U.S.$400,000,000 VOTO-VOTORANTIM OVERSEAS TRADING OPERATIONS IV LIMITED

Transcription

1 U.S.$400,000,000 VOTO-VOTORANTIM OVERSEAS TRADING OPERATIONS IV LIMITED 7.75% Notes Due June 24, 2020 guaranteed by: VOTORANTIM PARTICIPAÇÕES S.A., VOTORANTIM CELULOSE E PAPEL S.A., and CIMENTO RIO BRANCO S.A. We are offering U.S.$400,000,000 aggregate principal amount of Voto-Votorantim Overseas Trading Operations IV Limited s guaranteed notes due June 24, Voto-Votorantim Overseas Trading Operations IV Limited is a Cayman Islands exempted company incorporated for the sole purpose of issuing the notes. The notes are jointly and severally, unconditionally and irrevocably guaranteed by Votorantim Participações S.A., or VPAR, Votorantim Celulose e Papel S.A., or VCP, and Cimento Rio Branco S.A., or CRB, each a sociedade anônima organized under the laws of the Federative Republic of Brazil; provided that liability of each of VCP and CRB, under their respective guarantees, will be limited to 50% of the outstanding amount of the notes. Interest on the notes will be payable semi-annually in arrears on June 24 and December 24 of each year, beginning on December 24, The notes will be redeemable prior to the maturity only as described in this offering circular. The notes will be senior obligations of the issuer and will rank at least equally with all other senior unsecured obligations of the issuer. The guarantees of the notes will be senior obligations of the guarantors and will rank at least equally with all of their other senior unsecured obligations. The trustee for the notes, on behalf of the holders of the notes, will have the benefit of an irrevocable standby letter of credit provided by Credit Suisse, acting through its Cayman Islands branch, or the letter of credit issuer, to provide coverage in an amount equal to U.S.$47,000, (which amount is equal to the sum of (i) three payments of scheduled interest on the notes plus (ii) an amount equal to 30 days of interest payable on three accrued payments of scheduled interest plus (iii) certain trustee s fees) in the event of certain Brazilian currency inconvertibility/non-transfer events; provided that the equivalent amount in reais of such funds to be drawn plus an amount to cover risks associated with the uncertain date of conversion of the reais into U.S. dollars have been deposited with the letter of credit issuer. See The Letter of Credit. Application has been made to list the notes on the Luxembourg Stock Exchange. Investing in the notes involves risks. See Risk Factors beginning on page 12. Price: 100% plus accrued interest if any from June 24, 2005 Delivery of the notes in book-entry form will be made on or about June 24, 2005, through The Depository Trust Company, or DTC, and its participants, including Euroclear Bank S.A./N.V., or Euroclear, and Clearstream Banking, société anonyme, Luxembourg, or Clearstream. The notes have not been registered under the Securities Act of 1933, as amended, or the Securities Act. The notes may not be offered or sold within the United States or to U.S. persons, except to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A and to certain non U.S. persons in offshore transactions in reliance on Regulation S. You are hereby notified that sellers of the notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Credit Suisse First Boston The date of this offering circular is June 21, 2005

2 TABLE OF CONTENTS PRESENTATION OF FINANCIAL RELATED PARTY TRANSACTIONS ÏÏÏÏÏÏÏÏÏ 108 INFORMATION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ iii DESCRIPTION OF THE NOTES AND THE CAUTIONARY STATEMENT REGARDING GUARANTEES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 109 FORWARD-LOOKING STATEMENTS ÏÏÏÏÏÏ iv THE LETTER OF CREDIT ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 137 SUMMARY ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 PLAN OF DISTRIBUTION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 143 RISK FACTORSÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12 NOTICE TO CANADIAN RESIDENTS ÏÏÏÏÏÏÏ 146 USE OF PROCEEDS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21 TRANSFER RESTRICTIONS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 147 EXCHANGE RATES ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22 TAXATION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 149 THE ISSUER ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 INDEPENDENT ACCOUNTANTS ÏÏÏÏÏÏÏÏÏÏÏ 156 CAPITALIZATION ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 LEGAL MATTERSÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 156 SELECTED FINANCIAL AND OTHER DATA OF THE GUARANTORSÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ÏÏÏÏÏÏÏÏÏ 35 THE VOTORANTIM GROUPÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 64 BUSINESS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66 MANAGEMENTÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 103 PRINCIPAL SHAREHOLDERSÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 106 SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 157 ADDITIONAL CORPORATE INFORMATION ÏÏ 159 LISTING AND GENERAL INFORMATION ÏÏÏÏ 166 INDEX TO FINANCIAL STATEMENTSÏÏÏÏÏÏÏ F-1 ANNEX A Ì SUMMARY OF CERTAIN DIFFERENCES BETWEEN BRAZILIAN GAAP AND U.S. GAAP ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A-1 You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is diåerent. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document. NOTICE TO NEW HAMPSHIRE RESIDENTS Neither the fact that a registration statement or an application for a license has been Ñled under Chapter 421-B of the New Hampshire Revised Statutes with the State of New Hampshire nor the fact that a security is eåectively registered or a person is licensed in the State of New Hampshire constitutes a Ñnding by the Secretary of State that any document Ñled under RSA 421-B is true, complete and not misleading. Neither any such fact nor the fact that an exemption or exception is available for a security or a transaction means that the Secretary of State has passed in any way upon the merits or qualiñcations of, or recommended or given approval to, any person, security or transaction. It is unlawful to make, or cause to be made, to any prospective purchaser, customer, or client any representation inconsistent with the provisions of this paragraph. This oåering circular is based on the law and practice currently in force in the Cayman Islands and is subject to changes therein. No invitation to the public in the Cayman Islands to subscribe for the notes is permitted to be made. For this oåering, the issuer, the guarantors and the initial purchasers are relying upon exemptions from registration under the Securities Act for an oåer and sale of securities which does not involve a public oåering. The notes may not be transferred or resold except as permitted under the Securities Act i

3 and applicable state securities laws. You should be aware that you may be required to bear the Ñnancial risks of this investment for an indeñnite period of time. See ""Transfer Restrictions.'' Neither the notes nor the guarantees of the notes have been, nor will be, registered with the Brazilian Securities and Exchange Commission (Comiss ao de Valores Mobili πarios, or CVM). Any public oåering or distribution, as deñned under Brazilian laws and regulations, of the notes and guarantees of the notes in Brazil is not legal without such prior registration under Law No. 6,385/76. The initial purchasers have agreed not to oåer or sell the notes in Brazil. A person may only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, or the FSMA) received by it in connection with the issue or sale of any notes in circumstances in which Section 21(1) of the FSMA does not apply to the issuer and guarantors. This communication is directed only at persons who (i) are outside the United Kingdom, (ii) have professional experience in matters relating to investments or (iii) are persons falling within Article 49(2)(a) to (d) (""high net worth companies, unincorporated associations etc.'') of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (all such persons together being referred to as ""relevant persons''). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons. Each of the issuer and the guarantors accepts responsibility for the information contained in this oåering circular regarding the issuer, the guarantors, the notes and the other transaction documents. This oåering circular contains summaries intended to be accurate with respect to certain terms of certain documents, but reference is made to the actual documents, all of which are available free of charge at the oçce of the Luxembourg paying agent and will be made available to you upon request to the issuer or the trustee for complete information with respect thereto, and all such summaries are qualiñed in their entirety by such reference. In making an investment decision, you must rely on your own examination of the issuer's and the guarantors' business and Ñnancial condition and the terms of this oåering, including the merits and risks involved. These notes have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not conñrmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal oåense. Application has been made to list the notes on the Luxembourg Stock Exchange. This oåering circular forms the prospectus for admission to the Luxembourg Stock Exchange. ii

4 PRESENTATION OF FINANCIAL INFORMATION The Votorantim group reorganized its business units along operating lines. As part of this reorganization, the Votorantim group centralized all of its operations under a holding company, VPAR, which, until April 30, 2002, had been named S.A. Ind πustrias Votorantim, or SAIV. Prior to December 28, 2002, all of the operations of the Votorantim group were owned directly or indirectly by Hejoassu Administra c ao S.A., or Hejoassu. SAIV was a wholly-owned subsidiary of Hejoassu that directly and indirectly owned a portion, but not all, of the Votorantim group. As a result of the reorganization, Hejoassu continues to be the sole shareholder of SAIV, now VPAR, and VPAR is now the holding company for all of the Votorantim group. This oåering circular presents consolidated Ñnancial statements of Hejoassu as of and for the year ended December 31, 2002 instead of those of VPAR. We believe that Hejoassu's 2002 Ñnancial statements are more meaningful for investors to understand the historic results and Ñnancial condition of what is today VPAR. The consolidated Ñnancial statements of Hejoassu presented in this oåering circular include certain assets and liabilities which are not part of the assets and liabilities of VPAR. These assets and liabilities are immaterial. The consolidated Ñnancial statements of VPAR as of and for the years ended December 31, 2004 and 2003 and the consolidated Ñnancial statements of Hejoassu as of and for the year ended December 31, 2002 are referred to herein as the ""Votorantim Group Consolidated Financial Statements.'' The Ñnancial statements and the Ñnancial information relating to VCP and CRB presented in this oåering circular have been derived from their respective records and Ñnancial statements. The guarantors publish their Ñnancial statements in Brazil in accordance with accounting practices adopted in Brazil, or Brazilian GAAP, which are based on the Brazilian Corporation Law (Law No. 6,404/76, as amended), the rules and regulations of the CVM (only as it relates to VCP, a publicly listed company in Brazil), and the accounting standards issued by the Brazilian Federal Accounting Council (Conselho Federal de Contabilidade, or CFC), and the Brazilian Institute of Independent Accountants (Instituto dos Auditores Independentes do Brasil, or IBRACON). VCP is required by the CVM to publish consolidated Ñnancial statements. VPAR, as the ultimate holding company, is required by CFC rules to publish consolidated Ñnancial statements. CRB publishes only unconsolidated Ñnancial statements. VPAR does not prepare or publish interim consolidated Ñnancial statements. The condensed interim Ñnancial information for VCP and CRB for the three-month periods ended March 31, 2005 and March 31, 2004 is unaudited. However, in the opinion of management, such condensed interim Ñnancial information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for interim periods. The results of operations for the three-month period ended March 31, 2005 are not necessarily indicative of the results to be expected for the full Ñscal year ending December 31, iii

5 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This oåering circular contains statements that are or may constitute forward-looking statements. These statements appear throughout this oåering circular and include statements regarding the current expectations of the issuer and the guarantors and intentions and projections about future events aåecting the business of the issuer and the guarantors. These statements include, but are not limited to: trends aåecting the Ñnancial condition or results of operations of the issuer or the guarantors, any statements preceded by, followed by or that include the words ""believes,'' ""expects,'' ""predicts,'' ""anticipates,'' ""intends,'' ""estimates,'' ""should,'' ""may'' or similar expressions, and other statements contained or incorporated by reference in this oåering circular regarding matters that are not historical facts. Because these statements are subject to risks and uncertainties, actual results may diåer materially from those expressed or implied by the forward-looking statements. Factors that could cause actual results to diåer materially from those contained in the forward-looking statements include, but are not limited to: the pursuit of potential business strategies, including acquisitions or dispositions of assets or internal açliates, performance of projects undertaken by us and the success of eåorts to invest in and develop new opportunities, the international market prices of the products that we sell, governmental regulation and tax matters, inöation and changes in currency exchange rates, eåects of competition, political, economic, regulatory and demographic developments in Brazil where the guarantors conduct all of their business, and other factors discussed under ""Risk Factors'' and ""Management's Discussion and Analysis of Financial Condition and Results of Operations.'' You should not place undue reliance on forward-looking statements, which speak only as of the date that they were made. Neither the issuer nor any guarantor undertakes any obligation to release publicly any revisions to such forward-looking statements after completion of this oåering to reöect later events or circumstances or to reöect the occurrence of unanticipated events. All the estimates of mineral reserves described in this oåering circular were calculated by us based on geological research conducted by our technicians and standard evaluation methods generally used in the industry. See ""Risk Factors Ì Risks relating to the operations and business of the Votorantim group Ì Our estimates of the volume and grade of our mineral deposits could be incorrect.'' iv

6 SUMMARY The following is a summary of the business and Ñnancial information of the issuer, each of the guarantors and of the notes. This summary may not contain all of the information that may be important to you. You should read this entire oåering circular, including the information set forth in ""Risk Factors'' and the Ñnancial statements of each of the guarantors and the notes thereto, before deciding to invest in the notes. The words ""we,'' ""our'' and ""the Votorantim group'' when used in this oåering circular refer to VPAR and its subsidiaries, except where the context requires otherwise. The Votorantim group In 1918, the Votorantim group commenced operations with Fπabrica de Tecidos Votorantim, a small textile plant located in Votorantim, in the state of S ao Paulo. Originally controlled by Senator Josπe Ermπrio de Moraes, the Votorantim group has grown to become one of the largest privately held industrial conglomerates in Latin America in terms of assets and revenues. The Votorantim group is a leader in the Brazilian metallurgy, cement and pulp and paper industries and is also actively engaged in the production of frozen concentrated orange juice, chemicals, energy and packaging, as well as in Ñnancial services and venture capital investments. VPAR is the holding company for the Votorantim group. Its principal subsidiaries are involved in the following activities: Industrial operations Metallurgy. The Votorantim group, through several companies, is a leading Brazilian producer of nonferrous metals, including aluminum, zinc, nickel and non-öat steel, and also owns a Peruvian zinc smelter. Cement. The Votorantim group had approximately a 40% market share of the Brazilian cement market in 2004, according to the Cement Industry Syndicate of Brazil (Sindicato Nacional da Ind πustria do Cimento, or SNIC). The Votorantim group owns a number of cement companies in Brazil, the United States and Canada. CRB, one of the guarantors, is the principal cement producer of the Votorantim group and had a market share of 24% in Brazil in CRB, which has nine plants throughout Brazil, also manufactures mortar. Pulp and paper. VCP, one of the guarantors, is one of the largest pulp and paper products companies in Brazil in terms of revenues and pulp production and the leading Brazilian producer of wood-free printing and writing papers and specialty papers in terms of net sales and total assets, according to the Brazilian Association of Pulp and Paper (Associa c ao Brasileira de Celulose e Papel, or Bracelpa). VCP primarily produces eucalyptus pulp, which is a high-quality variety of hardwood pulp. Others. The Votorantim group is also actively engaged in the production of (i) frozen concentrated orange juice, (ii) chemical compounds such as nitrocellulose, Öuoridic acid, aluminum Öuoride and sulfuric acid, (iii) energy, by operating hydroelectric and thermoelectric plants and investing in energy companies, and (iv) Öexible Ñlms for use in the packaging of tobacco, candy and foodstuås, among other things. The Votorantim group also engages in commercial trading activities through its subsidiary Votorantrade N.V., or Votorantrade. Financial operations Financial services. Banco Votorantim S.A., or Banco Votorantim, is a full-service bank, which, together with its subsidiaries, undertakes a broad range of banking activities, including commercial, investment and international banking. Banco Votorantim oåers tailor-made products and advisory services such as structuring and advising on project Ñnance transactions and local and international underwriting. 1

7 The issuer The issuer, a Cayman Islands limited liability company, is a wholly-owned subsidiary of VPAR. Certain covenants in the indenture governing the notes, or the indenture, limit its activities to the issuance of the notes and certain related activities; consequently, the issuer is a special purpose company. See ""The Issuer'' and ""Description of the Notes and the Guarantees Ì Covenants Ì Limitations with respect to the issuer.'' The guarantors Payments of principal and interest on the notes will be jointly, severally, unconditionally and irrevocably guaranteed by the following entities, subject to the limitations set forth below: VPAR had consolidated net revenues and net assets of R$18,429.1 million and R$16,985.3 million, respectively, as of and for the year ended December 31, VPAR will unconditionally and irrevocably guarantee the full outstanding amount of the notes. VCP had consolidated net revenues and net assets of R$3,402.9 million and R$3,917.1 million, respectively, as of and for the year ended December 31, In 2004, VCP produced 1,346,840 tons of pulp and 660,740 tons of paper. VCP's guarantee will be unconditional and irrevocable, but will be limited to 50% of the outstanding amount of the notes. CRB had unconsolidated net revenues and net assets of R$1,792.6 million and R$4,439.8 million, respectively, as of and for the year ended December 31, In 2004, CRB produced approximately 15.8 million tons of cement. CRB's guarantee will be unconditional and irrevocable, but will be limited to 50% of the outstanding amount of the notes. Recent developments First quarter 2005 results On April 18, 2005, VCP announced its results for the Ñrst quarter of VCP recorded net revenue and gross proñt of R$774.9 million and R$362.2 million, respectively, for the Ñrst three months of 2005, as compared to R$815.9 million and R$406.2 million, respectively, for the Ñrst three months of See ""Selected Financial and Other Data of the Guarantors.'' CRB recorded net revenue and gross proñt of R$401.1 million and R$213.4 million, respectively, for the Ñrst three months of 2005, as compared to R$455.0 million and R$286.3 million, respectively, for the Ñrst three months of See ""Selected Financial and Other Data of the Guarantors.'' On May 13, 2005, Votorantim Finan cas Ñled with the CVM its results for the Ñrst quarter of Votorantim Finan cas' net revenue and gross proñt was R$140.0 million and R$111.9 million, respectively, for the Ñrst three months of 2005, as compared to R$122.6 million and R$85.3 million, respectively, for the Ñrst three months of VPAR does not prepare or publish interim consolidated Ñnancial statements. Potential sale of our packaging operations We are currently involved in negotiations for the potential sale of our packaging operations. Although these negotiations are ongoing, we cannot assure you that the sale will be consummated. See ""Business Ì Other business segment Ì Packaging.'' 2

8 Issuer ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Notes oåeredïïïïïïïïïïïïïïïïïïïïïï Guarantors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ GuaranteesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Maturity date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Interest rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Redemption for tax reasons ÏÏÏÏÏÏÏÏÏÏ Optional redemption ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Letter of Credit Issuer ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Letter of CreditÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ The oåering Voto-Votorantim Overseas Trading Operations IV Limited. U.S.$400,000,000 million in aggregate principal amount of 7.75% Notes due Votorantim Participa c oes S.A., or VPAR, Votorantim Celulose e Papel S.A., or VCP, and Cimento Rio Branco S.A., or CRB. VPAR, VCP and CRB will jointly, severally, unconditionally and irrevocably guarantee on a senior unsecured basis the due and punctual payment of all amounts at any time becoming due and payable with respect to the notes, provided that the liability of each of VCP and CRB will be limited to 50% of the outstanding amount of the notes. The notes will mature on June 24, 2020, provided the stated maturity may be extended for a period of up to 18 months if VPAR certiñes that the issuer and/or the guarantors have suçcient funds in reais to repay the principal amount of the notes on the stated maturity and any other indebtedness payable on the stated maturity but cannot make such payment due to a Currency Inconvertibility/Non-Transfer Event, as deñned below. In the event of an extension of the stated maturity, we will notify the Luxembourg Stock Exchange at least ten business days in advance, Ñle a supplement to the oåering circular with the exchange and publish a notice in a leading newspaper having general circulation in Luxembourg (which is expected to be d'wort) or, if such publication is not practicable, in an English language newspaper having general circulation in Europe. Interest on the notes will accrue from June 24, 2005 at the rate of 7.75% per annum on the outstanding principal amount, payable semiannually in arrears on June 24 and December 24 of each year, commencing on December 24, The notes will be redeemable in whole at their principal amount, plus accrued and unpaid interest, if any, to the date of redemption, at the option of the issuer, at any time in the event of certain changes aåecting taxation in Brazil. See ""Description of the Notes and the Guarantees Ì Tax repurchase.'' The notes are redeemable, in whole or in part, at any time at the option of the issuer at a price calculated as set forth in this oåering circular. See ""Description of the Notes and the Guarantees Ì Redemption, repurchase, and early repayment.'' Credit Suisse, acting through its Cayman Islands branch. The trustee of the notes on behalf of the noteholders, will have the beneñt of the letter of credit provided by Credit Suisse, acting through its Cayman Islands branch, as the letter of credit issuer, covering a Currency Inconvertibility/Non-Transfer Event. The letter of credit issuer's obligation to make funds available under the letter of credit is limited to the Maximum L/C Amount (as deñned below) and is subject to certain conditions, limitations and exclusions that may aåect the ability of the 3

9 trustee to draw on such letter of credit, including the making of certain deposits by VPAR with the letter of credit issuer. The letter of credit will be issued to the trustee for the beneñt of the noteholders and the trustee must act in accordance with and as limited by the terms of the indenture and the letter of credit agreement. Nothing in the letter of credit, express or implied, will give to any noteholder any legal or equitable right, remedy or claim under the letter of credit. See ""Risk Factors Ì Risks relating to the letter of credit'' and ""The Letter of Credit.'' ""Currency Inconvertibility/Non-Transfer Event'' means, collectively, any condition or event caused by (i) an act or measure or a series of acts or measures taken, directed, authorized, ratiñed or approved by the government of Brazil (or by any representative of the government of Brazil, only if acting solely on behalf of the government of Brazil) after the closing date of this oåering that prevent the guarantors of the notes from (A) directly or indirectly converting reais to U.S. dollars through channels legally permitted by the government of Brazil on a timely basis for remittance, (x) to the issuer to enable it to pay the Scheduled Payment (as deñned below) and to (y) the trustee for the notes pursuant to the guarantees of the notes to pay the Scheduled Payment, and/or (B) transferring or remitting U.S. dollars outside Brazil after conversion from reais into U.S. dollars through channels legally permitted by the government of Brazil on a timely basis for remittance as described above, (ii) the failure of the government of Brazil (or of entities authorized under the laws of Brazil to operate in the foreign exchange markets) to eåect the conversion and/or transfer or remittance described in item (i) above in accordance with the terms of the indenture and the notes and such failure results from a policy, law, or regulation which was not in eåect on the closing date of this oåering, or (iii) expropriation, conñscation, nationalization, discriminatory legislative actions or other governmental measures taken by the government of Brazil which have the eåect of depriving the guarantors of the use or control of U.S. dollars to enable the issuer to meet its obligations under the indenture. ""Maximum L/C Amount'' means U.S.$47,000,312.50, which amount is equal to the sum (as of the closing date of this oåering) of (i) the three payments of scheduled interest on the notes plus (ii) the amount of interest that would accrue during a 30-day period on each of the three payments of scheduled interest referred to in item (i) above (being a total of 90 days of interest on interest) plus (iii) the aggregate amount of any fees (but not expenses) that are stated to be payable by the issuer to the trustee for the notes under the terms of any Related Document (as deñned in ""The Letter of Credit Ì DeÑnitions'') during the period ending 18 months after such date. ""Scheduled Payment'' means one or more payments of accrued and unpaid semi-annual interest on the notes (together with additional amounts and interest payable on such interest, if any) 4

10 and the amount of trustee's fees due and payable by the issuer to the trustee of the notes pursuant to the indenture or any other Related Document (as deñned under ""The Letter of Credit Ì DeÑnitions''). Ranking ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Limitation on liens of the guarantors ÏÏ Certain other covenants ÏÏÏÏÏÏÏÏÏÏÏÏÏ The notes will be general senior unconditional and unsubordinated obligations of the issuer, which will at all times rank at least equally among themselves and at least equally with all other present and future senior unsecured obligations of the issuer. See ""Description of the Notes and the Guarantees.'' The guarantees constitute direct, general irrevocable, unconditional and unsubordinated senior obligations of each of the guarantors, which will at all times rank at least equally with all other present and future senior unsecured obligations of each guarantor, in each case except for such obligations as may be preferred by provisions of law that are both mandatory and of general application. So long as any note remains outstanding and subject to certain important exceptions, none of VPAR, VCP, CRB or certain of their subsidiaries may incur or suåer to exist any lien on or with respect to any property, assets or capital stock now owned or hereafter acquired to secure any indebtedness without making, or causing such subsidiary to make, eåective provision for securing the notes (x) equally and ratably with (or prior to) such indebtedness as to such property, assets or capital stock for so long as such indebtedness will be so secured or (y) in the event that indebtedness is indebtedness of that guarantor or subsidiary which is subordinate in right of payment of the notes, prior to that indebtedness as to that property for so long as such indebtedness will be so secured. See ""Description of the Notes and the Guarantees Ì Covenants Ì Limitation on liens of the Guarantors.'' The indenture contains certain additional restrictive covenants relating to the issuer, the guarantors and certain of their subsidiaries, including covenants relating to, among other things: transactions with açliates and related persons, provision of Ñnancial information, mergers, consolidation and certain sales of assets, and payment of additional amounts. See ""Description of the Notes and the Guarantees.'' Cross default and accelerationïïïïïïïï The notes have the beneñt of a cross default in respect of any indebtedness of the issuer, any of the guarantors or any of their subsidiaries on a consolidated basis with respect to the issuer or such guarantor having an aggregate principal amount of U.S.$50 million or more, except in the case of VPAR which will be U.S.$50 million or more on an unconsolidated basis. See ""Description of the Notes and the Guarantees Ì Events of Default.'' 5

11 No noteholder will have any rights to institute any proceeding with respect to the indenture or for any remedy thereunder, unless, among other conditions, such noteholder will have previously given to the trustee written notice of a continuing event of default (as deñned in the indenture) and unless the noteholders of at least 25% in aggregate principal amount of outstanding notes will have made a written request to the trustee to institute such proceedings. Selling restrictionsïïïïïïïïïïïïïïïïïï Use of proceedsïïïïïïïïïïïïïïïïïïïï Form and denomination ÏÏÏÏÏÏÏÏÏÏÏÏÏ Listing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Risk factors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Trustee ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ The notes have not been registered under the Securities Act and may be transferred only as described under ""Transfer Restrictions.'' The net proceeds from the sale of the notes will be used primarily to: repay the U.S.$250 million 5.75% senior notes issued by Votorantim Overseas Trading Operations II Limited, a special purpose company and a subsidiary of VPAR, which mature on June 28, 2005, repay a U.S.$60 million loan borrowed by St. Helen Holding II Ltd., a special purpose company and a subsidiary of VPAR, which matures on June 30, 2005, and repay other short-term indebtedness. See ""Use of Proceeds.'' The notes will be in fully registered form without interest coupons attached. The notes sold in reliance on Rule 144A will be issued in the form of a restricted global note, or the restricted global note, and the securities sold in reliance on Regulation S, will be issued in the form of a Regulation S global note, or the Regulation S global note, and together with the restricted global note, the global notes). The notes, will be registered in the name of Cede & Co. as nominee for, and deposited with JPMorgan Chase Bank, N.A. as custodian for, DTC. The securities oåered and sold will be issued in minimal denominations of U.S.$100,000 and integral multiples of U.S.$1,000 in excess thereof. See ""Description of the Notes and the Guarantees Ì Form, denomination and registration.'' We have applied to list the Notes on the Luxembourg Stock Exchange in accordance with the rules and regulations of the Luxembourg Stock Exchange. If our application is approved, we may subsequently delist the Notes if the provisions of the European Transparency Obligations Directive (2003/2004/ COD) become too onerous or burdensome. In the event we decide to delist, we will comply with all applicable Luxembourg Stock Exchange rules and regulations. See ""Risk Factors'' beginning on page 12 for a discussion of certain factors you should carefully consider before deciding to invest in the notes. JPMorgan Chase Bank, N.A. 6

12 Principal paying agent ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Paying agent ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Luxembourg paying agent ÏÏÏÏÏÏÏÏÏÏÏ Listing agent ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Governing law ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ J.P. Morgan Trust Bank Ltd. JPMorgan Chase Bank, N.A. J.P. Morgan Bank Luxembourg S.A. Dexia Banque Internationale fia Luxembourg S.A. The notes, the indenture and the letter of credit agreement will be governed by, and construed in accordance with, New York law. The letter of credit will be governed by the International Standby Practices 1998 (ICC Publication No. 590) 7

13 Summary Ñnancial information of the guarantors Votorantim group(1) As of and for the Year Ended December 31, VPAR VPAR Hejoassu (In thousands of reais, except ratios) Consolidated Statement of operations data: Net revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ R$18,429,131 R$15,742,080 R$11,586,355 Gross proñt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,831,032 6,749,084 5,215,581 Selling, lending, general and administrative expenses ÏÏÏÏ (2,724,903) (2,084,343) (1,827,815) Equity adjustment from investments(2)ïïïïïïïïïïïïïïï (189,790) (90,373) (298,910) Financial income (expense), net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,238 (306,014) 85,943 Net income for the year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,139,346 3,462,577 2,206,510 Balance sheet data: Cash and banks(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ R$ 276,905 R$ 175,525 R$ 148,502 Financial investments and instruments:(4) ÏÏÏÏÏÏÏÏÏÏÏÏ 33,516,747 27,138,940 22,297,204 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 68,300,720 56,881,902 43,760,705 Short-term debt(5)ïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïïï 27,717,500 20,084,640 15,508,628 Long-term debt (excluding current portion)(5) ÏÏÏÏÏÏÏÏ 15,389,243 14,867,673 12,263,421 Total shareholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,985,338 15,280,551 10,155,959 Other data: Adjusted EBITDA(6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ R$ 6,348,548 R$ 5,801,478 R$ 4,123,969 Net debt/adjusted EBITDA(7)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Capital expenditures(8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,311,187 3,481,731 2,468,321 (1) Prior to December 28, 2002, all of the operations of the Votorantim group were owned directly or indirectly by Hejoassu. As a result of a reorganization, Hejoassu continues to be the sole shareholder of VPAR, but VPAR is now the holding company for all of the Votorantim group. The table above presents consolidated Ñnancial statements of Hejoassu as of and for 2002 instead of those of VPAR because we believe they are more meaningful for investors to understand the historic results and Ñnancial condition of what is today VPAR. See ""Presentation of Financial Information.'' The Votorantim Group Consolidated Financial Statements as of and for the years ended December 31, 2004 and 2003 include the proportional consolidation of our 33.3% economic interest in VBC Participa c oes S.A, or VBC. VBC indirectly owns 37.7% of the total shares of CPFL Energia S.A. (after selling a 6.7% interest in October 2004), a holding company that, through its subsidiaries, owns and operates several energy generation and distribution assets in Brazil and is the largest privately-held power company in Brazil. The proportional consolidation of VBC resulted in net revenues of R$1,034.9 million and R$977.2 million, and net income (loss) of R$77.4 million and R$(123.5) million, in 2004 and 2003, respectively. The Votorantim Group Consolidated Financial Statements as of and for 2002 treated VBC under the equity method. As a result, we recorded a R$236.1 million loss in the line item ""equity in earnings (losses) of açliates.'' (2) Includes equity in earnings (losses) of açliates and amortization of goodwill. (3) Includes R$247.5 million relating to the industrial segment and R$29.4 million relating to the Ñnancial segment. 8

14 (4) Includes short and long-term Ñnancial investments for the industrial segment, and interbank investments, and Ñnancial and derivative instruments investments for the Ñnancial segment. (5) Includes loans and Ñnancings, customer deposits, securities sold under repurchase agreement, funds from acceptance and issuance of securities (notes), debentures, derivative Ñnancial instruments, foreign exchange portfolio and borrowings. (6) Adjusted EBITDA means gross proñt minus selling and lending expenses, general and administrative expenses and other operating income (expenses), net plus depreciation, amortization and depletion. Adjusted EBITDA is not a Brazilian GAAP measure, does not represent cash Öow for the periods indicated and should not be considered an alternative to net income (loss), as an indicator of the Votorantim group's operating performance or as an alternative to cash Öows as a source of liquidity. The Votorantim group's deñnition of Adjusted EBITDA may not be comparable with Adjusted EBITDA as deñned by other companies. Although Adjusted EBITDA, as deñned above, does not provide a Brazilian GAAP measure of operating cash Öows, VPAR's management uses it to measure the Votorantim group's operating performance. (7) Net debt/adjusted EBITDA means total short and long-term debt less cash and banks and short and long-term Ñnancial investments and instruments, divided by Adjusted EBITDA. (8) Represents capital expenditures determined on an accrual basis for permanent assets (investments, property, plant and equipment, deferred charges and goodwill (negative goodwill) on the acquisition of investments) as presented in the Statement of Changes in Financial Position in the Votorantim Group Consolidated Financial Statements included elsewhere in this oåering circular. 9

15 Votorantim Celulose e Papel S.A. As of and for the Three-Month As of and for the Period Ended March 31, Year Ended December 31, (In thousands of reais, except ratios) Consolidated Statement of operations data: Net sales and/or services ÏÏÏ R$ 774,913 R$ 815,875 R$3,402,912 R$2,926,153 R$2,061,391 Gross proñt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 362, ,199 1,671,135 1,445, ,651 Selling, general and administrative expenses ÏÏ (119,186) (119,278) (502,471) (379,020) (280,627) Financial income (expense), net(1)ïïïïïïïïïïïïïïïïï (41,118) (31,284) (135,538) (75,868) (97,215) Net income for the period/yearïïïïïïïïïïïïï 144, , , , ,882 Balance sheet data: Cash and banks and Ñnancial investments(2) ÏÏ R$ 855,985 R$1,389,400 R$ 556,862 R$1,275,715 R$ 549,704 Financial investments (noncurrent) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 570, , , ,206 1,020,315 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,740,960 8,102,571 7,650,180 7,949,095 7,345,155 Short-term debt(3)(4) ÏÏÏÏÏ 788,395 1,296, ,004 1,391, ,917 Long-term debt (excluding current portion)(4) ÏÏÏÏÏÏ 2,895,985 2,275,744 1,991,233 2,287,225 2,838,062 Total shareholders' equity ÏÏ 4,066,735 3,619,892 3,917,088 3,414,687 2,796,131 Other data: Adjusted EBITDA(5) ÏÏÏÏÏ R$ 315,988 R$ 359,494 R$1,479,142 R$1,305,777 R$ 870,779 Net debt/adjusted EBITDA(6) ÏÏÏÏÏÏÏÏÏÏÏ Capital expenditures(7) ÏÏÏÏ 119, , , ,576 1,427,332 (1) Includes net monetary and exchange variations (including swap operations). (2) Includes all available funds and current Ñnancial investments (excluding non-current assets). (3) Includes current portion of long-term debt. (4) Referred to as ""loans and Ñnancings'' in VCP's Ñnancial statements. (5) Adjusted EBITDA means gross proñt minus selling, general and administrative expenses (including management fees) and other operating income (expenses), net plus depreciation and amortization. Adjusted EBITDA is not a Brazilian GAAP measure, does not represent cash Öow for the periods indicated and should not be considered an alternative to net income (loss), as an indicator of VCP's operating performance or as an alternative to cash Öows as a source of liquidity. VCP's deñnition of Adjusted EBITDA may not be comparable with Adjusted EBITDA as deñned by other companies. Although Adjusted EBITDA, as deñned above, does not provide a Brazilian GAAP measure of operating cash Öows, VCP's management uses it to measure VCP's operating performance. (6) Net debt/adjusted EBITDA means total short and long-term debt less cash and banks and short and long-term Ñnancial investments divided by Adjusted EBITDA. The ratios for the three-month periods have been annualized by multiplying Adjusted EBITDA by four. (7) Represents capital expenditures determined on an accrual basis for permanent assets (investments, property, plant and equipment and deferred charges) as presented in the Statement of Changes in Financial Position in VCP's Ñnancial statements. 10

16 Cimento Rio Branco S.A. As of and for the Three-Month Period As of and for the Ended March 31, Year Ended December 31, (In thousands of reais, except ratios) Unconsolidated Statement of operations data: Net revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏ R$ 401,072 R$ 454,977 R$1,792,615 R$1,784,007 R$1,595,408 Gross proñt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 213, ,346 1,069,856 1,116, ,903 Selling, general and administrative expenses(1) ÏÏÏÏÏÏÏÏÏÏÏÏ (16,671) (15,721) (65,754) (57,498) (60,025) Financial income (expense), net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,029) (3,969) (23,649) 9,098 15,355 Net income for the period/yearïïïïïïïïïïïïï 205, ,115 1,160,805 1,081, ,971 Balance sheet data: Cash and banks and marketable securitiesïïïïï R$ 34,681 R$ 47,849 R$ 8,224 R$ 78,612 R$ 170,535 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,766,078 4,924,347 5,045,382 4,838,832 5,466,106 Short-term debt(2)(3) ÏÏÏÏÏ 12,631 27,709 9,164 36,072 18,583 Long-term debt (excluding current portion)(3) ÏÏÏÏÏÏ 1,483 8,831 2,278 10,807 16,360 Total shareholders' equity ÏÏ 4,438,657 4,526,237 4,439,797 4,439,797 4,756,535 Other data: Adjusted EBITDA(4) ÏÏÏÏÏ R$ 212,790 R$ 293,174 R$1,061,131 R$1,136,342 R$1,024,239 Net debt/adjusted EBITDA(5) ÏÏÏÏÏÏÏÏÏÏÏ Capital expenditures(6) ÏÏÏÏ 26,510 25, , , ,244 (1) Excludes provision for contingencies. (2) Includes current portion of long-term debt. (3) Referred to as ""loans and financings'' in CRB's Ñnancial statements. (4) Adjusted EBITDA means unconsolidated gross proñt minus selling, general and administrative expenses, provision for contingencies and other operating income (expenses), net plus depreciation and amortization. Adjusted EBITDA is not a Brazilian GAAP measure, does not represent cash Öow for the periods indicated and should not be considered an alternative to net income (loss), as an indicator of CRB's operating performance or as an alternative to cash Öows as a source of liquidity. CRB's deñnition of Adjusted EBITDA may not be comparable with Adjusted EBITDA as deñned by other companies. Although Adjusted EBITDA, as deñned above, does not provide a Brazilian GAAP measure of operating cash Öows, CRB's management uses it to measure CRB's operating performance. (5) Net debt/adjusted EBITDA means total short and long-term debt less cash and marketable securities divided by Adjusted EBITDA. The ratios for the three-month periods have been annualized by multiplying Adjusted EBITDA by four. (6) Represents capital expenditures determined on an accrual basis for permanent assets (investments, property, plant and equipment and deferred charges) as presented in the Statement of Changes in Financial Position in CRB's Ñnancial statements included elsewhere in this oåering circular. 11

17 RISK FACTORS Investing in the notes involves signiñcant risks. You should carefully consider all the information contained in this oåering circular, especially the following, before deciding to invest in the notes. Risks relating to Brazil Brazilian political and economic conditions have a direct impact on the business of each of the guarantors. In the past, the Brazilian government has intervened in the Brazilian economy and made, in some cases, drastic and sudden changes in policy. The Brazilian government's actions to control inöation and aåect other public policies have included the imposition of high interest rates, currency devaluations and exchange controls, wage and price controls, freezing bank accounts, foreign exchange controls, tariås and import quotas and electricity consumption controls. These policies have had signiñcant eåects on the Brazilian economy and on its securities markets, which have been at times illiquid and very volatile. Each of the guarantors may be adversely aåected by changes in policy, as well as factors such as: inöation, interest rate hikes, liquidity of domestic capital and lending markets, changes in tax laws, currency Öuctuations, restrictions on remittances abroad, which were brieöy imposed in 1989 and early 1990, and other political, diplomatic, social and economic developments in or aåecting Brazil. At the end of 2002, Brazil elected a new president from the Workers Party, Luiz Inπacio Lula da Silva. In the period leading up to and following his election, there was substantial uncertainty relating to the policies that the new government would pursue, including the potential implementation of macroeconomic policies that diåered signiñcantly from those of the prior administration. This uncertainty resulted in a loss of conñdence in the Brazilian capital markets, including the steady devaluation of the real against the U.S. dollar in that period. Luiz Inπacio Lula da Silva took oçce on January 1, While President Lula's government has adopted conservative economic measures, public speculation about future actions and changes in the current economic policies may contribute signiñcantly to economic uncertainty and to heightened volatility in the Brazilian securities market and securities issued by Brazilian issuers. We cannot predict what future Ñscal, monetary, social security and other policies will be adopted by President Lula's administration and whether these policies will result in adverse consequences to the economy to our business, results of operations or Ñnancial condition. InÖation and governmental measures to curb inöation may adversely aåect the business of the guarantors. Brazil has in the past experienced extremely high rates of inöation. InÖation itself and some governmental measures to curb inöation have in the past had signiñcant negative eåects on the Brazilian economy. Since 1994, Brazil's inöation rate has been substantially lower than in previous periods. However, during recent periods, there have been inöationary pressures and governmental actions taken to curb inöation, which, together with public speculation about possible future governmental actions, have contributed to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities market. According to the Brazilian general price inöation index (Indice Geral de Pre cos Disponibilidade Interna, or IGP-DI), the inöation rate was 2.2% in the Ñrst four months of 2005, 12.1% in 2004, 7.7% in 2003 and 26.4% in If Brazil experiences signiñcant inöation in the future, operating expenses and borrowing costs may increase and, thus, the business of each of the guarantors may be adversely aåected if those costs cannot be passed onto their customers. 12

18 Fluctuations in the value of the real against the value of the U.S. dollar may adversely aåect the guarantors and/or the Brazilian securities market and could adversely aåect our ability to pay interest and principal under the notes. The Brazilian currency has historically experienced frequent devaluations relative to the U.S. dollar. For example, in 2002, the real devalued against the U.S. dollar by 34.3% due in part to the political uncertainty caused by national elections, as well as the global economic slowdown. While a signiñcant portion of our sales are made in reais (although the prices of some of our products are determined by reference to international U.S. dollar denominated prices), a substantial amount of our debt is denominated in U.S. dollars. A devaluation of the real relative to the U.S. dollar could adversely aåect the ability of one or more of the guarantors to meet their foreign currency denominated obligations, including their guarantees of the notes. Devaluations may also reduce the market value of the notes and may also create additional inöationary pressures in Brazil that may negatively aåect the guarantors. Any devaluations may also curtail access to foreign Ñnancial markets and may require government intervention, including recessionary governmental policies. We cannot assure you that the real will not devalue substantially again in the near future. Developments in other emerging market countries may adversely aåect the market value of the notes. Although economic conditions are diåerent in each country, the reaction of investors to developments in one emerging market country may cause the capital markets in other emerging market countries to Öuctuate. Economic and market conditions in other emerging market countries, especially those in Latin America, inöuence investors' perceptions of economic conditions in Brazil and thereby aåect the market for securities issued or guaranteed by Brazilian companies. In addition, developments or conditions in other emerging market countries have at times signiñcantly aåected the availability of credit in the Brazilian economy and resulted in considerable outöows of funds and declines in the amount of foreign currency invested in Brazil. Events such as the economic and social crisis in Argentina that began in 2001 and the political crises in Venezuela, Bolivia and Ecuador inöuenced investors' perception of political and economic risk in Brazil, negatively aåecting investors' perceptions of Brazilian securities. If market conditions in Argentina, Venezuela or any large emerging markets country falter, the ability of the guarantors to borrow funds at an acceptable interest rate or to raise equity capital when and if there should be a need may be adversely aåected. Accordingly, adverse developments in Argentina, Venezuela or in other emerging market countries could lead to a reduction in the market price of the notes The Brazilian government may institute a more restrictive exchange control policy, which could aåect the issuer's and guarantors' ability to meet their foreign currency obligations. The purchase and sale of foreign currency in Brazil is subject to governmental control and regulation. On March 4, 2005, the National Monetary Council enacted Resolution No. 3,265, pursuant to which the Öoating rate market and the commercial market were uniñed, eåective as of March 14, The new regulation allows for more Öexibility for the purchase and sale of foreign currency and the transfer of reais to foreign residents by any person or legal entity, subject to certain regulatory procedures. However, we cannot assure you that the Brazilian government will not institute a more restrictive exchange control policy in the future. In recent years, the Brazilian government has not imposed any restrictions on payments by Brazilian issuers or guarantors in respect of securities issued in the international capital markets to date. Notwithstanding, many factors beyond the issuer's or the guarantors' control may aåect the likelihood of the Brazilian government's imposition of such restrictions. Among such factors are: the extent of Brazil's foreign currency reserves, the availability of suçcient foreign exchange on the date a payment is due, 13