Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No. P7407-BR

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ONA

PARTIAL CREDIT GUARANTEE OPERATION

IN THE AMOUNT OF US$180.0 MILLION

FOR

NOTES TO BE ISSUED

BY

TRANSPORTADORA BRASILEIRA GASODUTO BOLIVIA-BRASIL S.A.

FOR THE

GAS SECTOR DEVELOPMENT PROJECT - BOLIVIA-BRAZIL GAS PIPELINE

November 28, 2000

Finance, Private Sector and Infrastructure Department Project Finance and Guarantees DepartmentLatin America and the Caribbean Region Private Sector and Infrastructure Vice Presidency

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization

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CURRENCY EQUIVALENTS(as of October'31, 2000)

Currency Unit = Brazilian RealR$1.00 = US$0.52US$1.00 = R$1.93

BRAZIL FISCAL YEARJanuary 1- December 31

ABBREVIATIONS AND ACRONYMS

ANP - Agencia Nacional do Petr6leoBBPP - Joint venture of El Paso, British Gas and TotalFinaElfBNDES - Banco Nacional de Desenvolvimento Econ6mico e SocialCAF - Corporacion Andina de FomentoCSFB - Credit Suisse First BostonEIB - European Investment BankGASPETRO - Subsidiary of PETROBRAS for the gas sectorGTB - Gas TransBoliviano S.A., the gas transport company on

the Bolivian sideIBRD - International Bank for Reconstruction and DevelopmentIDA - International Development AssociationIDB - Inter-American Development BankJEXIM - Japanese Export-Import BankMMcmd - Million cubic meters per dayPCG - Partial Credit GuaranteePETROBRAS - Petr6leo Brasileiro S.A., the Brazilian petroleum

companyRFP - Request for ProposalsTBG - Transportadora Brasileira Gasoduto Bolivia-Brasil S.A.,

the gas transport company on the Brazilian sideTCO - Transportation Capacity Option - refers to 6 MMcmd of

pipeline capacity above TCQTCQ - Transport Capacity Quantity - refers to the initial

contractual volume of 18 MMcmdYPFB - Yacimientos Petroliferos Fiscales Bolivianos, the

Bolivian petroleum company

Vice President David de FerrantiCountry Director Gobind T. NankaniSector Director Danny LeipzigerTask Managers Nelson de Franco/ Suman Babbar

FOR OFFICIAL USE ONLY

Federative Republic of BrazilGas Sector Development Project - Bolivia-Brazil Gas Pipeline

IBRD Partial Credit Guarantee for US$180 million Notes

TABLE OF CONTENTS

Page

INTRODUCTION ................................................................... 1

PROJECT STATUS .................................................................... 1

ENERGY SECTOR DEVELOPMENTS IN BRAZIL ...................... ............................................. 3

SUMMARY OF CURRENT PROJECT COST AND FINANCING PLAN .........................................................5

PROPOSED BANK GUARANTEE .................................................................... 5

RATIONALE AND BENEFITS OF THE PROPOSED PARTIAL CREDIT GUARANTEE ............. ...............6

GUARANTEE FEES ................................................................... 8

CONDITIONS OF ISSUE OF GUARANTEES ................................................................... 8

NEXT STEPS ................................................................ 9

RECOMMENDATION .................................................................... 9

ANNEX I: SUMMARY OF TERMS FOR THE WORLD BANK GUARANTEED NOTES ........................... 11

ANNEX II: STATUS OF BANK GROUP OPERATIONS IN BRAZIL ............................................................. 15

ANNEX III: BRAZIL AT A GLANCE ................................................................... 18

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not be otherwise disclosed withoutWorld Bank authorization.

Federative Republic of BrazilGas Sector Development Project - Bolivia-Brazil Gas Pipeline

Partial Credit Guarantee for US$180 million Notes

INTRODUCTION

1. This memorandum seeks the approval of the Board to provide an IBRD Partial CreditGuarantee (PCG) for private placement of Notes of US$180 million for the Gas SectorDevelopment Project -- Bolivia-Brazil Gas Pipeline (the Project). The Government of Brazil hasrequested Bank support to mobilize financing to provide a PCG for the Project and hasconfirmed that it would provide an indemnity to the Bank. The Project is also being supportedby a World Bank loan of US$130 million that was approved on December 18, 19971, andbecame effective on May 17, 1999. The financing plan of the Project considered by the Boardincluded the provision of a PCG.

2. According to the original schedule, Transportadora Brasileira Gasoduto Bolivia-BrasilS.A. (TBG), the special purpose project company for the Brazilian section of the pipeline hadplanned to go to the market with the private placement of the Notes issue by September 1998.However, by the time a formal approval to process the issuance of the Notes was obtained inBrazil by mid 1998, the capital markets had started to deteriorate in the wake of the Asian crisis.The Asian crisis was followed by the Russian crisis during which period the capital markets wereclosed to all emerging market credits. The Brazilian crisis followed, resulting in high volatilityof Brazilian spreads in the capital markets. With the improvement in market conditions,subsequently, a Request for Proposals (RFP) to select an arranger for the proposed Notes wasissued in October 1999. In October 2000, a Road Show was organized by the placement agent(Credit Suisse First Boston or CSFB) to present the Notes transaction to prospective investors.Representatives from TBG, the Bank, and CSFB participated in the Road Show. Thismemorandum provides details on the current status of the Project and the proposed structure ofthe PCG Notes.

PROJECT STATUS

3. The Bolivia-Brazil Gas Pipeline is a joint undertaking promoted by the governments ofBolivia and Brazil, and developed initially by both Yacimientos Petroliferos Fiscales Bolivianos(YPFB), a Bolivian state company tasked to manage gas export contracts with Argentina andBrazil, and Petr6leo Brasileiro S.A. (PETROBRAS), the Brazilian state company for oil and gas.The Project is comprised of a natural gas pipeline 3150 kilometers (km) long that begins in RioGrande, Bolivia and reaches the Bolivia-Brazil border after some 557 km using a 32 inchdiameter pipe. The Bolivia-Brazil pipeline extends from Rio Grande, Bolivia, through theBrazilian States of Mato Grosso do Sul, Sao Paulo, Parana, Santa Catarina and Rio Grande doSul. Its purpose is to transport natural gas from Bolivia to customers in Brazil. The 2,593 kmBrazilian portion of the pipeline includes a 32 inch diarneter pipeline from the border to a pointnear Campinas, Brazil, with smaller diameter pipelines extending to Sao Paulo (24 inchdiameter) and to Porto Alegre (24 inch diameter reducing to 16 inch diameter). The pipeline andrelated compression stations are designed to transport up to 30 million cubic meters per day(MMcmd) of natural gas to a split-point near Campinas, with some of the gas flowing east to SaoPaulo and beyond and the remainder flowing south from such point along the southern leg of the

Loan No. BR-4265, Project Appraisal Document - Report No. 16769-BR

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pipeline to Porto Alegre. TBG owns the Brazilian portion of the pipeline and is responsible forits construction, operation and maintenance.

4. The construction of the pipeline has been satisfactorily completed within the estimatedcosts. Despite the tight schedule, complexity and the adverse conditions, the Project has facedonly minor delays. The Project is in compliance with the environmental and socio-economiccompensation programs. The trunkline, which spans from Rio Grande in Bolivia to Sao Paulo,has been in commercial operation since July 1999; the southern leg, scheduled for completion ina year after the operation of the trunkline, began operations in March 2000. The southern legwas partially financed by the World Bank loan of US$130 million. It is estimated that the WorldBank loan would be disbursed completely by the end of this calendar year. In anticipation of theissuance of the PCG Notes, the goods and services that were to be funded from the proceedsfrom the Notes have been financed through short-term financing. The expenditures beingfinanced from the proceeds of the Notes were incurred for supply of equipment, materials andconstruction of some sections of the trunkline and the southern leg, compressor stations, citygates as well as construction management services. The utilization of the pipeline willprogressively increase as the gas market develops and transport capacity is expected to reach itsmaximum capacity by 2004, much earlier than envisaged during appraisal of the Project.

5. The existence of abundant and underutilized gas resources in Bolivia is the basis for thedevelopment of the Project. The Project is of great importance to Bolivia as a major source ofexport revenue. The Project's significance to Brazil derives from its need to find anenvironmentally sound way to support its growing industrial base. The development of the gassector in Brazil establishes a platform to diversify the fuel mix away from high sulfur fuel oil,thereby providing further environmental benefits. Gas transported by the pipeline will besupplied to industrial and residential users in Brazil's principal cities, including Campo Grande,Sao Paulo, Rio de Janeiro, Curitiba and Porto Alegre, as well as gas-fired thermal power plantsalong the pipeline route.

b.-- s0ts.|0| >_ BRAZIL^

S~~~~~~~~~~~~~~~~~~~o de. ft

ARGENTINA \_

The Brazil Pipeline (Section from Corumbd to Guararema denotes the Brazil Trunkline; the dotted line represents the BrazilSouthern Leg)

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6. Beyond the value of the Project to Bolivia and Brazil, part of the reason that the Projecthas received support from the Bank, IDB, EIB and CAF is its regional significance. The Projectis an important cornerstone for establishing a natural gas transportation infrastructure for theSouthern Cone of Latin America so as to create an energy matrix linking these resource-richcountries (Argentina and Bolivia) with important demand centers (Brazil and Chile). Whencombined with the pipeline infrastructure in neighboring countries, the effect of the Project is tomake Bolivia the natural gas hub of the Southern Cone of Latin America. Because of theProject, additional connecting pipelines to transport supplemental gas volumes from Argentinaare already under development or in advanced feasibility stages. In addition, other pipelines,possibly from Peru, are also expected to feed additional gas into Brazil within the next twodecades. When completed, these additional projects will create a natural gas transportationsystem covering most of South America.

ENERGY SECTOR DEVELOPMENTS IN BRAZIL

7. Reform in the hydrocarbon sector was initiated with the constitutional amendment ofNovember 1995 that terminated the monopoly of PETROBRAS for the exploration,transportation, import and export of oil and gas, and approval of the "Hydrocarbon Law" by theBrazilian Congress in August 1997, that set the framework for the establishment of a free marketfor the oil and gas industry. Under the Project, the World Bank also supported Brazil's policy ofprogressively phasing out fuel subsidies and deregulating petroleum product prices. In 1998, theBrazilian regulatory authority, Agencia Nacional do Petr6leo (ANP) was established pursuant tothe Hydrocarbon Law. Since its inception, the ANP has awarded two successful rounds of oiland gas block concessions, with participation of major international oil companies, and issued aseries of essential regulations. The reforms undertaken by the government, including theestablishment of ANP as a respected entity, are facilitating the growth of the natural gas sector.

8. While the Bolivia-Brazil Gas Pipeline is of great importance to Bolivia for exportrevenue, the pipeline's significance to Brazil derives from its potential to provide anenvironmentally sound means of supporting its growing industrial base. As indicated in the chartbelow, natural gas would considerably increase its share in the Brazilian energy matrix in arelatively short time horizon.

Brazil's Energy Consumption 1998 Brazil's Projected Energy Consumption 2005

Hydroelectricity

37% ~~~~~~~~~~~~~Hydroelectricity33%

XFirewood / > Firewood

Sugar Cane Sugar CaneProducts Pout

7% Pout7%

Natural Gas 2%

Natural GasX 5%/> Petroleum 10%

Petroleum _ / Others 35% oal35% 8% 3% 6%

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9. The demand for gas supplied through the Project is in line with the projections at the timeof its appraisal (1997), but is expected to rise sharply due to a sizable share of the expansion ofthe electric generation being predicated on gas-fueled power plants. The demand in the firstsemester of 2000 reached the level envisaged in the appraisal for end of 1999 (about 5 MMcmd);while next year the demand (about 10 MMcmd) will be lower than foreseen in the appraisal (13MMcmd) due to a delay in the closing of financing for the thermal electric program. This delayin demand growth is expected to be for a short duration and it is estimated that the pipelinethroughput will reach 80% of the maximum capacity in 2003 (24 MMcmd compared to appraisalforecast of 17 MMcmd).

10. TBG, the Project company, was formed by PETROBRAS and five other leadinginternational energy companies to develop, construct, operate and maintain the pipeline totransport natural gas in Brazil. The project sponsors represent a wide spectrum of companies,including GASPETRO, a subsidiary of PETROBRAS, state-controlled Brazilian company andprivate sector companies from Europe and North America (British Gas, El Paso, Enron,TotalFinaElf and Shell). In addition to the investment in the pipeline, all of the TBGshareholders have made significant investments in the region aside from TBG. This combinationof international experience, resources and commitment ensures that the Project has access to alevel of operating expertise that is seldom matched in other similar ventures. The ownershipstructure of TBG in Brazil is as follows2:

TBG

12% 4% 4% 29% 51%

Shell Enron AffifiateAffiliate

TransredesBBPP GASPETRO

34% 25% 25% 16% 33.3%% 0%33.3% 7 33.3%

Bolivian Enron Shell Private Total Fina Elf El Paso British Gas PETROBRASPension Funds Affiliate Affiliate Investors Affiliate Affiliate Affiliate

11. It is also noteworthy that Project sponsors participating in the Brazilian portion of thepipeline are also involved in the ownership and operation of the interconnecting Bolivianpipeline through shareholdings in Gas TransBoliviano S.A. (GTB), the Bolivian companyformed to develop, own and operate the Bolivian portion of the Pipeline. GTB is a joint venturewith 51% controlled by Transredes, and 34% equally shared by Shell and Enron, with theremaining 15% held by GASPETRO (9%) and BBPP (6%). The cross ownership of the twotransportation companies helps ensure that a common interest in the success of the Project existsamong the owners of the pipelines.

2 Parent companies shown.

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SUMMARY OF CURRENT PROJECT COST AND FINANCING PLAN

12. The Project, which includes both Brazilian and Bolivian pipelines, is estimated to costabout US$2,030 million. The project is being financed with equity and a TransportationCapacity Option ("TCO")3 from PETROBRAS, as well as BNDES. Other key financiers includethe Bank, IDB, EIB and CAF. Approximately 80% of total project cost is related to the Brazilportion of the pipeline. The debt/equity ratio for the Brazil portion is projected to beapproximately 60/40, with TCO payments included in the equity portion. As shown below, thecurrent financing plan of the Project is in line with the financing plan approved by the Board inDecember 1997.

Original Estimates (at Board Current Plan4Approval for IBRD loan)

GTB TBG (Brazil) GTB TBG (Brazil)(Bolivia) (Bolivia)

Shareholders Equity (including 75 310 72 308subordinated loans)

Petrobras Transport Capacity Option - 81 302 81 302TCO (with CAF/BNDES financing)

Petrobras Loan (with Jexim/Marubeni and - 348 - 263BNDES financing)

Petrobras Advance Payment Contract (with 280 - 270 -

Jexim/Marubeni financing)

IBRD Loan - 130 - 130

IBRD Partial Credit Guarantee - 180 - 180

Inter-American Development Bank (IDB) - 240 - 240

Corporaci6n Andina de Fomento (CAF) - 80 - 80

European Investment Bank (EIB) - 60 - 60

Cash from Operations - - 15 21

Total 436 1,650 438 1,584

PROPOSED BANK GUARANTEE

13. To complete the financing plan of the Project, it is proposed to issue Notes in the UScapital market supported by the Bank's PCG (see Annex I for the Term sheet) to mobilizeUS$180 million. TBG has obtained short-term bridge loans to avoid project slippage to continuethe construction of the project with the understanding that the Bank would only provide the PCGwhen the market conditions would make the issuance feasible. The guarantee will help catalyzeprivate financing for the project through debt financing from the capital markets. The proceedsof the Notes issue would be used to reimburse the bridge financing used to pay for eligibleexpenditures.

3The Project has created an option for an additional six MMcmd of firm capacity over and above the TCQ(Transport Contract Quantities). PETROBRAS, as purchaser of the TCO has agreed to pay a total of US$383million, of which about US$302 million would be used towards the initial construction of the pipeline in Brazil inlieu of payment of future capacity charges.4 Reflects existing contracts and current execution of the project.

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14. The proposed Notes instrument is a fixed rate issue of a maturity of 18 years, with theprincipal amortizing over a three year period (years 16 to 18) in three equal installments. ThePCG of the World Bank would cover 100 percent of the amortizing principal repayment atscheduled maturities, on a non-accelerable basis. In addition, the World Bank would alsoguarantee two annual coupons on a rolling and non-accelerable basis. This particular structureresults in a substantially longer 'grace period' as compared with the grace period of 4-5 years fora typical Bank loan, and an average life5 much longer to that of a Bank loan (currently estimatedto be about 7.4 years).

15. In the proposed structure, two scheduled annual interest payments are separatelyguaranteed by the World Bank. As described in detail in Annex I, the reinstatable or rollingnature of each of the interest guarantees is contingent upon the World Bank being reimbursed byTBG or Brazil. In the event the World Bank makes a payment under an interest guarantee, theWorld Bank would have the option of demanding immediate reimbursement from TBG or Brazilor extending repayment terms. In the case of two defaults by TBG on annual interest payments ina scenario where the World Bank demanded immediate reimbursement, if TBG or Brazil did notrepay the World Bank within the stipulated 60-day period, the interest guarantees would fallaway and the Noteholders would face uncovered TBG interest payment risk i.e. project riskthereafter. In circumstances where the World Bank elects to grant terms to Brazil forreimbursement, the relevant interest guarantee would be reinstated only in the event the WorldBank receives full reimbursement of the interest payment made five days prior to the next annualNotes interest payment date. Brazil is providing an indemnity to the World Bank for anypayments or liabilities incurred by the World Bank, however there is no sovereign guaranteebacking TBG obligations with respect to the Notes. The Noteholders are potentially exposed tothe interest payment risk on TBG for sixteen years (years 3 to 18). This is of significancebecause TBG (51% owned by GASPETRO which is a fully owned subsidiary of PETROBRASand 49% owned by a consortium of private companies) is a single asset company, transportinggas for a single buyer so far - PETROBRAS in Brazil - and it is perceived by the investorsthat the credit risk of the project is higher than that of PETROBRAS and/or Brazil. Unlikeprevious World Bank supported PCGs where the investors faced only the borrowing governmentor parastatal credit risk, the Noteholders could also face some project risks.

RATIONALE AND BENEFITS OF THE PROPOSED PARTIAL CREDIT GUARANTEE

16. The Project has a long gestation period i.e. the gas market needs to be well established forthe Project to be sustainable in the long-term. Once the market is established, the project isexpected to generate revenues to maintain adequate financial ratios. TBG is unable to tap thecapital markets for US$180 million for long maturities on its own credit or with a sovereignguarantee. In order to maintain acceptable debt service coverage, long-term and especially backended debt is essential, i.e. where the principal can be amortized in the last few years of the debt.The Bank's guarantee support would result in significant additionality by mobilizing longermaturities and narrower margins for the Project debt.

17. Brazilian corporate credits have been experiencing difficulty in tapping the capitalmarkets particularly for longer maturities. Placement for the TBG Notes at spreads and maturitythat are financially acceptable to TBG is only feasible with an investment grade rating for theissue. The IBRD rolling guarantee of two interest payments was essential to obtain an

Average Life is the average period of time the loan principal is disbursed and outstanding.

-6 -

investment grade of BBB+6 for the Notes. This was required because of (i) the below investmentgrade country credit; (ii) difficult market conditions; (iii) long tenor of the financing; and (iv) nodirect government guarantees on the Notes.

18. Based on market feedback, indications are that the Bank's guarantee has resulted insignificant additionality in terms of mobilizing longer maturities and narrower margins for theproject debt. In summary, the proposed guarantee provides:

> Access to capital markets: This operation would enable TBG to obtain market financingwith reasonable spread and longer maturity with enhanced credit.

> Lengthening of maturity: In the current market situation, it is practically impossible forTBG to go to the capital markets on reasonable terms for any maturity. This operationenables TBG to extend its available financing considerably beyond current market terms to18 years, with an extended grace period through a back-ended amortizing structure.

) Competitive Financing Cost: Borrowing with the support of the World Bank Guaranteehas enabled TBG to obtain attractive terms on the borrowing, reflecting the creditenhancement provided by the World Bank.

> Leverage: The guarantee (amortized principal and the two rolling interest payments) willresult in an initial exposure to the Bank of about US$56 million, or 31%7 of the face value ofthe Notes resulting in an initial leverage of 3 to 1. The maximum exposure from theguarantee is approximately US$94 million, or 52% of the face value of the Notes or aleverage of 2 to 1. In comparison, a World Bank loan does not provide any leverage to theWorld Bank's support (leverage of 1 to 1).

19. While pricing the principal component of the transaction, the investors have consideredthe World Bank's credit for similar maturities; for pricing the interest component, investors haveconsidered primarily the sovereign's credit because the World Bank's rolling interest guaranteeis contingent upon the sovereign reimbursing and indemnifying the World Bank in respect of anypayments made by the World Bank. Notwithstanding the significant credit enhancementprovided by the World Bank, the pricing of the PCG Notes has taken into account the fact that ifBrazil defaults to the World Bank (or the World Bank has extended terms to Brazil and there isno voluntary prepayment), investors face uncovered TBG / Project interest payment risk. In theworst case scenario, the private lenders would take the interest payment risk on TBG/projectcredit for a period of 16 years. In addition, the investors have considered the prevailing spreadsof the underlying sovereign debt and other investment opportunities from the region, both in theprimary and secondary markets. This is because investors view the PCG Notes as a quasi-sovereign instrument that will share many fundamentals with other Brazilian sovereign debtissues.

20. As in the case of other partial credit guarantees, the PCG Notes is priced as an hybridcredit that is a function of the credits of the World Bank (Aaa/AAA, at spread of approxirnately50-100 bps over corresponding US Treasuries); the government of Brazil credit and the Project'scredit, which has been estimated on the basis of similar structured project finance credits in the

6 Brazil's long term foreign debt ratings are BB- (negative) by Fitch IBCA, B2 by Moody's and B+ by S&P.Based on an average Bank discount rate (for guaranteed principal and interest) of about 6.17%.

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market. The table below provides a review of structures and pricing levels of similarlystructured transactions that are most relevant to the operation:

Transaction Ratings (Moody's Maturity/Average Secondary Secondary/S&P/Fitch) Life (years) Trading Level(as Trading Level (as

of 10/13/00) of 11/15/00)CVRD (Private Placement) Baa2/BBB- 10/7 T5 + 320 bps N.A. 8

/BBB+PEMEX Finance (144A) Baal/BBB+/A- 18/16.3 T30 + 315 bps T30 + 340 bpsPDVSA Finance (144A) Baal/NR/A- 20/18.5 T30 + 425 bps T30 + 470 bpsPDVSA Finance (144A) Baal/NRlA- 16/15 T30 + 370 bps T30 + 435 bpsCerro Negro (144A) Baa2/NRIBBB 20/16.2 T1O + 440 bps TIO + 520 bpsPetrozuata (144A) Baa2/BB/BBB- 17/13.3 T30 + 480 bps T30 + 560 bps

21. The placement agent has successfully obtained commitments from investors to buy thePCG Notes. The Notes have been priced at 4359 basis points over the 30-year US Treasuries andthe final coupon will be set prior to financial close. An Indemnity Agreement (between theWorld Bank and Government of Brazil) and Project Agreement (between the World Bank andTBG) have been fully negotiated. A summary of the proposed terms of the PCG Notes and theWorld Bank guarantee is set out in Annex I. The detailed terms and conditions for the WorldBank Guarantee have been reviewed by counsel to the investors, TBG's counsel and theplacement agent. A placement memorandum has been provided to potential investors, and allelements of Notes related legal documentation (including the Subscription Agreement, the Fiscaland Paying Agency Agreement, Warranty Agreement and the Conditions of the Notes) to whichthe World Bank is party have been substantially negotiated among the World Bank, TBG and theinvestors' counsel. The relevant currency and market consent from the US authorities to theissue of the guarantee required pursuant to Article IV(i)(b) of the Articles of Agreement iscurrent.

GUARANTEE FEES

22. A guarantee fee of 25 bpl° on the average exposure every period, calculated in advance ofeach period is being charged for the project. As with past partial credit guarantees, the guaranteefees would be payable upfront on a present value basis".

CONDITIONS OF ISSUE OF GUARANTEES

23. Payment of the Guarantee Fee, due execution of the Indemnity Agreement and theProject Agreement, including ratification by the Brazilian Senate, amendment of the Loan

8 No trading of the Bonds on that date.

9 The semi-annualized spread is based on current commitments (as of Nov 15, 2000).10 The pricing proposal to be considered by the Board on December 19,2000 (Aligning of charges on IBRD

Guarantees and Loans, R2000-1/2, dated September 15, 2000; see footnote 7) grandfathers the proposed PCGfrom the changes in guarantee pricing.IBRD's cost of borrowing for similar maturities would be used as the discount rate to calculate the presentvalue.

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Agreement, and delivery of satisfactory legal opinions will be conditions precedent to signatureand issue of the World Bank Guarantees.

NEXT STEPS

24. The Notes documentation is currently being finalized. The coupon for the notes would beset after all approvals have been obtained. Following approval by the Board, signature andeffectiveness of all legal documentation and the issuance of legal opinions satisfactory to theBank the Notes transaction is scheduled to be closed during the week of 25th December. Theexpected processing schedule for the guaranteed Notes is as follows:

Processing Steps Indicative Dates

Completion of negotiation of terms of the Notes and Notes related December, 2000documents

Financial Close: Subscription for and issue of the Notes, signature of Week of December 25th, 2000Indemnity Agreement, Project Agreement and all documentationconstituting the Notes; signature and issue of the World BankGuarantees

RECOMMENDATION

25. I recommend that the Executive Directors authorize the Bank to issue a guarantee for theproposed Notes to be issued by TBG in accordance with the terms and conditions described inthis Memorandum and in the Attachment hereto. The final terms and conditions of the guaranteeshall be as determined by either the President or the relevant Managing Director, and theExecutive Directors will be informed accordingly. If there is any substantial change in the termsand conditions of the partial credit guarantee or the Notes from those described herein, theapproval of the Executive Directors will be sought.

James D. WolfensohnPresident

By Sven SandstromWashington D.C.November 28, 2000Attachments

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ANNEX I: SUMMARIZED DESCRIPTION OF THE NOTES AND TERMS FOR THE WORLDBANK GUARANTEES

Issuer: Transportadora Brasileira Gasoduto Bolivia-Brasil S.A. (TBG)

Guarantor: International Bank for Reconstruction and Development (the "World Bank") as to theprincipal repayments on a non-accelerable basis (the "World Bank PrincipalGuarantee") and two scheduled annual interest payments on a rolling and non-accelerable basis (the "World Bank Interest Guarantee," and together with the WorldBank Principal Guarantee, the "World Bank Guarantees")

Fiscal Agent: Bank of New York will act as Fiscal Agents and Registrar

Currency: US Dollars

Amount: US$180,000,000

Price: 100% of face value of Notes

Use of Proceeds: The net proceeds of the placement will be used exclusively for partial funding of theBrazilian portion of the Bolivia-Brazil Gas Pipeline Project.

Target Closing/Funding Date: Fourth Quarter, CY 2000

Drawdown: TBG will receive the full amount of the proceeds less World Bank guarantee andother fees, commissions and any other expenses for placement agent (includingreasonable legal fees for investors counsel and out of pocket expenses at closing dateof the issue).

Final Maturity: 18 years.

Interest Payments: Annual basis.

Repayment: Three equal annual installments starting in year 16.

Rating (Fitch IBCA): BBB+

Taxes and Other Deductions: All payments to be made under or in connection with the issue of the PCG Notes areto be free and clear of any Brazilian taxes, withholdings or other deductions.

Ranking, amendment and The PCG Notes will be unconditional, unsubordinated and unsecured obligations ofredemption of Notes: TBG. All modifications, save those which have no material adverse effect on the

World Bank's rights and obligations, to the terms of the PCG Notes will require priorwritten approval from the World Bank. If any modifications were made without theWorld Bank's prior written consent, the World Bank's Guarantees would lapse. ThePCG Notes may be redeemed before maturity for taxation reasons by TBG. Suchredemption will be subject to a negotiated make-whole arrangement between TBGand the Noteholders.

World Bank Guarantee Scope: The terms of the World Bank Guarantees will be more fully set out in theProvisions: appropriate documents, namely a Fiscal and Paying Agency Agreement and the

conditions to the Notes. The World Bank Interest Guarantee will not cover default orpenalty interest. Upon either permitted redemption of the PCG Notes by TBG orupon payment under the World Bank Guarantees, the World Bank will be dischargedunconditionally from all obligations with respect to that redemption or payment. TheWorld Bank will not guarantee the due execution or authenticity of the PCG Notesand the World Bank Guarantees will be of payment only, and not of collection offunds. The obligations of the World Bank under the World Bank Guarantee are notobligations of any governments, including those of the Federative Republic of Brazil,and a notation to this effect will appear on the PCG Notes.

Principal Guarantee: The World Bank Principal Guarantee will cover payment ofprincipal only at scheduled maturities of the PCG Notes and will not be accelerable inthe event of default by TBG prior to stated maturities or under any othercircumstances.

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Interest Guarantee: The World Bank will guarantee two annual scheduled interestpayments on a rolling and non-accelerable basis. In the case of a default by TBG inthe payment of scheduled interest, the World Bank will make payment followingconfirmation of such default by the Fiscal Agent, provided that there has not been anybreach of the covenant not to amend any provisions of the terms of the PCG Notes orother related documents without the prior written consent of the World Bank. At anytime during the term of the PCG Notes, the World Bank Interest Guarantee will covertwo future scheduled annual interest payments provided TBG or the FederativeRepublic of Brazil has reimbursed the World Bank in full for any previous interestpayments made by the World Bank under its World Bank Interest Guarantee withinthe prescribed time limits described below. Subject to the provisions described belowin the section "PCG Indemnity Agreement", if TBG or the Federative Republic ofBrazil fail to reimburse the World Bank within 60 days of the date of demand by theWorld Bank for payment of the amount paid by the World Bank in respect of aninterest payment, the World Bank Interest Guarantee will terminate with respect toone interest payment. Thereafter, only a single annual scheduled interest paymentwill be covered, subject always to the same conditions of reimbursement.

Liability Cap: The World Bank's maximum liability under the World Bank InterestGuarantee will be two scheduled interest payments calculated on the basis ofoutstanding principal.

Call: Demand in respect of principal or interest under the World Bank Guaranteescan only be made after notice has been given by the Fiscal Agent to the World Bankthat the Noteholders have not received the required repayment amounts from TBG.The World Bank will make payment on the second business day af$er receipt ofdemand. The Fiscal and Paying Agency Agreement (as early warnig of anypotential call on the World Bank Guarantees) requires TBG to pay interestinstallments and principal (at scheduled maturities or on redemption) 2 business daysin advance of the relevant due dates into a designated account with the Fiscal Agent,with interest on the amounts in such account accruing for the benefit of TBG. Anycall on the World Bank Guarantees must be made no later than 10 days after therespective due dates.

Subrogation: Upon payment in full by the World Bank of all amounts payable underthe World Bank Guarantees, the World Bank would be immediately subrogated (inrespect of that payment) to the rights of the Noteholders against TBG, regardless ofwhether the Noteholders have been paid in full in respect of any interest or otheramounts due and outstanding under the PCG Notes. The World Bank's claimsthrough subrogation will rank equally to all other Noteholders' claims. Nothing in theWorld Bank Interest Guarantee or the World Bank Principal Guarantee shall give theNoteholders any rights under the PCG Indemnity Agreement between the WorldBank and the Federative Republic of Brazil; the World Bank may exercise its rightsthereunder as it sees fit and without any obligation to account to the Noteholders forany monies or other proceeds realized.

Currency Indemnity: The World Bank Guarantees will not provide any currencyindemnity to the Noteholders.

Guarantees Status: The World Bank will give a standard negative pledge in relationto the World Bank Guarantees enjoying the same security as may be granted by theWorld Bank in respect of its other unsecured and unsubordinated obligations. TheWorld Bank Guarantees will rank paripassu with the World Bank's other unsecuredand unsubordinated obligations.

Discharge of Guarantee: In the event that any PCG Notes are repaid, redeemed, canceled or exchanged, theWorld Bank Guarantees will be discharged with respect to such PCG Notes. TheFiscal Agent will have responsibility for notifying the World Bank on repayment,redemption, exchange or cancellation of PCG Notes.

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Repackaging Arrangements: The Noteholders will undertak-e to the World Bank that, so long as the World BankGuarantees remain in effect, they will not enter into any arrangement pursuant towhich any security or other obligation is created or issued, the economic effect ofwhich is the separation of rights of payment from the World Bank under the WorldBank Guarantees from the rights of payment from TBG under the PCG Notes.

World Bank Warranties: The World Bank will enter into an agreement with the PCG Note purchasers,providing customary basic warranties and an indemnity in relation to (i) the accuracyof information about the World Bank contained in the placement memorandum issuedby TBG on October 11th 2000 and (ii) the World Bank's legal authority to issue theWorld Bank Guarantees.

Offer to Purchase: Pursuant to its Articles, the World Bank will have the right, upon default by TBG onany interest payment obligations, to offer to purchase the PCG Notes at par andinterest (accrued and due).Prior to the acceleration of Notes, any such offer may beaccepted or declined at the sole option of the Noteholders. After acceleration of theNotes, the Noteholders will not have the option of declining the offer. A provision tothis effect will appear in the terms and conditions of the World Bank Guaranteespursuant to the Fiscal and Paying Agency Agreement and in the Notes.

PCG Indemnity Agreement: Pursuant to the PCG Indemnity Agreement, the Federative Republic of Brazil willagree to reimburse and indemnify the World Bank in respect of any amount paid outin respect of principal or scheduled interest on the PCG Notes (or other liabilitiesincurred by the World Bank in connection with the issue of the World BankGuarantees) on demand or as the World Bank may otherwise direct. After a defaultby TBG on any scheduled interest payment to Noteholders under the PCG Notes andupon being called to make and after making payment to the Fiscal Agent under theWorld Bank Interest Guarantee, the World Bank will either:

(a) issue a written demand to the Federative Republic of Brazil for immediatereimbursement, in which case if the Federative Republic of Brazil fails for any reasonto make full reimbursement to the World Bank within 60 days of the date of suchwritten demand, the World Bank Interest Guarantee in respect of one of the annualscheduled interest payments will terminate automatically, and will not 'roll' and willnever be reinstated; or

(b) exercise its discretion under the PCG Indemnity Agreement (in what theWorld Bank may determine constitutes exceptional circumstances) not to require theFederative Republic of Brazil to make immediate repayment. The World Bank willthen notify the Federative Republic of Brazil of the reimbursement terms, set at thesole discretion of the World Bank and will also notify the Fiscal Agent. The WorldBank will have the right (at its discretion) to direct to the Federative Republic ofBrazil whatever terms and conditions of reimbursement the World Bank considers areappropriate and to vary those terms and conditions subsequently. Nothing in theprovisions of the World Bank Guarantees will restrict or alter this right.

If the World Bank exercises its discretion in (b) above and the Federative Republic ofBrazil makes specific and full reimbursement to the World Bank of the due amountpursuant to the reimbursement terms notified by the World Bank at any time prior toWorld Bank close of business on the business day five days before the due date forthe next annual scheduled interest payment payable by TBG under the terms of thePCG Notes, the World Bank Interest Guarantee in respect of the interest payment willbe reinstated. In the event that the Federative Republic of Brazil has (for any reason)not made full reimbursement as aforesaid to the World Bank by that date, then theWorld Bank Interest Guarantee in respect of one of the interest payments willautomatically terminate and not be reinstated. The World Bank Interest Guarantee inrespect of the second interest payment will remain, subject to identical terms.

If the Federative Republic of Brazil makes a payment to the World Bank equal toreimbursement of all outstanding amounts owed to the World Bank pursuant to thePCG Indemnity Agreement, the World Bank will allocate and apply that payment as

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expressly stipulated by the Federative Republic of Brazil and, failing such stipulation,will allocate and apply the payment as the World Bank sees fit.

Breach of the PCG Indemnity Agreement by the Federative Republic of Brazil wouldentitle the World Bank to declare an event of suspension under all loan agreementswith, and (if such breach is a payment default) all loan agreements guaranteed by, theFederative Republic of Brazil.

Guarantee Fee: The fee represents 0.25% per annum, charged on the guaranteed exposure (principaland scheduled interest amounts) on a present value basis, using the World Bank's costof funds at or near the day of the closing of the PCG Notes as the 'discount rate'. Thefees are payable in advance at the closing of the PCG Notes, out of the proceeds ofthe PCG Notes. Payment of the fees to the World Bank will be a condition precedentto the delivery of the World Bank Guarantees and is guaranteed by the FederativeRepublic of Brazil.

Governing Law & Jurisdiction: The terms and conditions of the PCG Notes, the World Bank Guarantees and allagreements with the commercial parties to which the World Bank is a party(excluding the World Bank Project Agreement) will be subject to the laws of the Stateof New York. Non-exclusive jurisdiction will be vested in the courts of New York,subject to the World Bank's statutory right (22 USC § 236(g)) to transfer anyproceedings to the appropriate U.S. District Court and to certain immunities grantedunder its Articles of Agreement concernig jurisdictions in which actions may bebought against the World Bank; immunity from suit by its members, immunity frominterim attachment or seizure of assets and inviolability of its archives. Noteholderswill be deemed to have assented to these World Bank rights.

The PCG Indemnity Agreement with the Federative Republic of Brazil and the WorldBank Project Agreement will contain the dispute resolution provisions common to allWorld Bank agreements with member countries and project agreements withborrowers, and will follow the usual legal regime for such World Bank agreements.

Legal Opinions: The World Bank will be an addressee of the relevant legal opinions delivered bycounsel to TBG. The World Bank will deliver the customary legal opinion for theissue of guarantees under the PCG Programn to the Note purchasers. The World Bankwill receive a legal opinion from Brazil covering the Indemnity Agreement.

Conditions Precedent: World Bank Board approval, payment of the Guarantee Fee, due execution (includingratification by the Brazilian Senate) of the PCG Indemnity Agreement and the WorldBank Project Agreement (an agreement between TBG and the World Bank which alsobinds TBG to certain covenants also contained in the World Bank Loan Agreementfor the term of the World Bank Guarantee) and delivery of satisfactory legal opinionsand amendment of the World Bank Loan Agreement will be conditions precedent todelivery of the World Bank Guarantees.

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ANNEX II: STATUS OF BANK GROUP OPERATIONS IN BRAZIL

IBRD Active ProjectsAs of 11/9/00

Difference BetwveenI -1. D8 Expected and Actual

Supervisien Rating bI i I I il nDhs,c M,,e,-"

Pr-ject ID Project Name n cv..m I P)-M.Nln Fiecl Year IBRD IDA GRANT Cancel. Undisb- Origu Frm RevdR-G-~~~~~~~~~~~~~

P006559 (BF-R)SP.TSP S S 1998 45 0 0 0 43.7 41 0P043871 (PIAUI)R.POVERTY S S 1997 30 0 0 0 3.6 2.2 0P043873 AGTECHDEV. S S 1997 60 0 0 0 39.9 268 5.1P055388 ANIMAL&PLANT DIS. CO S S 1999 44 0 0 0 44 136 0P006562 BAHIA MUN.DV S S 1997 100 0 0 0 78.2 57 2 3.6P035728 BAHIA WTR RESOURCES S S 1998 51 0 0 0 35.9 274 0P006564 8ELO H M.TSP S U 1995 99 0 0 0 28.6 24 9 0P037828 BR (PR)R.POVERTY S S 1996 175 0 0 0 111.2 943 0P044597 BR BIODIVERSITY FUND S S 1996 0 0 20 0 8.3 B.6 0P058129 BR EMER. FIRE PREVENTION S S 1999 15 0 0 0 133 10 0.3P047309 BRENERGYEFFICIENCY(GEF) S S 2000 0 0 15 0 14.4 03 0P006512 BR ENVICONS(CVRO) U U 1996 0 0 0 0 0 0 0P006474 BRLANDMGT3(SAOPAULO) HS S 1998 55 0 0 0 53 223 58P006524 BR MINAS MNC.DEVELOPMT S S 1994 150 0 0 9.7 22 317 26.7P048870 BR MT STATE PRIV. S S 1997 45 0 0 0 5 5 0P057910 BR PENSION REFORM LIL HS S 1998 5 0 0 0 47 47 0P006541 BRWTR QIPLN(SPIPR/FED) S S 1993 245 0 0 9.3 5.9 15.2 5.8P05412C BR- AIDS & STO Control!! S S 1999 165 0 0 0 103.5 502 0P043874 BR- DISEASESURVEILLANCE-VIGISUS S U 1999 100 0 0 0 872 53.9 0P050763 BR- Furnescola 2 S S 1999 202 0 0 0 132.4 -209 0P050762 BR- Fundescola I S S 1998 62.5 0 0 0 6.3 -86 0P006554 BR- HEALTH SECTOR REFORM-REFORSUS S S 1996 300 0 0 0 1845 184.5 0P006542 BR- MINAS GERAIS BASIC EDU. S S 1994 150 0 0 0 13.2 132 0P00655e BR- PARANA BASIC EDUC S S 1994 96 0 0 0 11.4 11.4 0P038947 BR- SC. &TECH3 S S 1998 155 0 0 0 1281 88.1 0P006449 CEARAVWTRMGT S S 2000 136 0 0 0 1316 14 0P046052 CEARA WTR PILOT S S 1997 9 6 0 0 0 5.6 5.6 5.6P048357 CEN.BANKTAL S S 1998 20 0 0 0 73 73 0P006436 Ceara Urban Development & Water Resource S S 1995 140 0 0 0 27.8 27.8 -0.8P039200 ENERGY EFFICIENCY (ELETROBRAS) S S 2000 43.4 0 0 0 43.4 0.7 0P006522 ESP.SANTO WATER S S 1994 154 0 0 54 18.3 72.3 4P006532 FED HWY DECENTR S S 1997 300 0 0 0 178 1713 0P038895 FED.WTR MGT S S 1998 198 0 0 0 135.3 84 5.3P006549 GAS SCTR DEV PROJECT HS HS 1998 130 0 0 0 36.9 36.9 0P062619 INSS REF LIL S S 2000 5 0 0 0 4 5 15 0P006475 LAND RFM PILOT S S 1997 90 0 0 0 34.4 25.1 0P051701 MARANHAO R.POVERTY S S 1998 s0 0 0 0 214 -17.2 0P006505 MATO GROSSO NAT RES U U 1992 205 0 0 0 35 35 0P006547 METROTRANSP RIO S S 1993 128.5 0 0 0 0.3 03 0P040033 MG STATE PRIV. U U 1998 0 0 0 0 0 0 0P006210 NATL BIODIVERSITY S S 1996 0 0 10 0 5.5 5.9 6.4P035741 NATL ENV 2 S S 2000 15 0 0 0 14.1 -0 9 0P006453 NE IRRIG I S U 1990 210 0 0 69 13.4 82.4 60.7P050776 NE M!cofinance Development # 2000 50 0 0 0 47 0 0P042565 PARAIBA R.POVERTY S S 1998 60 0 0 0 38.4 7.1 0P039199 PROSANEAR2 S S 2000 30 3 0 0 0 30.3 0 0P042566 R.POVERTY(PE) S S 1997 39 0 0 0 7.7 8.3 0P038896 R.POVERTY(RGN) S S 1997 24 0 0 0 5.9 48 0P040028 RAILWAYS RESTRUCTURG S S 1996 350 0 0 50 43.4 90.1 434P038882 RECIFE M TSP S S 1995 102 0 0 0 54 1 49.5 0P034575 RGS HWY MGT S S 1897 70 0 0 0 56.1 39.1 11 8P043868 RGS LAND MGT/POVERTY S S 1997 100 0 0 0 81.1 39.3 0P043421 RJ M TRANSIT PRJ. S S 1998 186 0 0 0 174.6 160 0P006454 RONDONIA NTRL RES. M U U 1992 167 0 0 0 26.3 263 0P035717 RURAL POV. (BAHIA) S S 1995 105 0 0 0 12 1 104 0P038884 RURALPOV.-CEARA S S 1995 70 0 0 0 2.8 15 0P038885 RURAL POV.-SERGIPE S S 1995 36 0 0 0 1 0.3 0P048869 SALVADOR URBAN TRANS S S 1999 150 0 0 0 144 5 36.2 0P043420 WATER S.MOD.2 S S 1998 150 0 0 0 148.3 107.6 57.8Result Result 5903.4 0 45 192 2764.9 1884.5 241 5

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IFC Held and Disbursed PortfolioAs of 8/31/00

(n I IS Dolars Mdilliotns)

Held Disbursed

FY Anogroval CoQmUaOv Loan Eauiy Qsi Partic LoanEuiyQaiari

1980/92 DENPASA 0 0 0.12 0 0 0 0.05 01998 Dixie Toga 0 15 0 0 0 15 0 01987/96/97 Duratex 20.64 0 0 59.93 20.64 0 0 59.931990 ENGEPOL 0.44 0 0 0 0.44 0 0 01999 Eliane 32 0 13 0 32 0 13 01998 Empesca 5 0 10 0 5 0 10 02000 Fleury 9 0 6 0 0 0 0 01998 Fosfertil 20 0 0 45 18.15 0 0 40.851998 Fras-le 10 0 10 0 10 0 6.7 01994 GAVEA 8.13 0 5.5 0 8.13 0 5.5 01994 GP Capital 0 10.39 0 0 0 10.39 0 01995/96/98 Globocabo 0 9.91 0 0 0 9.91 0 01997 Guilmana-Amorim 27.75 0 0 71.84 27.75 0 0 71.841998 Icatu Equity 0 30 0 0 0 4.39 0 01999 Innova SA 20 5 0 60 11.5 5 0 34.51980/87/97 Ipiranga 37.33 0 0 111.82 37.33 0 0 111.821999 Itaberaba 0 0 5.34 0 0 0 5.34 01999 JOSAPAR 13 0 7 0 0 0 0 01995 LATASA-Brazil 10.33 0 0 1 10.33 0 0 11996/97 Lightel 0 8.17 0 0 0 8.17 0 01995 Lojas Americana 20 0 5 8 20 0 5 81987/92/96 MBR 0 0 0 0 0 0 0 01993 Macedo Alimentos 9.04 0 5 0 9.04 0 5 01996 Mallory 5.82 0 0 0 5.82 0 0 01975/96 Oxiteno NE 17.5 0 0 0 17.5 0 0 01982/84/86 PISA 0 0 0 0 0 0 0 01994 ParaPigmentos 27.73 0 9 24.04 27.73 0 9 24.041987/96 Perdigao 21.88 0 0 8 21.88 0 0 81989/95 Politeno Ind. 10.23 0 0 0 10.23 0 0 01994/00 Portobello 16 0 0 0 15.29 0 0 02000 Puras 5 0 0 0 5 0 0 01998 Randon 7 0 3 0 7 0 3 01991 Rhodia-Ster 2.86 5.95 0 0 2.86 5.95 0 01995 Rhodiaco/PTA 15 0 0 12 15 0 0 121990 Ripasa 0 5 0 0 0 5 0 01997 Rodovia 33.06 0 0 71.55 33.06 0 0 71.55

S.A.I.C.C. 0 2.85 0 0 0 2.85 0 01987/97 SP Alpargatas 21.67 0 5 0 21.67 0 5 01994/95/97 Sadia 25 0 8.33 133.33 25 0 8.33 133.331997 Samarco 14.4 0 0 10.67 14.4 0 0 10.671998 Saraiva 13.85 3 0 0 13.85 3 0 01997 Sucorrico 12 0 0 0 12 0 0 01996 TIGRE 19.23 0 5 12.82 19.23 0 5 12.821992/93 TRIKEM 0 0 0 0 0 0 0 01998 Tecon Rio Grande 7.5 0 5.5 18 6.65 0 5.5 15.951993 Votorantim 8.14 0 0 0.57 8.14 0 0 0.571999 Vulcabras 20 0 0 0 20 0 0 01997 Wembley 0 10 0 0 0 10 0 01999 Wiest 9 0 8 0 0 0 8 01998 Arteb 20 7 0 20 20 7 0 201999 AutoBAn 35 0 0 31 19.25 0 0 16.641993 BACELL 6 15.7 0 16.2 6 15.7 0 16.21998 BSC 11.53 0 0 6.18 11.53 0 0 6.18

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Held Disbursed

FY Approval Company Loan Equity Ouasi Partic Loan Equitv Ouasi Partic1990/91/92 Bahia Sul 0 0 0 0 0 0 0 01996 Banco Bradesco 14.26 0 0 19.57 14.26 0 0 19.571997 Bompreco 22.92 0 5 0 22.92 0 5 01991 Bradesco-Bahia 1.5 0 0 0 1.5 0 0 01991 Bradesco-Eucatex 6.25 0 0 0 6.25 0 0 01995 Bradesco-Hering 7.5 0 0 0 7.5 0 0 01991 Bradesco-Petrofl 7.5 0 0 0 7.5 0 0 01991 Bradesco-Romi 0.4 0.4 0 0 0.4 0.4 0 01995 Brahma - BRA 15 0 5 24.6 15 0 5 24.61993/96 CEVAL 0 10 0 0 0 10 0 01994/96 CHAPECO 15 0 0 5 15 0 0 51973/78/83 CODEMIN 0 0.4 0 0 0 0.4 0 01992 CRP-Caderi 0 0.68 0 0 0 0.68 0 01995 Cambuhy/MC 13.13 0 0 0 13.13 0 0 01997 Copesul 32.5 0 0 141.43 32.5 0 0 141.431993/97/00 Coteminas 0 0.53 0 0 0 0.53 0 0

Total Portfolio: 454764 37324.12 30121 IE+06 705.36 114.37 104.42 866.49

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ANNEX III: BRAZIL AT A GLANCE

Latin Upper-POVERTY and SOCIAL America middle.

Brazil & Carib. Income Development diamond'1999PoDulation. mid-vear (millions) 168.1 509 573 Life expectancyGNP oer caoita tAtlas method. US3) 4.420 3.840 4.900ONP (Atlas method. US$ billions) 742.7 1.955 2.811

Average annual growth, 1993-99

PoDulation r'%) 1.4 1.6 1.4Labor force IS) 2.1 2.5 2.1 GNP , Gross

per primaryMost recent estimate (latest year available, 1993-99) capita /nmnl

Povertv (% of oopufation below natonal DovernV ne)Urban Dooulation (1 oftotaDoDulatonl 81 75 76Life expectancv at birth (vears) 67 70 70Infant mortaiitv (Der 1.000 live births) 33 31 27Child malnutrition (% of children under 5) 6 8 7 Access to safe waterAccess to imoroved water source (16 of ooula/eon) .. 75 78llliteracY(%ofooou/ationaoe 15t) 15 12 10Gross onnarv enrogment (% ofschool-aae Dooula/aon) 125 113 109 Bazil

Male .. .. Upper-mniddle-income group

Female

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1979 1989 1998 1999Economic ratios'

GDP (US$ bililons) 225.0 448.8 787.1 791.4Gross domestic investmenttGDP 22.8 24.8 21.3 21.0 TradeExports of goods and services/GDP 7.1 8.2 7.4 9.7Gross domestic savings/GDP 20.7 28.0 18.6 21.7Gross natonal savings/GDP 18.0 25.0 16.3 18.8

Current account balance/GDP -4.7 0.4 -4.3 -3.1 DomesticInterest payments/GDP 2.1 0.9 1.4 1.5 InvestmentTotal debYGDP 27.3 25.5 29.5 28.0 SavingsTotal debt servicelexports 62.8 36.3 73.5 120.8Present value of debt/GDP .. .. 27.9Present value of debt/exports .. ., 337.5

Indebtedness1979-89 1989-99 1998 1999 1999-03

(average annual grwth)GDP 2.9 2.6 -0.1 1.0 4.0 -- BrazilGNP per capita 0.9 0.7 -1.4 -2.6 2.8 Upper-rmiddle-income groupExports ot goods and services 8.9 4.2 0.2 -6.5 5.6

STRUCTURE of the ECONOMY1979 1989 1998 1999 GrowthofinvestmentandGDP(I%)

(% of GDP) .Agriculture 11.0 8.5 8.4 8.4Industry 40.6 42.7 28.8 31.7

Manufacturng 31.0 29 5 22.7 22.7 uServices 48.3 48.8 62.8 59.9 -s 94 95 s 9

Pnvate consumption 69.5 57.8 63.6 62.8 -10General ooverriment consumotion 9.7 14.3 17.8 15.6 00GD GDPImports of goods and services 9.2 5.0 10.1 9.0

1979-89 1989-99 1998 1999 Growth of exports and imports (I%)(average annual growth)Agriculture 3.4 2.9 0.0 9.5 40Industry 2.3 2.1 -1.3 -1.7

Manufacturing 1.9 1.1 -2.0 -0.7 20

Services 3.4 2.7 0.8 1.3 1-.- .

Pnvate consumption 1.9 5.8 -3.4 9.4 9794 95 se 97 Os 9

General aovernment consumotion 6.4 -2.0 2.1 -9.3Gross domestic investment -0.1 2.4 0.1 -6.9 2DImports of goods and services -1.4 12.4 8.9 -17.4 -- Exports ""O""importsGross national product 2.9 2.2 0.0 -1.3

Note: 1999 data are prehminary estimates.

The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond willbe incomplete.

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Brazil

PRICES and GOVERNMENT FINANCE1979 1989 1998 1999 Inflation 1%)

DomesSic prices2,0(% choange) 2.500

Consumer prces .. 1,430.7 2.7 8.6 2.0r0

Implicit GDP deflator 56.5 1,322.5 3.9 11.3 1,5001,000

Government finance son(% of GOP, inctudes curent grants) oCurrent revenue .. .. 20.4 21.9 94 ss ss 97 90 95Current budget balance .. .. -4.4 -5.2 --GDP deflator O CPIOverall surplus/deficit ... .. -5.5 -6.2

TRADE

(US$ millions) 1979 1989 1998 1999 Export and import levels (USS mill.)

Total exports (fob) .. 34,375 51,140 48,011 75,000Coffee .. 1,803 2,576 2,441Soybeans .. 3,647 4,755 3,784Manufactures .. 17,575 31,964 30,251 so 0l

Total imports (f) .. 18,264 57,733 49,219 dFood .. 1,249 3,057 2,078 25,00|Fuel and energy 3,753 1,965 2,169Capital goods .. 4,873 25,283 21,157 0

Exoort Drice index (1995=100) .. 98 92 86 93 94 95 9s 97 98 99Imort Donce index (1995=100) .. 85 84 89 r Exports NImportsTeem,s of trade (1995=100) .. 115 108 97

BALANCE of PAYMENTS

(US$ millions) 1979 1989 1998 1999 Current account balance to GDP l%)

Exports of goods and services 16,708 36,394 55,473 51,887 oImports of goods and services 21,724 21,486 69,650 57,516 93 94Resource balance -5,016 14.908 -14,177 -5,629 -1

Net income -5,479 -13,265 -21,217 -20,786 -2Net current transfers 5 249 1,778 2,040

Current account balance -10,490 1,892 -33,616 -24,375

Finandng items (net) 7,703 -7,087 16,331 13,634 4Changes in net reserves 2,787 5,195 17,285 10,741 5

Memo:Reserves includino aold (USS millions) 9.045 7.672 43.971 35.725Conversion rate (DEC, locaf/USS) 9.79E-12 1.03E-6 1.1 1.3

EXTERNAL DEBT and RESOURCE FLOWS1979 1989 1998 1999

(US$ millions) Compositlon of 1999 debt (US$ mill.)Total debt outstanding and disbursed 61,327 114,532 232,004 221,792

IBRD 1,790 8,311 6,298 6,822 6522IDA 0 0 0 0 2sB41 10292

Total debt service ~~~~~~~~~~~~~~~~~~~~~~~~11610Total debt service 11,310 14,122 47,887 73,694 | 34oo

IBRO 234 1,475 1,373 1,380IDA 0 0 0 0

ComDosition of net resource flowsOfficial grants 10 44 97Official creditors 436 223 4,911 -1,077Prvate creditors 5,236 -3,716 21,930 -15,796Foreigndirectinvestment 2,419 1,267 31,913 26,916Portfolio equity 0 0 542 3.234

157433World Bank program

Commitments 674 933 1,290 1,465 A- IBRD E - BdiaberalDisbursements 302 819 1,240 1,533 6B IDA D - Other mulblateral F- PnvatePrincipal repayments 74 871 995 952 C - MF G - Short-tenrmNet flows 228 -52 245 580Interest payments 160 604 378 428Net transfers 67 -656 -133 153

Development Economics 8125/00

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