OFFICIALDOCUMENTS

LOAN NUMBER 8638-PY

Loan Agreement(Transport Connectivity Project -

Habilitacidn de la Red Pavimentada)

between

REPUBLIC OF PARAGUAY

and

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

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LOAN AGREEMENT

Agreement dated as of the Signature Date, between REPUBLIC OF PARAGUAY

("Borrower") and INTERNATIONAL BANK FOR RECONSTRUCTION AND

DEVELOPMENT ("Bank"). The Borrower and the Bank hereby agree as follows:

ARTICLE I - GENERAL CONDITIONS; DEFINITIONS

1.01. The General Conditions (as defined in the Appendix to this Agreement) constitute

an integral part of this Agreement.

1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement

have the meanings ascribed to them in the General Conditions or in the Appendix

to this Agreement.

ARTICLE II - LOAN

2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or

referred to in this Agreement, the amount of one hundred million Dollars,

($100,000,000), as such amount may be converted from time to time through a

Currency Conversion in accordance with the provisions of Section 2.08 of this

Agreement ("Loan"), to assist in financing the project described in Schedule 1 to

this Agreement ("Project").

2.02. The Borrower may withdraw the proceeds of the Loan in accordance with Section

IV of Schedule 2 to this Agreement.

2.03. The Front-end Fee payable by the Borrower shall be equal to one quarter of one

percent (0.25%) of the Loan amount.

2.04. The Commitment Charge payable by the Borrower shall be equal to one quarter of

one percent (0.25%) per annum on the Unwithdrawn Loan Balance.

2.05. The interest payable by the Borrower for each Interest Period shall be at a rate

equal to the Reference Rate for the Loan Currency plus the Fixed Spread; provided,

that upon a Conversion of all or any portion of the principal amount of the Loan,

the interest payable by the Borrower during the Conversion Period on such amount

shall be determined in accordance with the relevant provisions of Article IV of the

General Conditions. Notwithstanding the foregoing, if any amount of the

Withdrawn Loan Balance remains unpaid when due and such non-payment

continues for a period of thirty days, then the interest payable by the Borrower

shall instead be calculated as provided in Section 3.02 (e) of the General

Conditions.

2.06. The Payment Dates are May 15 and November 15 in each year.

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2.07. The principal amount of the Loan shall be repaid in accordance with theamortization schedule set forth in Schedule 3 to this Agreement.

2.08. (a) The Borrower may at any time request any of the following Conversionsof the terms of the Loan in order to facilitate prudent debt management:(i) a change of the Loan Currency of all or any portion of the principalamount of the Loan, withdrawn or unwithdrawn, to an ApprovedCurrency; (ii) a change of the interest rate basis applicable to: (A) all orany portion of the principal amount of the Loan withdrawn andoutstanding from a Variable Rate to a Fixed Rate, or vice versa; or (B) allor any portion of the principal amount of the Loan withdrawn andoutstanding from a Variable Rate based on a Reference Rate and theVariable Spread to a Variable Rate based on a Fixed Reference Rate andthe Variable Spread, or vice versa; or (C) all of the principal amount of theLoan withdrawn and outstanding from a Variable Rate based on a VariableSpread to a Variable Rate based on a Fixed Spread; and (iii) the setting oflimits on the Variable Rate or the Reference Rate applicable to all or anyportion of the principal amount of the Loan withdrawn and outstanding bythe establishment of an Interest Rate Cap or Interest Rate Collar on theVariable Rate or the Reference Rate.

(b) Any conversion requested pursuant to paragraph (a) of this Section that isaccepted by the Bank shall be considered a "Conversion", as defined inthe General Conditions, and shall be effected in accordance with theprovisions of Article IV of the General Conditions and of the ConversionGuidelines.

ARTICLE III - PROJECT

3.01. The Borrower declares its commitment to the objectives of the Project. To thisend, the Borrower shall carry out: (a) Parts 1, 2.1, 3 and 4 of the Project throughMOPC; and (b) Part 2.2 of the Project through MOPC with the assistance ofANTSV and the participation of the Eligible Municipalities, all in accordance withthe provisions of Article V of the General Conditions.

3.02. Without limitation upon the provisions of Section 3.01 of this Agreement, andexcept as the Borrower and the Bank shall otherwise agree, the Borrower shallensure that the Project is carried out in accordance with the provisions of Schedule2 to this Agreement.

ARTICLE IV -TERMINATION

4.01. The Effectiveness Deadline is the date one hundred and eighty (180) days after theSignature Date.

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ARTICLE V - REPRESENTATIVE; ADDRESSES

5.01. The Borrower's Representative is its Minister of Finance.

5.02. The Borrower's Address is:

Ministry of Finance(Ministerio de Hacienda)Chile 128Asunci6n, Paraguay

Facsimile: 59521-448-283

Cc:

State Sub-secretariat of Financial Management of the Ministry of Finance(Subsecretaria de Estado de Administraci6n Financiera del Ministerio deHacienda)

Facsimile: 59521 493-641

5.03. The Bank's Address is:

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

Telex: Facsimile:

248423(MCI) or 1-202-477-639164145(MCI)

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reed at Asunci6n, Republic of Paraguay, on behalf of the Bankon 0 6N, and on behalf of the Borrower onSe p+em 1,R), 0511 (

REPUBLIC OF PARAGUAY

By

Authorized Representative

Name: ny L 00

Title: Woa*MkS Q'

INTERNATIONAL BANK ORRECONSTRUCTION AND VEL 1(YWII?

By I ,

uthori d epresentative

Name: TO1ov

Title:. _____ h v___ s____________

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SCHEDULE 1

Project Description

The objectives of the Project are to: (a) reduce transport connectivity costs andimprove road safety along selected paved road sections that pass through TargetedDepartments; and (b) improve the Borrower's planning and national road assetmanagement capacity.

The Project consists of the following parts:

Part 1: Road Rehabilitation and Maintenance CREMA Contracts

(a) Carrying out, under the terms of two (2) CREMA Contracts, of rehabilitation andmaintenance works for approximately three hundred and nineteen (319) kilometers of thefollowing identified sections of the Borrower's national paved roads RN1 and RN3-8 inthe Targeted Departments of San Pedro, Caaguazu, Canindeyu, Misiones and Itapua: (i)San Juan Bautista - Encarnaci6n (approximately 169.7 kilometers); (ii) Mbutuy - Yasy

Kaily (approximately 70.6 kilometers); and (iii) Carayao - Tacuara - Calle 6000 y Accesoa San Estanislao (approximately 78.4 kilometers); and (b) carrying out the supervision ofworks under said CREMA Contracts; all aiming at reducing transport costs in said TargetedDepartments.

Part 2: Road Safety

2.1. Carrying out, under the terms of the two (2) CREMA Contracts referred to under PartI of the Project, of road safety improvement interventions (including, inter alia, theinstallation of side guardrails, the carrying out of signaling works, the improvement ofidentified roundabouts and the construction of shoulders and of pedestrian walkways)targeting the most vulnerable users near urban areas along the identified sections of theBorrower's national paved roads referred to under Part 1 of the Project; all aiming atimproving road safety in Targeted Departments.

2.2. Carrying out prioritized road safety improvement interventions (other than those underthe CREMA Contracts) with the goal of improving road safety conditions in EligibleMunicipalities, such as, inter alia, road marking of exclusive areas, the installation oftraffic lights in urban areas, the construction of speed bumps, roundabouts, ramps forpeople with disabilities and of pedestrian paths in school vicinities.

Part 3: Road Asset Planning and Management

Provision of support for the consolidation of MOPC's strategic road managementmethodologies and systems, through: (a) the completion of MOPC's road networkinventory; (b) the expansion, operation and maintenance of MOPC's traffic counting

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system; and (c) the operationalization of MOPC'S road asset management system, allaiming at improving national planning and road asset management capacity.

Part 4: Project Management and Implementation Support

Provision of support to MOPC for Project implementation, for purposes of ensuring thequality and timely attainment of Project's objectives, through, inter alia: (a) the financingof Operating Costs, Training and of monitoring and evaluation activities; (b) the carryingout of the Project audits; (c) the implementation of the Project's citizen engagement web-based system; (d) the carrying out of environment and social management activities,including, inter alia, safeguard compliance supervision activities; (e) the promotion ofindigenous communities' social inclusion by addressing their specific needs, differentiatedby gender; and (f) the acquisition of land and the provision of compensation (includingcash compensation and other Resettlement assistance) related to the implementation of theRAP.

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SCHEDULE 2

Project Execution

Section I. Implementation Arrangements

A. Institutional Arrangements.

1. The Borrower, through MOPC, shall operate and maintain, at all times throughoutProject implementation, the UEP, with functions and responsibilities acceptable tothe Bank, which shall be responsible for overall Project coordination and day today implementation of the Project, and staffed with competent personnel inadequate numbers, with qualifications, experience and terms of referencesatisfactory to the Bank, as set forth in the Operational Manual.

2. The Borrower, through MOPC, shall ensure, throughout Project implementation,the coordination of UEP with other MOPC's subordinated units participating inthe implementation of the technical and fiduciary aspects of the Project, whichsubordinated units shall be vested with powers and functions acceptable to theBank, as set forth in the Operational Manual.

3. The Borrower, through MOPC, shall ensure and shall cause any contractor toensure, that any road under a CREMA Contract has met the eligibility criteria setforth in the Operational Manual, which criteria shall include, inter alia, that anysaid road: (a) has not been previously financed by the Bank; (b) is not beingfinanced by the Bank, and/or is not being financed with the Borrower's funds, allunder any Bank project.

B. Participation Agreements.

1. For purposes of carrying any given Road Safety Intervention under Part 2.2 of theProject, and prior to the carrying out of any works under the pertinent Road SafetyIntervention, the Borrower, through MOPC, shall: (a) select each EligibleMunicipality in accordance with the eligibility criteria set forth in the OperationalManual; and (b) thereafter enter into an agreement with the corresponding EligibleMunicipality and ANTSV (the Participation Agreement), under terms andconditions acceptable to the Bank, as established in the Operational Manual,setting forth their respective roles and responsibilities regarding theimplementation of the pertinent Road Safety Intervention works under Part 2.2 ofthe Project, including, inter alia: (i) the obligation of the respective EligibleMunicipality to: (A) delegate to the Borrower, through MOPC, the responsibilitiesto carry out the Road Safety Intervention works under the Eligible Municipality'sjurisdictions; (B) comply with the applicable Safeguard Documents; (C) uponsatisfactory completion of the pertinent Road Safety Intervention, operate andmaintain said Road Safety Intervention in accordance with the terms andconditions of the respective Participation Agreement, with due diligence and

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efficiency, and in accordance with adequate technical, economic, social andenvironmental standards and practices; and (D) take or permit to be taken allactions to enable the Borrower, through MOPC, to comply with the provisions ofthis Agreement with regard to pertinent Road Safety Intervention under Part 2.2 ofthe Project; and (ii) the obligation of the Borrower, through MOPC, to carry out,on behalf of the corresponding Eligible Municipality, the pertinent Road SafetyIntervention works in accordance with the pertinent provisions of this Agreementas applicable to said Part of the Project.

2. The Borrower, through MOPC, shall exercise its rights and carry out itsobligations under each Participation Agreement in such manner as to protect theinterests of the Borrower and the Bank and to accomplish the purposes of theLoan. Except as the Bank shall otherwise agree, the Borrower, through MOPC,shall not assign, amend, abrogate, terminate, waive or fail to enforce anyParticipation Agreement, or any provision thereof.

3. In case of any conflict between the terms of a Participation Agreement and thoseof this Agreement, the terms of this Agreement shall prevail.

C. Operational Manual

1 . Without limitation upon the provisions of Section 3.01 of this Agreement, theBorrower, through MOPC, shall, and shall cause the ANTSV and the EligibleMunicipalities (as the case may be), to carry out the Project in accordance withthe provisions of a manual (the Operational Manual), acceptable to the Bank,which shall include, inter alia: (a) the list of CREMA Contracts and road sectionsidentified under Parts I and 2.1 of the Project, including the eligibility criteria forselecting said road sections; (b) the organizational structure of the Project,including the functions and responsibilities of UEP and of each of MOPC'ssubordinated units referred to in Section I.A.2 of this Schedule; (c) the Project'schart of accounts, internal controls, and budgeting, accounting and financialreporting systems, and the semi-annual un-audited interim financial reports andthe format of the annual financial statements referred to in Section II. B.2 and B.3of this Schedule, respectively; (d) the terms of reference for carrying out theProject audits under Section II.B.3 of this Schedule; (e) the Project's flow of fundsstructure; (f) the Project's administrative and procurement procedures; (g) thestandard environmental provisions to be included in the bidding documents forinvestments to be carried out under the Project; (h) the Project indicators; (i) the

Safeguards Documents; (j) the eligibility criteria for the selection of EligibleMunicipalities; (k) the model Participation Agreement; and (1) the Road SafetyIntervention List.

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2. Except as the Bank shall otherwise agree, the Borrower shall not amend, terminateor waive the Operational Manual or any of its provisions. In case of any conflictamong the terms of the Operational Manual and those of this Agreement, the termsof this Agreement shall prevail.

D. Anti-Corruption

The Borrower shall ensure that the Project is carried out in accordance with the

provisions of the Anti-Corruption Guidelines.

E. Safeguards

1. The Borrower, through MOPC, shall ensure that any works under the CREMAContracts are carried out in accordance with the ESMPs, IPP, and the RAP, all ina manner acceptable to the Bank.

2. Without limitation to the provisions of this Section, and after the final detaileddesigns of the works to be carried out under any CREMA Contract have beencompleted, the Borrower shall: (a) prior to the carrying out of any works under anysaid CREMA Contract, update the RAP in a manner acceptable to the Bank (whichupdated RAP shall be consistent with the pertinent provisions of the ResettlementPolicy Framework); and (b) immediately thereafter, implement and/or caused tobe implemented, the updated RAP in accordance with its terms and in a manneracceptable to the Bank.

3. The Borrower, through MOPC, shall: (a) implement Part 2.2 of the Project inaccordance with the Environmental and Social Management Framework (EMSF),including the procedures detailed in said EMSF for environmental screening,evaluation, implementation and monitoring of the activities under said Part of theProject, as well as the procedures for the preparation of environmentalmanagement plans, when applicable; and (b) implement and/or cause to beimplemented the pertinent environmental management plan, in accordance with itsterms and in a manner acceptable to the Bank.

4. The Borrower, through MOPC, shall: (a) implement the Project in accordance withthe Resettlement Policy Framework (RPF), including the procedures detailed insaid RPF for screening, evaluation, implementation and monitoring of the Projectactivities, as well as the procedures for the preparation of resettlement action plans,when applicable, and for the update of the RAP (as provided in paragraph 2 (a) ofthis Section); and (b) thereafter implement and/or cause to be implemented thepertinent resettlement action plan in accordance with its terms and in a manneracceptable to the Bank.

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5. The Borrower, through MOPC, shall: (a) implement Part 2.2 of the Project inaccordance with the Indigenous People Planning Framework (IPPF), including theprocedures detailed in said IPPF for screening, evaluation, implementation, andmonitoring of the activities under the Project, as well as procedures for thepreparation of indigenous peoples plans, when applicable; and (b) thereafterimplement and/or cause to be implemented the pertinent indigenous peoples planin accordance with its terms, and in a manner acceptable to the Bank.

6. The Borrower, through MOPC, shall ensure that the contractors for civil worksunder the Project include the obligation of the relevant contractor to comply withthe relevant Safeguard Documents, as applicable to such civil works commissionedor carried out pursuant to said contract.

7. The Borrower, thorugh MOPC, shall ensure that the terms of reference for anyconsultancy in respect of any Project activity shall be satisfactory to the Bankfollowing its review thereof and, to that end, such terms of reference shall dullyincorporate the requirements of the applicable Bank's Safeguards Policies, asapplied to the advice conveyed through such technical assistance.

Section II. Project Monitoring Reporting and Evaluation

A. Project Reports

The Borrower shall monitor and evaluate the progress of the Project and prepareProject Reports in accordance with the provisions of Section 5.08 of the GeneralConditions and on the basis of indicators acceptable to the Bank, as set forth in theOperational Manual. Each Project Report shall cover the period of one calendarsemester, and shall be furnished to the Bank not later than forty-five (45) days afterthe end of the period covered by such report.

B. Financial Management, Financial Reports and Audits

1 . The Borrower, through MOPC, shall maintain or cause to be maintained a financialmanagement system in accordance with the provisions of Section 5.09 of theGeneral Conditions.

2. Without limitation on the provisions of Part A of this Section, the Borrower,through MOPC, shall prepare and furnish to the Bank as part of each Project Reportinterim unaudited financial reports for the Project covering the pertinent semester,in form and substance satisfactory to the Bank.

3. The Borrower, through MOPC, shall have its Financial Statements audited inaccordance with the provisions of Section 5.09 (b) of the General Conditions. Eachaudit of the Financial Statements shall cover the period of one fiscal year of the

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Borrower. The audited Financial Statements for each such period shall be

furnished to the Bank not later than six months after the end of such period.

4. The Borrower, through MOPC, shall, not later than six months after the Effective

Date and prior to the commencement of each calendar year during Project

implementation thereafter, create, and thereafter maintain throughout each

calendar year of Project implementation, a specific budget line in order to keep

track of the expenditures incurred during Project implementation, including a

specific allocation for expenditures related to the implementation of the RAP under

the CREMA Contracts.

Section III. Procurement

A. General

1 . Goods, Works and Non-consulting Services. All goods, works and non-

consulting services required for the Project and to be financed out of the proceeds

of the Loan shall be procured in accordance with the requirements set forth or

referred to in Section I of the Procurement Guidelines, and with the provisions of

this Section.

2. Consultants' Services. All consultants' services required for the Project and to

be financed out of the proceeds of the Loan shall be procured in accordance with

the requirements set forth or referred to in Sections I and IV of the Consultant

Guidelines and with the provisions of this Section.

3. Definitions. The capitalized terms used below in this Section to describe particular

procurement methods or methods of review by the Bank of particular contracts

refer to the corresponding method described in Sections II and III of the

Procurement Guidelines, or Sections II, III, IV and V of the Consultant Guidelines,as the case may be.

B. Particular Methods of Procurement of Goods, Works and Non-consultingServices

1 . International Competitive Bidding. Except as otherwise provided in paragraph

2 below, goods, works and non-consulting services shall be procured under

contracts awarded on the basis of International Competitive Bidding procedures.

2. Other Methods of Procurement of Goods, Works and Non-consulting

Services. The following methods, other than International Competitive Bidding,may be used for procurement of goods, works and non-consulting services for

those contracts specified in the Procurement Plan: (a) National Competitive

Bidding, subject to the provisions set forth in Section III.E below of this Schedule;

(b) Shopping; and (c) Direct Contracting.

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C. Particular Methods of Procurement of Consultants' Services

1. Quality- and Cost-based Selection. Except as otherwise provided in paragraph2 below, consultants' services shall be procured under contracts awarded on thebasis of Quality and Cost-based Selection.

2. Other Methods of Procurement of Consultants' Services. The followingmethods, other than Quality and Cost-based Selection, may be used forprocurement of consultants' services for those contracts which are specified in theProcurement Plan: (a) Quality-based Selection; (b) Selection under a FixedBudget; (c) Least Cost Selection; (d) Selection based on Consultants'Qualifications; (e) Single-source Selection of consulting firms; (f) Procedures setforth in paragraphs 5.2 and 5.3 of the Consultant Guidelines for the Selection ofIndividual Consultants; and (g) Single-source procedures for the Selection ofIndividual Consultants.

D. Review by the Bank of Procurement DecisionsThe Procurement Plan shall set forth those contracts which shall be subject to theBank's Prior Review. All other contracts shall be subject to Post Review by theBank.

E. Special Provisions.

Without limitation to the other provisions in Section III.A of this Schedule, thefollowing additional provisions shall also govern the procurement of goods, works,non-consulting services and consultants' services under the Project (as the casemay be):

(a) procurement of goods, works, non-consulting services and consultants'services (in respect of firms) shall be carried out using: (i) (A) standardbidding documents (which bidding documents in respect of works shallinclude, if applicable, a provision whereby the pertinent contractor mustcomply with the pertinent provisions of the Safeguard Documents; and (B)standard requests for quotations/proposals (as the case may be), whichshall all include, inter alia, a settlement of dispute provision and thepertinent provisions of the Anti-Corruption Guidelines; (ii) model bidevaluation forms, and model quotations/proposals evaluation forms (as thecase may be); and (iii) model contract forms, all acceptable to the Bank;

(b) a two-envelope bidding procedure shall not be allowed in the procurementof goods, works and Non-consulting Services;

(c) after the public opening of bids for goods, works and non-consultingservices, information relating to the examination, clarification andevaluation of bids and recommendations concerning awards, shall not be

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disclosed to bidders or other persons not officially concerned with thisprocess until the publication of contract award. In addition, bidders and/orother persons not officially concerned with said process shall not beallowed to review or make copies of other bidders' bids;

(d) after the public opening of consultants' proposals, information relating tothe examination, clarification and evaluation of proposals andrecommendations concerning awards, shall not be disclosed to consultantsor other persons not officially concerned with this process until thepublication of contract award (except as provided in paragraphs 2.23 and2.30 of the Consultant Guidelines). In addition, consultants and/or otherpersons not officially concerned with said process shall not be allowed toreview or make copies of other consultants' proposals;

(e) foreign bidders or foreign consultants shall not, as a condition forsubmitting bids or proposals and/or for contract award: (i) be required tobe registered in Paraguay (except as provided in the standard biddingdocuments referred to in paragraph (a) (i) (A) above); (ii) be required tohave a representative in Paraguay; and (iii) be required to be associated orsubcontract with Paraguayan suppliers, contractors or consultants;

(f) the invitations to bid, bidding documents, minutes of bid openings,requests for expressions of interest and the pertinent summary of theevaluation reports of bids and proposals of all goods, works, non-consulting services and consultants' services procured by the Borrower,through UEP, shall be published in the web page of the DNCP (DireccidnNacional de Contrataciones Pziblicas) in a manner acceptable to the Bank.The bidding period shall be counted from the date of publication of theinvitation to bid or the date of the availability of the bidding documents,whichever is later, to the date of bid opening;

(g) the provisions set forth in paragraphs 2.49, 2.50, 2.52, 2.53, 2.54 and 2.59of the Procurement Guidelines shall also be applicable to contracts forgoods, works and non-consulting services procured under NationalCompetitive Bidding procedures;

(h) references to bidders in one or more specialized magazines shall not beused by the Borrower, through UEP, in determining if the bidder in respectof goods whose bid has been determined to be the lowest evaluated bidhas the capability and resources to effectively carry out the contract asoffered in the bid, as referred to in the provision set forth in paragraph 2.58of the Procurement Guidelines. The provision set forth in paragraph 2.58of the Procurement Guidelines (including the limitation set forth herein)shall also be applicable to contracts for goods procured under NationalCompetitive Bidding procedures;

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(i) witness prices shall not be used as a parameter for bid evaluation, bidrejection or contract award;

(j) the provisions of paragraphs 2.55 and 2.56 of the Procurement Guidelinesproviding for domestic preference in the evaluation of bids shall apply togoods manufactured in the territory of the Borrower in respect of contractsfor goods procured under International Competitive Bidding procedures;

(k) compliance by bidders with the norms issued by ISO with respect to anygiven good procured under the Project shall not be used as parameter forcontract award;

(1) consultants shall not be required to submit bid or performance securities;

(m) contracts of goods, works and non-consulting services shall not beawarded to the "most convenient" bid, but rather to the bidder whose bidhas been determined: (i) to be substantially responsive; and (ii) to offer thelowest evaluated bid, provided that said bidder has demonstrated to theBorrower, through UEP, to be qualified to perform the contractsatisfactorily; and

(n) the types of contracts described in Section IV of the Consultant Guidelinesshall be the only types of contracts to be used by the Borrower, throughUEP, in connection with the contracting of consultants' services providedby a firm and to be financed with the proceeds of the Loan.

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Section IV. Withdrawal of Loan Proceeds

A. General

1. The Borrower may withdraw the proceeds of the Loan in accordance with theprovisions of Article II of the General Conditions, this Section, and such additionalinstructions as the Bank shall specify by notice to the Borrower (including the"World Bank Disbursement Guidelines for Projects" dated May 2006, as revisedfrom time to time by the Bank and as made applicable to this Agreement pursuantto such instructions), to finance Eligible Expenditures as set forth in the table inparagraph 2 below.

2. The following table specifies the categories of Eligible Expenditures that may befinanced out of the proceeds of the Loan ("Category"), the allocation of theamounts of the Loan to each Category, and the percentage of expenditures to befinanced for Eligible Expenditures in each Category.

Amount of the Loan Percentage of ExpendituresAllocated to be financed

Catefzory (expressed in USD) (inclusive of Taxes)

(1) Goods, works, non- 99,490,000 100%consulting services,consultants' services,Operating Costs andTraining

(2) Land acquisition and cash 260,000 100%compensation paid forResettlement related to theimplementation of theRAP.

(3) Front-end Fee 250,000 Amount payable pursuant toSection 2.03 of this

Agreement in accordancewith Section 2.07 (b) of the

General Conditions

TOTAL AMOUNT 100,000,000

B. Withdrawal Conditions; Withdrawal Period

1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall bemade for payments made prior to the Signature Date.

2. The Closing Date is June 30, 2024.

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SCHEDULE 3

Amortization Schedule

The following table sets forth the Principal Payment Dates of the Loan and the

percentage of the total principal amount of the Loan payable on each Principal

Payment Date ("Installment Share"). If the proceeds of the Loan have been fullywithdrawn as of the first Principal Payment Date, the principal amount of the Loan

repayable by the Borrower on each Principal Payment Date shall be determined by

the Bank by multiplying: (a) Withdrawn Loan Balance as of the first Principal

Payment Date; by (b) the Installment Share for each Principal Payment Date, such

repayable amount to be adjusted, as necessary, to deduct any amounts referred to

in paragraph 4 of this Schedule, to which a Currency Conversion applies.

Installment SharePrincipal Payment Date (Expressed as a Percentage)

On each May 15 and November 15 1.90 %

Beginning on November 15, 2024through May 15, 2028Beginning on November 15,2028 2.28 %through May 15, 2033On November 15, 2033 2.20%On May 15,2034 2.28%Beginning on November 15, 2034 2.80 %through November 15, 2038Beginning on May 15, 2039 1.70 %through November 15, 2043Beginning on May 15, 2044 0.00 %through November 15, 2044Beginning on May 15,2045 1.04 %

through November 15, 2050On May 15, 2051 2.88%

2. If the proceeds of the Loan have not been fully withdrawn as of the first Principal

Payment Date, the principal amount of the Loan repayable by the Borrower on

each Principal Payment Date shall be determined as follows:

(a) To the extent that any proceeds of the Loan have been withdrawn as of the

first Principal Payment Date, the Borrower shall repay the Withdrawn

Loan Balance as of such date in accordance with paragraph I of this

Schedule.

(b) Any amount withdrawn after the first Principal Payment Date shall be

repaid on each Principal Payment Date falling after the date of such

withdrawal in amounts determined by the Bank by multiplying the amount

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of each such withdrawal by a fraction, the numerator of which is theoriginal Installment Share specified in the table in paragraph I of thisSchedule for said Principal Payment Date ("Original Installment Share")and the denominator of which is the sum of all remaining OriginalInstallment Shares for Principal Payment Dates falling on or after suchdate, such amounts repayable to be adjusted, as necessary, to deduct anyamounts referred to in paragraph 4 of this Schedule, to which a CurrencyConversion applies.

3. (a) Amounts of the Loan withdrawn within two calendar months prior to anyPrincipal Payment Date shall, for the purposes solely of calculating theprincipal amounts payable on any Principal Payment Date, be treated aswithdrawn and outstanding on the second Principal Payment Datefollowing the date of withdrawal and shall be repayable on each PrincipalPayment Date commencing with the second Principal Payment Datefollowing the date of withdrawal.

(b) Notwithstanding the provisions of sub-paragraph (a) of this paragraph, ifat any time the Bank adopts a due date billing system under which invoicesare issued on or after the respective Principal Payment Date, the provisionsof such sub-paragraph shall no longer apply to any withdrawals made afterthe adoption of such billing system.

4. Notwithstanding the provisions of paragraphs 1 and 2 of this Schedule, upon aCurrency Conversion of all or any portion of the Withdrawn Loan Balance to anApproved Currency, the amount so converted in the Approved Currency that isrepayable on any Principal Payment Date occurring during the Conversion Period,shall be determined by the Bank by multiplying such amount in its currency ofdenomination immediately prior to the Conversion by either: (i) the exchange ratethat reflects the amounts of principal in the Approved Currency payable by theBank under the Currency Hedge Transaction relating to the Conversion; or (ii) ifthe Bank so determines in accordance with the Conversion Guidelines, theexchange rate component of the Screen Rate.

5. If the Withdrawn Loan Balance is denominated in more than one Loan Currency,the provisions of this Schedule shall apply separately to the amount denominatedin each Loan Currency, so as to produce a separate amortization schedule for eachsuch amount.

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APPENDIX

Section I. Definitions

1. "Anti-Corruption Guidelines" means the "Guidelines on Preventing andCombating Fraud and Corruption in Projects Financed by IBRD Loans and IDACredits and Grants", dated October 15, 2006 and revised in January 2011.

2. "ANTSV" means Agencia Nacional de Trdnsito y Seguridad Vial, the Borrower'sNational Traffic and Road Safety Agency, created pursuant to the Borrower's LawNo. 5016, dated May 16, 2014, and published in the Borrower's Official Gazetteon May 21, 2014.

3. "Bank's Safeguards Policies" means the Bank's operational policies andprocedures, set forth in the Bank's operational manual and identified as OP/BP

4.01, 4.04, 4.09, 4.10, 4.11, 4.12, 4.36, 4.37, 7.50 and 7.60, as said manual ispublished under www.WorldBank.org/opmanual.

4. "Category" means a category set forth in the table in Section IV of Schedule 2 tothis Agreement.

5. "Consultant Guidelines" means the "Guidelines: Selection and Employment ofConsultants under IBRD Loans and IDA Credits and Grants by World BankBorrowers" dated January 2011 (revised July 2014).

6. "CREMA Contract" means a multi-year contract entered into by the Borrower,through MOPC, with a private sector contractor, which contract obligates theprivate sector contractor to undertake all phases of road rehabilitation and

maintenance works and road safety intervention works under Parts I and 2.1 of theProject, respectively, as a single package, from design and programming of the

works, through the execution of such works, with respect to an identified portion

of the Borrower-managed corresponding national paved road network and whose

remuneration is partially linked to road performance criteria.

7. "Department" means any of the Borrower's political subdivisions created pursuantto article 159 of the Borrower's Constitution.

8. "Eligible Municipality" means a Borrower's municipality within a TargetedDepartment which has met the eligibility criteria set forth in the OperationalManual to participate under Part 2.2 of the Project.

9. "Environmental and Social Management Framework" or "EMSF" means Marco

para el Manejo Ambiental y Social, the Borrower's framework dated May 6, 2016,acceptable to the Bank and disclosed on May 12, 2016, which contains, inter alia,

the environmental protection measures in respect of the Project, including: (a)measures for chance findings of physical cultural property; (b) guidelines for the

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identification of existing environmental conditions and potential direct and indirectenvironmental impacts resulting from the carrying out of the Project; (c)guidelines for the carrying out of environmental assessments and the preparationof environmental management plans, when applicable; (d) the recommendation ofmitigation measures for each negative impact identified; and (e) measures forenhancing each identified positive impact; as said framework may be updatedand/or amended from time to time with the agreement of the Bank.

10. "Environmental and Social Management Plans" or "ESMPs" means Plan deGesti6n Ambiental y Social: RN1 and Plan de Gestidn Ambiental y Social: RN3-8,the Borrower's plans dated May 6, 2016, acceptable to the Bank, and disclosed onMay 12, 2016, setting forth the environmental and social management actionsapplicable to activities to be carried out under the CREMA Contracts, including,inter alia, programs and standards as well as provisions on communications andmanagement of citizens' feedback and claims and standards and specific mitigationmeasures for the carrying out of rehabilitation and maintenance works.

11. "General Conditions" means the "International Bank for Reconstruction andDevelopment General Conditions for Loans", dated March 12, 2012, with themodifications set forth in Section II of this Appendix.

12. "Indigenous Peoples' Planning Framework" or "IPPF" means Marco dePlanificaci6n Para Pueblos Indigenas, the Borrower's indigenous peoplesframework, dated May 6, 2016, acceptable to the Bank, and disclosed on May 12,2016, setting forth the indigenous peoples policy framework applicable to all theactivities to be carried out under the Project and the basis and procedures to preparespecific indigenous peoples' plans or related instruments during Projectimplementation; as said framework may be updated and/or amended from time totime with the agreement of the Bank.

13. "Indigenous Peoples Plan" or "IPP" means Plan de Pueblos Indigenas, theBorrower's plan dated May 6, 2016, acceptable to the Bank, and disclosed on May12, 2016, setting forth the indigenous peoples policy actions applicable to theactivities to be carried out under the CREMA Contracts.

14. "ISO" means International Organization for Standardization, an international-standard-setting body composed of representatives from various national standardsorganizations which issues world-wide proprietary industrial and commercialstandards for products.

15. "MOPC" means Ministerio de Obras Publicas y Comunicaciones, the Borrower'sMinistry of Public Works and Communications, or any successor theretoacceptable to the Bank.

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16. "Operating Costs" means reasonable recurrent expenditures, based on an annualbudget previously approved by the Bank, that would not have been incurred by theBorrower, through MOPC, absent the Project, for Project administration andsupervision, including, inter alia, operation and maintenance of office equipment,non-durable goods, vehicle rental, fuel, travel costs and per diem.

17. "Operational Manual" means the Borrower's manual, dated May 20, 2016, referredto in Section I.C. I of Schedule 2 to this Agreement, as said manual may be updatedand/or amended from time to time with the agreement of the Bank.

18. "Participation Agreement" means any of the agreements referred to in SectionI.B. 1 of Schedule 2 to this Agreement.

19. "Procurement Guidelines" means the "Guidelines: Procurement of Goods, Worksand Non-consulting Services under IBRD Loans and IDA Credits and Grants byWorld Bank Borrowers" dated January 2011 (revised July 2014).

20. "Procurement Plan" means the Borrower's procurement plan for the Project, datedMay 13, 2016 and referred to in paragraph 1.18 of the Procurement Guidelines andparagraph 1.25 of the Consultant Guidelines, as the same shall be updated fromtime to time in accordance with the provisions of said paragraphs.

21. "Resettlement" means the impact of an involuntary taking of land under theProject, which taking causes affected persons to have their: (a) standard of livingadversely affected; or (b) right, title or interest in any house, land (includingpremises, agricultural and grazing land) or any other fixed or movable assetacquired or possessed, temporarily or permanently; or (c) access to productiveassets adversely affected, temporarily or permanently; or (d) business, occupation,work or place of residence or habitat adversely affected, temporarily orpermanently.

22. "Resettlement Action Plan" or "RAP" means the Borrower's Plan de Mudanzas(Malla Norte-Rutas Nacionales 3 y 8) y Malla Sur (Ruta Nacional 1)), dated May6, 2016, acceptable to Bank, and disclosed on May 12, 2016 in the web sitehttp://www.mopc.gov.py/upgp-bm-ol. defining protocols and procedures for theprovision of resettlement assistance in connection with the involvement ofResettlement under the CREMA Contracts; as such plan may be revised, updatedor supplemented, from time to time, with the Bank's prior written approval.

23. "Resettlement Policy Framework" or "RPF" means Marco de Politica deReasentamiento, the Borrower's framework, dated May 6, 2016, acceptable to theBank, and disclosed on May 12, 2016, outlining general implementationprocedures, mitigation measures and monitoring procedures for Resettlementunder the Project, including the procedures for preparation and implementation ofresettlement plans, when applicable, and for the update of the RAP, as said

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framework may be amended from time to time with the Bank's prior writtenapproval.

24. "Road Safety Intervention" means any road safety improvement interventionsunder Part 2.2 of the Project and included in the Road Safety Interventions List.

25. "Road Safety Interventions List" means the positive list of eligible Road SafetyInterventions included in the Operational Manual, as the same may be amended

from time to time with the prior agreement of the Bank.

26. "Safeguard Documents" means the Environmental and Social ManagementFramework, the Environmental and Social Management Plan, the IndigenousPeoples' Planning Framework, the Indigenous Peoples' Plan, the ResettlementPolicy Framework and Resettlement Action Plan, as the same may be amended,supplemented or otherwise modified from time to time with the prior writtenagreement of the Bank.

27. "Signature Date" means the latest of the two dates on which the Borrower and the

Bank signed the Loan Agreement and such definition applies to all references to"the date of the Loan Agreement" in the General Conditions.

28. "Targeted Department" means any of the following Departments: San Pedro,Caaguaz6, Canindey-6, Misiones and Itapua and/or any other Department (s) thatthe Borrower and the Bank may agree upon from time to time.

29. "Training" means expenditures (other than those for consultants' services)

incurred by the Borrower, through MOPC, as approved by the Bank on the basis

of an annual budget acceptable to the Bank, to finance reasonable transportationcosts and per-diem of trainees and trainers (if applicable), training registration fees,and rental of training facilities and equipment, all under Part 4 of the Project.

30. "UEP" means Unidad Ejecutora del Proyecto, the Project executing unit,organized within MOPC's Roads Directorate, established pursuant to MOPC's

Ministerial Resolution No. 523 of September 9, 2004 (as amended on August 24,2005 by MOPC Ministerial Resolution No. 593 and on February 11, 2015,pursuant to MOPC's Ministerial Resolution No. 187), and referred to in Section

I.A. I of Schedule 2 to this Agreement, or any successor thereto acceptable to the

Bank.

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Section II. Modifications to the General Conditions

The General Conditions are hereby modified as follows:

1. In the Table of Contents, the references to Sections, Section names and Sectionnumbers are modified to reflect the modifications set forth in the paragraphs below.

2. Section 3.01. (Front-end Fee) is modified to read as follows:

"Section 3.01. Front-end Fee; Commitment Charge

(a) The Borrower shall pay the Bank a front-end fee on the Loan amount atthe rate specified in the Loan Agreement (the "Front-end Fee").

(b) The Borrower shall pay the Bank a commitment charge on theUnwithdrawn Loan Balance at the rate specified in the Loan Agreement (the"Commitment Charge"). The Commitment Charge shall accrue from a date sixtydays after the date of the Loan Agreement to the respective dates on which amountsare withdrawn by the Borrower from the Loan Account or cancelled. TheCommitment Charge shall be payable semi-annually in arrears on each PaymentDate."

3. In the Appendix, Definitions, all relevant references to Section numbers andparagraphs are modified, as necessary, to reflect the modification set forth inparagraph 2 above.

4. The Appendix is modified by inserting a new paragraph 19 with the followingdefinition of "Commitment Charge", and renumbering the subsequent paragraphsaccordingly:

"19. "Commitment Charge" means the commitment charge specified in theLoan Agreement for the purpose of Section 3.01(b)."

5. In the renumbered paragraph 49 (originally paragraph 48) of the Appendix, thedefinition of "Front-end Fee" is modified by replacing the reference to Section3.01 with Section 3.01 (a).

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6. In the renumbered paragraph 68 (originally paragraph 67) of the Appendix, thedefinition of the term "Loan Payment" is modified to read as follows:

"68. "Loan Payment" means any amount payable by the Loan Parties to theBank pursuant to the Legal Agreements or these General Conditions, including(but not limited to) any amount of the Withdrawn Loan Balance, interest, the Front-end Fee, the Commitment Charge, interest at the Default Interest Rate (if any), anyprepayment premium, any transaction fee for a Conversion or early termination ofa Conversion, the Variable Spread Fixing Charge (if any), any premium payableupon the establishment of an Interest Rate Cap or Interest Rate Collar, and anyUnwinding Amount payable by the Borrower."

7. In the renumbered paragraph 73 (originally paragraph 72) of the Appendix, thedefinition of "Payment Date" is modified by deleting the word "is" and insertingthe words "and Commitment Charge are" after the word "interest".