactured Goods

The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix 2thereto shall apply to goods manufactured in the territory of the Borrower.

Part C: Other Procurement Procedures

1. Limited International Bidding

Specialized scientific equipment which the Bank agrees can only be purchasedfrom a limited number of suppliers, regardless of the cost thereof, may be procuredunder contracts awarded in accordance with the provisions of paragraph 3.2 of theGuidelines.

2. National Competitive Bidding

Goods (including goods for Subprojects) and works estimated to cost



respectively, less than $350,000 and $5,000,000 equivalent per contract, up to anaggregate amount of $400,000 equivalent for goods for Part A.2 (e) of the Project, maybe procured under contracts awarded in accordance with the provisions of paragraphs3.3 and 3.4 of the Guidelines. In the procurement of goods and works under this PartC.2, standard bidding documents, satisfactory to the Bank, shall be used.

3. National Shopping

Goods (including goods for Subprojects) estimated to cost less than $100,000equivalent per contract, up to an aggregate amount of $300,000 equivalent for goodsother than for Subprojects, may be procured under contracts awarded on the basis ofnational shopping procedures, in accordance with the provisions of paragraphs 3.5 and3.6 of the Guidelines.

4. Procurement of Small Works

Works estimated to cost less than $350,000 equivalent per contract may beprocured under lump-sum, fixed-price contracts awarded on the basis of quotationsobtained from three (3) qualified domestic contractors in response to a writteninvitation. The invitation shall include a detailed description of the works,including basic specifications, the required completion date, a basic form ofagreement acceptable to the Bank, and relevant drawings, where applicable. The awardshall be made to the contractor who offers the lowest price quotation for the requiredwork, and who has the experience and resources to complete the contract successfully.

Part D: Review by the Bank of Procurement Decisions

1. Procurement Planning

Prior to the issuance of any invitations to bid for contracts, the proposedprocurement plan for the Project shall be furnished to the Bank for its review andapproval, in accordance with the provisions of paragraph 1 of Appendix 1 to theGuidelines. Procurement of all goods and works shall be undertaken in accordance withsuch procurement plan as shall have been approved by the Bank, and with the provisionsof said paragraph 1.

2. Prior Review

With respect to: (a) each contract for goods estimated to cost the equivalent of$500,000 or more; (b) each contract for works estimated to cost the equivalent of

$5,000,000 or more; and (c) to the first two contracts for goods and works to beawarded in accordance with the provisions of Part C.2 above, the procedures set forthin paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply.

3. Post Review

The procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shallapply to each contract not governed by paragraph 2 of this Part.

Section II. Employment of Consultants

Part A: General

Consultants’ services shall be procured in accordance with the provisions of theIntroduction and Section IV of the “Guidelines: Selection and Employment ofConsultants by World Bank Borrowers” published by the Bank in January 1997 and revisedin September 1997 (the Consultant Guidelines) and the following provisions of SectionII of this Schedule.

Part B: Quality- and Cost-based Selection

1. Except as otherwise provided in Part C of this Section, consultants’ serviceswith firms shall be procured under contracts awarded in accordance with the provisionsof Section II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto,Appendix 2 thereto, and the provisions of paragraphs 3.13 through 3.18 thereofapplicable to quality- and cost-based selection of consultants.



2. The short list of consultants for services to be procured in accordance with theprovisions of paragraph 1 above, estimated to cost less than $100,000 equivalent percontract, may comprise entirely national consultants in accordance with the provisionsof paragraph 2.7 of the Consultant Guidelines.

Part C: Other Procedures for the Selection of Consultants

1. Quality-based Selection

Services to be provided by firms for technical assistance and research shall beprocured under contracts awarded in accordance with the provisions of paragraphs 3.1through 3.4 of the Consultant Guidelines.

2. Least-cost Selection

Consultants’ services for tasks of a routine or standard nature and estimated tocost less than $60,000 equivalent per contract, up to an aggregate not to exceed$2,500,000 equivalent for services other than for Subprojects may be procured, at theoption of the Borrower, under contracts awarded in accordance with the provisions ofparagraphs 3.1 and 3.6 of the Consultant Guidelines.

3. Individual Consultants

Services for tasks that meet the requirements set forth in paragraph 5.1 of the

Consultant Guidelines shall be procured under contracts awarded to individualconsultants in accordance with the provisions of paragraphs 5.1 through 5.3 of theConsultant Guidelines.

Part D: Review by the Bank of the Selection of Consultants

1. Selection Planning

Prior to the issuance to consultants of any requests for proposals, the proposedplan for the selection of consultants under the Project shall be furnished to the Bankfor its review and approval, in accordance with the provisions of paragraph 1 ofAppendix 1 to the Consultant Guidelines. Selection of all consultants’ services shallbe undertaken in accordance with such selection plan as shall have been approved bythe Bank, and with the provisions of said paragraph 1.

2. Prior Review

(a) With respect to each contract for the employment of consulting firmsestimated to cost the equivalent of $200,000 or more, the procedures set forth inparagraphs 1, 2 and (other than the third subparagraph of paragraph 2 (a)) and 5 ofAppendix 1 to the Consultant Guidelines shall apply.

(b) With respect to each contract for the employment of consulting firmsestimated to cost the equivalent of $100,000 or more, but less than the equivalent of$200,000, the procedures set forth in paragraphs 1, 2 (other than the secondsubparagraph of paragraph 2(a)) and 5 of Appendix 1 to the Consultant Guidelinesshall apply.

(c) With respect to each contract for the employment of individualconsultants estimated to cost the equivalent of $50,000 or more, the qualifications,experience, terms of reference and terms of employment of the consultants shall befurnished to the Bank for its prior review and approval. The contract shall beawarded only after the said approval shall have been given.

3. Post Review

With respect to each contract not governed by paragraph 2 of this Part, theprocedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shallapply, provided, however, that the terms of reference for the respective assignmentsshall be subject to the Bank’s prior review and approval.

SCHEDULE 5



Special Account

1. For the purposes of this Schedule:

(a) the term “eligible Categories” means Categories (1), (2), (3) and (4) setforth in the table in paragraph 1 of Schedule 1 to this Agreement;

(b) the term “eligible expenditures” means expenditures in respect of the

reasonable cost of goods, works and services required for the Project and to befinanced out of the proceeds of the Loan allocated from time to time to the eligibleCategories in accordance with the provisions of Schedule 1 to this Agreement; and

(c) the term “Authorized Allocation” means the amount of $9,000,000 to bewithdrawn from the Loan Account and deposited into the Special Account pursuant toparagraph 3 (a) of this Schedule, provided, however, that unless the Bank shallotherwise agree, the Authorized Allocation shall be limited to the amount of$3,000,000 until the aggregate amount of withdrawals from the Loan Account plus thetotal amount of all outstanding special commitments entered into by the Bank pursuantto Section 5.02 of the General Conditions shall be equal to or exceed $9,000,000.

2. Payments out of the Special Account shall be made exclusively for eligibleexpenditures in accordance with the provisions of this Schedule.

3. After the Bank has received evidence satisfactory to it that the Special Account

has been duly opened, withdrawals of the Authorized Allocation and subsequentwithdrawals to replenish the Special Account shall be made as follows:

(a) For withdrawals of the Authorized Allocation, the Borrower shall furnishto the Bank a request or requests for deposit into the Special Account of an amount oramounts which do not exceed the aggregate amount of the Authorized Allocation. On thebasis of such request or requests, the Bank shall, on behalf of the Borrower, withdrawfrom the Loan Account and deposit into the Special Account such amount or amounts asthe Borrower shall have requested.

(b) (i) For replenishment of the Special Account, the Borrower shallfurnish to the Bank requests for deposits into the SpecialAccount at such intervals as the Bank shall specify.

(ii) Prior to or at the time of each such request, the Borrower shallfurnish to the Bank the documents and other evidence required

pursuant to paragraph 4 of this Schedule for the payment orpayments in respect of which replenishment is requested. On thebasis of each such request, the Bank shall, on behalf of theBorrower, withdraw from the Loan Account and deposit into the Special Account

such amount as the Borrower shall have requested and as shall have beenshown by said documents and other evidence to have been paid outof the Special Account for eligible expenditures. Allsuch deposits shall be withdrawn by the Bank from the LoanAccount under the respective eligible Categories, and in therespective equivalent amounts, as shall have been justified by said

documents and other evidence.

4. For each payment made by the Borrower out of the Special Account, the Borrowershall, at such time as the Bank shall reasonably request, furnish to the Bank suchdocuments and other evidence showing that such payment was made exclusively foreligible expenditures.

5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shallnot be required to make further deposits into the Special Account:

(a) if, at any time, the Bank shall have determined that all furtherwithdrawals should be made by the Borrower directly from the Loan Account inaccordance with the provisions of Article V of the General Conditions and paragraph(a) of Section 2.02 of this Agreement;

(b) if the Borrower shall have failed to furnish to the Bank, within theperiod of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit



reports required to be furnished to the Bank pursuant to said Section in respect ofthe audit of the records and accounts for the Special Account;

(c) if, at any time, the Bank shall have notified the Borrower of itsintention to suspend in whole or in part the right of the Borrower to make withdrawalsfrom the Loan Account pursuant to the provisions of Section 6.02 of the GeneralConditions; or

(d) once the total unwithdrawn amount of the Loan allocated to the eligibleCategories, minus the total amount of all outstanding special commitments entered intoby the Bank pursuant to Section 5.02 of the General Conditions, shall equal theequivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawalfrom the Loan Account of the remaining unwithdrawn amount of the Loan allocated to theeligible Categories shall follow such procedures as the Bank shall specify by noticeto the Borrower. Such further withdrawals shall be made only after and to the extentthat the Bank shall have been satisfied that all such amounts remaining on deposit inthe Special Account as of the date of such notice will be utilized in making paymentsfor eligible expenditures.

6. (a) If the Bank shall have determined at any time that any payment out of theSpecial Account: (i) was made for an expenditure or in an amount not eligible pursuantto paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnishedto the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide suchadditional evidence as the Bank may request; or (B) deposit into the Special Account

(or, if the Bank shall so request, refund to the Bank) an amount equal to the amountof such payment or the portion thereof not so eligible or justified. Unless the Bankshall otherwise agree, no further deposit by the Bank into the Special Account shallbe made until the Borrower has provided such evidence or made such deposit or refund,as the case may be.

(b) If the Bank shall have determined at any time that any amount outstandingin the Special Account will not be required to cover further payments for eligibleexpenditures, the Borrower shall, promptly upon notice from the Bank, refund to theBank such outstanding amount.

(c) The Borrower may, upon notice to the Bank, refund to the Bank all or anyportion of the funds on deposit in the Special Account.

(d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) ofthis Schedule shall be credited to the Loan Account for subsequent withdrawal or for

cancellation in accordance with the relevant provisions of this Agreement, includingthe General Conditions.

Contrato Chile BM (MECE)

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