The World Bank 1818 H Street, N.W. (202) 477-1234



The World Bank 1818 H Street N.W. (202) 477-1234

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD

INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS

December 18, 2003

Lic. Timoteo Harris Howard

Director de Financiamientos Internacionales

Nacional Financiera, S.N.C.

Plaza Inn, Insurgentes Sur # 1971

Torre IV, piso 11

01020 México, D.F.

Dr. Andrés Conesa Labastida

Titular de la Unidad de Crédito Público

Secretaría de Hacienda y Crédito Público

Palacio Nacional, Patio Central, Piso 3, Of. 3010,

Col. Centro

06000 México, D.F.

Lic. Claudia Bazúa Witte

Tesorera de la Federación

Secretaría de Hacienda y Crédito Público

Av. Constituyentes # 1001, Edif.. “A”, piso 4,

Col. Belén de las Flores,

06000 México, D.F.

Re: Loan No. 4137-ME (Community Forestry Project) Amendment to the Loan and Guarantee Agreements

Dear Sirs:

Please refer to the Loan Agreement (the Loan Agreement) between Nacional Financiera, S.N.C. (the Borrower) and the International Bank for Reconstruction and Development (the Bank), dated May 2, 1997 and the Guarantee Agreement of even date therewith between the United Mexican States (the Guarantor) and the Bank, both with respect to the above-captioned Project. Based on discussions with your representatives, we are pleased to inform you that the Bank hereby proposes to amend the Loan and Guarantee Agreements to read as set forth in Attachment A to this letter (the specific changes made in arriving at those amended texts are reflected for your convenience in Attachment B to this letter). Please confirm your agreement with the foregoing, on behalf of the Borrower and the Guarantor, by signing and dating the three originals of this letter and returning one fully signed original to us. The amendment set forth in this letter will become effective as of January 1, 2002 upon receipt by the Bank of (i) one fully executed original of this letter and (ii) a copy of the contractual arrangements referred to in Section 3.01 of the Loan Agreement, together with legal opinions (one each from the Borrower, the Guarantor and CONAFOR), satisfactory to the Bank and issued by counsel acceptable to the Bank, confirming that said contractual arrangements have been duly authorized or ratified by, and executed and delivered on behalf of, the party on whose behalf the opinion is issued and are legally binding upon such party in accordance with the terms of such contractual arrangements.

Sincerely,

INTERNATIONAL BANK FOR RECONSTRUCTION

AND DEVELOPMENT

_______________________________

Isabel Guerrero

Director

Country Management Unit

Colombia and México

AGREED:

NACIONAL FINANCIERA, S.N.C.

By: /s/ Timoteo Harris Howard

Date: December 22, 2003

UNITED MEXICAN STATES as guarantor.

UNITED MEXICAN STATES

By: /s/ Andrés Conesa Labastida By: /s/ Claudia María Bazúa Witte

Date: December 22, 2003 Date: /s/ December 22, 2003

Signed by Tesorería de la Federación

for the only purposes of Article 54

of the Ley del Servicio de Tesorería

de la Federación, regarding the

Guarantor’s obligations set forth in

Article II, Section 2.01 of the

Guarantee Agreement.

Attachment A

LOAN NUMBER 4137-ME

Loan Agreement

(Community Forestry Project)

between

INTERNATIONAL BANK FOR RECONSTRUCTION

AND DEVELOPMENT

and

NACIONAL FINANCIERA, S.N.C.

Dated May 2, 1997 (as amended on June 1, 2000 and December 18, 2003)

LOAN NUMBER 4137-ME

LOAN AGREEMENT

AGREEMENT, dated May 2, 1997 between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and NACIONAL FINANCIERA, S.N.C. (the Borrower).

WHEREAS (A) the United Mexican States (the Guarantor) and the Borrower, having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, have requested the Bank to assist in the financing of the Project;

(B) by an agreement (the Guarantee Agreement) of even date herewith between the Guarantor and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower in respect of the Loan and to undertake such other obligations as set forth in the Guarantee Agreement; and

WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower 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 Guarantee Agreements for Single Currency Loans" of the Bank, dated May 30, 1995 (the General Conditions), constitute an integral part of this Agreement, except that Section 6.03 of the General Conditions is modified to read: "Section 6.03. Cancellation by the Bank. If (a) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty days, or (b) at any time, the Bank determines, after consultation with the Borrower, that an amount of the Loan will not be required to finance the Project's costs to be financed out of the proceeds of the Loan, or (c) at any time the Bank determines, with respect to any contract to be financed out of the proceeds of the Loan, that corrupt or fraudulent practices were engaged in by representatives of the Borrower or of a beneficiary of the Loan during the procurement or the execution of such contract, without the Borrower having taken timely and appropriate action satisfactory to the Bank to remedy the situation, and establishes the amount of expenditures in respect of such contract which would otherwise have been eligible for financing out of the proceeds of the Loan, or (d) at any time, the Bank determines that the procurement of any contract to be financed out of the proceeds of the Loan is inconsistent with the procedures set forth or referred to in the Loan Agreement and establishes the amount of expenditures in respect of such contract which would otherwise have been eligible for financing out of the proceeds of the Loan, or (e) after the Closing Date, an amount of the Loan shall remain unwithdrawn from the Loan Account, or (f) the Bank shall have received notice from the Guarantor pursuant to Section 6.07 with respect to an amount of the Loan, the Bank may, by notice to the Borrower and the Guarantor, terminate the right of the Borrower to make withdrawals with respect to such amount. Upon the giving of such notice, such amount of the Loan shall be cancelled.".

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

(a) "Community" means the population and land tenancy unit (comunidad), with its own legal personality, governed by Title III, Chapter V of the Guarantor's Agrarian Law (Ley Agraria), published in the Guarantor's Official Gazette (Diario Oficial de la Federación) on February 26, 1992;

(b) "CONABIO" means the Guarantor's National Biodiversity Commission (Comisión Nacional para el Conocimiento y Uso de la Biodiversidad);

(c) “CONAFOR” means the Guarantor’s National Forestry Commission (Comisión Nacional Forestal);

(d) "Ejido" means the population and land tenancy unit, with its own legal personality, governed by Title III, Chapters I-IV of the Guarantor's Agrarian Law (Ley Agraria), published in the Guarantor's Official Gazette (Diario Oficial de la Federación) on February 26, 1992;

(e) "Implementation Letter" means the letter of even date herewith, from the Guarantor to the Bank, with respect to the implementation schedule and indicators for the Project;

(f) "Management Plan" means a forestry management program (programa de manejo forestal) referred to in Article 12 of the Guarantor's Forestry Law cited in Section 5.01 (a) of this Agreement;

(g) "Participating States" means the Mexican States of Chihuahua, Durango, Guerrero, Jalisco, Michoacán and Oaxaca;

(h) "Pilot Projects" means projects, carried out by Communities and Ejidos and financed with nonreimbursable contributions made by CONAFOR to such Communities and Ejidos, to implement economically viable proposals, consistent with such Communities’ and Ejidos’ Management Plans (either approved by SEMARNAT or by another public sector entity, satisfactory to the Bank, legally mandated to undertake such approval role), for the development and management of tradable or potentially tradable non-timber and non-traditional forest products;

(i) "PIT" means each Project implementation team referred to in Section 3.01 (b) (ii) of the Guarantee Agreement;

(j) "PMT" means the Project management team referred to in Section 3.01 (b) (i) of the Guarantee Agreement;

(k) "Secretariat" means the Forestry Secretariat, or its equivalent, of the executive branch of the government of a Participating State;

(l) "SEMARNAT" means the Guarantor's Natural Resources and Environment Secretariat (Secretaría de Medio Ambiente y Recursos Naturales); and

(m) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount equal to fifteen million Dollars ($15,000,000).

Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for: (i) amounts paid (or, if the Bank shall so agree, to be paid) by the Guarantor on account of expenditures incurred by a Community or Ejido to meet the reasonable cost of goods, works and services required to carry out Pilot Projects under Part C.2 of the Project and in respect of which the withdrawal from the Loan Account is requested; and (ii) expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods, works and services required for the Project (other than Part C.2 of the Project) described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan.

(b) The Borrower may, for the purposes of the Project, open and maintain in Dollars a special deposit account in Banco de México on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement.

Section 2.03. The Closing Date shall be December 31, 2003 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date.

Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time.

Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan 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 the date of this Agreement to, but excluding, the first Interest Payment Date occurring thereafter, and after the initial period, each period from and including an Interest Payment Date to, but excluding the next following Interest Payment Date.

(ii) "Interest Payment Date" means any date specified in Section 2.06 of this Agreement.

(iii) "LIBOR Base Rate" means, for each Interest Period, the London interbank offered rate for six-month deposits in Dollars for value the first day of such Interest Period (or, in the case of the initial Interest Period, for value the Interest Payment Date occurring on or next preceding the first day of such Interest Period), as reasonably determined by the Bank and expressed as a percentage per annum.

(iv) "LIBOR Total Spread" means, for each Interest Period: (A) one half of one percent (1/2 of 1%); (B) minus (or plus) the weighted average margin, for such Interest Period, below (or above) the London interbank offered rates, or other reference rates, for six-month deposits, in respect of the Bank's outstanding borrowings or portions thereof allocated by the Bank to fund single currency loans or portions thereof made by it that include the Loan; as reasonably determined by the Bank and expressed as a percentage per annum.

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

(d) Whenever, in light of changes in market practice affecting the determination of the interest rates referred to in this Section 2.05, the Bank determines that it is in the interest of its borrowers as a whole and of the Bank to apply a basis for determining the interest rates applicable to the Loan other than as provided in said Section, the Bank may modify the basis for determining the interest rates applicable to the Loan upon not less than six (6) months' notice to the Borrower and the Guarantor of the new basis. The basis shall become effective on the expiry of the notice period unless the Borrower notifies the Bank during said period of its objection thereto, in which case said modification shall not apply to the Loan.

Section 2.06. Interest and other charges shall be payable May 15 and November 15 in each year.

Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement.

ARTICLE III

Transfer of Loan Proceeds; Other Covenants

Section 3.01. The Borrower shall enter into contractual arrangements with the Guarantor and CONAFOR, satisfactory to the Bank, providing, inter alia, for: (a) the transfer to the Guarantor of the proceeds of the Loan for use by CONAFOR; (b) the transfer by the Guarantor to the Borrower of such funds as the Borrower shall be required to pay to the Bank on account of principal, interest and other charges on the Loan; and (c) compliance by CONAFOR with all the obligations that the Guarantor, pursuant to the terms of the Guarantee Agreement, is obligated to cause CONAFOR to comply with, for purposes of the Project (as well as compliance by CONAFOR with the provisions of Schedule 1 to the Guarantee Agreement). Except as the Bank may otherwise agree, the Borrower shall not amend or fail to enforce any provision of such contractual arrangements. The Borrower shall exercise its rights and carry out its obligations under such contractual arrangements in such a manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan.

Section 3.02. The Bank and the Borrower hereby agree that the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) shall be carried out, or caused to be carried out, by the Guarantor pursuant to Section 3.04 (a) of the Guarantee Agreement.

Section 3.03. The Borrower shall participate in the review referred to in Section 3.13 (c) of the Guarantee Agreement.

ARTICLE IV

Financial Covenants

Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and separate accounts adequate to reflect, in accordance with sound accounting practices, the resources and expenditures in connection with the execution of the Project.

(b) The Borrower shall:

(i) have the records and accounts referred to in paragraph (a) of this Section, and the records and accounts for the Special Account, for each fiscal year audited, in accordance with generally accepted auditing standards and procedures, consistently applied, by independent and qualified auditors;

(ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested;

(iii) furnish to the Bank each month certified statements of the Special Account; and

(iv) furnish to the Bank such other information concerning said records and accounts as well as the audit thereof as the Bank shall from time to time reasonably request.

(c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall provide to the Guarantor any information that may be required by the Guarantor to comply with the Guarantor's obligations under Section 3.05 (c) of the Guarantee Agreement.

ARTICLE V

Remedies of the Bank

Section 5.01. Pursuant to Section 6.02 (l) of the General Conditions, the following additional events are specified:

(a) The Ley Forestal (Forestry Law; published in the Guarantor's Diario Oficial de la Federación on December 22, 1992) shall have been, in whole or in part, amended, suspended, abrogated, repealed or waived so as to affect, in the opinion of the Bank, materially and adversely the carrying out of the Project.

(b) The Forestry Law's regulations, published in the Guarantor's Diario Oficial de la Federación on February 21, 1994, shall have been, in whole or in part, amended, suspended, abrogated, repealed or waived so as to affect, in the opinion of the Bank, materially and adversely the carrying out of the Project.

(c) The decree creating CONAFOR, published in the Guarantor’s Diario Oficial de la Federación on April 4, 2001, and/or CONAFOR’s Organic Statute (Estatuto Orgánico), shall have been, in whole or in part, amended, suspended, abrogated, repealed or waived so as to affect, in the opinion of the Bank, materially and adversely the carrying out of the Project.

Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified, namely, that any event specified in Section 5.01 of this Agreement shall occur.

ARTICLE VI

Effective Date; Termination

Section 6.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the contractual arrangements referred to in Section 3.01 of this Agreement have been entered into.

Section 6.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank, namely, that on behalf of each of the Borrower and the Guarantor, the contractual arrangements referred to in Section 3.01 of this Agreement have been duly authorized or ratified, and executed and delivered, by the Borrower and the Guarantor and are legally binding upon the Borrower and the Guarantor in accordance with the terms of such contractual arrangements.

Section 6.03. The date August 1, 1997 is hereby specified for the purposes of Section 12.04 of the General Conditions.

ARTICLE VII

Representative of the Borrower; Addresses

Section 7.01. The Director Internacional of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions.

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

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 248423 (MCI) or

Washington, D.C. 64145 (MCI)

For the Borrower:

Nacional Financiera, S.N.C.

Dirección Internacional

Torre IV, piso 8

Plaza Inn, Insurgentes Sur 1971

01020 México, D.F.

México

Cable address: Telex:

NAFIN NAFIME 383-1775765

Mexico City Mexico City

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

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

By /s/ Shahid Javed Burki

Regional Vice President

Latin America and the Caribbean

NACIONAL FINANCIERA, S.N.C.

By /s/ José García Torres

Authorized 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 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) Goods (except items 1,000,000 70% included in Categories (3)

or (4) below and vehicles, but

including aerial photographs)

(2) Consultant services

(except as included in

Categories (3) and (4) below):

(a) under Part A.2 of 5,800,000 100% of amount

the Project disbursed by

CONAFOR to

Communities and

Ejidos

(b) other 5,000,000 100%

(3) Pilot Projects 1,000,000 100% of amounts

disbursed by

CONAFOR to

Communities and

Ejidos for Pilot

Projects

(4) Training 2,200,000 100%

Amount of the

Loan Allocated % of

(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(5) Unallocated 0

______________

TOTAL 15,000,000

============

2. For the purposes of this Schedule, the term "training" includes only: (a) fees of consultants employed as trainers; (b) reasonable travel, room, board and per diem expenditures incurred by trainees in connection with their training under Parts A and D of the Project; (c) course fees charged by academic institutions; and (d) training material preparation, acquisition, reproduction and distribution expenses not otherwise covered under this paragraph.

3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made: (a) in respect of a Pilot Project unless the procedures, terms and conditions set forth or referred to in Section 3.10 of the Guarantee Agreement have been complied with for that Pilot Project; and (b) in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $1,500,000, may be made on account of payments made for expenditures incurred within the twelve months prior to the date of this Agreement but after March 1, 1996.

4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures under contracts costing less than $100,000 equivalent (in the case of consulting firms) and less than $50,000 equivalent (in the case of individual consultants), as well as for expenditures for training items referred to in paragraph 2 (b), (c) and (d) of this Schedule, for goods estimated to cost less than $350,000 equivalent per contract or per bid package and for Pilot Projects, all under such terms and conditions as the Bank shall specify by notice to the Borrower.

SCHEDULE 2

Description of the Project

The objectives of the Project are to: (a) improve natural resource management and conservation by Community and Ejido forestry resource owners in Mexico; and (b) increase the range of forestry-based income generating options available to such owners.

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

Part A: Assistance to Participating States’ Communities and Ejidos

1. Implementation of promotional activities to inform Communities and Ejidos in the Participating States of the support available to them under the Project and to evaluate their pine-oak, tropical and/or other broadleaf forestry resource management interests and needs.

2. Provision of technical assistance to Communities and Ejidos in the Participating States in support of their pine-oak, tropical and/or other broadleaf forestry resource management-related initiatives undertaken to, inter alia: (a) prepare or upgrade Management Plans; (b) prepare forested area conservation plans; (c) address integrated forestry resource management and forestry research issues; and (d) increase the efficiency of their forestry enterprises.

3. Provision of demand-driven training (through courses, workshops, seminars and two- or four-year scholarships), to members of Communities and of Ejidos in the Participating States, on pine-oak, tropical and/or other broadleaf forestry resource management topics (including environmental, biodiversity and land use planning and boundary issues).

4. Implementation, on a national or regional level, of Community/Ejido-to-Community/Ejido workshops sponsored by the Communities and/or Ejidos to exchange information on forestry development and conservation activities.

Part B: Capacity Strengthening Assistance to Private Service Providers

1. Provision of environmental, forestry resource management and related training (including biodiversity training), through two-week orientation/immersion workshops, to private providers of services to Communities and Ejidos engaged in forestry activities, so as to make such providers eligible to provide technical assistance under Part A.2 of the Project.

2. Implementation, through courses consisting of two-week workshops, of a post-graduate level continuing education program (in the same fields for which training is provided under Part B.1 of the Project) for providers deemed eligible pursuant to Part B.1 of the Project so that they may maintain such eligibility.

Part C: Promotion of Non-timber Forest Products

1. (a) Carrying out of diagnostic studies to create a comprehensive data base on the extent, management, production, use, conservation and trade of tradable or potentially tradable non-timber and non-traditional forest products in the Participating States; and (b) implementation of campaigns to promote interest in the carrying out of Pilot Projects.

2. Carrying out of Pilot Projects by Communities and Ejidos in the Participating States.

3. Monitoring, evaluation, publication and other dissemination of the results of the Pilot Projects carried out under Part C.2 of the Project.

Part D: Institutional Strengthening

1. Strengthening (through the provision of technical assistance, training and goods) of the SEMARNAT Oaxaca office's capacity to review, approve, supervise and audit Management Plans.

2. (a) Strengthening (through the provision of technical assistance, training and goods) of the capacity of SEMARNAT and CONAFOR offices located in the Participating States to carry out their forestry responsibilities; and (b) strengthening (through the provision of technical assistance and training) of the capacity of the Secretariats to absorb forestry responsibilities, held by SEMARNAT and/or CONAFOR, which are potentially transferable to such Secretariats.

3. Design, computerization, administration and dissemination of the SEMARNAT and/or CONAFOR Sistema Nacional de Información Forestal (National Forestry Information System) and Registro Nacional Forestal (National Forestry Registry).

4. Provision of training (through courses, workshops, study tours, seminars and two-year scholarships) to CONAFOR forestry officials to upgrade their forestry, administrative and technology skills.

5. Provision of equipment and administrative support to the PMT and the PITs to facilitate their role in Project management.

6. Carrying out of workshops and other preliminary activities in connection with the preparation of potential future pine-oak, tropical and/or other broadleaf forest projects, for the States of Chihuahua, Durango, Michoacán, Jalisco and Guerrero, modeled on Parts A and B of the Project.

* * *

The Project is expected to be completed by June 30, 2003.

SCHEDULE 3

Amortization Schedule

Payment of Principal

Date Payment Due (expressed in Dollars)*

On each May 15 and November 15

beginning November 15, 2002

through May 15, 2012 750,000

___________________

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

SCHEDULE 4

Special Account

1. For the purposes of this Schedule:

(a) the term "eligible Categories" means Categories (1), (2), (3) and (4) set forth 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 and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and

(c) the term "Authorized Allocation" means an amount equivalent to $1,000,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule.

2. Payments out of the Special Account shall be made exclusively for eligible expenditures 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 subsequent withdrawals to replenish the Special Account shall be made as follows:

(a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for deposit into the Special Account of an amount or amounts which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested.

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

(ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures.

All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective 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 Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures.

5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account:

(a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance 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 the period 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 of the audit of the records and accounts for the Special Account;

(c) if, at any time, the Bank shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or

(d) once the total unwithdrawn amount of the Loan allocated to the eligible Categories, minus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation.

Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures.

6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional 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 amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be 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 outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount.

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

(d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.

LOAN NUMBER 4137-ME

Guarantee Agreement

(Community Forestry Project)

between

UNITED MEXICAN STATES

and

INTERNATIONAL BANK FOR RECONSTRUCTION

AND DEVELOPMENT

Dated May 2, 1997 (as amended on June 1, 2000 and December 18, 2003)

LOAN NUMBER 4137-ME

GUARANTEE AGREEMENT

AGREEMENT, dated May 2, 1997, between UNITED MEXICAN STATES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank).

WHEREAS (A) the Guarantor and Nacional Financiera, S.N.C. (the Borrower), having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to the Loan Agreement, have requested the Bank to assist in the financing of the Project; and

(B) by the Loan Agreement of even date herewith between the Bank and the Borrower, the Bank has agreed to extend to the Borrower a loan in the amount of fifteen million Dollars ($15,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan and to undertake such other obligations as provided in this Agreement; and

WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower and to undertake such other obligations as 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 Guarantee Agreements for Single Currency Loans" of the Bank, dated May 30, 1995 (the General Conditions) constitute an integral part of this Agreement.

Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to and Section 1.02 of the Loan Agreement have the respective meanings therein set forth.

ARTICLE II

Guarantee; Provision of Funds

Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan, and the punctual performance of all the other obligations of the Borrower, all as set forth in the Loan Agreement.

Section 2.02. The Guarantor shall provide, in a timely manner as needed, the funds, facilities, services and other resources required for the Project.

ARTICLE III

Execution of the Project

Section 3.01. (a) The Guarantor declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall cause CONAFOR to carry out the Project with due diligence and efficiency and in conformity with appropriate environmental, financial, technical and administrative standards and practices, as well as in accordance with the technical assistance financing criteria and periodically adjustable implementation schedule set forth in the Implementation Letter.

(b) Throughout the course of Project implementation, the Guarantor shall:

(i) cause CONAFOR to maintain a Project management team in CONAFOR’s headquarters, consisting of sufficient qualified staff to carry out general Project coordination, provide liaison with officials of the Participating States and provide procurement and forestry expertise in connection with the Project;

(ii) cause CONAFOR to maintain a Project implementation team in each of the CONAFOR regional offices (gerencias regionales) that have jurisdiction over a Participating State, consisting of sufficient qualified staff and/or consultants to carry out general Project coordination within the Participating States, promote the Project, provide liaison with Communities and Ejidos and provide administrative, training, procurement and biodiversity expertise in connection with the Project (of which the procurement and biodiversity expertise shall each be represented by a separate staff member and/or consultant in each such regional office); and

(iii) maintain an advisory committee, consisting of selected SEMARNAT and CONAFOR officials satisfactory to the Bank, to ensure coordination of Project activities with other SEMARNAT and CONAFOR initiatives, evaluate Project progress and make recommendations for improved Project execution as necessary.

Section 3.02. The Guarantor shall enter into the contractual arrangements referred to in Section 3.01 of the Loan Agreement. Except as the Bank may otherwise agree, the Guarantor shall not amend or fail to enforce any provision of such contractual arrangements. The Guarantor shall exercise its rights and carry out its obligations under such contractual arrangements in such a manner as to protect the interests of the Guarantor and the Bank and to accomplish the purposes of the Loan.

Section 3.03. Except as the Bank shall otherwise agree, procurement of the goods, works and consultant services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 1 to this Agreement.

Section 3.04. (a) The Guarantor shall cause CONAFOR to carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) with regard to the Project.

(b) For purposes of Section 9.08 of the General Conditions, and without limitation thereto, the Guarantor shall cause CONAFOR to:

(i) prepare, on the basis of guidelines acceptable to the Bank, and furnish to the Bank not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Guarantor and the Bank, a plan for the future operation of the Project; and

(ii) afford the Bank a reasonable opportunity to exchange views with the Guarantor and CONAFOR on said plan.

Section 3.05. (a) The Guarantor shall cause CONAFOR to maintain records and separate accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in connection with the execution of the Project.

(b) The Guarantor shall cause CONAFOR to:

(i) have the records and accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with generally accepted auditing standards and procedures consistently applied, by independent and qualified auditors;

(ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and

(iii) furnish to the Bank such other information concerning said records and accounts as well as the audit thereof as the Bank shall from time to time reasonably request.

(c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Guarantor shall cause CONAFOR to:

(i) maintain, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures;

(ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account or payment out of the Special 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 annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals.

(d) For all expenditures with respect to which withdrawals were made from the Special Account, the Guarantor shall provide, or cause CONAFOR to provide, to the Borrower any information that may be required by the Borrower to comply with the Borrower's obligations under Section 4.01 of the Loan Agreement.

Section 3.06. With regard to Part A.2 of the Project, the Guarantor shall cause CONAFOR to:

(a) have the PMT prepare and maintain an updated roster of technical assistance providers from the private sector, a set of standardized terms of reference for the types of technical assistance that may be provided by said providers and a standard contract to be entered into between said providers and Communities and Ejidos, all satisfactory to the Bank;

(b) have the PITs distribute to Communities and Ejidos the roster, standard terms of reference and standard contract referred to in paragraph (a) of this Section;

(c) subject to the Bank prior review stipulations contained in paragraph 2 of Section II of Schedule 1 to this Agreement with respect to consultant contracts, have the PITs accept standard contracts referred to in paragraph (a) of this Section entered into by Communities or Ejidos, with technical assistance providers on the roster referred to in said paragraph (a), which contracts incorporate standard terms of reference also referred to in said paragraph (a);

(d) have the PITs, through a disbursement mechanism satisfactory to the Bank, pay each of the technical assistance providers for such provider’s services, according to the terms of the standard contract referred to in paragraph (a) of this Section, if: (i) said provider's contract was accepted by the relevant PIT pursuant to paragraph (c) of this Section; (ii) the terms of reference incorporated in such contract are the standard ones referred to in paragraph (a) of this Section or are otherwise approved by the Bank; and (iii) the relevant PIT has received a signed certification from the relevant Ejido president or Community leader (comisariado), as the case may be, that said provider has completed the work for which payment is sought; and

(e) have the PITs actively solicit annual or more frequent evaluations of their participation in Part A.2 of the Project from Communities and Ejidos.

Section 3.07. With regard to Part A.2 of the Project, the Guarantor shall cause CONAFOR to ensure that the provisions of Section I of Schedule 2 to this Agreement are complied with.

Section 3.08. With regard to Part A.3 of the Project, the Guarantor shall cause CONAFOR to ensure that:

(a) to be eligible for a scholarship, members of a Community or of an Ejido must have been nominated by their Community or Ejido and accepted by a training institution for admission into such institution’s study program;

(b) from among those eligible for scholarships pursuant to paragraph (a) of this Section, scholarships be awarded solely to those whose scholarship applications have been approved by a review panel which shall be in existence throughout Project implementation and shall consist of the head (delegado) of the SEMARNAT office in relevant Participating State, the head (gerente regional) of the CONAFOR regional office (gerencia regional) for the relevant Participating State, the head (in the case of the State of Oaxaca) of the Forestry Technical School (Escuela Técnica Forestal de Santa María Atzompa) in Oaxaca and the head of the relevant Participating State’s Secretariat; and

(c) the relevant PIT pays the relevant training institution in advance for each semester’s tuition, and pays the scholarship recipient in advance for each semester’s room and board.

Section 3.09. With regard to Part B of the Project, the Guarantor shall cause CONAFOR to allow private providers of services to be eligible to participate in Part A.2 of the Project only if: (a) such providers (or at least one member thereof if the provider is a firm) have successfully completed the orientation/immersion workshop referred to in Part B.1 of the Project and have successfully completed one course per year from among the courses offered in the continuing education program referred to in Part B.2 of the Project; and (b) such providers have not provided services under Part A.2 of the Project in a manner unsatisfactory to Communities or Ejidos.

Section 3.10. With regard to Part C of the Project, the Guarantor shall cause CONAFOR to provide nonreimbursable contributions to Communities and Ejidos in a Participating State, in support of Pilot Projects, only if:

(a) the diagnostic study referred to in Part C.1 (a) of the Project has been carried out for that Participating State and contains a list, satisfactory to the Bank, of forest products appropriate for potential productive development;

(b) the forest product that is the subject of the Pilot Project is identified in the list referred to in paragraph (a) of this Section; and

(c) the provisions of Section II of Schedule 2 to this Agreement are complied with.

Section 3.11. With regard to Part D.3 of the Project, the Guarantor shall cause SEMARNAT and/or CONAFOR to ensure that: (a) the computerized and disseminated National Forestry Information System referred to in said Part D.3 include data (in the form of threatened species information sheets) for each of the species that occur in Mexican forests and are listed in the CITES or the NOM-059 referred to in Section II, paragraph 3 (h) of Schedule 2 to this Agreement; and (b) prior to or concurrent with the computerization and dissemination of the National Forestry Information System, such threatened species information sheets also be disseminated in a non-computerized format suitable for use in the field.

Section 3.12. With regard to Part D.4 of the Project, the Guarantor shall cause CONAFOR to:

(a) only award two-year scholarships to staff, of the CONAFOR regional offices (gerencias regionales) for the Participating States, who have an undergraduate professional degree and who have had their scholarship applications approved by the advisory committee referred to in Section 3.01 (b) (iii) of this Agreement; and

(b) not award more than a single two-year scholarship per student.

Section 3.13. (a) Throughout the course of Project implementation, and without limitation of the provisions of Section 9.07 of the General Conditions, the Guarantor shall cause CONAFOR’s PMT to furnish to the Bank, by no later than each January 31 (starting no later than January 31, 1998), an annual progress report on implementation of the Project, in form satisfactory to the Bank and based on the implementation schedule and indicators set forth in the Implementation Letter. Each such report shall include, as a separate component thereof, the results of the Communities' and Ejidos' own monitoring of those Parts of the Project in which they participate.

(b) As part of each annual report referred to in paragraph (a) of this Section, the Guarantor shall cause CONAFOR’s PMT to present to the Bank an annual action plan, satisfactory to the Bank, for Project implementation during the immediately subsequent twelve months. The Guarantor shall cause CONAFOR to carry out each such action plan during the twelve months covered by the action plan, which plan may contain, inter alia, the periodic adjustment to the implementation schedule and indicators referred to in Section 3.01 (a) of this Agreement (as well as adjustments to the procurement plan referred to in Section I, Part D.1 of the Schedule to this Agreement).

(c) The Guarantor shall cause CONAFOR to hold a review of Project implementation with the Bank and the Borrower during the month of September 1999. Such review shall, based, inter alia, on the annual reports referred to in paragraph (a) of this Section:

(i) examine the status of Project implementation;

(ii) discuss the transfer of forestry responsibilities referred to in Part D.2 of the Project;

(iii) examine the status of project preparation referred to in Part D.6 of the Project;

(iv) examine whether to introduce cost recovery measures with respect to the training provided under Part B of the Project; and

(v) examine whether to amend this Agreement and the Loan Agreement to extend Part C of the Project to States other than the Participating States.

Section 3.14. The Guarantor shall ensure and cause CONAFOR to ensure that no Management Plans supported in any way under the Project (or other plans referred to in Part A of the Project or elsewhere in Schedule 2 to the Loan Agreement) are carried out unless such Management Plans and other plans are deemed, in writing by the Bank, to support independently certifiable sustainable forestry management and conservation oriented forestry and to otherwise comply with the Bank’s Operational Policy on Forestry (OP 4.36 of September 1993), as such Operational Policy may be amended from time to time.

ARTICLE IV

Representatives of the Guarantor; Addresses

Section 4.01. The Director General de Crédito Público of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions.

Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions:

For the Guarantor:

Secretaría de Hacienda y Crédito Público

Dirección General de Crédito Público

Palacio Nacional, Colonia Centro

06000 México, D.F.

México

Telex:

1777313-SHOCME

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 248423 (MCI)

Washington, 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 in the District of Columbia, United States of America, as of the day and year first above written.

UNITED MEXICAN STATES

By /s/ Jesús Silva Herzog

Authorized Representative

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

By /s/ Shahid Javed Burki

Regional Vice President

Latin America and the Caribbean

SCHEDULE 1

Procurement and Consultants' Services

Section I. Procurement of Goods and Works

Part A: General

Goods and works shall be procured in accordance with the provisions of Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 and revised in January and August 1996 (the Guidelines) and the following provisions of this Section, as applicable.

Part B: International Competitive Bidding

1. Except as otherwise provided in Parts C, D and E of this Section, goods shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto.

2. The following provisions shall apply to goods to be procured under contracts awarded in accordance with the provisions of paragraph 1 of this Part B:

(a) Grouping of contracts

To the extent practicable, contracts for goods shall be grouped in bid packages estimated to cost $350,000 equivalent or more each.

(b) Preference for domestically manufactured goods

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

Part C: National Competitive Bidding

Goods estimated to cost less than $350,000 equivalent per contract or per bid package, up to an aggregate amount not to exceed $800,000 equivalent, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines, using standard bidding documents satisfactory to the Bank.

Part D: International or National Shopping

Goods estimated to cost less than $50,000 equivalent per contract or per bid package, up to an aggregate amount not to exceed $200,000 equivalent, may be procured under contracts awarded on the basis of national or international shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines.

Part E: Pilot Project Goods and Works

Goods and works for the carrying out of Pilot Projects may be procured by Communities or Ejidos in accordance with procedures, including direct contracting, acceptable to the Bank.

Part F: Review by the Bank of Procurement Decisions

1. Procurement Planning

Prior to the issuance of any invitations to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods (other than those procured for Pilot Projects) shall be undertaken in accordance with such procurement plan as shall have been approved by the Bank, and with the provisions of said paragraph 1.

2. Prior Review

The procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply with respect to all goods procured under Part B of this Section and to the first five contracts or bid packages for goods procured under Part C of this Section.

3. Post Review

With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply.

Section II. Employment of Consultants

1. Consultants' services shall be procured under contracts awarded in accordance with the provisions of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981 (the Consultant Guidelines). For complex, time-based assignments, such contracts shall be based on the standard form of contract for consultants' services issued by the Bank, with such modifications thereto as shall have been agreed by the Bank. Where no relevant standard contract documents have been issued by the Bank, other standard forms acceptable to the Bank shall be used.

2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Bank review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts, shall not apply to contracts for the employment of consulting firms estimated to cost less than $100,000 equivalent each and contracts for the employment of individual consultants estimated to cost less than $50,000 equivalent each. However, said exceptions to prior Bank review shall not apply to: (a) the terms of reference for such contracts; (b) single-source selection of consulting firms; (c) assignments of a critical nature, as reasonably determined by the Bank; (d) amendments to contracts for the employment of consulting firms raising the contract value to $100,000 equivalent or above; and (e) amendments to contracts for the employment of individual consultants raising the contract value to $50,000 equivalent or above.

SCHEDULE 2

Procedures, Terms and Conditions with Respect to

Parts A.2 and C.2 of the Project

Section I.

With regard to Part A.2 of the Project:

1. no technical assistance shall be provided to Communities and Ejidos with respect to investments in timber harvesting or timber processing equipment, as well as with respect to any road-related civil works or engineering;

2. no technical assistance shall be provided to Communities and Ejidos not appearing on the list, in the Implementation Letter, of eligible Communities and Ejidos (as such list may be updated from time to time by written notifications, satisfactory to the Bank, from the Guarantor to the Bank);

3. no technical assistance shall be provided to Communities and Ejidos that fail to formally evidence their membership’s support (through an acta or similar communal instrument and a letter to CONAFOR) for receiving the technical assistance;

4. Communities and Ejidos receiving technical assistance shall have had some of their members successfully complete, within twelve months after said Communities and Ejidos begin receiving such technical assistance, an environmental impact and conservation course under Part A.3 of the Project; and

5. the relevant Community and Ejido shall: (a) pay at least 30% of the cost of the technical assistance if it operates a timber processing enterprise; (b) pay at least 25% of the cost of the technical assistance if it does not operate a timber processing enterprise but harvests timber; and (c) pay at least 20% of the cost of the technical assistance if it does not operate a timber processing enterprise, does not harvest timber, but sells standing timber (Communities or Ejidos that lack a Management Plan (approved as indicated in Section 1.02 (h) of the Loan Agreement) and do not fall under subparagraphs (a), (b) or (c) of this paragraph shall pay at least 10% of the technical assistance cost).

Section II.

With regard to Part C.2 of the Project, the Guarantor shall cause CONAFOR to:

1. only provide nonreimbursable contributions to Communities and Ejidos which have in place a Management Plan (approved as indicated in Section 1.02 (h) of the Loan Agreement), have an uncontested legal right to exploit the forest properties with respect to which the contributions are sought and have had their Pilot Project proposals approved after steps two or three (as applicable) of the review procedure set forth in paragraph 4 of this Section;

2. not finance more than one Pilot Project per Community or Ejido, not contribute more than $18,700 equivalent to each Pilot Project;

3. only finance Pilot Projects pursuant to a standard contract, satisfactory to the Bank, entered into between CONAFOR and the relevant Community or Ejido, which contract shall, inter alia: (a) require the Community or Ejido to contribute at least 25% of the cost, in cash or in kind, of the Pilot Project activities (which contribution shall include all value added tax included in the cost of such activities); (b) specify that the nonreimbursable contribution shall be disbursed to the Community or Ejido in tranches over a period not to exceed two years, the first of which tranches shall be an advance and the rest of which shall be disbursed against confirmation by CONAFOR, by means of on-site evaluations, of the physical progress of the Pilot Project activities as measured according to benchmarks identified in the standard contract; (c) specify that procurement of the goods, works and services to be financed with the nonreimbursable contribution shall be governed by the provisions of Section I, Part E of Schedule 1 to this Agreement; (d) specify that the Community or Ejido shall take all action necessary to facilitate Guarantor compliance with the terms of Sections 3.04 (a) and 3.05 of this Agreement in connection with the Pilot Project in question; (e) preclude the use of the nonreimbursable contribution to compensate the Community or Ejido for labor provided by their members; (f) preclude the carrying out, as part of the Pilot Project, of activities relating to, or in preparation for, road construction; (g) preclude the purchase, as part of the Pilot Project, of timber harvesting equipment; and (h) preclude the carrying out, as part of the Pilot Project, of activities relating to, or in preparation for, exploitation of any plant or animal species listed in the Convention on International Trade in Endangered Species of Fauna and Flora (CITES) or in the Guarantor’s list of threatened species (Norma Oficial Mexicana NOM-059), except that such activities may be carried out as part of the Pilot Project, with the prior approval of the Bank, and if the individual plant or animal specimens in question:

(i) are of a species not listed in CITES Appendix I or qualify as part of CITES Appendix II pursuant to CITES Article VII (4);

(ii) qualify for the issuance of certificates pursuant to CITES Article VII (5) and are bred or propagated from parent specimens that also qualify for the issuance of such certificates;

(iii) are to be placed in trade or otherwise disposed of in a manner specifically approved by INE and consistent with the terms of CITES and of Mexican law; and

(iv) if of a species listed in Norma Oficial Mexicana NOM-059 but not in a CITES Appendix, have been bred or propagated, and are to be placed in trade or otherwise disposed of, in a manner specifically approved by INE and consistent with the terms of Mexican law;

4. subject Pilot Project proposals submitted by Communities or Ejidos to a two- or three-step review process whereby: (a) in step one, the proposals are screened by the relevant Participating State's review panel consisting of the head (delegado) of the SEMARNAT office in that Participating State and the head (gerente regional) of CONAFOR’s regional office (gerencia regional) for that Participating State; (b) in step two, the proposals approved in step one undergo a final screening by a federal review panel consisting of the SEMARNAT environmental protection subsecretary (sub-secretario de gestión para la protección ambiental), the CONAFOR director general (director general) and the president of CONABIO; and (c) in step three (only applicable to the first ten Pilot Projects to be financed under the Project), the proposals are reviewed and approved by the Bank; and

5. cause independent physical monitoring and financial auditing of activities in each Participating State on an annual basis (and, as part of such monitoring, actively solicit annual or more frequent evaluations of their participation in Part C of the Project from Communities and Ejidos).

Attachment B

LOAN NUMBER 4137-ME

Loan Agreement

(Community Forestry Project)

between

INTERNATIONAL BANK FOR RECONSTRUCTION

AND DEVELOPMENT

and

NACIONAL FINANCIERA, S.N.C.

Dated May 2, 1997 (as amended on June 1, 2000 and December 18, 2003)

LOAN NUMBER 4137-ME

LOAN AGREEMENT

AGREEMENT, dated May 2, 1997 between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and NACIONAL FINANCIERA, S.N.C. (the Borrower).

WHEREAS (A) the United Mexican States (the Guarantor) and the Borrower, having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, have requested the Bank to assist in the financing of the Project;

(B) by an agreement (the Guarantee Agreement) of even date herewith between the Guarantor and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower in respect of the Loan and to undertake such other obligations as set forth in the Guarantee Agreement; and

WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower 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 Guarantee Agreements for Single Currency Loans" of the Bank, dated May 30, 1995 (the General Conditions), constitute an integral part of this Agreement, except that Section 6.03 of the General Conditions is modified to read: "Section 6.03. Cancellation by the Bank. If (a) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty days, or (b) at any time, the Bank determines, after consultation with the Borrower, that an amount of the Loan will not be required to finance the Project's costs to be financed out of the proceeds of the Loan, or (c) at any time the Bank determines, with respect to any contract to be financed out of the proceeds of the Loan, that corrupt or fraudulent practices were engaged in by representatives of the Borrower or of a beneficiary of the Loan during the procurement or the execution of such contract, without the Borrower having taken timely and appropriate action satisfactory to the Bank to remedy the situation, and establishes the amount of expenditures in respect of such contract which would otherwise have been eligible for financing out of the proceeds of the Loan, or (d) at any time, the Bank determines that the procurement of any contract to be financed out of the proceeds of the Loan is inconsistent with the procedures set forth or referred to in the Loan Agreement and establishes the amount of expenditures in respect of such contract which would otherwise have been eligible for financing out of the proceeds of the Loan, or (e) after the Closing Date, an amount of the Loan shall remain unwithdrawn from the Loan Account, or (f) the Bank shall have received notice from the Guarantor pursuant to Section 6.07 with respect to an amount of the Loan, the Bank may, by notice to the Borrower and the Guarantor, terminate the right of the Borrower to make withdrawals with respect to such amount. Upon the giving of such notice, such amount of the Loan shall be cancelled.".

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

(a) "Community" means the population and land tenancy unit (comunidad), with its own legal personality, governed by Title III, Chapter V of the Guarantor's Agrarian Law (Ley Agraria), published in the Guarantor's Official Gazette (Diario Oficial de la Federación) on February 26, 1992;

(b) "CONABIO" means the Guarantor's National Biodiversity Commission (Comisión Nacional para el Conocimiento y Uso de la Biodiversidad);

(c) "COPLADE" means the State Committee for Planning and Development (Comité de Planificación y Desarrollo Estatal) of each of the Participating States (as hereinafter defined);“CONAFOR” means the Guarantor’s National Forestry Commision (Comisión Nacional Forestal);

(d) "Ejido" means the population and land tenancy unit, with its own legal personality, governed by Title III, Chapters I-IV of the Guarantor's Agrarian Law (Ley Agraria), published in the Guarantor's Official Gazette (Diario Oficial de la Federación) on February 26, 1992;

(e) "Implementation Letter" means the letter of even date herewith, from the Guarantor to the Bank, with respect to the implementation schedule and indicators for the Project;

(f) "Management Plan" means a forestry management program (programa de manejo forestal) referred to in Article 12 of the Guarantor's Forestry Law cited in Section 5.01 (a) of this Agreement;

(g) "Participating States" means the Mexican States of Chihuahua, Durango, Guerrero, Jalisco, Michoacán and Oaxaca;

(h) "Pilot Projects" means projects, carried out by Communities and Ejidos and financed with nonreimbursable contributions made by SEMARNAP (as hereinafter defined)CONAFOR to such Communities and Ejidos, to implement economically viable proposals, consistent with such Communities’ and Ejidos’ SEMARNAP-approved Management Plans (either approved by SEMARNAT or by another public sector entity, satisfactory to the Bank, legally mandated to undertake such approval role), for the development and management of tradable or potentially tradable non-timber and non-traditional forest products;

(i) "PIT" means theeach Project implementation team referred to in Section 3.01 (b) (ii) of the Guarantee Agreement;

(j) "PMT" means the Project management team referred to in Section 3.01 (b) (i) of the Guarantee Agreement;

(k) "Secretariat" means the Forestry Secretariat, or its equivalent, of the executive branch of the government of a Participating State;

(l) "SEDAF" means the Forestry Secretariat (Secretaría de Desarrollo Agropecuario y Forestal) of the executive branch of the government of the State of Oaxaca;

(m) "SEMARNAP"(l) "SEMARNAT" means the Guarantor's Natural Resources,Resources and Environmentand Fisheries Secretariat (Secretaría de Medio Ambiente, Recursos Naturales y Pesca);Ambiente y Recursos Naturales); and

(n)(m) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount equal to fifteen million Dollars ($15,000,000).

Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for: (i) amounts paid (or, if the Bank shall so agree, to be paid) by the Guarantor on account of expenditures incurred by a Community or Ejido to meet the reasonable cost of goods, works and services required to carry out Pilot Projects under Part C.2 of the Project and in respect of which the withdrawal from the Loan Account is requested; and (ii) expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods, works and services required for the Project (other than Part C.2 of the Project) described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan.

(b) The Borrower may, for the purposes of the Project, open and maintain in Dollars a special deposit account in Banco de México on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement.

Section 2.03. The Closing Date shall be June 30, 2002December 31, 2003 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date.

Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time.

Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan 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 the date of this Agreement to, but excluding, the first Interest Payment Date occurring thereafter, and after the initial period, each period from and including an Interest Payment Date to, but excluding the next following Interest Payment Date.

(ii) "Interest Payment Date" means any date specified in Section 2.06 of this Agreement.

(iii) "LIBOR Base Rate" means, for each Interest Period, the London interbank offered rate for six-month deposits in Dollars for value the first day of such Interest Period (or, in the case of the initial Interest Period, for value the Interest Payment Date occurring on or next preceding the first day of such Interest Period), as reasonably determined by the Bank and expressed as a percentage per annum.

(iv) "LIBOR Total Spread" means, for each Interest Period: (A) one half of one percent (1/2 of 1%); (B) minus (or plus) the weighted average margin, for such Interest Period, below (or above) the London interbank offered rates, or other reference rates, for six-month deposits, in respect of the Bank's outstanding borrowings or portions thereof allocated by the Bank to fund single currency loans or portions thereof made by it that include the Loan; as reasonably determined by the Bank and expressed as a percentage per annum.

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

(d) Whenever, in light of changes in market practice affecting the determination of the interest rates referred to in this Section 2.05, the Bank determines that it is in the interest of its borrowers as a whole and of the Bank to apply a basis for determining the interest rates applicable to the Loan other than as provided in said Section, the Bank may modify the basis for determining the interest rates applicable to the Loan upon not less than six (6) months' notice to the Borrower and the Guarantor of the new basis. The basis shall become effective on the expiry of the notice period unless the Borrower notifies the Bank during said period of its objection thereto, in which case said modification shall not apply to the Loan.

Section 2.06. Interest and other charges shall be payable May 15 and November 15 in each year.

Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement.

ARTICLE III

Transfer of Loan Proceeds; Other Covenants

Section 3.01. The Borrower shall enter into contractual arrangements with the Guarantor and CONAFOR, satisfactory to the Bank, providing, inter alia, for: (a) the transfer to the Guarantor of the proceeds of the Loan; andLoan for use by CONAFOR; (b) the transfer by the Guarantor to the Borrower of such funds as the Borrower shall be required to pay to the Bank on account of principal, interest and other charges on the Loan; and (c) compliance by CONAFOR with all the obligations that the Guarantor, pursuant to the terms of the Guarantee Agreement, is obligated to cause CONAFOR to comply with, for purposes of the Project (as well as compliance by CONAFOR with the provisions of Schedule 1 to Loan.the Guarantee Agreement). Except as the Bank may otherwise agree, the Borrower shall not amend or fail to enforce any provision of such contractual arrangements. The Borrower shall exercise its rights and carry out its obligations under such contractual arrangements in such a manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan.

Section 3.02. The Bank and the Borrower hereby agree that the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) shall be carried out, or caused to be carried out, by the Guarantor pursuant to Section 3.04 (a) of the Guarantee Agreement.

Section 3.03. The Borrower shall participate in the review referred to in Section 3.13 (c) of the Guarantee Agreement.

ARTICLE IV

Financial Covenants

Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and separate accounts adequate to reflect, in accordance with sound accounting practices, the resources and expenditures in connection with the execution of the Project.

(b) The Borrower shall:

(i) have the records and accounts referred to in paragraph (a) of this Section, and the records and accounts for the Special Account, for each fiscal year audited, in accordance with generally accepted auditing standards and procedures, consistently applied, by independent and qualified auditors;

(ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested;

(iii) furnish to the Bank each month certified statements of the Special Account; and

(iv) furnish to the Bank such other information concerning said records and accounts as well as the audit thereof as the Bank shall from time to time reasonably request.

(c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall provide to the Guarantor any information that may be required by the Guarantor to comply with the Guarantor's obligations under Section 3.05 (c) of the Guarantee Agreement.

ARTICLE V

Remedies of the Bank

Section 5.01. Pursuant to Section 6.02 (l) of the General Conditions, the following additional events are specified:

(a) The Ley Forestal (Forestry Law; published in the Guarantor's Diario Oficial de la Federación on December 22, 1992) shall have been, in whole or in part, amended, suspended, abrogated, repealed or waived so as to affect, in the opinion of the Bank, materially and adversely the carrying out of the Project.

(b) The Forestry Law's regulations, published in the Guarantor's Diario Oficial de la Federación on February 21, 1994, shall have been, in whole or in part, amended, suspended, abrogated, repealed or waived so as to affect, in the opinion of the Bank, materially and adversely the carrying out of the Project.

(c) The decree creating CONAFOR, published in the Guarantor’s Diario Oficial de la Federación on April 4, 2001, and/or CONAFOR’s Organic Statute (Estatuto Orgánico), shall have been, in whole or in part, amended, suspended, abrogated, repealed or waived so as to affect, in the opinion of the Bank, materially and adversely the carrying out of the Project.

Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified, namely, that any event specified in Section 5.01 of this Agreement shall occur.

ARTICLE VI

Effective Date; Termination

Section 6.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the contractual arrangements referred to in Section 3.01 of this Agreement have been entered into.

Section 6.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank, namely, that on behalf of each of the Borrower and the Guarantor, the contractual arrangements referred to in Section 3.01 of this Agreement have been duly authorized or ratified, and executed and delivered, by the Borrower and the Guarantor and are legally binding upon the Borrower and the Guarantor in accordance with the terms of such contractual arrangements.

Section 6.03. The date August 1, 1997 is hereby specified for the purposes of Section 12.04 of the General Conditions.

ARTICLE VII

Representative of the Borrower; Addresses

Section 7.01. The Director Internacional of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions.

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

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 248423 (MCI) or

Washington, D.C. 64145 (MCI)

For the Borrower:

Nacional Financiera, S.N.C.

Dirección Internacional

Torre IV, piso 8

Plaza Inn, Insurgentes Sur 1971

01020 México, D.F.

México

Cable address: Telex:

NAFIN NAFIME 383-1775765

Mexico City Mexico City

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

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

By /s/ Shahid Javed Burki

Regional Vice President

Latin America and the Caribbean

NACIONAL FINANCIERA, S.N.C.

By /s/ José García Torres

Authorized 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 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) Goods (except items 1,000,000 70% included in Categories (3)

or (4) below and vehicles, but

including aerial photographs)

(2) Consultant services

(except as included in

Categories (3) and (4) below):

(a) under Part A.2 of 3,600,0005,800,000 100% of amount

the Project disbursed by

SEMARNAPCONAFOR

to Communities and

Ejidos

(b) other 3,000,0005,000,000 100%

(3) Pilot Projects 1,500,0001,000,000 100% of amounts

disbursed by

SEMARNAPCONAFOR

to Communities and

Ejidos for Pilot

Projects

(4) Training 4,200,0002,200,000 100%

Amount of the

Loan Allocated % of

(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(5) Unallocated 1,700,000

______________

TOTAL 15,000,000

============

2. For the purposes of this Schedule, the term "training" includes only: (a) fees of consultants employed as trainers; (b) reasonable travel, room, board and per diem expenditures incurred by trainees in connection with their training under Parts A and D of the Project; (c) course fees charged by academic institutions; and (d) training material preparation, acquisition, reproduction and distribution expenses not otherwise covered under this paragraph.

3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made: (a) in respect of a Pilot Project unless the procedures, terms and conditions set forth or referred to in Section 3.10 of the Guarantee Agreement have been complied with for that Pilot Project; and (b) in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $1,500,000, may be made on account of payments made for expenditures incurred within the twelve months prior to the date of this Agreement but after March 1, 1996.

4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures under contracts costing less than $100,000 equivalent (in the case of consulting firms) and less than $50,000 equivalent (in the case of individual consultants), as well as for expenditures for training items referred to in paragraph 2 (b), (c) and (d) of this Schedule, for goods estimated to cost less than $350,000 equivalent per contract or per bid package and for Pilot Projects, all under such terms and conditions as the Bank shall specify by notice to the Borrower.

SCHEDULE 2

Description of the Project

The objectives of the Project are to: (a) improve natural resource management and conservation by Community and Ejido forestry resource owners in Mexico; and (b) increase the range of forestry-based income generating options available to such owners.

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

Part A: Assistance to Participating States’ Communities and Ejidos

1. Implementation of promotional activities to inform Communities and Ejidos in the Participating States of the support available to them under the Project and to evaluate their pine-oak, tropical and/or other broadleaf forestry resource management interests and needs.

2. Provision of technical assistance to Communities and Ejidos in the Participating States in support of their pine-oak, tropical and/or other broadleaf forestry resource management-related initiatives undertaken to, inter alia: (a) prepare or upgrade Management Plans; (b) prepare forested area conservation plans; (c) address integrated forestry resource management and forestry research issues; and (d) increase the efficiency of their forestry enterprises.

3. Provision of demand-driven training (through courses, workshops, seminars and two- or four-year scholarships), to members of Communities and of Ejidos in the Participating States, on pine-oak, tropical and/or other broadleaf forestry resource management topics (including environmental, biodiversity and land use planning and boundary issues).

4. Implementation, on a national or regional level, of Community/Ejido-to-Community/Ejido workshops sponsored by the Communities and/or Ejidos to exchange information on forestry development and conservation activities.

Part B: Capacity Strengthening Assistance to Private Service Providers

1. Provision of environmental, forestry resource management and related training (including biodiversity training), through two-week orientation/immersion workshops, to private providers of services to Communities and Ejidos engaged in forestry activities, so as to make such providers eligible to provide technical assistance under Part A.2 of the Project.

2. Implementation, through courses consisting of two-week workshops, of a post-graduate level continuing education program (in the same fields for which training is provided under Part B.1 of the Project) for providers deemed eligible pursuant to Part B.1 of the Project so that they may maintain such eligibility.

Part C: Promotion of Non-timber Forest Products

1. (a) Carrying out of diagnostic studies to create a comprehensive data base on the extent, management, production, use, conservation and trade of tradable or potentially tradable non-timber and non-traditional forest products in the Participating States; and (b) implementation of campaigns to promote interest in the carrying out of Pilot Projects.

2. Carrying out of Pilot Projects by Communities and Ejidos in the Participating States.

3. Monitoring, evaluation, publication and other dissemination of the results of the Pilot Projects carried out under Part C.2 of the Project.

Part D: Institutional Strengthening

1. Strengthening (through the provision of technical assistance, training and goods) of the SEMARNAPSEMARNAT Oaxaca office's capacity to review, approve, supervise and audit Management Plans.

2. (a) Strengthening (through the provision of technical assistance, training and goods) of the capacity of SEMARNAPSEMARNAT and CONAFOR offices located in the Participating States to carry out their forestry responsibilities; and (b) strengthening (through the provision of technical assistance and training) of the capacity of the Secretariats to absorb forestry responsibilities, held by SEMARNAP,SEMARNAT and/or CONAFOR, which are potentially transferable to such Secretariats.

3. Design, computerization, administration and dissemination of the SEMARNAPSEMARNAT and/or CONAFOR Sistema Nacional de Información Forestal (National Forestry Information System) and Registro Nacional Forestal (National Forestry Registry).

4. Provision of training (through courses, workshops, study tours, seminars and two-year scholarships) to SEMARNAPCONAFOR forestry officials to upgrade their forestry, administrative and technology skills.

5. Provision of equipment and administrative support to the PMT and the PITs to facilitate their role in Project management.

6. Carrying out of workshops and other preliminary activities in connection with the preparation of potential future pine-oak, tropical and/or other broadleaf forest projects, for the States of Chihuahua, Durango, Michoacán, Jalisco and Guerrero, modeled on Parts A and B of the Project.

* * *

The Project is expected to be completed by December 31, 2001.June 30, 2003.

SCHEDULE 3

Amortization Schedule

Payment of Principal

Date Payment Due (expressed in Dollars)*

On each May 15 and November 15

beginning November 15, 2002

through May 15, 2012 750,000

___________________

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

SCHEDULE 4

Special Account

1. For the purposes of this Schedule:

(a) the term "eligible Categories" means Categories (1), (2), (3) and (4) set forth 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 and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and

(c) the term "Authorized Allocation" means an amount equivalent to $1,000,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule.

2. Payments out of the Special Account shall be made exclusively for eligible expenditures 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 subsequent withdrawals to replenish the Special Account shall be made as follows:

(a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for deposit into the Special Account of an amount or amounts which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested.

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

(ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures.

All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective 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 Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures.

5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account:

(a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance 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 the period 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 of the audit of the records and accounts for the Special Account;

(c) if, at any time, the Bank shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or

(d) once the total unwithdrawn amount of the Loan allocated to the eligible Categories, minus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation.

Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures.

6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional 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 amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be 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 outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount.

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

(d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.

LOAN NUMBER 4137-ME

Guarantee Agreement

(Community Forestry Project)

between

UNITED MEXICAN STATES

and

INTERNATIONAL BANK FOR RECONSTRUCTION

AND DEVELOPMENT

Dated May 2, 1997 (as amended on June 1, 2000 and December 18, 2003)

LOAN NUMBER 4137-ME

GUARANTEE AGREEMENT

AGREEMENT, dated May 2, 1997, between UNITED MEXICAN STATES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank).

WHEREAS (A) the Guarantor and Nacional Financiera, S.N.C. (the Borrower), having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to the Loan Agreement, have requested the Bank to assist in the financing of the Project; and

(B) by the Loan Agreement of even date herewith between the Bank and the Borrower, the Bank has agreed to extend to the Borrower a loan in the amount of fifteen million Dollars ($15,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan and to undertake such other obligations as provided in this Agreement; and

WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower and to undertake such other obligations as 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 Guarantee Agreements for Single Currency Loans" of the Bank, dated May 30, 1995 (the General Conditions) constitute an integral part of this Agreement.

Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to and Section 1.02 of the Loan Agreement have the respective meanings therein set forth.

ARTICLE II

Guarantee; Provision of Funds

Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan, and the punctual performance of all the other obligations of the Borrower, all as set forth in the Loan Agreement.

Section 2.02. The Guarantor shall provide, in a timely manner as needed, the funds, facilities, services and other resources required for the Project.

ARTICLE III

Execution of the Project

Section 3.01. (a) The Guarantor declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall cause CONAFOR to carry out the Projectthrough SEMARNAP, with due diligence and efficiency and in conformity with appropriate environmental, financial, technical and administrative standards and practices, as well as in accordance with the technical assistance financing criteria and periodically adjustable implementation schedule set forth in the Implementation Letter.

(b) Throughout the course of Project implementation, the Guarantor shall maintain:

(i) through SEMARNAP,cause CONAFOR to maintain a Project management team in the SEMARNAP General Forestry Directorate (Dirección General Forestal) in Mexico City,CONAFOR’s headquarters, consisting of sufficient qualified staff to carry out general Project coordination, provide liaison with officials of the State of OaxacaParticipating States and provide procurement and forestry expertise in connection with the Project;

(ii) through SEMARNAP,cause CONAFOR to maintain a Project implementation team in the SEMARNAP office in the State of Oaxaca,each of the CONAFOR regional offices (gerencias regionales) that have jurisdiction over a Participating State, consisting of sufficient qualified staff and/or consultants to carry out general Project coordination within the State of Oaxaca,Participating States, promote the Project, provide liaison with Communities and Ejidos and provide administrative, training, procurement and biodiversity expertise in connection with the Project (of which the procurement and biodiversity expertise shall each be represented by a separate staff member and/or consultant);consultant in each such regional office); and

(iii) maintain an advisory committee, consisting of selected SEMARNAP director generals,SEMARNAT and CONAFOR officials satisfactory to the Bank, to ensure coordination of Project activities with other SEMARNAPSEMARNAT and CONAFOR initiatives, evaluate Project progress and make recommendations for improved Project execution as necessary; andnecessary.

(iv) a coordinating commission for the State of Oaxaca, consisting of a COPLADE technical advisor, the SEDAF secretary (secretario) and the head (delegado) of the SEMARNAP office in the State of Oaxaca, to ensure coordination of Project activities in the State of Oaxaca and to evaluate Project progress in the State of Oaxaca.

Section 3.02. The Guarantor shall enter into the contractual arrangements referred to in Section 3.01 of the Loan Agreement. Except as the Bank may otherwise agree, the Guarantor shall not amend or fail to enforce any provision of such contractual arrangements. The Guarantor shall exercise its rights and carry out its obligations under such contractual arrangements in such a manner as to protect the interests of the Guarantor and the Bank and to accomplish the purposes of the Loan.

Section 3.03. Except as the Bank shall otherwise agree, procurement of the goods, works and consultant services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 1 to this Agreement.

Section 3.04. (a) The Guarantor shall carry out, or cause to be carried out,cause CONAFOR to carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) with regard to the Project.

(b) For purposes of Section 9.08 of the General Conditions, and without limitation thereto, the Guarantor shall cause CONAFOR to:

(i) prepare or cause to be prepared, on the basis of guidelines acceptable to the Bank, and furnish to the Bank not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Guarantor and the Bank, a plan for the future operation of the Project; and

(ii) afford the Bank a reasonable opportunity to exchange views with the Guarantor and CONAFOR on said plan.

Section 3.05. (a) The Guarantor shall, through SEMARNAP,shall cause CONAFOR to maintain records and separate accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in connection with the execution of the Project.

(b) The Guarantor shall cause CONAFOR to:

(i) have the records and accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with generally accepted auditing standards and procedures consistently applied, by independent and qualified auditors;

(ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and

(iii) furnish to the Bank such other information concerning said records and accounts as well as the audit thereof as the Bank shall from time to time reasonably request.

(c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Guarantor shall cause CONAFOR to:

(i) maintain, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures;

(ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account or payment out of the Special 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 annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals.

(d) For all expenditures with respect to which withdrawals were made from the Special Account, the Guarantor shall provide, or cause CONAFOR to provide, to the Borrower any information that may be required by the Borrower to comply with the Borrower's obligations under Section 4.01 of the Loan Agreement.

Section 3.06. With regard to Part A.2 of the Project, the Guarantor, through SEMARNAP, shall:Guarantor shall cause CONAFOR to:

(a) have the PMT prepare and maintain an updated roster of technical assistance providers from the private sector, a set of standardized terms of reference for the types of technical assistance that may be provided by said providers and a standard contract to be entered into between said providers and Communities and Ejidos, all satisfactory to the Bank;

(b) have the PITs distribute to Communities and Ejidos the roster, standard terms of reference and standard contract referred to in paragraph (a) of this Section;

(c) subject to the Bank prior review stipulations contained in paragraph 2 of Section II of Schedule 1 to this Agreement with respect to consultant contracts, have the PITs accept standard contracts referred to in paragraph (a) of this Section entered into by Communities or Ejidos, with technical assistance providers on the roster referred to in said paragraph (a), which contracts incorporate standard terms of reference also referred to in said paragraph (a);

(d) have the PITs, through a disbursement mechanism satisfactory to the Bank, pay each of the technical assistance providers for such provider’s services, according to the terms of the standard contract referred to in paragraph (a) of this Section, if: (i) said provider's contract was accepted by the relevant PIT pursuant to paragraph (c) of this Section; (ii) the terms of reference incorporated in such contract are the standard ones referred to in paragraph (a) of this Section or are otherwise approved by the Bank; and (iii) the relevant PIT has received a signed certification from the relevant Ejido president or Community leader (comisariado), as the case may be, that said provider has completed the work for which payment is sought; and

(e) have the PITs actively solicit annual or more frequent evaluations of their participation in Part A.2 of the Project from Communities and Ejidos.

Section 3.07. With regard to Part A.2 of the Project, the Guarantor, through SEMARNAP, shallGuarantor shall cause CONAFOR to ensure that the provisions of Section I of Schedule 2 to this Agreement are complied with.

Section 3.08. With regard to Part A.3 of the Project, the Guarantor, through SEMARNAP, shallGuarantor shall cause CONAFOR to ensure that:

(a) to be eligible for a scholarship, members of a Community or of an Ejido must have been nominated by their Community or Ejido and accepted by a training institution for admission into such institution’s study program;

(b) from among those eligible for scholarships pursuant to paragraph (a) of this Section, scholarships be awarded solely to those whose scholarship applications have been approved by a review panel which shall be in existence throughout Project implementation and shall consist of the head (delegado) of the SEMARNAPT office in the State ofrelevant Oaxaca, the natural resources and planning subdelegates (sub-delegados) of said office, the headParticipating State, the head (gerente regional) of the CONAFOR regional office (gerencia regional) for the relevant Participating State, the head (in the case of the State of Oaxaca) of the Forestry Technical School (Escuela Técnica Forestal de Santa María Atzompa) in Oaxaca and the Secretary (Secretario) of SEDAF;head of the relevant Participating State’s Secretariat; and

(c) the relevant PIT pays the relevant training institution in advance for each semester’s tuition, and pays the scholarship recipient in advance for each semester’s room and board.

Section 3.09. With regard to Part B of the Project, the Guarantor, through SEMARNAP, shallGuarantor shall cause CONAFOR to allow private providers of services to be eligible to participate in Part A.2 of the Project only if: (a) such providers (or at least one member thereof if the provider is a firm) have successfully completed the orientation/immersion workshop referred to in Part B.1 of the Project and have successfully completed one course per year from among the courses offered in the continuing education program referred to in Part B.2 of the Project; and (b) such providers have not provided services under Part A.2 of the Project in a manner unsatisfactory to Communities or Ejidos.

Section 3.10. With regard to Part C of the Project, the Guarantor, through SEMARNAP, shallGuarantor shall cause CONAFOR to provide nonreimbursable contributions to Communities and Ejidos in a Participating State, in support of Pilot Projects, only if:

(a) the diagnostic study referred to in Part C.1 (a) of the Project has been carried out for that Participating State and contains a list, satisfactory to the Bank, of forest products appropriate for potential productive development;

(b) the forest product that is the subject of the Pilot Project is identified in the list referred to in paragraph (a) of this Section; and

(c) the provisions of Section II of Schedule 2 to this Agreement are complied with.

Section 3.11. With regard to Part D.3 of the Project, the Guarantor, through SEMARNAP, shallGuarantor shall cause SEMARNAT and/or CONAFOR to ensure that: (a) the computerized and disseminated National Forestry Information System referred to in said Part D.3 include data (in the form of threatened species information sheets) for each of the species that occur in Mexican forests and are listed in the CITES or the NOM-059 referred to in Section 3.10 (d) (vii) ofII, paragraph 3 (h) of Schedule 2 to this Agreement; and (b) prior to or concurrent with the computerization and dissemination of the National Forestry Information System, such threatened species information sheets also be disseminated in a non-computerized format suitable for use in the field.

Section 3.12. With regard to Part D.4 of the Project, the Guarantor, through SEMARNAP, shall:Guarantor shall cause CONAFOR to:

(a) only award two-year scholarships to staff, of the SEMARNAP natural resources subsecretariat (sub-secretaría de recursos naturales) or of the SEMARNAP offices inCONAFOR regional offices (gerencias regionales) for the Participating States, who have an undergraduate professional degree and who have had their scholarship applications approved by the advisory committee referred to in Section 3.01 (b) (iii) of this Agreement; and

(b) not award more than a single two-year scholarship per student.

Section 3.13. (a) Throughout the course of Project implementation, and without limitation of the provisions of Section 9.07 of the General Conditions, the Guarantor (through PMT) shallshall cause CONAFOR’s PMT to furnish to the Bank, by no later than each January 31 (starting no later than January 31, 1998), an annual progress report on implementation of the Project, in form satisfactory to the Bank and based on the implementation schedule and indicators set forth in the Implementation Letter. Each such report shall include, as a separate component thereof, the results of the Communities' and Ejidos' own monitoring of those Parts of the Project in which they participate.

(b) As part of each annual report referred to in paragraph (a) of this Section, the Guarantor, through PMT, shallGuarantor shall cause CONAFOR’s PMT to present to the Bank an annual action plan, satisfactory to the Bank, for Project implementation during the immediately subsequent twelve months. EachThe Guarantor shall cause CONAFOR to carry out each such action planshall be carried out by SEMARNAP during the twelve months covered by the action plan, which planand may contain, inter alia, the periodic adjustment to the implementation schedule and indicators referred to in Section 3.01 (a) of this Agreement (as well as adjustments to the procurement plan referred to in Section I, Part D.1 of the Schedule to this Agreement).

(c) The Guarantor, through SEMARNAP, shallGuarantor shall cause CONAFOR to hold a review of Project implementation with the Bank and the Borrower during the month of September 1999. Such review shall, based, inter alia, on the annual reports referred to in paragraph (a) of this Section:

(i) examine the status of Project implementation, with particular emphasis on implementation in the State of Oaxaca;

(ii) discuss the transfer of forestry responsibilities referred to in Part D.2 of the Project;

(iii) examine the status of project preparation referred to in Part D.6 of the Project;

(iv) examine whether to introduce cost recovery measures with respect to the training provided under Part B of the Project; and

(v) examine whether to amend this Agreement and the Loan Agreement to extend Part C of the Project to States other than the Participating States.

Section 3.14. The Guarantor shall ensure and cause CONAFOR to ensure that no Management Plans supported in any way under the Project (or other plans referred to in Part A of the Project or elsewhere in Schedule 2 to the Loan Agreement) are carried out unless such Management Plans and other plans are deemed, in writing by the Bank, to support independently certifiable sustainable forestry management and conservation oriented forestry and to otherwise comply with the Bank’s Operational Policy on Forestry (OP 4.36 of September 1993), as such Operational Policy may be amended from time to time.

ARTICLE IV

Representatives of the Guarantor; Addresses

Section 4.01. The Director General de Crédito Público of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions.

Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions:

For the Guarantor:

Secretaría de Hacienda y Crédito Público

Dirección General de Crédito Público

Palacio Nacional, Colonia Centro

Insurgentes Sur 826, piso 9

Colonia del Valle

03100 06000 México, D.F.

México

Telex:

1777313-SHOCME

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 248423 (MCI)

Washington, 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 in the District of Columbia, United States of America, as of the day and year first above written.

UNITED MEXICAN STATES

By /s/ Jesús Silva Herzog

Authorized Representative

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

By /s/ Shahid Javed Burki

Regional Vice President

Latin America and the Caribbean

SCHEDULE 1

Procurement and Consultants' Services

Section I. Procurement of Goods and Works

Part A: General

Goods and works shall be procured in accordance with the provisions of Section I of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995 and revised in January and August 1996 (the Guidelines) and the following provisions of this Section, as applicable.

Part B: International Competitive Bidding

1. Except as otherwise provided in Parts C, D and E of this Section, goods shall be procured under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto.

2. The following provisions shall apply to goods to be procured under contracts awarded in accordance with the provisions of paragraph 1 of this Part B:

(a) Grouping of contracts

To the extent practicable, contracts for goods shall be grouped in bid packages estimated to cost $350,000 equivalent or more each.

(b) Preference for domestically manufactured goods

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

Part C: National Competitive Bidding

Goods estimated to cost less than $350,000 equivalent per contract or per bid package, up to an aggregate amount not to exceed $800,000 equivalent, may be procured under contracts awarded in accordance with the provisions of paragraphs 3.3 and 3.4 of the Guidelines, using standard bidding documents satisfactory to the Bank.

Part D: International or National Shopping

Goods estimated to cost less than $50,000 equivalent per contract or per bid package, up to an aggregate amount not to exceed $200,000 equivalent, may be procured under contracts awarded on the basis of national or international shopping procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines.

Part E: Pilot Project Goods and Works

Goods and works for the carrying out of Pilot Projects may be procured by Communities or Ejidos in accordance with procedures, including direct contracting, acceptable to the Bank.

Part F: Review by the Bank of Procurement Decisions

1. Procurement Planning

Prior to the issuance of any invitations to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all goods (other than those procured for Pilot Projects) shall be undertaken in accordance with such procurement plan as shall have been approved by the Bank, and with the provisions of said paragraph 1.

2. Prior Review

The procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply with respect to all goods procured under Part B of this Section and to the first five contracts or bid packages for goods procured under Part C of this Section.

3. Post Review

With respect to each contract not governed by paragraph 2 of this Part, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply.

Section II. Employment of Consultants

1. Consultants' services shall be procured under contracts awarded in accordance with the provisions of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981 (the Consultant Guidelines). For complex, time-based assignments, such contracts shall be based on the standard form of contract for consultants' services issued by the Bank, with such modifications thereto as shall have been agreed by the Bank. Where no relevant standard contract documents have been issued by the Bank, other standard forms acceptable to the Bank shall be used.

2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Bank review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts, shall not apply to contracts for the employment of consulting firms estimated to cost less than $100,000 equivalent each and contracts for the employment of individual consultants estimated to cost less than $50,000 equivalent each. However, said exceptions to prior Bank review shall not apply to: (a) the terms of reference for such contracts; (b) single-source selection of consulting firms; (c) assignments of a critical nature, as reasonably determined by the Bank; (d) amendments to contracts for the employment of consulting firms raising the contract value to $100,000 equivalent or above; and (e) amendments to contracts for the employment of individual consultants raising the contract value to $50,000 equivalent or above.

SCHEDULE 2

Procedures, Terms and Conditions with Respect to

Parts A.2 and C.2 of the Project

Section I.

With regard to Part A.2 of the Project:

1. no technical assistance shall be provided to Communities and Ejidos with respect to investments in timber harvesting or timber processing equipment, as well as with respect to any road-related civil works or engineering;

2. no technical assistance shall be provided to Communities and Ejidos not appearing on the list, in the Implementation Letter, of eligible Communities and Ejidos (as such list may be updated from time to time by written notifications, satisfactory to the Bank, from the Guarantor to the Bank);

3. no technical assistance shall be provided to Communities and Ejidos that fail to formally evidence their membership’s support (through an acta or similar communal instrument and a letter to SEMARNAP)CONAFOR) for receiving the technical assistance;

4. Communities and Ejidos receiving technical assistance shall have had some of their members successfully complete, within twelve months after said Communities and Ejidos begin receiving such technical assistance, an environmental impact and conservation course under Part A.3 of the Project; and

5. the relevant Community and Ejido shall: (a) pay at least 50% 30% of the cost of the technical assistance if it operates a timber processing enterprise; (b) pay at least 35% 25% of the cost of the technical assistance if it does not operate a timber processing enterprise but harvests timber; and (c) pay at least 20% of the cost of the technical assistance if it does not operate a timber processing enterprise, does not harvest timber, but sells standing timber (Communities or Ejidos that lack a SEMARNAP-approved Management Plan (approved as indicated in Section 1.02 (h) of the Loan Agreement) and do not fall under subparagraphs (a), (b) or (c) of this paragraph need themselves pay none shall pay at least 10% of the technical assistance cost).

Section II.

With regard to Part C.2 of the Project, the Guarantor, through SEMARNAP, shall:Guarantor shall cause CONAFOR to:

1. only provide nonreimbursable contributions to Communities and Ejidos which have in place a SEMARNAP-approved Management Plan (approved as indicated in Section 1.02 (h) of the Loan Agreement), have an uncontested legal right to exploit the forest properties with respect to which the contributions are sought and have had their Pilot Project proposals approved after steps two or three (as applicable) of the review procedure set forth in paragraph 4 of this Section;

2. not finance more than one Pilot Project per Community or Ejido, not contribute more than $15,000$18,700 equivalent to each Pilot Project, not finance more than one Pilot Project per year per Participating State with respect to the same non-timber or non-traditional forest product (with a maximum allowable limit during the course of the Project of three Project;

Pilot Projects per Participating State per product);

3. only finance Pilot Projects pursuant to a standard contract, satisfactory to the Bank, entered into between the Guarantor, through SEMARNAP,CONAFOR and the relevant Community or Ejido, which contract shall, inter alia: (a) require the Community or Ejido to contribute at least 25% of the cost, in cash or in kind, of the Pilot Project activities (which contribution shall include all value added tax included in the cost of such activities); (b) specify that the nonreimbursable contribution shall be disbursed to the Community or Ejido in tranches over a period not to exceed two years, the first of which tranches shall be an advance and the rest of which shall be disbursed against confirmation by SEMARNAP,CONAFOR, by means of on-site evaluations, of the physical progress of the Pilot Project activities as measured according to benchmarks identified in the standard contract; (c) specify that procurement of the goods, works and services to be financed with the nonreimbursable contribution shall be governed by the provisions of Section I, Part E of Schedule 1 to this Agreement; (d) specify that the Community or Ejido shall take all action necessary to facilitate Guarantor compliance with the terms of Sections 3.04 (a) and 3.05 of this Agreement in connection with the Pilot Project in question; (e) preclude the use of the nonreimbursable contribution to compensate the Community or Ejido for labor provided by their members; (f) preclude the carrying out, as part of the Pilot Project, of activities relating to, or in preparation for, road construction; (g) preclude the purchase, as part of the Pilot Project, of timber harvesting equipment; and (h) preclude the carrying out, as part of the Pilot Project, of activities relating to, or in preparation for, exploitation of any plant or animal species listed in the Convention on International Trade in Endangered Species of Fauna and Flora (CITES) or in the Guarantor’s list of threatened species (Norma Oficial Mexicana NOM-059), except that such activities may be carried out as part of the Pilot Project, with the prior approval of the Bank, and if the individual plant or animal specimens in question:

(i) are of a species not listed in CITES Appendix I or qualify as part of CITES Appendix II pursuant to CITES Article VII (4);

(ii) qualify for the issuance of certificates pursuant to CITES Article VII (5) and are bred or propagated from parent specimens that also qualify for the issuance of such certificates;

(iii) are to be placed in trade or otherwise disposed of in a manner specifically approved by INE and consistent with the terms of CITES and of Mexican law; and

(iv) if of a species listed in Norma Oficial Mexicana NOM-059 but not in a CITES Appendix, have been bred or propagated, and are to be placed in trade or otherwise disposed of, in a manner specifically approved by INE and consistent with the terms of Mexican law;

4. subject Pilot Project proposals submitted by Communities or Ejidos to a two- or three-step review process whereby: (a) in step one, the proposals are screened by the relevant Participating State's review panel consisting of the head (delegado) of the SEMARNAPSEMARNAT office in that Participating State, the head(secretario) of that Participating State's Secretariat and a representative of the COPLADEthe head (gerente regional) of CONAFOR’s regional office (gerencia regional) for that Participating State; (b) in step two, the proposals approved in step one undergo a final screening by a federal review panel consisting of the SEMARNAP natural resourcesSEMARNAT environmental protection subsecretary (sub-secretario de recursos naturales), the SEMARNAP forestrygestión para la protección ambiental), the CONAFOR director general (director general forestal) and the president of CONABIO; and (c) in step three (only applicable to the first ten Pilot Projects to be financed under the Project), the proposals are reviewed and approved by the Bank; and

5. cause independent physical monitoring and financial auditing of activities in each Participating State on an annual basis (and, as part of such monitoring, actively solicit annual or more frequent evaluations of their participation in Part C of the Project from Communities and Ejidos).

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download