CONFORMED COPY

CREDIT NUMBER 561 BO

Development Credit

Agreement(Agricultural Credit Project)

BETWEEN

REPUBLIC OF BOLIVIA

AND

INTERNATIONAL DEVELOPMENT ASSOCIATION

DATED JUNE 20, 1975

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CONFORMED COPY

CREDIT NUMBER 561 BO

Development Credit

Agreement(Agricultural Credit Project)

BETWEEN

REPUBLIC OF BOLIVIA

AND

INTERNATIONAL DEVELOPMENT ASSOCIATION

DATED JUNE 20, 1975

DEVELOPMENT CREDIT AGREEMENT

AGREEMENT, dated June 20, 1975, between REPUBLIC OF BOLIVIA(hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT

. ASSOCIATION (hereinafter called the Association).

WHEREAS (A) The Borrower has requested the Association to assist in thefinancing of the Project described in Schedule 2 to this Agreement by extendingthe Credit as hereinafter provided;

(B) The Project will be partly carried out by Banco Agricola de Bolivia(hereinafter called BAB) with the Borrower's assistance and, as part of suchassistance, the Borrower will make available to BAB part of the proceeds of theCredit as hereinafter provided; and

(C) The Association is willing to make the Credit available upon the termsand conditions set forth hereinafter and in a project agreement of even dateherewith between the Association and BAB;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept all the provisions of theGeneral Conditions Applicable to Development Credit Agreements of theAssociation, dated March 15, 1974, with the same force and effect as if they werefully set forth herein (said General Conditions Applicable to Development CreditAgreements of the Association being hereinafter called the General Conditions).

Section 1.02. Wherever used in this Agreement, unless the context otherwiserequires, the several terms defined in the General Conditions have the respectivemeanings therein set forth and the following additional terms have the followingmeanings:

(a) "Project Agreement" means the agreement between the Associationand BAB of even date herewith, as the same may be amended from time to time,and such term includes the schedule to the Project Agreement;

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(b) "Subsidiary Loan Agreement" means any one of the agreements tobe entered into between Banco Central, acting on behalf of the Borrower, anda Participating Bank pursuant to Section 3.03(iii) of this Agreement, as the samemay be amended from time to time; and "Subsidiary Loan" means a loan providedfor in a subsidiary loan agreement;

(c) "Banco Central" means Banco Central de Bolivia;

(d) "BAB" means Banco Agricola de Bolivia;

(e) "Participating Bank" means BAB or any commercial bank, once it hasentered into a Subsidiary Loan Agreement;

(f) "Project Account" means Banco Central's account referred to inSection 3.03(i) of this Agreement;

(g) "Farm Loan Agreement" means an agreement to be entered into,pursuant to paragraph B of Schedule 3 to this Agreement, between a ParticipatingBank and a Beneficiary for the financing of a Farm Plan; and "Farm Loan" meansa loan provided for in a Farm Loan Agreement;

(h) "Beneficiary" means a farmer or group of farmers to which theParticipating Bank proposes to make or has made a Farm Loan;

(i) "Farm Plan" means the farm development and the farm managementplan, to be carried out by a Beneficiary, to increase or to improve, or both, thephysical resources and productivity of a farm, including, but without limitation,the acquisition of such goods and services and the construction of such facilitiesas shall be suitable for the purposes of the Farm Plan;

(j) "ALPD" means the Agricultural and Livestock Project Division of BABreferred to in Section 2.02(i) of the Project Agreement;

(k) "Project Director" and "Deputy Project Director" mean the personsreferred to in Section 3.08 of this Agreement; and

(1) "peso" means the currency of the Borrower.

ARTICLE II

The Credit

Section 2.01. The Association agrees to lend to the Borrower, on the termsand conditions in the Development Credit Agreement set forth or referred to, an

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amount in various currencies equivalent to seven million and five hundred thousanddollars ($7,500,000).

Section 2.02. The amount of the Credit may be withdrawn from the CreditAccount in accordance with the provisions of Schedule 1 to this Agreement, assuch Schedule may be amended from time to time, for expenditures made (or,if the Association shall so agree, to be made) in respect of the reasonable costof goods and services required for the Project and to be financed out of the proceedsof the Credit.

Section 2.03. Except as the Association shall otherwise agree, goods, worksand services (other than consultants' services) for the Project and to be financedout of the proceeds of the Credit allocated from time to time to Category (2)of the table in paragraph I of Schedule 1 to this Agreement, shall be procuredin accordance with the provisions referred to in Section 2.03 of the Project

- Agreement.

Section 2.04. The Closing Date shall be June 30, 1979 or such later date- as the Association shall establish. The Association shall promptly notify the

Borrower of such later date.

Section 2.05. The Borrower shall pay to the Association a service chargeat the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principalamount of the Credit withdrawn and outstanding from time to time.

Section 2.06. Service charges shall be payable semi-annually on March 1 andSeptember 1 in each year.

Section 2.07. The Borrower shall repay the principal amount of the Creditin semi-annual installments payable on each March I and September 1 commencingSeptember 1, 1985 and ending March 1, 2025, each installment to and includingthe installment payable on March 1, 1995 to be one-half of one per cent (1/2of 1%) of such principal amount, and each installment thereafter to be one andone-half per cent (1-1/2%) of such principal amount.

Section 2.08. The currency of the United States of America is herebyspecified for the purposes of Section 4.02 of the General Conditions.

Section 2.09. Banco Central is designated as representative of the Borrowerfor the purposes of taking any action required or permitted to be taken underthe provisions of Section 2.02 of this Agreement and Article V of the GeneralConditions.

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ARTICLE III

Execution of the Project

Section 3.01. (a) The Borrower shall, through its Ministerio de AsuntosCompesinos Y Agropecuarios, carry out Part B of the Project and shall cause BancoCentral and the Participating Banks to carry out Part A of the Project, with duediligence and efficiency and in conformity with appropriate administrative,financial, banking and agricultural practices, and shall provide, promptly as needed,the funds, facilities, services and other resources required for the purpose.

(b) Without any limitation or restriction upon any of its other obligationsunder the Development Credit Agreement, the Borrower shall cause BAB to performin accordance with the provisions of the Project Agreement all the obligationstherein set forth, shall take and cause to be taken all action, including the provisionof funds, facilities, services and other resources, necessary or appropriate to enableBAB to perform such obligations, and shall not take or permit to be taken anyaction which would prevent or interfere with such performance.

(c) Without restriction or limitation upon its obligations under thepreceding paragraph (b) of this Section, the Borrower shall subscribe to increasesof capital stock of BAB not less than the equivalent of $4,300,000 and makepayments on account thereof as follows:

(i) the equivalent of $250,000, before the Effective Date;

(ii) the equivalent of $860,000, not later than January 31, 1976;

(iii) the equivalent of $860,000, not later than July 31, 1976;

(iv) the equivalent of $1,360,000, not later than January 31, 1977;and

(v) the equivalent of $970,000, not later than September 30, 1977.

Section 3.02. (a) Without limitation or restriction upon the provisions ofSection 3.01(a) of this Agreement, the Borrower shall, for the purposes of carryingout Part B of the Project, and in addition to the proceeds of the Credit withdrawnfrom time to time from Category (3) of the table in paragraph I of Schedule1 to this Agreement, provide as and when needed funds equivalent to not lessthan $100,000.

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(b) In carrying out the program of agricultural research andexperimentation included in Part B of the Project, the Borrower shall cause itsstaff to work in close coordination with the Project Director to ensure that suchprogram conforms to the needs of the Project.

Section 3.03. Except as the Association shall otherwise agree, the Borrowershall:

(i) establish and maintain in Banco Central a Project Account forthe purpose of recording all receipts and payments of moneyfor or in connection with Part A of the Project;

(ii) deposit in the Project Account (A) immediately upon withdrawalfrom the Credit Account, such amounts of money in thecurrency of the Borrower as shall be equivalent to the amountswithdrawn by the Borrower from time to time from the CreditAccount for Farm Loans; (B) the amount referred to in Section6.01(c) of this Agreement; (C) an amount equivalent to not lessthan $280,000, not later than January 31, 1976; and (D) anamount equivalent to not less than $280,000, not later thanJanuary 31, 1977; and

(iii) cause Banco Central, acting on behalf of the Borrower, (A) tolend to the Participating Banks such amounts of money as shallhave been credited to the Project Account pursuant to thepreceding paragraph (ii), under Subsidiary Loan Agreements onsuch terms and conditions as set forth in Schedule 3 to thisAgreement, as such Schedule may be amended from time totime, and on such other terms and conditions as shall besatisfactory to the Association; and (B) to exercise its rights inrelation to any Subsidiary Loan Agreement in such manner asto protect the interests of the Borrower and the Association,and not to take or concur in any action which would have theeffect of amending, abrogating, assigning or waiving anyprovision of any such Subsidiary Loan Agreement without theprior approval of the Association.

Section 3.04. The Borrower shall review every six months, starting six monthsafter the date of this Agreement, the amounts contributed by the ParticipatingBanks (other than BAB) for the execution of the Project. In the event that suchcontribution by any Participating Bank (other than BAB) shall have not taken

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place as required for the execution of the Project, the Boirower shall promptlyprovide BAB with funds, in the form of contribution to the capital of BAB, insuch amounts as shall correspond to the difference between the expectedcontribution of the equivalent of about $225,000 in each six-month period andthe actual contribution of such Participating Bank in the Project.

Section 3.05. The Borrower: (i) shall maintain, and in respect of Part Aof the Project shall cause Banco Central and the Participating Banks to maintain,records adequate to record the progress of the Project (including the cost thereof)and to identify the goods and services financed out of the proceeds of the Credit,and to disclose the use thereof in the Project; (ii) shall enable the Association'saccredited representatives to visit the farms and facilities included in the Projectand to examine the goods financed out of the proceeds of the Credit and anyrelevant records and documents; and (iii) shall furnish or cause to be furnishedto the Association all such information as the Association shall reasonably requestconcerning the Project, the expenditure of the proceeds of the Credit, the goodsand services financed out of such proceeds, and in respect of Part A of the Project,the administration, operations and financial condition of Banco Central and theParticipating Banks.

Section 3.06. The Borrower shall transfer to BAB in the form of contributionto the capital of BAB the proceeds of the Credit withdrawn from time to timefrom the Credit Account for the purposes of Project administration.

Section 3.07. The Borrower shall cause the amounts paid by the ParticipatingBanks to Banco Central under the Subsidiary Loan Agreements less the amountsneeded by the Borrower to service the Credit, to be used for further lending forthe same purposes of Part A of the Project for a period of 15 years from thedate of this Agreement on such terms and conditions as shall be agreed from timeto time between the Borrower and the Association.

Section 3.08. The Borrower shall appoint, in agreement with the Association,an experienced high level administrator and an agricultural and livestock expertto be respectively the Project Director and Deputy Project Director of ALPD, suchpersons to be employed under terms and conditions satisfactory to the Association.

ARTICLE IV

Other Covenants

Section 4.01. The Borrower shall: (i) give priority to the carrying out, inconsultation with BAB, of a program for granting legal land titles to farmers settled

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in the lands in the Project areas; and (ii) provide, promptly as needed, the funds,facilities, services and other resources required therefor.

Section 4.02. The Borrower shall maintain a price policy aimed at increasingits agricultural production and providing adequate incentives to farmers.

Section 4.03. The Borrower shall maintain or cause to be maintained recordsadequate to reflect in accordance with consistently maintained appropriateaccounting practices the operations, resources and expenditures, in respect of theProject, of the departments or agencies of the Borrower responsible for carryingout the Project or any part thereof.

Section 4.04. The Borrower shall cause Banco Central to: (i) have its accountsand financial statements (balance sheets, statements of income and expenses andrelated statements), in respect of Part A of the Project, for each fiscal year audited,in accordance with appropriate auditing principles consistently applied, by auditorsacceptable to the Association; (ii) furnish to the Association 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, in respect of Part A of the Project,for such year as so audited and (B) the report of such audit by said auditors,of such scope and in such detail as the Association shall have reasonably requested;and (iii) furnish to the Association such other information concerning the accountsand financial statements of Banco Central, in respect of Part A of the Project,and the audit thereof as the Association shall from time to time reasonably request.

ARTICLE V

Remedies of the Association

Section 5.01. For the purposes of Section 6.02 of the General Conditionsthe following additional events are specified pursuant to paragraph (h) thereof:

(a) a default shall occur in the performance of any obligation on the partof BAB under the Project Agreement;

(b) a Participating Bank shall have become unable to pay its debts as theymature or any action or proceeding shall have been taken by a Participating Bankor by others whereby any of the property of such Participating Bank shall ormay be distributed among its creditors; and

(c) the Borrower or any other authority having jurisdiction shall have takenany action for the dissolution or disestablishment of any Participating Bank or

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for the suspension of its operations; provided, however, that if any event referredto in paragraph (a), (b) or (c) of this Section shall have occurred and be continuing,the Association may at its option suspend the right of the Borrower to makewithdrawals from the Credit Account only in respect of amounts relent or proposedto be relent to such Participating Bank.

Section 5.02. For the purposes of Section 7.01 of the General Conditions,the following additional events are specified pursuant to paragraph (d) thereof:

(a) the event specified in paragraph (a) of Section 5.01 of this Agreementshall occur and shall continue for a period of 60 days after notice thereof shallhave been given by the Association to the Borrower and BAB; and

(b) any event specified in paragraph (b) or (c) of Section 5.01 of thisAgreement shall occur.

ARTICLE VI

Effective Date; Termination

Section 6.01. The following events are specified as additional conditions tothe effectiveness of the Development Credit Agreement within the meaning ofSection 12.01(b) of the General Conditions:

(a) the execution and delivery of the Project Agreement on behalf of BABhave been duly authorized or ratified by all necessary corporate and governmentalaction;

(b) the execution and delivery of the Subsidiary Loan Agreement on behalfof Banco Central and BAB, respectively, have been duly authorized or ratifiedby all necessary corporate and governmental action;

(c) the Project Account has been established and the Borrower has madea deposit therein in the currency of the Borrower tquivalent to not less than$250,000;

(d) the amount set forth in Section 3.01(c)(i) of this Agreement has beenpaid to BAB as required therein;

(e) the Project Director and the Deputy Project Director have beenretained as required in Section 3.08 of this Agreement; and

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(f) a Decreto Supremo has been enacted authorizing the adoption byBanco Central and the Participating Banks of the adjustment method provided inparagraphs A.3(i) and B.5(i) of Schedule 3 to this Agreement and of the rate ofinterest provided in paragraphs A.4(a)(ii) and B.6(i) of such Schedule 3.

Section 6.02. The following is specified as an additional matter, within themeaning of Section 12.02(b) of the General Conditions, to be included in theopinion or opinions to be furnished to the Association, namely that the ProjectAgreement has been duly authorized or ratified by, and executed and deliveredon behalf of, BAB, and is legally binding upon BAB in accordance with its terms

Section 6.03. The date September 19, 1975 is hereby specified for thepurposes of Section 12.04 of the General Conditions.

Section 6.04. The obligations of the Borrower under Section 4.02 of thisAgreement and the provisions of paragraphs (a) and (b) of Section 5.02 of thisAgreement shall cease and determine on the date on which the Development CreditAgreement shall terminate or on a date 15 years after the date of this Agreement,whichever shall be the earlier.

ARTICLE VII

Representative of the Borrower; Addresses

Section 7.01. The Minister of Finance of the Borrower is designated asrepresentative of the Borrower for the purposes of Section 11.03 of the GeneralConditions.

Section 7.02. The following addresses are specified for the purposes ofSection 11.01 of the General Conditions:

For the Borrower.

Ministerio de FinanzasLa PazBolivia

Cable address:

MINFINANZASLa Paz

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For the Association:

International Development Association1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address:

INDEVASWashington, D.C.

IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused this Agreement to be signedin their respective names in the District of Columbia, United States of America,as of the day and year first above written.

REPUBLIC OF BOLIVIA

By /s/ Roberto CaprilesAuthorized Representative

INTERNATIONAL DEVELOPMENT ASSOCIATION

By /s/ Adalbert KriegerRegional Vice President

Latin America and the Caribbean

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SCHEDULE 1

Withdrawal of the Proceeds of the Credit

1. The table below sets forth the Categories of items to be financed out ofthe proceeds of the Credit, the allocation of the amounts of the Credit to eachCategory and the percentage of expenditures for items so to be financed in eachCategory:

Amount of theCredit Allocated 9% Of

(Expressed in ExpendituresCategory Dollar Equivalent) to be Financed

(1) Fart Loans under 7,100,000 73% of amountsPart A of the disbursed underProject Farm Loans

(2) Project administra- 300,000tion

(a) Civil works and 40%equipment

(b) Vehicles and 100% of foreignsalaries of expendituresstaff

(3) Equipment for agri- 100,000 100% of foreigncultural research and expendituresexperimentation

TOTAL 7,500,000

2. For the purposes of this Schedule the term "foreign expenditures" meansexpenditures in the currency of any country other than the Borrower and forgoods or services supplied from the territory of any country other than theBorrower.

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3. The disbursement percentages have been calculated in compliance with thepolicy of the Association that no proceeds of the Credit shall be disbursed onaccount of payments for taxes levied by, or in the territory of, the Borrower ongoods or services, or on the importation, manufacture, procurement or supplythereof; to that end, if the amount of any such taxes levied on or in respectof any item to be financed out of the proceeds of the Credit decreases or increases,the Association may, by notice to the Borrower, increase or decrease thedisbursement percentage then applicable to such item as required to be consistentwith the aforementioned policy of the Association.

4. Notwithstanding the provisions of paragraph I above, no withdrawals shallbe made in respect of (i) expenditures prior to the date of this Agreement, and(ii) a Farm Loan until the Association has received evidence satisfactory to theAssociation that the execution and delivery of the appropriate Subsidiary LoanAgreement for the Farm Loan in question, on behalf of Banco Central and thePart'cipating Bank, have been duly authorized or ratified by all necessarygovernmental and corporate action.

5. Notwithstanding the allocation of an amount of the Credit or thedisbursement percentages set forth in the table in paragraph I above:

(a) withdrawals in respect of Farm Loans under Part A(i) of the Projectshall not exceed 55% of the amount of the Credit allocated to Category (1); and

(b) if the Association has reasonably estimated that the amount of theCredit then allocated to any Category will be insufficient to finance the agreedpercentage of all expenditures in that Category, the Association nay, by noticeto the Borrower: (i) reallocate to such Category, to the extent required to meetthe estimated shortfall, proceeds of the Credit which are then allocated to anotherCategory and which in the opinion of the Association are not needed to meetother expenditures, and (ii) if such reallocation cannot fully meet the estimatedshortfall, reduce the disbursement percentage then applicable to such expendituresin order that further withdrawals under such Category may continue until allexpenditures thereunder shall have been made.

6. If the Association shall have reasonably determined that the procurementof any item in Category (2) is inconsistent with the procedures set forth or referredto in this Agreement, no expenditures for such item shall be financed out of theproceeds of the Credit and the Association may, without in any way restrictingor limiting any other right, power or remedy of the Association under theDevelopment Credit Agreement, by notice to the Borrower, cancel such amount

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of the Credit as, in the Association's reasonable opinion, represents the amountof such expenditures which would otherwise have been eligible for financing outof the proceeds of the Credit.

&

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SCHEDULE 2

Description of the Project

The Project is part of the Borrower's lending program to help develop beefand sugarcane production in the lowlands, annual crops and grapes in the valleysand mutton and wool production in the high plateau. Its main objectives are: (a)to expand agricultural production both for export (livestock and sugarcane) anddomestic consumption (wool, mutton, wheat, potatoes, oats and grapes); (b) toimprove the social and economic condition of about 3,600 poor families in therural areas; and (c) to channel additional resources to the poorer regions (highplateau and valleys) of the country.

The Project includes:

Part A: Provision of Farm Loans to: (i) beef cattle ranchers in Beni and SantaCruz for development of beef cattle breeding and fattening ranches;(ii) sugarcane farmers in Santa Cruz; (iii) grape growers in the valleyof Tarija; (iv) potato, wheat and oat growers in Cochabamba; and (v)sheep ranchers in the highlands north and east of La Paz fordevelopment of sheep breeding for both wool and mutton.

Part B: A program of agricultural research and experimentation at the Saavedrastation.

The Project is expected to be completed by December 31, 1989.

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SCHEDULE 3

Lending and Operating Policiesand Procedures

A. Subsidiary Loan Agreements

1. Banco Central will refinance, under the Subsidiary Loans, to the ParticipatingBanks: (i) 75% of the Farm Loans under Part A(i) of the Project; (ii) 80% ofthe Farm Loans under Part A(ii) and (iii) of the Project; and (iii) 100% of theFarm Loans under Part A(iv) and (v) of the Project; provided that any suchrefinancing by Banco Central to a Participating Bank other than BAB will be madeonly with the prior approval of ALPD of the technical and financial aspects ofthe respective Farm Plans.

2. Each Subsidiary Loan will be repayable by the Participating Bank to BancoCentral within the same period provided by the Participating Bank for therepayment of the amounts disbursed by it under Farm Loans.

3. The outstanding principal amount of the Subsidiary Loan utilized forrefinancing Farm Loans under Part A(i), (ii) and (iii) of the Project will be adjustedby Banco Central in the same proportion as the modification of either (i) therate of exchange between the peso and the dollar between the date of the firstdisbursement under the Subsidiary Loan and whenever such modification shalloccur, such adjustment to be made on the portions of the Subsidiary Loan utilizedfor refinancing Farm Loans adjusted as provided in paragraph B.5(i) hereof, or(ii) the La Paz cost-of-living index published by hIstituto Nacional de Estadisticasor any successor thereto, every year starting one year after the date of the firstdisbursement under the Subsidiary Loan, provided that amounts of the SubsidiaryLoan disbursed between such first disbursement and the first anniversary thereof,or between such anniversaries, will be adjusted for the time period between suchdisbursement and such anniversary and the corresponding adjustment will be addedto the outstanding amount of the Subsidiary Loan on such anniversary, suchadjustment to be made on the portions of the Subsidiary Loan utilized forrefinancing Farm Loans adjusted as provided in paragraph B.5(ii) hereof.

4. (a) The outstanding principal amount of the portions of the SubsidiaryLoan utilized for refinancing Farm Loans under Part A(i), (ii) and (iii) of theProject will bear (i) no interest in the case of the portions of the Subsidiary Loanadjusted as provided in the preceding paragraph A.3(ii) hereof, and (ii) interestat the rate of 9% per annum in the case of the portions of the Subsidiary Loanadjusted as provided in the preceding paragraph A.3(i) hereof.

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(b) The outstanding principal amount of the portions of the SubsidiaryLoan utilized for refinancing Farm Loans under Part A(iv) and (v) of the Projectwill bear interest at the rate of 6% per annum.

5. Each Participating Bank will undertake to make Farm Loans in accordancewith the provisions of paragraph B of this Schedule.

6. (a) Each Participating Bank will undertake that, unless the Association shallotherwise agree, any Farm Loan will be made on terms whereby the ParticipatingBank will obtain, by written contract with the Beneficiary or by other appropriatelegal means, rights adequate to protect the interests of the Borrower, the Associationand the Participating Bank, including the right of the Participating Bank to: (i)require the Beneficiary to carry out the Farm Plan with due diligence and efficiencyand in accordance with appropriate technical, financial and agricultural practicesand to maintain adequate records; (ii) require that (1) goods and services to befinanced out of the proceeds of the Farm Loans be purchased through regularcommercial channels, at a reasonable price, account being taken also of otherrelevant factors such as time of delivery, efficiency and reliability of the goodsand availability of service facilities and (2) the goods financed by the Farm Loan -be used exclusively in the carrying out of the Farm Plan; (iii) inspect, by itselfor jointly with representatives of the Association if the Association shall so request,such goods and the farms and facilities included in the Farm Plan, the operationthereof, and any relevant records and documents; (iv) require that the Beneficiaryshall take out and maintain with responsible insurers such insurance, against suchrisks and in such amounts, as shall be consistent with appropriate practice; (v)obtain all such information as the Association, the Borrower or the ParticipatingBank shall reasonably request relative to the foregoing and to the administration,operations and financial condition of the Beneficiary; and (vi) suspend andterminate the right of the Beneficiary to the use of the proceeds of the FarmLoan, and accelerate the maturity of the Farm Loan, upon failure by suchBeneficiary to perform its obligations under its Farm Loan Agreement.

(b) Each Participating Bank will exercise its rights in relation to each FarmPlan in such manner as to: (i) protect the interests of the Association, the Borrowerand the Participating Bank; (ii) comply with its obligations under the SubsidiaryLoan Agreement; and (iii) achieve the purposes of the Project.

7. Each Participating Bank will establish and maintain a separate accountthrough which all amounts withdrawn from, and to be paid into, the ProjectAccount by such Participating Bank will flow, such account to (i) identify eachFarm Loan made by such Bank; (ii) identify the goods and services financed out

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of each such Farm Loan; and (iii) reflect, in accordance with consistentlymaintained appropriate accounting practices, the administration of such accountand of each such Farm Loan.

8. Each Participating Bank will have: (i) the account referred to in the precedingparagraph 7 for each fiscal year audited, in accordance with appropriate auditingprinciples consistently applied, by independent auditors acceptable to theAssociation; (i) furnish to the Association as soon as available, but in any casenot later than four months after the end of each such year, (A) certified copiesof such account as so audited and (B) the report of such audit by said auditors,of such scope and in such detail as the Association shall have reasonably requested;and (iii) furnish to the Association such other information concerning such accountand the audit thereof as the Association shall from time to time reasonably request.

B. Farm Loan Agreements

I. To qualify for the granting of a Farm Loan, each applicant will show tothe satisfaction of the Participating Bank that he meets all such creditworthinesscriteria as shall be reasonably established from time to time by the ParticipatingBank. No Farm Loan will be made (i) to any sugarcane farmer with a farm exceeding50 hectares of area, and (ii) to any grape grower with a farm exceeding 4 hectaresof area.

2. Farm Loans will be made on the basis of Farm Plans prepared by qualifiedtechnicians employed by the Participating Bank, such Plans to demonstrate, interalia, the possibility of increased production and the Beneficiary's potential forrepayment of the Farm Loan.

3. Farm Loans' under Part A(ii), (iii), (iv) and (v) of the Project will financeup to the total cost (excluding labor by members of the Beneficiary's family) ofFarm Plans, and those under Part A(i) will finance up to 80% of the cost of FarmPlans.

4. Farm Loans will be denominated and repayable in the currency of theBorrower.

5. The outstanding principal amount of each Farm Loan under Part A(i), (ii)and (iii) of the Project will be adjusted by the Participating Bank, at the optionof the Beneficiary, in the same proportion as the modification of either (i) therate of exchange between the peso and the dollar, between the date of the firstdisbursement under the Farm Loan and whenever such modification shall occur,

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or (ii) the La Paz cost-of-living index published by 1IstitUto Nacional de Estadisticasor any successor thereto, every year starting one year after the date of the firstdisbursement under the Farm Loan, provided that amounts of the Farm Loandisbursed between such first disbursement and the first anniversary thereof, orbetween such anniversaries, will be adjusted for the time period between suchdisbursement and such anniversary and the corresponding adjustment will be addedto the outstanding amount of the Farm Loan on such anniversary. The foregoingoption by the Beneficiary will be made at the date of the Farm Loan Agreementand will not be modified thereafter.

6. The adjusted outstanding principal amount of each Farm Loan under PartA(i), (ii) and (iii) of the Project will bear interest at the annual rate of (i) X4in the case of Farm Loans adjusted as provided in the preceding paragraph B.5(i)hereof, and (ii) 40 in the case of Farm Loans adjusted as provided in the precedingparagraph B.5(ii) hereof.

7. The outstanding principal amount of each Farm Loan under Part A(iv) and(v) of the Project will bear interest at the rate of I20< per annum.

8. Repayment of the principal of, and payment of interest on, the Farm Loanwill be made on the anniversaries of the first disbursement under the Farm Loan.The Farm Loans will be repaid over a period commensurate with the Beneficiary'sestimated net income arising from the carrying out of his Farm Plan, includingan appropriate grace period, provided that such periods will not exceed thefollowing terms:

Farm Loan Grace Period RepaYment Period Total(Part of the Projeet) (rears) (vears) (i?ears)

Parl A(i) and (v) 4 8 12Part A(ii) 3 3 6Part A(iii) 4 4 8Part A(iv) 2 2 4

9. Not more than 50' of the amount of any Farm Loan under Part A(i) ofthe Project may be used for the purchase of breeding cattle.

10. All cattle and sheep belonging to Beneficiaries will be periodically vaccinatedagainst foot-and-mouth disease, paralytic rabies and brucellosis.

1 1. Any Farm Loan which by itself or together with any other loan to thesame Beneficiary financed under this Development Credit Agreement or under any

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other Development Credit Agreement between the Borrower and the Associationshall exceed the equivalent of $50,000, will require the prior approval of theAssociation.

12. The staff of the Participating Bank will regularly visit the farms where FarmPlans have been financed by it to ensure that Beneficiaries are effectively andpunctually carrying out such Plans and are complying with the provisions of theirrespective Farm Loan Agreements.

13. Participating Banks will also make to Beneficiaries additional short-term loansneeded to satisfy the working capital requirements of such Beneficiaries for thecarrying out of their Farm Plans.