I do know that the Federal Senate has approved, and I, José Sarney, President, in the terms of art. 48, inciso XXVIII, of the Rules of Procedure, promulgated the following

R E S O L U UNK UNK UNK UNK

No. 16, DE 2003

Authorizes the State of Bahia to hire external credit operation with the International Bank for Reconstruction and Development (Bird), in the total value equivalent to US$ 60,000,000.00 (sixty million U.S. dollars) of principal, with collateral of the Federative Republic of Brazil, targeting the resources to be financed, partially, the second phase of the Bahia State Education Project.

The Federal Senate resolves:

Art. 1º It is the State of Bahia authorized to hire external credit operation with the International Bank for Reconstruction and Development (BIRD), worth up to US$ 60,000,000.00 (sixty million U.S. dollars) of principal, targeting the resources to be financed, partially, the second phase of the Bahia State Education Project.

Art. 2º Are the following financial conditions of the external credit operation:

I? debtor: State of Bahia ;

II? creditor: International Bank for Reconstruction and Development (BIRD) ;

III? guarantor: Federative Republic of Brazil ;

IV? purpose: to finance, partially, the second phase of the Bahia State Education Project ;

V? value: the equivalent of up to US$ 60,000,000.00 (sixty million U.S. dollars) ;

VI? loan modality: fixed spread loan with possibility of:

a) currency conversion ;

b)conversion of the fluctuating interest rate to fixed or vice-versal ; and

c)establishment of ceilings, floors, and bands for the fluctuation of the interest rate ;

VII? disbursement: as per the execution of the Project, until December 31, 2006 ;

VIII? amortization: 20 (twenty) semi-annual, consecutive and equal installments, due to each May 15 and November 15 between November 15, 2008 and May 15, 2018 ;

IX? interest: required semiannual, payable on May 15 and November 15, calculated on the periodic debtor balance of the loan, at an initially fluctuating annual rate (Libor increased from spread to be fixed a day before the signing of the Contract) ;

X? compromise commission: 0.85% a.a. (eighty-five hundredths per cent a year) on the non-disbursed debtor balances, required semester, on the same interest payment dates, entering into force 60 (sixty) days after signing of the Contract, up to the fourth year of its entry into force, and 0.75% a.a. (seventy and five hundredths per cent) from there on ;

XI? commission in sight: 1% (one per cent) on the value of the loan, to be debited on the date the Contract enters into effect.

Single Paragraph. All the possibilities referred to in inciso VI will eventually be applicable to the whole or parts of the loan.

Art. 3º It is the Union authorized to grant assurance to the credit operation that it treats art. 1º, having as contragarantia, offered by the State of Bahia pursuant to § 4º of the art. 167 of the Federal Constitution, the quotas of the Union constitutional transfers, provided for in the arts 157 and 159, complemented by the state tax revenues established in art. 155, all of the Federal Constitution, as well as other warranties admitted in law.

Art. 4º The Contragarantile Contract between the State of Bahia and the Union should be entered into prior to the signing of the remaining contractual instruments regarding the credit operation.

Art. 5º The authorisation granted by this Resolution shall be exercised within the maximum period of 540 (five hundred and forty) days, from the date of its publication.

Art. 6º This Resolution shall enter into force on the date of its publication.

Federal Senate, on October 30, 2003

Senator Jose Sarney

President of the Federal Senate