Construtora Norberto Odebrecht S.A. - Cbonds

OFFERING CIRCULARU.S.$200,000,000

Odebrecht Finance Ltd.(incorporated with limited liability in the Cayman Islands)

7.50% Notes due 2017Unconditionally and Irrevocably Guaranteed by

Construtora Norberto Odebrecht S.A.(incorporated in the Federative Republic of Brazil)

Odebrecht Finance Ltd., or the issuer, is offering U.S.$200,000,000 aggregate principal amount of itsguaranteed notes due 2017, bearing interest of 7.50% per year. The notes will mature on October 18, 2017.Interest will accrue from October 18, 2007 and will be payable on April 18 and October 18 of each year,beginning on April 18, 2008.

Odebrecht Finance Ltd. may, at its option, redeem the notes, in whole or in part, at any time at 100% oftheir principal amount plus a ‘‘make whole’’ amount described under ‘‘Terms and Conditions—Redemption andRepurchase—Optional Redemption’’ plus accrued and unpaid interest and additional amounts, if any, on orprior to October 18, 2012. In addition, the notes, may at the option of Odebrecht Finance Ltd., be redeemed,in whole or in part, at any time, at redemption prices (expressed as percentages of the notes’ principal amountat maturity) as more fully described under ‘‘Terms and Conditions—Redemption and Repurchase—OptionalRedemption’’ plus accrued interest and additional amounts, if any, at any time on or after October 18, 2012.Odebrecht Finace Ltd. may also redeem the notes in whole, but not in part, at a price equal to 100% of theirprincipal amount plus accrued and unpaid interest to the redemption date at any time upon the occurrence ofspecified events regarding Brazilian or Cayman Islands tax law, as set forth in this offering circular.

Construtora Norberto Odebrecht S.A., or CNO, has unconditionally and irrevocably guaranteed the fulland punctual payment of principal, interest and all other amounts that may become due and payable inrespect of the notes. The guaranty will rank equally with the other unsecured, unsubordinated indebtedness ofCNO. The issuer is a wholly-owned subsidiary of Odebrecht S.A., CNO’s parent company.

For a more detailed description of the notes, see ‘‘Terms and Conditions’’ beginning on page 74.

We have applied to list the notes on the Official List of the Luxembourg Stock Exchange and to trade thenotes on the Euro MTF Market of that exchange. See ‘‘Listing and General Information.’’ Notes that are sold toqualified institutional buyers will be eligible for trading in The PORTAL Market.

Investing in the notes involves risks. See ‘‘Risk Factors’’ on page 13.

Price: 98.282%plus accrued interest, if any

Delivery of the notes to purchasers in book-entry form has been made October 18, 2007.

The notes have not been registered under the Securities Act. The notes may not be offered or sold withinthe United States or to U.S. persons, except to qualified institutional buyers in reliance on the exemption fromregistration provided by Rule 144A and to certain non-U.S. persons in offshore transactions in reliance onRegulation S. You are hereby notified that sellers of the notes may be relying on the exemption from theprovisions of Section 5 of the Securities Act provided by Rule 144A. For more information about restrictionson transfer of the notes, see ‘‘Transfer Restrictions’’ beginning on page 114.

Joint Lead Managers and Joint Bookrunners

Credit Suisse Deutsche Bank SecuritiesThe date of this offering circular is November 13th, 2007

TABLE OF CONTENTS

Page Page

ENFORCEMENT OF CIVIL LIABILITIES . . . . v MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 70PRESENTATION OF FINANCIAL AND OTHER PRINCIPAL SHAREHOLDERS . . . . . . . . . . . 72

INFORMATION . . . . . . . . . . . . . . . . . . . vi RELATED PARTY TRANSACTIONS . . . . . . . 73FORWARD LOOKING STATEMENTS . . . . . . . viii TERMS AND CONDITIONS . . . . . . . . . . . . . 74EXCHANGE RATES . . . . . . . . . . . . . . . . . . x TAXATION . . . . . . . . . . . . . . . . . . . . . . . . 101SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . 1 PLAN OF DISTRIBUTION . . . . . . . . . . . . . . 107RISK FACTORS . . . . . . . . . . . . . . . . . . . . 13 NOTICE TO CANADIAN RESIDENTS . . . . . . 112USE OF PROCEEDS . . . . . . . . . . . . . . . . . . 22 TRANSFER RESTRICTIONS . . . . . . . . . . . . . 114CAPITALIZATION . . . . . . . . . . . . . . . . . . . 23 VALIDITY OF NOTES . . . . . . . . . . . . . . . . 116SELECTED FINANCIAL AND OTHER INDEPENDENT AUDITORS . . . . . . . . . . . . . 116

INFORMATION OF CNO . . . . . . . . . . . . 24 LISTING AND GENERAL INFORMATION . . . 117MANAGEMENT’S DISCUSSION AND INDEX TO FINANCIAL STATEMENTS . . . . . . F-1

ANALYSIS OF FINANCIAL CONDITION APPENDIX A—SUMMARY OF PRINCIPAL

AND RESULTS OF OPERATIONS . . . . . . . 29 DIFFERENCES BETWEEN BRAZILIAN

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . 48 GAAP AND U.S. GAAP . . . . . . . . . . . . A-1THE ISSUER . . . . . . . . . . . . . . . . . . . . . . 69

You should rely only on the information contained in this offering circular. We have notauthorized anyone to provide you with different information. This offering circular may only be usedwhere it is legal to sell these notes. You should not assume that the information contained in thisoffering circular is accurate as of any date other than the date on the front of this offering circular.

Unless otherwise indicated or the context otherwise requires, all references in this offering circularto ‘‘Construtora Norberto Odebrecht S.A.,’’ ‘‘CNO,’’ ‘‘our company,’’ ‘‘we,’’ ‘‘our,’’ ‘‘ours,’’ ‘‘us’’ orsimilar terms refer to Construtora Norberto Odebrecht S.A, and all references to ‘‘Odebrecht Finance’’or the ‘‘issuer’’ refer to Odebrecht Finance Ltd., a wholly-owned subsidiary of Odebrecht S.A. and theissuer of the notes. The term ‘‘Brazil’’ refers to the Federative Republic of Brazil, and the phrase‘‘Brazilian government’’ refers to the federal government of Brazil.

We, having made all reasonable inquiries, confirm that the information contained in this offeringcircular with regard to us is true and accurate in all material respects, that the opinions and intentionsexpressed in this offering circular are honestly held, and that there are no other facts the omission ofwhich would make this offering circular as a whole or any of such information or the expression of anysuch opinions or intentions misleading in any material respect. We accept responsibility accordingly.

This offering circular does not constitute an offer to sell, or a solicitation of an offer to buy, anynote offered hereby by any person in any jurisdiction in which it is unlawful for such person to makean offer or solicitation. Neither the delivery of this offering circular nor any sale made hereunder shallunder any circumstances imply that there has been no change in our affairs or that the informationset forth in this offering circular is correct as of any date subsequent to the date of this offeringcircular.

This offering circular has been prepared by us solely for use in connection with the proposedoffering of the notes. We, as well as Credit Suisse Securities (USA) LLC and Deutsche Bank

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Securities Inc., or the initial purchasers, reserve the right to reject any offer to purchase, in whole or inpart, for any reason, or to sell less than all of the notes offered by this offering circular.

You must (1) comply with all applicable laws and regulations in force in any jurisdiction inconnection with the possession or distribution of this offering circular and the purchase, offer or sale ofthe notes, and (2) obtain any required consent, approval or permission for the purchase, offer or saleby you of the notes under the laws and regulations applicable to you in force in any jurisdiction towhich you are subject or in which you make such purchases, offers or sales, and neither we nor theinitial purchasers have any responsibility therefor. See ‘‘Transfer Restrictions’’ for informationconcerning some of the transfer restrictions applicable to the notes.

You acknowledge that:

• you have been afforded an opportunity to request from us, and to review, all additionalinformation considered by you to be necessary to verify the accuracy of, or to supplement, theinformation contained in this offering circular;

• you have not relied on the initial purchasers or any person affiliated with the initial purchasersin connection with your investigation of the accuracy of such information or your investmentdecision; and

• no person has been authorized to give any information or to make any representationconcerning us or the notes other than those as set forth in this offering circular. If given ormade, any such other information or representation should not be relied upon as having beenauthorized by us or the initial purchaser.

In making an investment decision, you must rely on your own examination of our business and theterms of this offering, including the merits and risks involved. These notes have not been recommendedby any federal or state securities commission or regulatory authority. Furthermore, these authoritieshave not confirmed the accuracy or determined the adequacy of this offering circular. Anyrepresentation to the contrary is a criminal offense.

The offering is being made in reliance upon an exemption from registration under the SecuritiesAct, for an offer and sale of securities that does not involve a public offering. The notes are subject torestrictions on transferability and resale and may not be transferred or resold except as permittedunder the Securities Act and applicable state securities laws, pursuant to registration or exemptiontherefrom. In making your purchase, you will be deemed to have made certain acknowledgments,representations and agreements set forth in this offering circular under the caption ‘‘TransferRestrictions.’’ You should be aware that you may be required to bear the financial risks of thisinvestment for an indefinite period of time.

This offering circular may only be used for the purposes for which it has been published. Theinitial purchasers are not making any representation or warranty as to the accuracy or completeness ofthe information contained in this offering circular, and nothing contained in this offering circular is, orshall be relied upon as, a promise or representation, whether as to the past or the future.

No invitation may be made to the public in the Cayman Islands to subscribe for notes unless at thetime of invitation, the notes are listed on the Cayman Islands stock exchange.

The Luxembourg Stock Exchange takes no responsibility for the contents of this offering circular,makes no representations as to its accuracy or completeness and expressly disclaims any liabilitywhatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the

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contents of this offering circular. This offering circular constitutes a prospectus for the purpose ofLuxembourg law dated July 10, 2005 on Prospectuses for securities.

See ‘‘Risk Factors’’ for a description of certain factors relating to an investment in the notes,including information about our business. None of us, the initial purchasers or any of our or theirrepresentatives is making any representation to you regarding the legality of an investment by youunder applicable legal investment or similar laws. You should consult with your own advisors as tolegal, tax, business, financial and related aspects of a purchase of the notes.

Notwithstanding anything in this document to the contrary, except as reasonably necessary tocomply with applicable securities laws, you (and each of your employees, representatives or otheragents) may disclose to any and all persons, without limitation of any kind, the U.S. federal income taxtreatment and tax structure of this offering and all materials of any kind (including opinions or othertax analyses) that are provided to you relating to such tax treatment and tax structure. For this purpose,‘‘tax structure’’ is limited to facts relevant to the U.S. federal income tax treatment of the offering.

INTERNAL REVENUE SERVICE CIRCULAR 230 DISCLOSURE

PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE HEREBY INFORM YOUTHAT THE DESCRIPTION SET FORTH HEREIN WITH RESPECT TO U.S. FEDERAL TAXISSUES WAS NOT INTENDED OR WRITTEN TO BE USED, AND SUCH DESCRIPTION CANNOTBE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAYBE IMPOSED ON THE TAXPAYER UNDER THE U.S. INTERNAL REVENUE CODE. SUCHDESCRIPTION WAS WRITTEN TO SUPPORT THE MARKETING OF THE NOTES. TAXPAYERSSHOULD SEEK ADVICE BASED ON THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROMAN INDEPENDENT TAX ADVISOR.

NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT, OR AN APPLICATION FOR ALICENSE HAS BEEN FILED UNDER CHAPTER 421-B WITH THE STATE OF NEW HAMPSHIRENOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON ISLICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THESECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THEFACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR ATRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPONTHE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANYPERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BEMADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATIONINCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

The notes will be available initially only in book-entry form. We expect that the notes will beissued in the form of one or more registered global notes. The global notes will be deposited with, oron behalf of, The Depository Trust Company, or DTC, and registered in its name or in the name ofCede & Co., its nominee. Beneficial interests in the global notes will be shown on, and transfers ofbeneficial interests in the global notes will be effected through, records maintained by DTC and itsparticipants. We expect the Regulation S global notes, if any, to be deposited with the trustee, as

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custodian for DTC, and beneficial interests in them may be held through the Euroclear System,Clearstream Banking S.A. or other participants. After the initial issuance of the global notes,certificated notes may be issued in registered form, which shall be in minimum denominations ofU.S.$100,000 and integral multiples of U.S.$1,000.

Additional Information

While any notes remain outstanding, we will make available, upon request, to any holder and anyprospective purchaser of notes the information required pursuant to Rule 144(A)(d)(4)(i) under theSecurities Act, during any period in which we are not subject to Section 13 or 15(d) of the SecuritiesExchange Act of 1934, as amended, or the Exchange Act.

We have applied to list the notes on the Official List of the Luxembourg Stock Exchange and totrade the notes on the Euro MTF market. See ‘‘Listing and General Information.’’ We will comply withany undertakings that we give from time to time to the Luxembourg Stock Exchange in connection withthe notes, and we will furnish to the Luxembourg Stock Exchange all such information required inconnection with the listing of the notes.

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ENFORCEMENT OF CIVIL LIABILITIES

Cayman Islands

Odebrecht Finance Ltd. is an exempted limited liability company incorporated under the laws ofthe Cayman Islands. Odebrecht Finance Ltd. has been incorporated in the Cayman Islands because ofcertain benefits associated with being a Cayman Islands company, such as political and economicstability, an effective judicial system, a favorable tax system, the absence of exchange control orcurrency restrictions and the availability of professional and support services.

However, the Cayman Islands has a less developed body of securities laws as compared to theUnited States and certain other jurisdictions and provides significantly lesser protections for investors.All of Odebrecht Finance Ltd.’s directors and officers are nationals and/or residents of countries otherthan the United States, and all or a substantial portion of Odebrecht Finance Ltd.’s or such persons’assets are located outside the United States. As a result, it may be difficult for investors to effectservice of process within the United States upon Odebrecht Finance Ltd. or such persons or to enforceagainst them, judgments obtained in U.S. courts, including judgments predicated upon the civil liabilityprovisions of the securities laws of the United States or any state thereof.

There is no statutory enforcement in the Cayman Islands of judgments obtained in England, NewYork or Brazil. However, the courts of the Cayman Islands will recognize a foreign judgment as thebasis for a claim at common law in the Cayman Islands provided such judgment is rendered by acompetent foreign court, imposes on the judgment debtor a liability to pay a liquidated sum for whichthe judgment has been rendered, is final, is not in respect of taxes, a fine or a penalty and was notobtained in a manner and is not of a kind the enforcement of which is contrary to the public policy ofthe Cayman Islands.

Brazil

We have been advised by Souza, Cescon, Avedissian, Barrieu e Flesch Advogados, Braziliancounsel to the initial purchasers, that a final conclusive judgment of non-Brazilian courts for thepayment of money rendered thereby, subject to certain requirements described below, may be enforcedin Brazil. A judgment against either us or the issuer obtained outside Brazil would be enforceable inBrazil against us or the issuer without reconsideration of the merits, upon confirmation of thatjudgment by the Brazilian Superior Court of Justice (Superior Tribunal de Justica). That confirmation,generally, will occur if the foreign judgment:

• fulfills all formalities required for our enforceability under the laws of the non-Brazilian courts;

• is issued by a competent court after proper service of process on the parties, which service mustcomply with Brazilian law if made in Brazil, or after sufficient evidence of the parties’ absencehas been given, as required by applicable law;

• is not subject to appeal;

• is authenticated by the Brazilian consulate in the location of the non-Brazilian court;

• is translated into Portuguese by a certified translator; and

• does not violate Brazilian public policy, good morals or national sovereignty.

Notwithstanding the foregoing, no assurance can be given that such ratification would be obtained,that the process described above could be conducted in a timely manner or that a Brazilian courtwould enforce a monetary judgment for violation of the U.S. securities laws with respect to the notes.

We have also been advised that civil actions may be brought before Brazilian courts in connectionwith this offering circular based solely on the federal securities laws of the United States and that

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Brazilian courts may enforce such liabilities in such actions against us (provided that provisions of thefederal securities laws of the United States do not contravene Brazilian public policy, good morals ornational sovereignty). We have been further advised that a plaintiff, whether Brazilian or non-Brazilian,who resides outside Brazil or is outside Brazil during the course of the litigation in Brazil and whodoes not own real property in Brazil must post a bond to guaranty the payment of the defendant’s legalfees and court expenses, except in case of collection claims based on an instrument (which do notinclude the notes issued hereunder) that may be enforced in Brazilian courts without the review of itsmerit (tıtulo executivo extrajudicial) or counterclaims as established under Article 836 of the BrazilianCode of Civil Procedure.

The confirmation process may be time consuming and may also give rise to difficulties in enforcingthe foreign judgment in Brazil. Accordingly, we cannot assure you that confirmation would be obtained,that the confirmation process would be conducted in a timely manner or that a Brazilian court wouldenforce a monetary judgment for violation of the securities laws of countries other than Brazil.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

All references herein to the ‘‘real,’’ ‘‘reais’’ or ‘‘R$’’ are to the Brazilian real, the official currencyof Brazil. All references to ‘‘U.S. dollars,’’ ‘‘dollars’’ or ‘‘U.S.$’’ are to U.S. dollars.

Solely for the convenience of the reader, we have translated some amounts included in‘‘Summary—Summary Financial and Other Information of CNO,’’ ‘‘Capitalization’’ and elsewhere inthis offering memorandum from reais into U.S. dollars using the selling rate as reported by the CentralBank of Brazil (Banco Central do Brasil), or the Central Bank, at June 30, 2007 of R$1.9262 toU.S.$1.00. These translations should not be considered representations that any such amounts havebeen, could have been or could be converted into U.S. dollars at that or at any other exchange rate.Such translations should not be construed as representations that the real amounts represent or havebeen or could be converted into U.S. dollars as of that or any other date.

Financial Statements

CNO Financial Statements

We maintain our books and records in reais.

We prepare our consolidated financial statements in accordance with accounting practices adoptedin Brazil, or Brazilian GAAP, which are based on:

• Brazilian Law No. 6,404/76, as amended by Brazilian Law No. 9,457/97 and Brazilian LawNo. 10,303/01, which we refer to collectively as the Brazilian Corporation Law;

• the rules and regulations of the Brazilian Securities Commission, (Comissao de ValoresMobiliarios), or the CVM; and

• the accounting standards issued by the Brazilian Institute of Independent Accountants (Institutodos Auditores Independentes do Brasil).

The financial information contained in this offering circular include our consolidated financialstatements as of and for each of the years ended December 31, 2006, 2005 and 2004, which have beenaudited by our independent accountants, as stated in their report included elsewhere in this offeringcircular. Our unaudited consolidated financial statements as of and for the six-month periods endedJune 30, 2007 and 2006 are also included elsewhere in this offering circular.

The audit reports of our independent accountants in respect of our financial statements include anexplanatory paragraph regarding our relationships and transactions with related parties and the

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organizational restructuring in progress and an explanatory paragraph regarding the translation of thefinancial statements to U.S. dollars.

Brazilian GAAP differs in significant respects from accounting principles generally accepted in theUnited States, or U.S. GAAP. For a discussion of the significant differences relating to these financialstatements, see ‘‘Appendix A—Summary of Principal Differences Between Brazilian GAAP and U.S.GAAP.’’

Odebrecht Finance Ltd. Financial Statements

We have not included any financial statements for the issuer in this offering circular. OdebrechtFinance Ltd. was incorporated on January 30, 2007 and therefore does not have any historical financialstatements. Odebrecht Finance Ltd. will not publish financial statements, except for any financialstatements that it may be required to publish under the laws of the Cayman Islands. Currently, theissuer is not required by Cayman Islands law to publish any financial statements and does not intend topublish any financial statements. In addition, the issuer does not intend to furnish to the trustee or theholders of the notes any financial statements of, or other reports relating to, the issuer. The issuer willnot have any operations other than those related to its issuance of the notes. The issuer’s obligationsunder the notes are fully, unconditionally and irrevocably guaranteed by us.

Rounding

We have made rounding adjustments to reach some of the figures included in this offering circular.As a result, numerical figures shown as totals in some tables may not be an arithmetic aggregation ofthe figures that preceded them.

Market Share and Other Information

We make statements in this offering circular about our market share in the construction industry inBrazil and elsewhere. We have made these statements on the basis of information obtained from thirdparty sources that we believe are reliable. We derive information regarding our competitive position inthe construction industry and other information from Valor, a Brazilian newspaper, McGraw-HillConstruction Engineering News-Record, or ENR, a leading construction industry web site, and otherthird party sources and reports that we believe are reasonably reliable. Although we have no reason tobelieve that any of this information is inaccurate in any material respect, neither we nor the initialpurchasers have independently verified the construction capacity, market share, market size or similardata provided by third parties or derived from industry or general publications.

The issuer and/or the guarantor take(s) the responsibility for the correct reproduction/extraction ofthe information.

In this offering circular, all references to:

• ‘‘km’’ are to kilometers; and

• ‘‘MW’’ are to megawatts. Megawatts are units of power with one megawatt being equal to onemillion watts.

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FORWARD-LOOKING STATEMENTS

This offering circular contains forward-looking statements. Statements that are predictive in nature,that depend upon or refer to future events or conditions or that include words such as ‘‘expects,’’‘‘anticipates,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘believes,’’ ‘‘estimates’’ and similar expressions are forward-lookingstatements. Although we believe that these statements are based upon reasonable assumptions, they aresubject to several risks and uncertainties and are made in light of information currently available to us.

Our forward-looking statements may be influenced by factors, including the following:

• general economic, political and business conditions in the markets in which we operate, bothwithin Brazil and outside Brazil, including the level of spending for infrastructure projects of thetype that we perform and the ability of our clients to timely pay any amounts that they owe tous;

• the level of financing made available to us by the Brazilian government and by multilateralfinancial institutions for projects that we undertake;

• negotiations of claims with clients of cost and schedule variances and change orders on majorprojects;

• non-performance, default or bankruptcy of clients, joint-venture partners, key suppliers,subcontractors or financing sources;

• performance of fixed-price and other projects, where a failure to meet schedules, cost estimatesor performance targets on a timely basis could result in reduced profit margins or losses;

• interest rate fluctuations, inflation and devaluation or appreciation of the real in relation to theU.S. dollar (or other currencies in which we receive income);

• the outcome of pending litigation or arbitration proceedings;

• competition;

• our ability to obtain financing upon reasonable interest rates and terms;

• adverse financial developments that could reduce our available cash or lines of credit, or ourinability to provide adequate cash collateral for letters of credit or satisfy any other bondingrequirements from customers;

• a reduction in our credit ratings;

• volatility in the surety bond market relating to the type of projects undertaken by us;

• government regulation in certain of the countries in which we operate, including regulations thatencourage or mandate the hiring of local contractors or that require foreign contractors toemploy specific numbers of citizens of, or purchase specific quantities of supplies from, aparticular jurisdiction;

• compliance with job-safety requirements and environmental laws and regulations;

• unsettled political conditions, consequences of war or other armed conflict, civil unrest, strikes,currency controls and governmental actions in certain of the countries and regions in which weoperate, including Venezuela, Peru, Angola and the Middle East;

• severe weather, natural disasters or other force majeure events that adversely impact our businessand which could cause us to evacuate personnel, curtail our services, reduce productivity or failto deliver materials to jobsites on a timely basis in accordance with contract schedules; and

• other factors identified or discussed under ‘‘Risk Factors.’’

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Our forward-looking statements are not guarantees of future performance, and the actual resultsor developments may differ materially from the expectations expressed in the forward-lookingstatements. As for the forward-looking statements that relate to future financial results and otherprojections, actual results will be different due to the inherent uncertainty of estimates, forecasts andprojections. Because of these uncertainties, potential investors should not rely on these forward-lookingstatements.

We undertake no obligation to publicly update any forward-looking statement, whether as a resultof new information, future events or otherwise.

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EXCHANGE RATES

Prior to March 14, 2005, there were two official foreign exchange markets in Brazil:

• the commercial rate exchange market; and• the floating rate exchange market.

Most trade and financial foreign exchange transactions were carried out on the commercial rateexchange market. The floating rate exchange market generally applied to transactions to which thecommercial market rate did not apply. In March 2005, the Brazilian National Monetary Council(Conselho Monetario Nacional), or the CMN, enacted Resolution No. 3,265, as well as additionalregulations, that consolidated the two foreign exchange markets into a single foreign exchange marketin order to make foreign exchange transactions simpler and more efficient. As a result, all foreignexchange transactions in Brazil are carried out in this single foreign exchange market throughauthorized financial institutions.

Foreign exchange rates continue to be freely negotiated, but may be influenced from time to timeby Central Bank intervention. From March 1995 through January 1999, the Central Bank allowed thegradual devaluation of the real against the U.S. dollar. In January 1999, the Central Bank allowed thereal/U.S. dollar exchange rate to float freely. Since then, the real/U.S. dollar exchange rate has beenestablished mainly by the Brazilian interbank market and has fluctuated considerably. In the past, theCentral Bank has intervened occasionally to control unstable movements in foreign exchange rates. Wecannot predict whether the Central Bank or the Brazilian government will continue to allow the real tofloat freely or will intervene in the exchange rate market through a currency band system or otherwise,or that the exchange market will not be volatile as a result of political or economic instability or otherfactors. In light of these factors, we also cannot predict whether the real will depreciate or appreciate invalue in relation to the U.S. dollar in the future. In addition, exchange rate fluctuations may also affectour financial condition and results of operations.

The following tables set forth the exchange rate, expressed in reais per U.S. dollar (R$/U.S.$) forthe periods indicated, as reported by the Central Bank. The information in the ‘‘Average’’ columnrepresents the average of the exchange rates on the last day of each month during the years presented.

Average forPeriod-end Period Low High

(reais per U.S. dollar)

Year ended December 31,2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.533 2.918 2.270 3.9552003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.889 3.071 2.821 3.6622004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.654 2.925 2.654 3.2052005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.341 2.412 2.163 2.7622006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.138 2.179 2.059 2.371

Source: Central Bank.Period-end Low High

(reais per U.S. dollar)

MonthJanuary 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.125 2.125 2.156February 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.118 2.077 2.118March 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.050 2.050 2.139April 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.034 2.023 2.048May 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.929 1.929 2.031June 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.922 1.906 1.922July 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.878 1.845 1.918August 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.962 1.873 2.112September 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.839 1.839 1.964October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,744 1,744 1,828November . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,732 1,774

Source: Central Bank.

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SUMMARY

This summary highlights information presented in greater detail elsewhere in this offering circular. Thissummary is not complete and does not contain all the information you should consider before investing inthe notes. You should carefully read this entire offering circular before investing, including ‘‘Risk Factors’’and our financial statements. See ‘‘Presentation of Financial and Other Information’’ for informationregarding our financial statements, exchange rates and other matters.

Overview

We are the largest engineering and construction company in Latin America as measured by 2006gross revenues. We engage in the construction of large-scale infrastructure and other projects, includingthe construction of highways, railways, power plants, bridges, tunnels, subways, buildings, port facilities,dams, manufacturing and processing plants, as well as mining and industrial facilities. We provide avariety of integrated engineering, procurement and construction services to clients in a broad range ofindustries, both in Brazil and internationally. These capabilities enable us to provide clients, individuallyor as part of a consortium, with single-source, turnkey project responsibility for complex constructionprojects. We concentrate our construction activities on infrastructure projects in Brazil and in severalinternational markets, principally in Latin America and Angola, which include projects sponsored bythe public and private-sector, including concession-based projects.

We undertake projects throughout Brazil, other Latin American countries (such as Venezuela andPeru), the United States, Portugal and other countries in Africa and in the Middle East. We haveparticipated in the construction of over 176km of bridges, over 52,500 MW of hydroelectric powerplants, approximately 280 km of tunnels, over 11,200 km of roads and over 147 km of subway lines. In2006, we reported gross services and sales revenue of R$7.5 billion (U.S.$3.9 billion) and EBITDA ofR$550.1 million (U.S.$285.6 million).

We believe we are:

• The largest engineering and construction company in Latin America as measured by our grossrevenues in 2006;

• The largest exporter of services in Brazil with R$4.8 billion (U.S.$2.5 billion), or 65% of ourgross services and sales revenue in 2006, coming from outside Brazil;

• The world’s largest international builder of hydroelectric power plants, sanitary and stormsewers, water treatment plants and transmission lines and aqueducts, according to ENR asmeasured by our gross revenues in 2006;

• The world’s second largest international builder of water supply systems and the third largestinternational builder of bridges, according to ENR as measured by our gross revenues in 2006;and

• The world’s sixth largest international builder of highways, mass transit and rail, also accordingto ENR as measured our gross revenues in 2006.

Our Competitive Strengths

We believe that our main competitive strengths include the following:

Leadership Position

We are the largest engineering and construction company in Latin America as measured by 2006gross revenues. Our geographic diversification, extensive operations and leading market share in Brazilenables us to capitalize on opportunities as they arise. We are owned by the Odebrecht Group, which is

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one of the 10 largest Brazilian-owned private sector conglomerates based on gross sales revenue in2006. The Odebrecht Group is also the controlling shareholder of Braskem S.A., or Braskem, thelargest petrochemical company in Latin America, based on average annual production capacity in 2006,and one of the six largest Brazilian-owned private sector industrial companies based on net salesrevenue in 2006. We are able to take advantage of important synergies between us and our affiliates,such as constructing facilites for Braskem in the Brazilian states of Bahia and Alagoas.

Financial Strength

We believe that our financial performance has been consistent, enabling us to rely primarily on ourcash flow from operations to grow our business. Our EBITDA margins (EBITDA as a percentage ofour net sales and services revenue) for the last three fiscal years ended December 31, 2006 were 7.2%,7.3% and 7.6%, respectively. We are focused on maintaining the relatively strong financial position wehave compared to our Brazilian competitors.

Diversification

We have expanded our business internationally in order to broaden our client base and diversifythe risk inherent in relying heavily on the Brazilian market, as well as to increase our revenuedenominated in dollars and other currencies. At June 30, 2007, we had 135 on-going projects: Brazil(75); Angola (23); Venezuela (9); Peru (6); Portugal (5); the Dominican Republic (4); the United States(3); Ecuador (2); Panama (2); Mexico (2); the Middle East (2); Argentina (1); and Bolivia (1).

The percentage of our gross service revenue derived from international projects increased fromapproximately 30% in 1992 to approximately 67% for the six-month period ended June 30, 2007. Ourdiversification provides us with revenue growth opportunities, while adequately managing our exposureto market and other risks.

Strong and Diversfied Backlog

We define backlog to include contracts that we have signed for a particular project and for whichan identified source of funding exists but have not recognized as revenue. As of June 30, 2007, (1) ourbacklog represented approximately U.S.$10.7 billion or three years of future work and (2) we estimatethat 40% of our total backlog is scheduled to be completed between July 1, 2007 to June 30, 2008. Ourbacklog includes a diversified portfolio of engineering and construction projects among variousinfrastructure sectors, different types of construction works and numerous countries. This diversificationenables us to manage political risks associated with specific economic sectors and countries or regions.

Experienced and Professional Management Team with Strong Entrepeneurial Culture

Our management team has considerable industry experience and knowledge. We provide ourmanagement with ongoing training throughout their careers, and maintain a results-oriented corporateculture, with clear visions and responsibilities. We have decentralized the negotiation andadministration of each of our project contracts. An experienced on-site project manager is responsiblefor administering the implementation of each project contract in accordance with the project’s budget.Each of our project managers and other on-site employees is compensated based upon meetingdesignated project milestones and financial targets, which motivate them to meet their project budgets.We believe that planned delegation and decentralized decision-making enable us to better understandand satisfy our clients’ needs.

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Our Strategy

We intend to focus on continuing to achieve steady growth and to build our competitive strengthsin order to maintain and increase our leadership in Brazil and selected other international engineeringand construction markets. The principal components of our strategy are:

Managing Political Risk

We have operated for more than two decades in many countries that have significant levels ofpolitical risk. We are currently active in Angola, Argentina, Bolivia, Brazil, the Dominican Republic,Ecuador, Panama, Peru, the Middle East and the United States. In addition, we are seeking furtheropportunities in the Middle East and North Africa (including Libya) and in certain other countries inwhich significant levels of political risk exist. For example, we have established an office in the UnitedArab Emirates and have completed the construction of a port facility in the Republic of Djibouti ineastern Africa for a client located in the United Arab Emirates, and we have just started anotherproject for this client in this port in Djibouti. We attribute our success in countries with significantlevels of political risk to the following competitive strengths:

• In countries in which we operate with significant political risk concerns, such as Latin Americancountries and Angola, we usually bid on and perform projects that are funded under Braziliantrade credit or multilateral agency credit facilities. The Brazilian government offers exportfinancing for construction and engineering services related to projects undertaken in many ofthese countries, which we rely upon as an important source of funding for our projects locatedin these countries, together with support from multilateral financial institutions, includingCorporacion Andina de Fomento, or CAF, and the Interamerican Development Bank, or theIDB. Our management believes that the higher margins we are able to earn from projects inthese countries compensate us for the political risks that we may be subject to as a result.

• We attempt to mitigate political risk through our experience and knowledge of the local marketsin which we are active and by entering into joint ventures with local companies and using localsubcontractors, suppliers and labor. By establishing partnerships with local companies andemploying local subcontractors, suppliers and labor, we attempt to integrate our operations intothe communities in which we operate.

• We generally establish long-term operations in countries in which we are active and seekappropriate project opportunities that meet our rigorous risk management criteria. Ourlong-term presence in countries such as Peru (28 years), Angola (23 years), Ecuador (21 years)and Venezuela (15 years), including during periods of social unrest or war, and our involvementin high visibility projects that are important to a country’s economy and development haveearned us goodwill with the governments of these countries. Accordingly, while otherconstruction companies avoid operating in certain of the countries in which we are active, ourmanagement believes that our extensive experience in these countries, our diversification andour extensive contractual risk assessment and risk sharing with other project participants allowsus to effectively manage the political risks presented by construction projects in these countries.In addition, to help cover certain risks, we have a comprehensive portfolio of insurance policies.

• Our strategy involves concentrating our business into more profitable markets and projects.When our management no longer believes that a particular market continues to meet ourlong-term objectives, we act to close or phase out our operations in these markets. In the 1990s,for example, we closed offices in the United Kingdom, Germany and South Africa andsubstantially reduced our operations in Colombia.

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Enhancing Human Resources

We will continue to focus on recruiting and retaining motivated and knowledgeable employees. Webelieve that our continued growth and financial success is directly related to the experience of ourconstruction and engineering project managers, as well as our ability to attract and train our otheremployees to develop the skills necessary to manage and execute future projects.

Pursuing International Opportunities

We are the market leader for engineering and construction projects in Brazil, Angola and certainother countries in Latin America and will continue to pursue business opportunities and strategicalliances in selected projects that will improve our market share and competitiveness. We intend toleverage our experience to broaden our presence in selective international markets and to pursue anddevelop growth opportunities in these markets.

Focusing on Complex Large-Scale Construction Opportunities and Concession Projects

We seek to continue to focus on large-scale infrastructure and other complex, tailor-madeconstruction projects in Brazil. We believe there will be significant opportunities in the coming years forus in the Brazilian power, oil, transportation, water supply, sanitation and other infrastructure sectors.We believe that our domestic market knowledge, human and material resources, size, experience andexpertise enable us to continue to compete effectively for large and complex projects in Brazil. Inaddition to infrastructure projects in Brazil, we intend to concentrate our construction activities onconcession-based projects, principally in Latin America.

Offering Our Customers Differentiated Services

We will continue to seek to differentiate our company from our competitors through our capacityto offer our clients a complete range of services in the markets where we operate. Our capabilitiesencompass not only construction expertise and innovations that help to reduce completion time andimprove cost and quality controls but also extend to our substantial experience in arranging financingfor many of our engineering and construction projects.

Company History

We were founded in 1944 and commenced our operations in the northeastern region of Brazil,where we were active in the construction of industrial plants, warehouses, small dams, highways,buildings and canals. In 1970, we began to expand our operations into southern Brazil, concentratinginitially in Rio de Janeiro with the construction of the headquarters of Petrobras in 1970; Brazil’s firstnuclear power plant, the Central Nuclear de Angra dos Reis in 1971; the Rio de Janeiro internationalairport in 1971; and the Rio de Janeiro State University in 1972. In Peru, we won the contract for theconstruction of the Charcani Hydroelectric Plant in 1979. In the early 1980s, we began to expand ourwork in projects located outside Brazil. In 1984, we began the construction of the CapandaHydroelectric Project on Angola’s Kwanza river, and in 1991 we started the construction of thesouthern extension of the Metromover, part of Miami’s urban mass transportation system. In 1996, theOdebrecht Group reorganized its holdings into two principal business areas: (1) engineering andconstruction through our company; and (2) chemicals and petrochemicals through Braskem S.A. In2004, we began operations in the Middle East, completing two projects in Iraq with the United StatesArmy Corps of Engineers with a total cost of U.S.$86 million.

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Recent Developments

Because our management intends to continue to focus on the engineering and constructionbusiness, we are currently undergoing a corporate reorganization involving the transfer of certain assetsand equity interests in our infrastructure, oil and gas and real estate businesses to other companieswithin the Odebrecht Group, which are or will become subsidiaries of Odebrecht S.A., or Odebrecht.As part of this ongoing corporate restructuring, the following two Brazilian limited liability companieshave been established as subsidiaries of Odebrecht: (1) Odebrecht Investimentos em Infra-estrutura Ltda., or OII, which has been focusing on investments in the infrastructure sector; and(2) Odebrecht Oleo e Gas Ltda., or OOG, which has been focusing on investments in the oil and gasindustry. In addition, we anticipate that Odebrecht Empreendimentos Imobiliarios Ltda., or OEI, ourcurrent subsidiary that focuses on investments in the real estate industry, will become a subsidiary ofOdebrecht S.A. prior to the end of 2008. See ‘‘Business—Corporate Reorganization.’’

On August 9, 2007, Odebrecht Overseas Limited, or OOL, successfully concluded a cash ‘‘exit’’tender offer and consent solicitation relating to its U.S.$150.0 million 11.50% notes due 2009, whichnotes were issued under the medium-term note program. OOL received tenders and consents in respectof U.S.$116,056,000 in aggregate principal amount of notes, representing approximately 77.37% of theaggregate principal amount of the outstanding medium-term notes, not including notes then-held byOOL or its affiliates. Out of this total, U.S.$107,475,000 of notes were tendered (with a ‘‘deemedconsent’’ for certain proposed amendments) and U.S.$8,581,000 remained as noteholders but agreed toconsent to these amendments. The notes were amended to conform the covenants and events of defaultof these notes to the respective covenants and events of default set forth in OOL’s outstanding 9.625%U.S.$200.0 million perpetual notes.

Principal Shareholders

CNO

As of June 30, 2007, the aggregate amount of our issued and outstanding capital stock wasR$1,313.4 million, represented by 148,090,839 common shares and 107,737,914 preferred shares. Ourpreferred shares have no voting rights, but would rank ahead of our common shares in the event of ourliquidation. Each common share entitles the holder thereof to one vote at our shareholders’ meetings.We have no established authorized share capital.

As of June 30, 2007, 100% of our share capital was owned by Odebrecht, which, in turn, iscontrolled by ODBINV S.A. ODBINV S.A. is a Brazilian corporation that is controlled by KieppeParticipacoes e Administracao Ltda. (which owns 62.3% of the voting capital of ODBINV S.A). KieppeParticipacoes e Administracao Ltda. is a Brazilian limited liability company that is wholly-owned by theOdebrecht family. Certain shareholders and officers of Odebrecht own the remaining capital ofODBINV S.A. that is not owned by the Odebrecht family.

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24OCT200722220830

The following chart presents our current ownership structure, the issuer’s current ownershipstructure and Odebrecht’s ownership interest in OOI and OOG, identifying such ownership interest asof June 30, 2007. The percentages in bold represent the percentage of the voting share capital directlyowned by each shareholder, and the percentages not in bold represent the percentage of the total sharecapital owned by each such shareholder.

100% 100%

Odebrecht S.A.

100%

Odebrecht Finance Ltd. Construtora NorbertoOdebrecht S.A.

99.99% 100%

Odebrecht Óleo e GásLtda.

Odebrecht Investimentos emInfra-estrutura Ltda.

100%

Centaurus ParticipaçõesS.A.

100% 100%

Belgravia EmpreendimentosImobiliários S.A.

99.99%

Odebrecht EmpreendimentosImobiliários Ltda.

Odebrecht Finance Ltd.

Odebrecht Finance Ltd., a wholly-owned subsidiary of Odebrecht, is an exempted company whichwas incorporated with limited liability on January 30, 2007 under the laws of the Cayman Islands. Itsregistered office is located at M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House,South Church Street, George Town, Grand Cayman, Cayman Islands. See ‘‘The Issuer.’’

Our registered office is located at Praia de Botafogo, 300, 11th Floor, CEP 22250-040, Rio deJaneiro, Brazil, and our telephone number at this address is 55-21-2559-3000. Our principal executiveoffice is located at Avenida das Nacoes Unidas, 4777, 6th and 7th Floors, Sao Paulo, SP, CEP 05477-000,Brazil, and our telephone number at this address is 55-11-3443-9000.

Our website address is www.odebrecht.com.br. Information on our website is not incorporated intothis offering circular and should not be relied upon in determining whether to make an investment inthe notes.

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THE OFFERING

This summary highlights information presented in greater detail elsewhere in this offering circular. Thissummary is not complete and does not contain all the information you should consider before investing inthe notes. You should carefully read this entire offering circular before investing in the notes, including ‘‘RiskFactors’’ and our financial statements.

Issuer . . . . . . . . . . . . . . . . . . . . . . . . Odebrecht Finance Ltd.

Guarantor . . . . . . . . . . . . . . . . . . . . Construtora Norberto Odebrecht S.A.

Notes offered . . . . . . . . . . . . . . . . . . U.S.$200,000,000 aggregate principal amount of 7.50% notesdue 2017.

Guaranty . . . . . . . . . . . . . . . . . . . . . We will unconditionally and irrevocably guaranty all ofOdebrecht Finance Ltd.’s obligations pursuant to the notes.

Ranking . . . . . . . . . . . . . . . . . . . . . . The notes will be unsecured, unsubordinated obligations of theissuer. We will unconditionally and irrevocably guaranty thenotes on an unsecured basis. The guaranty will rank equally inright of payment with our unsecured and unsubordinatedindebtedness. The guaranty will be effectively junior to oursecured indebtedness and the indebtedness of any of oursubsidiaries.

Issue price . . . . . . . . . . . . . . . . . . . . 98.282%

Maturity . . . . . . . . . . . . . . . . . . . . . . October 18, 2017.

Interest . . . . . . . . . . . . . . . . . . . . . . 7.50% per annum, payable on April 18 and October 18 ofeach year, beginning on April 18, 2008.

Additional amounts . . . . . . . . . . . . . Odebrecht Finance Ltd., or CNO, as the case may be, will payadditional amounts in respect of any payments of interest orprincipal so that the amount you receive under the notes orthe guaranty, after applicable withholding tax, if any, willequal the amount that you would have received if nowithholding tax had been applicable, subject to someexceptions as described under ‘‘Terms and Conditions—Covenants—Additional Amounts.’’

Optional redemption . . . . . . . . . . . . . Odebrecht Finance Ltd. may, at its option, redeem the notesin whole or in part, at any time at 100% of their principalamount plus a ‘‘make whole’’ amount described under ‘‘Termsand Conditions—Redemption and Repurchase—OptionalRedemption’’ plus accrued and unpaid interest and additionalamounts, if any, on or prior to October 18, 2012. In addition,the notes, may at the issuer’s option be redeemed, in whole orin part, at any time at redemption prices (expressed aspercentages of the notes’ principal amount at maturity) asmore fully described under ‘‘Terms and Conditions—Redemption and Repurchase—Optional Redemption’’ plusaccrued interest and additional amounts, if any, on or afterOctober 18, 2012.

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Tax redemption . . . . . . . . . . . . . . . . . If due to changes in law relating to taxes applicable to(1) payment of interest or principal under the notes, suchpayments become subject to withholding or deductions oftaxes by the relevant tax authority or (2) payments under theguaranty, such payments become subject to withholding ordeductions of taxes by the relevant tax authority at a rate inexcess of the additional amounts that we would pay if suchpayments were subject to withholding or deduction at a rate of15% or at a rate of 25% (in case the holder of the notes isresident in a tax haven jurisdiction), Odebrecht Finance Ltd.may redeem the outstanding notes in whole but not in part at100% of the principal amount thereof, plus accrued interest tothe redemption date. See ‘‘Terms and Conditions—Redemption and Repurchase—Optional Repurchase—Optional Tax Redemption.’’

Change of control offer . . . . . . . . . . . Upon the occurrence of a change of control that results in aratings decline, you will have the right, as a holder of thenotes, subject to certain exceptions, to require us torepurchase some or all of your notes at 101% of theirprincipal amount, plus accrued and unpaid interest, if any, onthe repurchase date. See ‘‘Terms and Conditions—Covenants—Repurchase of Notes upon a Change of Control.’’

Delivery . . . . . . . . . . . . . . . . . . . . . . The notes has been made on October 18, 2007, as describedbelow.

Indenture . . . . . . . . . . . . . . . . . . . . . The notes will be issued, dated October 18th, 2007, under anindenture among Odebrecht Finance Ltd., our company, TheBank of New York, as trustee, and The Bank of Tokyo-Mitsubishi UFJ Ltd., as principal paying agent.

Clearance and settlement . . . . . . . . . The notes will be issued in book-entry form through thefacilities of DTC for the accounts of its participants, includingEuroclear Bank S.A./N.V., as the operator of the EuroclearSystem, and Clearstream Banking, societe anonyme, and willtrade in DTC’s same day funds settlement system. Beneficialinterests in notes held in book-entry form will not be entitledto receive physical delivery of certificated notes, except incertain limited circumstances.

Form and denomination . . . . . . . . . . Any notes sold outside the United States to non-U.S. personsin reliance on Regulation S under the Securities Act will be infully registered form without interest coupons attached only indenominations of U.S.$100,000 and in integral multiples ofU.S.$1,000 in excess thereof. Any notes sold pursuant toRule 144A under the Securities Act will be issued in fullyregistered form in denominations of U.S.$100,000 and integralmultiples of U.S.$1,000 in excess thereof.

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Certain covenants . . . . . . . . . . . . . . . The terms of the notes will limit our ability and the ability ofour subsidiaries (as described in ‘‘Terms and Conditions’’) to,among other provisions:

• incur debt;

• create liens;

• enter in a merger, sale or consolidation transaction; and

• enter into certain transactions with our affiliates.

These and other covenants are subject to important exceptionsand qualifications, which are described under the heading‘‘Terms and Conditions—Covenants’’ in this offering circular.

Use of proceeds . . . . . . . . . . . . . . . . Odebrecht intends to use the net proceeds of this offeringprimarily to make additional equity investments in itssubsidiaries, OII and OOG, and in OEI, which we will transferto Odebrecht prior to the end of 2008 as part of ourcorporate reorganization. We will not receive any materialportion of net proceeds from this Offering. See ‘‘Use ofProceeds.’’

Transfer restrictions . . . . . . . . . . . . . The notes have not been registered under the Securities Actand are subject to certain restrictions on transfer. See‘‘Transfer Restrictions.’’

Trustee . . . . . . . . . . . . . . . . . . . . . . . The Bank of New York

Principal paying agent . . . . . . . . . . . . The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Luxembourg listing agent . . . . . . . . . The Bank of New York (Luxembourg) S.A.

Luxembourg paying and transferagent . . . . . . . . . . . . . . . . . . . . . . The Bank of New York (Luxembourg) S.A.

Listing and trading . . . . . . . . . . . . . . We have applied to list the notes on the Official List of theLuxembourg Stock Exchange and to trade the notes on theEuro MTF market of the Luxembourg Stock Exchange.

We expect that the notes will be eligible for trading in thePORTAL market.

Governing law . . . . . . . . . . . . . . . . . The indenture, the notes and the guaranty will be governed bythe laws of the State of New York.

Rating . . . . . . . . . . . . . . . . . . . . . . . The notes have been assigned a rating of ‘‘BB’’ by Standard &Poor’s, or S&P, and ‘‘BB+’’ by Fitch Ratings, Ltd., or Fitch.

These ratings are not a recommendation to purchase, hold orsell notes, and they do not comment as to market price orsuitability for a particular investor. The ratings are based uponcurrent information furnished to S&P and Fitch by us andinformation obtained by S&P and Fitch from other sources.The ratings may be changed, superseded or withdrawn as aresult of changes in, or unavailability of, such information.

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Selling restrictions . . . . . . . . . . . . . . There are restrictions on persons to whom notes can be sold,and on the distribution of this offering circular, as described in‘‘Plan of Distribution.’’

Risk factors . . . . . . . . . . . . . . . . . . . Prospective investors should carefully consider all of theinformation contained in this offering circular prior toinvesting in the notes. In particular, we urge prospectiveinvestors to carefully consider the information set forth under‘‘Risk Factors’’ for a discussion of risks and uncertaintiesrelating to us, our subsidiaries, our business, our equityholders and an investment in the notes.

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SUMMARY FINANCIAL AND OTHER INFORMATION OF CNO

The following summary financial data has been extracted without material adjustment from ourconsolidated financial statements.

Our summary financial data as of and for the years ended December 31, 2006, 2005 and 2004 havebeen included from our audited consolidated financial statements included elsewhere in this offeringcircular. Our summary financial data as of and for the six-month periods ended June 30, 2007 and 2006have been included from our unaudited consolidated interim financial information included elsewherein this offering circular. Our results for the six-month period ended June 30, 2007 are not necessarilyindicative of the results expected for the entire year ending December 31, 2007. Our consolidatedfinancial statements are prepared in accordance with Brazilian GAAP, which differs in significantrespects from U.S. GAAP. For a discussion of the significant differences relating to these financialstatements, see Annex A—’’Unaudited Summary of Significant Differences Between Brazilian GAAPand U.S. GAAP.’’ This summary financial data also contains unaudited data in the section ‘‘OtherData.’’

This summary financial information should be read in conjunction with ‘‘Management’s Discussionand Analysis of Financial Condition and Results of Operations’’ and our consolidated financialstatements included elsewhere in this offering circular.

As of and for the six-month periods ended As of and for the years endedJune 30, December 31,

2007(1) 2007 2006 2006(1) 2006 2005 2004

(unaudited) (audited)(in U.S.$) (in reais) (in U.S.$) (in reais)

(amounts expressed in millions, except financial ratios)INCOME STATEMENT DATANet services and sales revenues . . . . . . . . . 1,786.2 3,440.6 3,185.9 3,749.8 7,222.8 6,214.8 5,754.7Gross profit . . . . . . . . . . . . . . . . . . . . . 273.1 526.0 442.6 506.1 974.8 835.3 695.3Net income . . . . . . . . . . . . . . . . . . . . . 21.9 42.0 40.8 57.9 111.6 133.9 301.3

BALANCE SHEET DATAAssetsCash and banks . . . . . . . . . . . . . . . . . . . 283.3 545.6 270.4 378.8 746.9 324.9 177.1Financial investments . . . . . . . . . . . . . . . 505.8 974.2 381.4 284.1 547.3 445.1 607.9Marketable securities . . . . . . . . . . . . . . . 133.1 256.4 725.5 174.2 335.7 725.8 509.8Trade accounts receivable . . . . . . . . . . . . 980.7 1,889.2 1,986.8 955.5 1,840.6 1,925.6 1,755.5

Permanent assets . . . . . . . . . . . . . . . . . . 571.5 1,100.9 865.6 597.0 1,150.0 776.5 692.9

Total assets . . . . . . . . . . . . . . . . . . . . . . 3,841.8 7,400.1 5,985.8 3,392.1 6,534.1 5,851.4 5,440.1

Current LiabilitiesLoans and financing . . . . . . . . . . . . . . . . 155.7 299.9 104.5 141.6 272.7 108.4 412.1Suppliers and subcontractors . . . . . . . . . . 499.5 962.1 817.6 410.6 790.9 722.1 634.1Advances from customers . . . . . . . . . . . . 565.2 1,088.6 760.2 492.2 948.1 331.2 276.1Other accounts payable(2) . . . . . . . . . . . . 102.6 198.0 141.0 82.1 158.2 74.9 44.7

Long-term LiabilitiesLoans and financing . . . . . . . . . . . . . . . . 437.4 842.5 1,061.2 468.9 903.2 1,170.5 1,162.5Suppliers and subcontractors . . . . . . . . . . 34.1 65.6 49.6 25.5 49.2 46.9 58.7Advances from customers . . . . . . . . . . . . 865.9 1,667.9 462.0 541.2 1,042.4 850.0 770.8

Stockholders’ equityCapital . . . . . . . . . . . . . . . . . . . . . . . 681.9 1,313.4 1,798.4 681.9 1,313.4 1,798.0 1,318.5Capital reserve . . . . . . . . . . . . . . . . . . 5.9 11.4 — 5.9 11.4 — —Revenue reserves . . . . . . . . . . . . . . . . 44.2 85.2 79.6 71.7 138.1 110.7 215.9Retained earnings . . . . . . . . . . . . . . . . 21.8 41.9 20.9 — — — —

753.8 1,451.9 1,898.9 759.5 1,462.9 1,908.7 1,534.4

Total liabilities and stockholders’ equity . . . . 3,841.8 7,400.1 5,985.8 3,392.1 6,534.1 5,851.4 5,440.1

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As of and for the six-month periods ended As of and for the years endedJune 30, December 31,

2007(1) 2007 2006 2006(1) 2006 2005 2004


(amounts expressed in millions, except financial ratios)OTHER DATA (unaudited)Gross margin(3) . . . . . . . . . . . . . . . . . . 15.3% 15.3% 13.9% 13.5% 13.5% 13.4% 12.1%EBITDA(4) . . . . . . . . . . . . . . . . . . . . . 150.4 289.5 233.5 285.6 550.1 456.7 413.2EBITDA margin(5) . . . . . . . . . . . . . . . . — 8.4% 7.3% — 7.6% 7.3% 7.2%Net debt/EBITDA ratio(6) . . . . . . . . . . . . — — — — — — 0.68

(1) Solely for the convenience of the reader, Brazilian real amounts as of and for the periods ended June 30, 2007 andDecember 31, 2006 have been translated into U.S. dollars at the commercial selling rate at June 30, 2007, of R$1.9262 toU.S.$1.00. See ‘‘Exchange Rates’’ for further information about recent fluctuations in exchange rates.

(2) Comprises current accounts with consortium members, liabilities associated with tax disputes, management profit sharing andother accounts payable.

(3) Gross margin represents gross profit divided by net service revenues.

(4) EBITDA means net revenue from services rendered, minus cost of services rendered, minus general and administrativeexpenses (including executive officers’ remuneration), plus any depreciation or amortization included in cost of sales andservices rendered or general and administrative expenses, plus other operating income. Although EBITDA is not ameasurement under Brazilian GAAP, our management believes that EBITDA serves as an important financial analysis toolfor measuring our performance in several areas, including liquidity, operating performance and leverage. EBITDA iscommonly used by financial analysts in evaluating our business. EBITDA should not be considered in isolation or as asubstitute for net income as a measure of performance, cash flow from operating activities or other measures of liquiditydetermined in accordance with Brazilian GAAP. EBITDA may not be comparable to similarly titled measures of othercompanies. EBITDA is calculated as follows:

For the six-months periods ended For the years endedJune 30, December 31,

2007(1) 2007 2006 2006(1) 2006 2005 2004


(amounts expressed in millions)Net services and sales revenues . . . . . . . 1,786.2 3,440.6 3,185.9 3,749.8 7,222.8 6,214.8 5,754.7Cost of services rendered . . . . . . . . . . . (1,513.1) (2,914.6) (2,743.3) (3,243.7) (6,248.0) (5,379.5) (5,059.4)

General and administrative expenses,including directors’ remunerationexpense . . . . . . . . . . . . . . . . . . . . . (175.7) (338.5) (291.6) (313.5) (603.8) (557.5) (405.8)

Depreciation/amortization . . . . . . . . . . 53.0 102.0 82.5 93.0 179.1 178.9 123.7EBITDA . . . . . . . . . . . . . . . . . . . . . 150.4 289.5 233.5 285.6 550.1 456.7 413.2

(5) EBITDA margin is calculated by dividing EBITDA by our total services and sales revenues, expressed as a percentage. Forthe six-month periods ended June 30, 2007 and 2006, we have calculated our EBITDA margin by dividing our EBITDA forthe six-month periods ended June 30, 2007 and 2006 by our total services and sales revenues for the corresponding six-monthperiod.

(6) Net debt means total short and long-term debt less cash and banks, less financial investments and less short-term marketablesecurities. Other than for the year ended December 31, 2004, we had negative net debt for each of the indicated periods.

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RISK FACTORS

Prospective purchasers of notes should carefully consider the risks described below, as well as the otherinformation in this offering circular, before deciding to purchase any notes. Our business, results ofoperations, financial condition or prospects could be negatively affected if any of these risks occurs, and asa result, the trading price of the notes could decline and you could lose all or part of your investment.

Risks Relating to the Issuer

The issuer’s ability to make payments on the notes depends on its receipt of payments from us.

The issuer’s principal business activity is to act as a financing vehicle for Odebrecht’s activities andoperations. The issuer has no substantial assets. Holders of the notes must rely on our operations topay amounts due in connection with the notes. The ability of the issuer to make payments of principal,interest and any other amounts due on the notes is contingent on its receipt from us of amountssufficient to make these payments, and, in turn, on our ability to make these payments. In the eventthat we are unable to make such payments for any reason, the issuer will not have sufficient resourcesto satisfy its obligations under the indenture governing the notes.

Risks Relating to Our Company

International and political events may adversely affect our operations.

A significant portion of our revenue is derived from construction projects undertaken in Brazil andcertain other emerging market economies, including other countries in Latin America, the Middle Eastand Angola, which exposes us to significant risks inherent in operating in these economies. These risksinclude:

• expropriation and nationalization of our assets in a particular jurisdiction or related to a specificproject;

• political and economic instability;

• social unrest, acts of terrorism, force majeure, war or other armed conflict;

• inflation;

• currency fluctuations, devaluations and conversion restrictions;

• confiscatory taxation or other adverse tax policies;

• government activities that limit or disrupt markets, restrict payments or limit the receipt ortransfer of funds; and

• government activities that may result in the indirect deprivation of rights.

Many of the countries in which we operate have significant levels of political risk, includingAngola, the Dominican Republic, Ecuador, Peru and Venezuela. For example, civil disturbances inAngola periodically interrupted the construction of the Capanda Hydroelectric Project in Angola fromSeptember 1992 through the first half of 1998 and again in 1999. In addition, we are seekingopportunities in the Middle East and elsewhere in which there are significant levels of political andoperational risks.

A significant portion of our services are contracted on a fixed-price basis, subjecting us to risks, including costover-runs and operating cost inflation.

We contract to provide services principally on a ‘‘unit price’’ basis or on a fixed-price basis, withboth unit price and fixed-price (or lump sum) contracts accounting for approximately 95.0% of our

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gross revenues during the six-month period ended June 30, 2007 and 93.0% of our gross revenues for2006. With fixed-price contracts, we bear the risk of unanticipated increases in the cost of equipment,materials or manpower due to inflation or unforeseen events, such as difficulties in obtaining adequatefinancing or required governmental permits or approvals, project modifications creating unanticipatedcosts or delays caused by local weather conditions (or other natural phenomena) or suppliers’ orsubcontractors’ failure to perform. In addition, we sometime bear the risk of delays caused byunexpected conditions or events, subject to the protection of standard force majeure provisions andinsurance policies contracted for a project. Our failure to estimate accurately the resources and timerequired to complete a particular fixed-price project, or our inability to complete our contractualobligations (or applicable milestones) within the contracted time frame, could have a material adverseeffect on our business, results of operations and financial condition.

Decreases in governmental spending and capital spending by our customers may materially adversely affect us.

Our business is directly affected by changes in governmental and private-sector spending andfinancing for infrastructure projects and by variations in capital expenditures by our customers.Accordingly, reductions in available governmental and private-sector spending and financing forinfrastructure projects may have a material adverse impact on our results of operations and financialcondition. Economic downturns generally lead to decreases in the number of new projects awarded, aswell as delays or cancellations of major projects awarded (but not commenced), which could have amaterial adverse effect on our business, results of operations and financial condition.

Decrease in availability of Brazilian governmental and multilateral financial institution funding may adverselyaffect us.

Many of our construction projects are financed by the Brazilian government and by multilateralfinancial institutions. A decrease in the level of financing available from the Brazilian government forservice exports or from multilateral financial institutions for infrastructure projects in the marketswhere we are active may materially and adversely affect our results of operations and financialcondition.

Delays in receipt of payment for public sector projects may materially adversely affect us.

We contract to provide services principally on a ‘‘unit price’’ basis or on a fixed-price basis, withboth unit price and fixed-price (or lump sum) contracts accounting for approximately 93% of our grossrevenues for 2006.

We contract to provide services to both public-sector clients and private-sector clients, with public-sector contracts in Brazil (excluding contracts with Petroleo Brasileiro S.A., or Petrobras, and FURNASCentrais Eletricas S.A., or Furnas, as these government-controlled entities are not currently dependentupon government funding for their operating and capital expenditures) accounting approximately 23.0%of our gross revenues in Brazil during the six-month period ended June 30, 2007 and 25.0% of ourBrazilian gross revenue for 2006. Historically, we have experienced payment delays for work completedon many of our public sector contracts. Although the percentage of our revenue that is derived frompublic sector contracts in Brazil (excluding contracts with Petrobras and Furnas) decreased from 89.5%during 1992 to 25.0% for 2006, delays by our public sector clients in paying us on a timely basis forwork completed could have a material adverse effect our business, results of operations and financialcondition.

We are susceptible to operational risks that could affect our business and financial condition.

We may be adversely affected by natural disasters, adverse weather conditions and operator error,business interruption (through evacuation of personnel, curtailment of services or inability to deliver

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materials to jobsites in accordance with contract schedules), property and equipment damage andpollution or environmental damage. Also, because we engage in engineering and construction activitiesfor large industrial facilities and other large projects where design, construction or systems failures canresult in substantial injury or damage to third parties, we are exposed to potential liability claims andcontractual disputes. Although we maintain comprehensive insurance covering our assets andoperations at levels that our management believes to be adequate, such insurance coverage will not besufficient in all circumstances or against all hazards. In addition, as prices for renewal of insurancecontracts and fees charged for the provision of surety bonds have increased considerably in Brazil andoutside Brazil over the past few years, there can be no assurance that we will be able to maintainadequate insurance coverage in the future at commercially reasonable rates or on acceptable terms. See‘‘Business—Insurance and Guarantees.’’ The occurrence of a significant adverse event for which we arenot fully insured could have a material adverse effect on our business, results of operations andfinancial condition.

We are directly affected by fluctuations in exchange rates between the real and the U.S. dollar.

Our results of operations and financial condition have been, and will continue to be, affected bythe rate of depreciation or appreciation of the real against the U.S. dollar because our revenues, costs,assets and indebtedness are both in U.S. dollars and reais. Accordingly, any major appreciation ordevaluation of the real against the U.S. dollar may have an adverse effect on our financial conditionand results of operations.

We are subject to stringent environmental requirements, and compliance with their regulations and any newregulations could require significant capital expenditures and increase our operating costs.

We are subject in the various jurisdictions in which operate to various federal, state and localenvironmental protection and health and safety laws and regulations governing, among other things:

• the generation, storage, handling, use and transportation of hazardous materials;

• the emission and discharge of hazardous materials into the ground, air or water; and

• the health and safety of our employees.

We are also required to obtain permits from governmental authorities for certain aspects of ouroperations. We cannot assure you that we have been or will be at all times in full compliance withthese laws, regulations and permits. These laws and regulations and permits can often require us topurchase and install expensive pollution control equipment or to make operational changes to limitimpacts or potential impacts on the environment and/or health of our employees and violation of theselaws and regulations or permit conditions can result in various sanctions, many of which may be appliedretroactively, including substantial fines, criminal sanctions, correction orders (including orders toinvestigate and/or clean up contamination) and/or revocations of operating permits.

We expect to make capital expenditures on an ongoing basis to continue to ensure our compliancewith environmental laws and regulations. However, due to the possibility of unanticipated regulatory orother developments, the amount and timing of future environmental expenditures may varysubstantially from those currently anticipated and may affect the availability of funds to us for capitaland other expenditures. We could also be held liable for any and all consequences arising out of humanexposure to hazardous substances or other environmental damage. We cannot assure you that our costsof complying with current and future environmental and health and safety laws, and our liabilitiesarising from past or future releases of, or exposure to, hazardous substances will not materiallyadversely affect our business, results of operations or financial condition.

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In addition, project contracts generally include environmental compliance obligations. Any breachby us of applicable environmental regulations or contractual compliance obligations could adverselyaffect our results of operations and financial condition. See ‘‘Business—Legal and Regulatory Matters.’’

We face significant competition in our business, which may adversely affect our profitability.

Many of the markets served by us are highly competitive, and most of the projects that we executerequire substantial resources, capital investment in equipment, particularly highly skilled andexperienced technical personnel. Most of our ongoing construction projects were awarded throughcompetitive bidding processes, and we face substantial competition for projects. While price generally isthe most important factor that determines whether we will be awarded a particular contract, otherimportant factors include health, safety and environmental protection records, service quality,technological capacity and performance, as well as reputation, experience, access to funding sourcesand client relations. Although we are the largest engineering and construction company in LatinAmerica (as measured by 2006 revenues) and the only Brazilian construction company with most of itsrevenues generated from outside of Brazil, many of our international competitors are larger, havegreater technological capacity and have access to sources of lower-cost funding than us. While theseinternational competitors operate mainly outside Brazil, they can also form partnerships in Brazil withdomestic engineering and construction companies and may compete with us in Brazil and abroad.Competition also places downward pressure on our contract prices and profit margins. Intensecompetition is expected to continue in these markets, presenting us with significant challenges in ourability to maintain strong growth rates and acceptable profit margins. If we are unable to meet thesecompetitive challenges, we could lose market share to our competitors and experience an overallreduction in our profits.

Any downgrade in the ratings of our company or our debt securities would likely result in increased interestand other financial expenses related to our borrowings and debt securities and could reduce our liquidity.

S&P maintains a rating of our company on a local and a global basis. S&P maintains a long-termrating of our company on a local basis of ‘‘brA+-,’’ with positive outlook. On a global basis, S&Pmaintains a long-term rating for our company of ‘‘BB,’’ with positive outlook. Since July 23, 2007 wealso have Fitch maintaining a rating of our company. Fitch maintains a national scale of ‘‘AA (bra)’’ ofour company with a stable outlook and on a global scale of ‘‘BB+’’ with a stable outlook. Any decisionby S&P or other rating agencies to downgrade the ratings of our company in the future would likelyresult in increased interest and other financial expenses relating to future borrowings and issuance ofdebt securities and could significantly reduce our ability to obtain such financing on satisfactory termsor in amounts required by us to maintain adequate liquidity.

We face risks related to project performance requirements and completion schedules, which could jeopardizeour profits.

In certain instances, we have guaranteed completion of a project by a scheduled acceptance dateor achievement of certain acceptance and performance testing levels. However, there is a risk thatadherence to these guarantees may not be possible. The failure to meet any such schedule orperformance requirements could result in costs that exceed projected profit margins, including fixed-amount liquidated damages up to a certain percentage of the overall contract amount and/orguarantees for the entire contract amount. There can be no assurance that the financial penaltiesstemming from the failure to meet guaranteed acceptance dates or achievement of acceptance andperformance testing levels would not have an adverse effect on our financial condition and results ofoperations.

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Our failure to recover adequately on claims against project owners for payment could have a material effecton us.

We occasionally bring claims against project owners for additional cost that exceed the contractprice or for amounts not included in the original contract price. These types of claims occur due tomatters such as owner-caused delays or changes from the initial project scope, which result, bothdirectly and indirectly, in additional cost. Often, these claims can be the subject of lengthy arbitrationor litigation proceedings, and it is often difficult to accurately predict when these claims will be fullyresolved. When these types of events occur and unresolved claims are pending, we may investsignificant working capital in projects to cover cost overruns pending the resolution of the relevantclaims. A failure to promptly recover on these types of claims could have a material adverse impact onour liquidity and financial condition.

Our continued success requires us to hire and retain qualified personnel.

Over the past year, the demand for employees who engage in and are experienced in the serviceswe perform has continued to grow as our customers have increased their capital expenditures and theuse of our services. The success of our business is dependent upon being able to attract and retainpersonnel, including engineers, corporate management and craft employees, who have the necessaryand required experience and expertise. Competition for these kinds of personnel is intense. Difficulty inattracting and retaining these personnel could reduce our capacity to perform adequately in presentprojects and to bid for new ones.

Risks Relating to Our Shareholders

We are controlled by the Odebrecht family who has the power to indirectly control us and all of oursubsidiaries.

As of December 31, 2006, all of our total voting capital was owned by Odebrecht which, in turn, isultimately controlled by the Odebrecht family. See ‘‘Principal Shareholders.’’ Accordingly, theOdebrecht family has the ability to influence the outcome of certain major corporate decisionsrequiring the approval of our shareholders or executive officers, which could affect the holders of thenotes, including the power to:

• appoint a majority of our executive officers, set our management policy and exercise overallcontrol over the management of CNO and its subsidiaries;

• agree to sell or in any manner transfer the controlling stake in us or any of our subsidiaries; and

• determine the outcome of any action requiring shareholder approval, including transactions withrelated parties, corporate reorganizations, acquisitions and dispositions of assets and the timingand payment of any future dividends.

We engage in, and expect from time to time to continue to engage in, commercial and financialtransactions with our shareholders or their affiliates. These commercial and financial transactionsbetween our affiliates and us could create the potential for, or could result in, conflicts of interests. Fora discussion of certain related party transactions, see ‘‘Related Party Transactions.’’

We may face conflicts of interest in transactions with related parties.

Certain decisions concerning our operations or financial structure, or that of our subsidiaries, maypresent conflicts of interest among our controlling shareholder, other shareholders, executive officersand the holders of the notes. We maintain trade accounts receivable and short and long-term payableswith some of our affiliates. These accounts receivable and accounts payable balances are due mainly topurchases and sales of services at prices and on terms equivalent to the average terms and prices of

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similar transactions that we enter into with third parties. Commercial transactions between us and theseaffiliates could result in conflicting interests. See ‘‘Related Party Transactions.’’ Our shareholders andexecutive officers may have an interest in pursuing transactions that, in their judgment, enhance thevalue of our equity, even though such transactions may involve risks to the holders of the notes. Wecannot assure you that our shareholders and executive officers will be able to address these conflicts ofinterests or others in an impartial manner.

Risks Relating to Brazil

The Brazilian government influences significantly the Brazilian economy. This influence together with theBrazilian political conditions may adversely affect our business and overall financial performance.

The Brazilian government frequently intervenes in the Brazilian economy and occasionally makessignificant changes in policy and regulations. The Brazilian government’s actions to control inflationand other policies and regulations have often involved, among other measures, increases in interestrates, changes in tax policies, price controls, currency devaluations, capital controls and limits onimports. Our business, financial condition and results of operations may be adversely affected bychanges in policy or regulations involving or affecting factors such as:

• interest rates;

• monetary policies;

• currency fluctuations;

• inflation;

• liquidity of domestic capital and financial markets; and

• tax policies.

Uncertainty over whether the Brazilian government will implement changes in policy or regulationaffecting these or other factors in the future may contribute to economic uncertainty in Brazil and toincrease volatility in the Brazilian securities market and securities issued abroad by Braziliancompanies. This uncertainty, illegal or anti-ethical conduct allegations, as well as other futureoccurrences affecting the Brazilian economy, including elections, may adversely affect us.

Government efforts to combat inflation, especially the increase in official interest rates, may contributesignificantly to economic uncertainty in Brazil and negatively affect our business and adversely affect themarket price of the notes.

Although (1) we are experiencing a positive period in terms of official inflation rates and itsconvergence with official targets, and (2) the Brazilian General Market Price Index—InternalAvailability (Indice Geral de Precos—Disponibilidade Interna), or IGP-DI, in 2006 presented a variationof 3.8%, some measures taken by the Brazilian government had a significant negative impact on theeconomy. These measures contributed to current economic uncertainty and higher volatility in theBrazilian securities market. The Brazilian government’s measures to control inflation have beenincluding the maintenance of a restrictive monetary policy and high interest rates, thereby limiting theavailability of credit and reducing economic growth. As a result, interest rates have fluctuatedsignificantly. For example, the official interest rates in Brazil at the end of 2002, 2003, 2004, 2005 and2006 were 25.0%, 16.5%, 17.8%, 18.0% and 13.25%, respectively, as set by the Brazilian Committee onMonetary Policy (Comite de Polıtica Monetaria), or COPOM.

Brazil may experience high levels of inflation in future periods. Increasing prices for petroleum,the depreciation of the real and future governmental measures seeking to maintain the value of the realin relation to the U.S. dollar, may trigger increases in inflation in Brazil. Periods of higher inflation

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may slow the rate of growth of the Brazilian economy, which would lead to reduced demand for ourservices in Brazil and decreased net services revenue. In addition, high inflation generally leads tohigher domestic interest rates, and, as a result, the costs of servicing our real-denominated debt mayincrease, causing our net income to be reduced. Inflation and its effect on domestic interest rates can,in addition, lead to reduced liquidity in the domestic capital and lending markets, which could adverselyaffect our ability to refinance our indebtedness in those markets. Any decline in our net servicesrevenue or net income and any deterioration in our financial condition would also likely lead to adecline in the market price of the notes.

Exchange rate instability may adversely affect the Brazilian economy and the market price of our notes.

As a result of multiple factors, the Brazilian currency has been devalued periodically in relation tothe U.S. dollar and other foreign currencies during the last four decades. Throughout this period, theBrazilian government has implemented various economic plans and implemented a number of exchangerate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency ofadjustments has ranged from daily to monthly), floating exchange rate systems, exchange controls anddual exchange rate markets. From time to time, there have been significant fluctuations in the exchangerate between the Brazilian currency and the U.S. dollar and other currencies. For example, the realdepreciated against the U.S. dollar 18.7% in 2001 and 52.3% in 2002. Although the real appreciated18.2%, 8.1%, 13.7% and 8.7% against the U.S. dollar in 2003, 2004, 2005 and 2006 respectively, therecan be no assurance that the real will not depreciate or be devalued against the U.S. dollar again. OnJune 29, 2007, the U.S. dollar-real exchange rate was R$1.9262 per U.S.$1.00.

Depreciations of the real against the U.S. dollar could create additional inflationary pressures inBrazil and lead to increases in interest rates, which may negatively affect the Brazilian economy as awhole, adversely affecting us.

Political, economic and social developments, and the perception of risk in other countries, especially emergingmarket countries, may adversely affect the flow of international capital, affecting the Brazilian economy, ourassets and the market price of our notes.

The market value of securities issued or guaranteed by Brazilian companies is directly influencedby the flow of international capital, economic and market conditions of other countries, especiallyemerging market countries, such as Brazil. An increase in risk aversion by investors may adverselyimpact the market value of the securities issued or guaranteed by Brazilian companies. Although Brazilhas recovered international respectability, crises in other emerging market countries may diminishinvestor interest in securities issued or guaranteed by Brazilian companies, including our notes. Thiscould adversely affect us, negatively impacting the market price of our notes, making our future accessto the capital markets more difficult, as well as limiting the financing of our operations in the future.

Judgments of Brazilian courts enforcing our obligations under the notes are payable only in Brazilian reais.

If proceedings were brought in the courts of Brazil seeking to enforce our obligations under theguaranty, we would not be required to discharge our obligations in a currency other than reais. Anyjudgment obtained against us in Brazilian courts in respect of any payment obligations under theguaranty will be expressed in reais equivalent to the U.S. dollar amount of such payment at theexchange rate on (1) the date of actual payment, (2) the date on which such judgment is rendered or(3) the actual due date of the obligations, as published by the Central Bank. There can be no assurancethat such rate of exchange will afford you full compensation of the amount invested in the notes plusaccrued interest.

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Changes in Brazilian tax laws may have an adverse impact on the taxes applicable to our business.

The Brazilian government frequently implements changes to tax regimes that affect us and ourcustomers. These changes include changes in prevailing tax rates and, on occasion, enactment oftemporary taxes, the proceeds of which are earmarked for designated governmental purposes.

Some of these changes may result in increases in our tax payments, which could adversely impactindustry profitability and increase the prices of our services, restrict our ability to do business in ourexisting and target markets and cause our financial results to suffer. There can be no assurance that wewill be able to maintain our projected cash flow and profitability following increases in Brazilian taxesapplicable to us and our operations.

The foreign exchange policy of Brazil may affect our ability to make remittances outside Brazil in respect ofthe Guaranty.

Under Brazilian regulations, Brazilian companies are not required to obtain authorization from theCentral Bank or any other governmental authority, in order to make payments in U.S. dollars outsideBrazil under guarantees in favor of foreign persons, such as the holders of the notes. We cannot assureyou that these regulations will continue to be in force at the time we may be required to perform ourpayment obligations under the guaranty. If these regulations or their current interpretations aremodified and an authorization from the Central Bank is required, we may need an authorization fromthe Central Bank to transfer the amounts under the guaranty outside Brazil or, alternatively, make suchpayments with funds that we hold outside Brazil. We cannot assure you that such an authorization willbe obtained or that such funds will be available.

Risks Relating to the Notes and the Guaranty

The guaranty will be unsecured and will rank equally with our existing and future unsecured unsubordinatedindebtedness.

The guaranty will be unsecured and will constitute our unsubordinated and unsecured obligationthat we have agreed will rank pari passu in priority of payment with all our other present and futureunsubordinated and unsecured obligations. Although the guaranty will provide the noteholders with adirect, but unsecured, claim on our assets and property, the guaranty will be effectively junior to oursecured debt, to the extent of the assets and property securing such debt. At June 30, 2007, we hadtotal indebtedness outstanding of R$1,142.4 million, of which approximately R$1,008.7 million wasunsecured, and approximately R$133.7 million was secured. The guaranty will also be junior to theindebtedness of any of our subsidiaries.

In addition, we may, in the future, grant additional liens to secure indebtedness without equallyand ratably securing the guaranty. If we become insolvent or are liquidated, or default in the paymentof these obligations, these secured creditors will be entitled to exercise the remedies available to themunder applicable law. These creditors will have a prior claim on our assets covered by their liens.

Our obligations under the guaranty will be subordinated to certain statutory liabilities.

Under Brazilian law, our obligations under the guaranty are subordinated to certain statutorypreferences. In the event of our liquidation or bankruptcy, these statutory preferences, includingmotions for restitution, post-petition claims, claims for salaries, wages, social security, taxes and courtfees and expenses and claims secured by collateral, among others, will have preference and priorityover any other claims, including any claims in respect of the guaranty.

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We cannot assure you that a judgment of a United States court for liabilities under U.S. securities laws wouldbe enforceable in Brazil, or that an original action can be brought in Brazil against us for liabilities underU.S. securities laws.

We are organized under the laws of Brazil and a majority of our assets are located in Brazil. Inaddition, all of our directors and officers and certain advisors named herein reside in Brazil. As aresult, it may not be possible for investors to effect service of process within the United States upon usor our directors, officers and advisors or to enforce against them in U.S. courts any judgmentspredicated upon the civil liability provisions of the U.S. federal securities laws. See ‘‘Enforcement ofCivil Liabilities.’’

We cannot assure you that an active trading market for the notes will develop.

The notes constitute a new issue of securities, for which there is no existing market. Although wewill apply to list the notes on the Luxembourg Stock Exchange, we cannot provide you with anyassurances that the application will be accepted. We cannot provide you with any assurances regardingthe future development of a market for the notes, the ability of holders of the notes to sell their notes,or the price at which such holders may be able to sell their notes. If such a market were to develop,the notes could trade at prices that may be higher or lower than the initial offering price depending onmany factors, including prevailing interest rates, our results of operations and financial condition,political and economic developments in and affecting Brazil and the market for similar securities. Theinitial purchasers of this offering have advised our company that they currently intend to make amarket in the notes. However, the initial purchasers are not obligated to do so, and any market-makingwith respect to the notes may be discontinued at any time without notice.

The notes are subject to transfer restrictions.

The notes have not been registered under the Securities Act or the securities laws of any U.S.state or any other jurisdiction, and, unless so registered, may not be offered, sold or otherwisetransferred except pursuant to an exemption from, or in a transaction not subject to, the registrationrequirements of the Securities Act and applicable state securities laws. In addition, we have notauthorized any offer of notes to the public in the United Kingdom within the meaning of theRegulations. Accordingly, the notes may not lawfully be offered or sold to persons in the UnitedKingdom except to persons whose ordinary activities involve them in acquiring, holding, managing ordisposing of investments (as principal or agent) for the purposes of their businesses or otherwise incircumstances which do not and will not result in an offer to the public in the United Kingdom withinthe meaning of the Financial Services and Markets 2000, or FSMA. See ‘‘Transfer Restrictions.’’

Brazilian bankruptcy laws may be less favorable to you than U.S. bankruptcy and insolvency laws.

If we are unable to pay our indebtedness, including our obligations under the guaranty, then wemay become subject to bankruptcy proceedings in Brazil. Brazilian bankruptcy laws are significantlydifferent from, and may be less favorable to creditors than, those of the United States. In addition, anyjudgment obtained against us in Brazilian courts in respect of any payment obligations under the notesnormally would be expressed in the real equivalent of the U.S. dollar amount of such sum at theexchange rate in effect on the date (1) of actual payment, (2) on which such judgment is rendered or(3) on which collection or enforcement proceedings are started against us. Consequently, in the eventof our bankruptcy, all of our debt obligations that are denominated in foreign currency, including thenotes, will be converted into reais at the prevailing exchange rate on the date of declaration of ourbankruptcy by the court.

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USE OF PROCEEDS

The net proceeds from the issue and sale of the notes are estimated to be approximatelyU.S.$196,164,000 million, after deducting commissions and other expenses. The net proceeds of thisoffering will be used primarily by Odebrecht to make additional equity investments in its subsidiaries,OII and OOG, and in OEI, which we will transfer to Odebrecht prior to the end of 2008 as part of ourcorporate reorganization. We will not receive any material portion of net proceeds from this offering.See ‘‘Business—Corporate Reorganization.’’

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CAPITALIZATION

Odebrecht Finance Ltd.

The issuer was established on January 30, 2007, with minimal share capital. Accordingly, aftergiving pro forma effect to the offering of the notes, substantially all of the issuer’s capitalization will bein the form of long-term indebtedness, in an aggregate amount equivalent to the gross proceeds of thisoffering.

Construtora Norberto Odebrecht S.A.

Because the issuer is not our subsidiary but a subsidiary of Odebrecht, the proceeds of thisoffering will not affect our capitalization. Accordingly, we have not included a column that sets forthour capitalization on an adjusted basis to give effect to the issuance of the notes pursuant to thisoffering. However, our guarantee of the notes will be included in any calculation of our indebtednessunder the terms and conditions of the notes. The following table has been included from our unauditedconsolidated financial statements at June 30, 2007 and sets forth our debt and capitalization at June 30,2007:

At June 30, 2007

Actual

(in millions (in millionsof reais) of U.S.$)(1)

Short-term loans and financings(2) . . . . . . . . . . . . . . . . . R$ 299.9 U.S.$ 155.7Long-term loans and financings(3) . . . . . . . . . . . . . . . . . 842.5 437.4Exceptional Installment Program (PAEX) . . . . . . . . . . . . 62.5 32.5Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . 1,451.9 753.8

Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . R$2,656.8 U.S.$1,379.4

(1) Translated for convenience only using the commercial selling rate as reported by theCentral Bank as of June 30, 2007 for reais into U.S. dollars of R$1.9262 to US$1.00.See ‘‘Presentation of Financial and Other Information’’ and ‘‘Exchange Rates.’’

(2) Includes current portion of long-term debt.

(3) Excludes current portion of long-term debt but includes related party liabilities.

(4) There has been no material change in capitalization of our company since June 30, 2007.

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SELECTED FINANCIAL AND OTHER INFORMATION OF CNO

The following selected financial data has been included from our consolidated financial statements.

Our selected financial data as of and for the years ended December 31, 2006, 2005, 2004 havebeen included from our audited consolidated financial statements included elsewhere in this offeringcircular. Our selected financial data as of and for the six-month periods ended June 30, 2007 and 2006have been included from our unaudited consolidated interim financial information included elsewherein this offering circular.

Our results for the six-month period ended June 30, 2007 are not necessarily indicative of theresults expected for the entire year ending December 31, 2007.

Our consolidated financial statements are prepared in accordance with Brazilian GAAP, whichdiffers in significant respects from U.S. GAAP. For a discussion of the significant differences relating tothese financial statements, see ‘‘Appendix A—Summary of Significant Differences Between BrazilianGAAP and U.S. GAAP.’’

This selected financial data also contains unaudited data in the section ‘‘Other Data.’’

This selected financial information should be read in conjunction with ‘‘Management’s Discussionand Analysis of Financial Condition and Results of Operations’’ and our consolidated financialstatements included elsewhere in this offering circular.

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SELECTED CONSOLIDATED FINANCIAL INFORMATION OF CNO

For the six-month periods ended June 30, For the years ended December 31,

2007(1) 2007 2006 2006(1) 2006 2005 2004


(amounts expressed in millions)

STATEMENT OF OPERATIONSGross service revenues

Domestic market . . . . . . . . . . . . . 602.7 1,161.0 1,131.5 1,360.9 2,621.4 1,613.4 1,262.1Foreign market . . . . . . . . . . . . . . 1,227.6 2,364.6 2,141.1 2,516.1 4,846.5 4,719.2 4,590.5

1,830.3 3,525.6 3,272.6 3,877.0 7,467.9 6,332.6 5,852.6Taxes and contributions on services . . . (44.1) (85.0) (86.7) (127.2) (245.1) (117.8) (97.9)

Net services and sales revenues . . . . . 1,786.2 3,440.6 3,185.9 3,749.8 7,222.8 6,214.8 5,754.7Cost of services rendered . . . . . . . . . (1,513.1) (2,914.6) (2,743.3) (3,243.7) (6,248.0) (5,379.5) (5,059.4)

Gross profit . . . . . . . . . . . . . . . . . . 273.1 526.0 442.6 506.1 974.8 835.3 695.3Operating expenses

General and administrative expense . (172.6) (332.5) (285.6) (306.9) (591.1) (545.0) (393.1)Directors’ remuneration expense . . . (3.1) (6.0) (6.0) (6.6) (12.7) (12.5) (12.7)

Operating profit before the equityinterests and financial results . . . . . 97.4 187.5 151.0 192.6 371.0 277.8 289.5

Results from investments in associatedcompaniesEquity in the results . . . . . . . . . . . 1.6 3.1 (4.5) 6.1 11.7 11.2 (25.5)Provision for losses on investments . . 0.2 0.3 0.7 (2.0) (3.9) (0.3) (11.1)Dividends received . . . . . . . . . . . . — — — — — — —

Financial resultFinancial revenue . . . . . . . . . . . . . 168.1 323.8 198.1 146.1 281.4 390.6 602.5Financial expenses . . . . . . . . . . . . (193.1) (371.9) (284.3) (153.9) (296.4) (379.2) 399.6

Operating profit . . . . . . . . . . . . . . . 74.2 142.8 61.0 188.9 363.8 300.1 455.8Non-operating results . . . . . . . . . . (2.8) (5.4) (0.7) (10.3) (19.8) (27.0) 19.8

Income before social contribution,income tax and minority interest . . . 71.4 137.4 60.3 178.6 344.0 273.1 475.6Social contribution . . . . . . . . . . . . (6.5) (12.6) (3.1) (23.1) (44.4) (26.6) 28.8Income tax . . . . . . . . . . . . . . . . . (33.6) (64.7) (12.2) (88.4) (170.3) (97.5) 132.8

Income before management profitsharing and minority interest . . . . . . 31.3 60.1 45.0 67.1 129.3 149.0 314.0Management profit sharing . . . . . . . — — — (6.4) (12.4) (12.4) (12.6)Minority interest . . . . . . . . . . . . . (9.4) (18.1) (4.2) (2.8) (5.3) (2.7) (0.1)

Net income . . . . . . . . . . . . . . . . . . 21.9 42.0 40.8 57.9 111.6 133.9 301.3

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At June 30, At December 31,

2007(1) 2007 2006 2006(1) 2006 2005 2004



BALANCE SHEET DATAAssetsCurrent assets

Cash and banks . . . . . . . . . . . . . . . 283.3 545.6 270.4 387.8 746.9 324.9 177.1Financial investments . . . . . . . . . . . 505.8 974.2 381.4 284.1 547.3 445.1 607.9Marketable securities . . . . . . . . . . . 65.8 126.7 587.8 101.4 195.4 655.1 509.8Trade accounts receivable . . . . . . . . . 563.6 1,085.7 1,123.9 591.6 1,139.6 1,073.1 997.4Advances to suppliers, subcontractors

and others . . . . . . . . . . . . . . . . . 166.3 320.4 143.9 73.8 142.1 123.9 259.4Investments and properties for sale . . . 126.2 243.0 54.1 30.0 57.7 2.0 214.8Deferred income tax and social

contribution . . . . . . . . . . . . . . . . 31.6 60.9 126.3 30.8 59.3 131.3 66.0Taxes recoverable . . . . . . . . . . . . . . 92.9 178.9 140.1 105.7 203.6 126.1 88.5Inventories . . . . . . . . . . . . . . . . . . 207.4 399.4 372.3 148.4 285.9 308.0 266.3Current accounts with consortium

members . . . . . . . . . . . . . . . . . . 16.8 32.4 21.6 15.0 28.8 15.8 44.3Eletrobras credits . . . . . . . . . . . . . . 123.7 238.2 — 123.7 238.2 — —Other accounts receivable . . . . . . . . . 135.2 260.4 59.5 87.0 167.6 142.7 108.6Prepaid expenses . . . . . . . . . . . . . . 40.5 78.1 45.5 24.7 47.6 50.5 45.1

Total current assets . . . . . . . . . . . . . . 2,359.1 4,543.9 3,326.8 2,004.0 3,860.0 3,398.5 3,385.2

Non-current assetsLong-term receivables

Marketable securities . . . . . . . . . . 67.3 129.7 137.7 72.8 140.3 70.7 —Odebrecht Organization companies . 305.8 589.0 500.6 258.9 498.7 464.3 340.3Trade accounts receivable . . . . . . . 417.1 803.5 862.9 363.9 701.0 852.5 758.1Investments and properties for sale . 44.4 85.6 60.5 27.6 53.1 137.1 21.4Deferred income tax and social

contribution . . . . . . . . . . . . . . 22.3 43.0 113.3 18.9 36.5 66.8 140.7Taxes recoverable . . . . . . . . . . . . 10.6 20.5 22.4 10.4 20.1 9.1 35.8Prepaid expenses . . . . . . . . . . . . . 3.9 7.5 13.1 4.6 8.9 17.4 —Judicial bond . . . . . . . . . . . . . . . 15.1 29.1 21.4 10.7 20.6 16.2 —Other accounts receivable . . . . . . . 24.7 47.4 61.5 23.3 44.9 42.3 65.7

Total non-current assets . . . . . . . . . . . 911.2 1,755.3 1,793.4 791.1 1,524.1 1,676.4 1,362.0

Permanent assetsInvestments

Associated companies . . . . . . . . . . 16.6 31.9 21.4 31.3 60.3 9.5 30.8Others . . . . . . . . . . . . . . . . . . . 78.2 150.7 262.8 79.2 152.5 196.1 193.7

Property and equipment . . . . . . . . . . 391.4 753.9 447.7 407.2 784.4 444.6 424.8Deferred charges . . . . . . . . . . . . . . 85.3 164.4 133.7 79.3 152.8 126.3 43.6

Total permanent assets . . . . . . . . . . . . 571.5 1,100.9 865.6 597.0 1,150.0 776.5 692.9

Total assets . . . . . . . . . . . . . . . . . . . 3,841.8 7,400.1 5,985.8 3,392.1 6,534.1 5,851.4 5,440.1

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At June 30, At December 31,

2007(1) 2007 2006 2006(1) 2006 2005 2004


(amounts expressed in millions, except financial ratios)

Liabilities and stockholders’ equityCurrent liabilities

Loans and financing . . . . . . . . . . . . 155.7 299.9 104.5 141.6 272.7 108.4 412.1Suppliers and subcontractors . . . . . . 499.5 962.1 817.6 410.6 790.9 722.1 634.1Taxes, rates, salaries and payroll

charges . . . . . . . . . . . . . . . . . . 178.6 344.0 290.1 233.9 450.6 229.4 227.7Management profit sharing . . . . . . . — — — 6.4 12.4 12.4 12.6Provisions for contingencies . . . . . . . 29.0 55.8 59.3 27.1 52.2 55.5 33.8Advances from customers . . . . . . . . 565.2 1,088.6 760.2 492.2 948.1 331.2 276.1Current accounts with consortium

members . . . . . . . . . . . . . . . . . 17.4 33.5 18.0 29.2 56.3 32.3 5.9Other accounts payable . . . . . . . . . . 102.6 198.0 141.0 82.1 158.2 74.9 44.7

Total current liabilities . . . . . . . . . . . 1,548.0 2,981.9 2,190.7 1,423.1 2,741.4 1,566.2 1,647.0

Non current liabilitiesLong-term liabilities

Odebrecht Organization companies . — — 0.6 12.5 24.0 0.6 4.0Loans and financing . . . . . . . . . . 437.4 842.5 1,061.2 468.9 903.2 1,170.5 1,162.5Advances from customers . . . . . . . 865.9 1,667.9 462.0 541.2 1,042.4 850.0 770.8Deferred income tax and social

contribution . . . . . . . . . . . . . . 102.8 198.1 170.0 72.3 139.3 162.7 128.7Suppliers and subcontractors . . . . . 34.1 65.6 49.6 25.5 49.2 46.9 58.7Provisions for contingencies . . . . . . 31.6 60.9 119.1 31.5 60.6 116.4 111.0Exceptional Installment Program

(PAEX) . . . . . . . . . . . . . . . . . 32.4 62.4 — 31.4 60.5 — —Provision for losses on investments . 7.5 14.4 14.7 7.8 15.1 16.6 16.8Other accounts payable (2) . . . . . . 15.7 30.2 10.7 14.9 28.7 8.5 4.7

Total non current liabilities . . . . . . . . 1,527.4 2,942.0 1,887.9 1,206.0 2,323.0 2,372.2 2,257.2

Minority interest . . . . . . . . . . . . . . . 12.6 24.3 8.3 3.5 6.8 4.3 1.5Stockholders’ equity

Capital . . . . . . . . . . . . . . . . . . . . 681.9 1,313.4 1,798.4 681.9 1,313.4 1,798.0 1,318.5Capital reserve . . . . . . . . . . . . . . . 5.9 11.4 — 5.9 11.4 — —Revenue reserves . . . . . . . . . . . . . . 44.2 85.2 79.6 71.7 138.1 110.7 215.9Retained earnings . . . . . . . . . . . . . 21.8 41.9 20.9 — — —

753.8 1,451.9 1,898.9 759.5 1,462.9 1,908.7 1,534.4

Total liabilities and stockholders’ equity 3,841.8 7,400.1 5,985.8 3,392.1 6,534.1 5,851.4 5,440.1

OTHER DATAGross margin(3) . . . . . . . . . . . . . . . . 15.3% 15.3% 13.9% 13.5% 13.5% 13.4% 12.1%EBITDA(4) . . . . . . . . . . . . . . . . . . 150.4 289.5 233.5 285.6 550.1 456.7 413.2EBITDA margin (5) . . . . . . . . . . . . . — 8.4% 7.3% — 7.6% 7.3% 7.2%Net debt/EBITDA ratio(6) . . . . . . . . . — — — — — — 0.68

(1) Solely for the convenience of the reader, Brazilian real amounts as of and for the periods ended June 30, 2007 andDecember 31, 2006 have been translated into U.S. dollars at the commercial selling rate at June 30, 2007, of R$1.9262 toU.S.$1.00. See ‘‘Exchange Rates’’ for further information about recent fluctuations in exchange rates.

(2) Comprises current accounts with consortium members, liabilities associated with tax disputed, management profit sharing andother accounts payable.

(3) Gross margin represents gross profit divided by net service revenues.

(4) EBITDA means net revenue from services rendered, minus cost of services rendered, minus general and administrativeexpenses (including executive officers’ remuneration), plus any depreciation or amortization included in cost of sales andservices rendered or general and administrative expenses, plus other operating income. Although EBITDA is not a

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measurement under Brazilian GAAP, our management believes that EBITDA serves as an important financial analysis toolfor measuring our performance in several areas, including liquidity, operating performance and leverage. EBITDA iscommonly used by financial analysts in evaluating our business. EBITDA should not be considered in isolation or as asubstitute for net income as a measure of performance, cash flow from operating activities or other measures of liquiditydetermined in accordance with Brazilian GAAP. EBITDA may not be comparable to similarly titled measures of othercompanies. EBITDA is calculated as follows:

For the six-month periods ended June 30, For the years ended December 31,

2007(1) 2007 2006 2006(1) 2006 2005 2004



Net services and sales revenues . . . . . 1,786.2 3,440.6 3,185.9 3,378.3 7,222.8 6,214.8 5,754.7Cost of services rendered . . . . . . . . . (1,513.1) (2,914.6) (2,743.3) (2,922.4) (6,248.0) (5,379.5) (5,059.4)

General and administrative expenses,including directors’ remunerationexpense . . . . . . . . . . . . . . . . . . . (175.7) (338.5) (291.6) (313.5) (603.8) (557.5) (405.8)

Depreciation/amortization . . . . . . . . . 53.0 102.0 82.5 93.0 179.1 178.9 123.7EBITDA . . . . . . . . . . . . . . . . . . . . 150.4 289.5 233.5 285.6 550.1 456.7 413.2

(5) EBITDA margin is calculated by dividing EBITDA by our total services and sales revenues, expressed as a percentage. Forthe six-month periods ended June 30, 2007 and 2006, we have calculated our EBITDA margin by dividing our EBITDA forthe six-month periods ended June 30, 2007 and 2006 by our total services and sales revenues for the corresponding six-monthperiod.

(6) Net debt means total short and long-term debt less cash and banks, less financial investments and less short-term marketablesecurities. Other than for the year ended December 31, 2004, we had negative net debt for each of the indicated periods.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION OF CNO

The following discussion of our financial condition and results of operations should be read inconjunction with our audited consolidated financial statements as of and for the years ended December 31,2006, 2005, 2004, and our unaudited consolidated interim financial statements as of and for the six-monthperiods ended June 30, 2007 and 2006 included elsewhere in this offering circular, as well as with theinformation presented under ‘‘Presentation of Financial and Other Information’’ and ‘‘Selected Financialand Other Information.’’

The following discussion contains forward-looking statements that involve risks and uncertainties. Ouractual results may differ materially from those discussed in the forward-looking statements as a result ofvarious factors, including those set forth in ‘‘Forward-Looking Statements’’ and ‘‘Risk Factors.’’

The discussion and analysis of our financial condition and results of operations has been organizedto present the following:

• a brief overview of our company and the principal factors that influence our results ofoperations, financial condition and liquidity;

• a review of our financial presentation and critical accounting policies;

• a discussion of the principal factors that influence our results of operations;

• a discussion of our results of operations for the six-month periods ended June 30, 2007 and 2006and the years ended December 31, 2006, 2005 and 2004;

• a discussion of our liquidity and capital resources, including our working capital at December 31,2006, our cash flows for the years ended December 31, 2006, 2005 and 2004, and our materialshort-term and long-term indebtedness at December 31, 2006;

• a discussion of our capital expenditures and our contractual commitments; and

• a qualitative and quantitative discussion of market risks that we face.

Overview

We are the largest engineering and construction company in Latin America as measured by 2006gross revenues. We engage in the construction of large-scale infrastructure and other projects, includingthe construction of highways, railways, power plants, bridges, tunnels, subways, buildings, port facilities,dams, manufacturing and processing plants, as well as mining and industrial facilities. We provide avariety of integrated engineering, procurement and construction services to clients in a broad range ofindustries, both in Brazil and outside Brazil. These capabilities enable us to provide clients, individuallyor as part of a consortium, with single-source, turnkey project responsibility for complex constructionprojects. We concentrate our construction activities on infrastructure projects in Brazil and in severalinternational markets, principally in Latin America and Angola, which include projects sponsored bythe public and private-sector, including concession-based projects.


We believe we are:


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Financial Presentation and Critical Accounting Policies

We have prepared our audited consolidated annual financial statements as of and for the yearsended December 31, 2006, 2005 and 2004 and our unaudited consolidated financial statements as ofand for the six-month periods ended June 30, 2007 and 2006 in Brazilian reais in accordance withBrazilian GAAP, which differ in certain respects from U.S. GAAP. See ‘‘Appendix A—Summary ofPrincipal Differences Between Brazilian GAAP and U.S. GAAP.’’ The financial information included inour discussion of our results of operations should be read in conjunction with ‘‘Presentation ofFinancial and Other Information’’ and our financial statements, including the notes thereto, includedelsewhere in this offering circular.

The presentation of our financial condition and results of operations requires our management tomake certain judgments regarding the effects of matters that are inherently uncertain and that affectour book value of our assets and liabilities, including the percentage of completion of the constructionprojects in which we are engaged. Certain of our accounting policies require higher degrees ofjudgment than others in their application. Actual results may differ from those estimated dependingupon the variables, assumptions or conditions used by our management. In order to provide anunderstanding regarding how management forms its judgments about future events, including thevariables and assumptions underlying the estimates, and the sensitivity of those judgments to differentvariables and conditions, we have included comments related to certain of our critical accountingpolicies described below.

Revenue Recognition for Construction Contracts

The majority of our contracts with our customers are either ‘‘unit price’’ or ‘‘fixed price’’. Underunit price contracts, we are committed to provide materials or services required by a project at unitprices (for example, dollars per cubic meter of concrete or cubic meter of earth excavated). While theunit price contract shifts the risk of estimating the quantity of units required for a particular project tothe customer, any increase in our unit cost over the unit price bid, whether due to inflation,inefficiency, faulty estimates or other factors, is borne by us unless otherwise provided in the contract.Fixed-price contracts are priced on a lump-sum basis under which we bear the risk that we may not beable to perform all of the work for the specified contract amount. Nearly all government or quasi-government contracts and many of our other contracts provide for termination of the contract for theconvenience of the party contracting with us, with provisions to pay us for work performed through thedate of termination.

Revenue and earnings on construction contracts are recognized on the percentage of completionmethod based upon the ratio of costs incurred to estimated final costs. Provisions are recognized in theincome statement for the full amount of estimated losses on uncompleted contracts whenever evidenceindicates that the estimated total cost of a contract exceeds its estimated total revenue. Contract costs

30

are recognized as they are incurred and consist of direct costs on contracts, including labor andmaterials, amount payable to subcontractors, direct overhead costs and equipment expense (primarilydepreciation, fuel, maintenance and repairs).

Revenue from contract claims for cost overruns is recognized when we have signed a settlementagreement and payment is assured, or on certain occasions, when an independent appraiser agrees withour assessment of the likelihood of collection and on the value of the claim.

The accuracy of our revenue and profit recognition in a given period is dependent on the accuracyof our estimates of the cost to complete each project. Our cost estimates use a highly detailed ‘‘bottomup’’ approach, and we believe our experience allows us to regularly produce materially reliableestimates. However, our projects can be highly complex, and in most cases, the profit margin estimatesfor a project will either increase or decrease to some extent from the amount that was originallyestimated at the time of bid.

Factors that can contribute to changes in estimates of contract cost and profitability include siteconditions that differ from those assumed in the original bid (to the extent that contract remediesunavailable), the availability and skill level of workers in the geographic location of the project, theavailability and proximity of materials, the accuracy of the original bid and subsequent estimates,inclement weather and timing and coordination issues inherent in all projects. The foregoing factors aswell as the stage of completion of contracts in process and the mix of contracts at different marginsmay cause fluctuations in gross profit between periods.

Construction Consortia

We participate in various construction consortia in order to share expertise, risk and resources forcertain highly complex projects. The consortium agreements typically provide that our interests in anyprofits and assets, and our respective share in any losses and liabilities that may result from theperformance of the contract, are limited to our stated percentage interest in the project.

The consortium’s contract with the project owner typically requires joint and several liabilityamong the consortium members. Our agreements with our consortia partners provide that each partywill assume and pay its full proportionate share of any losses resulting from a project. However, if oneof our partners is unable to pay its proportionate share, we remain liable under the contract with theproject owner. Circumstances that could lead to a loss under these guarantee arrangements include apartner’s inability to contribute additional funds to the consortium in the event that the projectincurred a loss or additional costs that we could incur should the partner fail to provide the servicesand resources toward project completion that had been committed to in the consortium agreement.

Under each consortium agreement, one partner is designated as the lead member of theconsortium. The lead member typically provides all administrative, accounting and most of the projectmanagement support for the project and generally receives a fee from the consortium for theseservices. We have been designated as the lead member in most of our current consortia projects.

Valuation of Permanent Assets (Other Than Long-term Investments)

We are required to determine if operating income is sufficient to absorb the depreciation andamortization of long-term assets, within the context of our balance sheet as a whole, in order to assesspotential asset impairment. If operating income is insufficient, within the context of permanent assets,to recover depreciation and amortization as a result of permanent impairment of assets, the assets, orgroup of assets, are required to be written down to recoverable values, preferably based on theprojected discounted cash flows of future operations.

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Valuation of Long-Term Investments

Investments of a permanent nature are recorded at the lower of cost or market. The valuation ofthese assets is based on quoted market prices, when available. If quoted market prices are notavailable, we determine the value of investments by reference to the quoted market price ofcomparable instruments, or discount the expected cash flows using market interest rates commensuratewith the credit quality and maturity of the investments. Management’s valuation determinations takeinto consideration the respective country’s economic situation, past experience and specific risks.Deterioration in economic conditions could adversely affect the values of these investments.

Contingencies

We are currently involved in certain legal and administrative proceedings that arise in our ordinarycourse of business, as described in note 11 to our unaudited consolidated financial statements as of andfor the six-month period ended June 30, 2007. Some of these proceedings involve amounts that arematerial to our financial statements. We believe that the extent to which these contingencies arerecognized in our financial statements is adequate. It is our policy to record accrued liabilities forcontingencies that are deemed probable to create a material adverse impact on the result of ouroperations or our financial condition.

We are also involved in several legal and administrative proceedings, which are aimed at obtainingor defending our legal rights with respect to tax legislation, which we believe to be unjust orunconstitutional as applied to us. We consider these issues to be contingent gains, which we do notrecognize in our financial statements until the contingency has been resolved. When we have beengranted the temporary right not to pay the disputed amounts or to offset the disputed amounts thathave already been paid against current tax obligations, we continue to maintain a liability for thedisputed amounts until the contingency has been fully resolved. We also accrue interest in arrears onthe liability, using the applicable interest rate defined in the tax law.

Principal Factors Affecting Our Results of Operations

Pricing of our Services

Engineering and construction contracts can be broadly categorized as fixed-price, sometimesreferred to as lump sum, or cost reimbursable (i.e., unit price) contracts. Some contracts can involveboth fixed-price and cost reimbursable elements.

Fixed-price contracts are for a fixed sum to cover all costs and any profit element for a definedscope of work. Fixed-price contracts entail more risk to a contractor, such as our company, as it mustdetermine both the quantities of work to be performed and the costs associated with executing thework. The risks to us in fixed-price engineering and construction contracts and fixed-price turnkeycontracts (i.e., contracts under which we are obligated to complete a project according to pre specifiedcriteria for a fixed price) arise principally from the following factors: (1) technical complexities;(2) bidding a fixed-price before (i) locking in the price, (ii) delivery of significant procurementcomponents and (iii) finalizing subcontractors’ agreements, even though a margin to cover uncertaintiesis usually included in the price; (3) coordination of multiple subcontractors; and (4) labor availabilityand productivity, as well as significant liquidated damages for delays.

Cost reimbursable contracts include contracts in which the price is based upon actual costsincurred for time and materials, or for variable quantities of work priced at defined unit rates. Profitelements on cost reimbursable contracts may be based upon a percentage of costs incurred and/or afixed amount. Cost reimbursable contracts are generally less risky than fixed-price contracts, as theproject owner retains many of the risks. Although fixed-price contracts involve greater risk, they also

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are potentially more profitable, as the project owners pay a premium to transfer certain risks to thecontractor.

We incur general administrative expenses in developing our backlog of construction projects. Werefer to these expenses as marketing development expenses, and they include personnel costs, travelexpenses and third-party consulting and other expenses. We expense these marketing developmentexpenses in the period in which they are incurred, although they generally benefit future periods (tothe extent that we successfully enter into a construction contract for a project in which we incur theseexpenses) or may not generate eventual revenues (to the extent we are unsuccessful in a competitivebidding situation for a particular construction project).

Growth of Brazil’s Gross Domestic Product and Domestic Demand for Our Products

Our net services and sales revenues in Brazil represented 33.2% of our net services and salesrevenue in 2006 and 31.7% in the six-month period ended June 30, 2007. As a Brazilian company withsubstantial operations in Brazil, we are significantly affected by economic conditions in Brazil. Ourresults of operations and financial condition have been, and will continue to be, affected by the growthrate of the Brazilian gross domestic product, or GDP, in Brazil because the level of spending oninfrastructure projects is significantly impacted by GDP growth and by Brazilian governmental policies.

In 2004, 2005 and 2006, GDP in Brazil increased by 5.2% (the highest annual growth rate since1994), 2.3% and 3.7%, respectively.

Brazilian GDP growth has fluctuated significantly, and we anticipate that it will likely continue todo so. Our management believes that economic growth in Brazil should positively affect our future netservices and sales revenue and results of operations. However, low growth or a recession in Brazilwould likely reduce our future net services and sales revenue and have negative impacts on our resultsof operations.

Growth of Infrastructure Spending and Available Financing in Other Emerging Markets

Our net services and sales revenues outside Brazil represented 66.8% of our net services and salesrevenue in 2006 and 68.3% in the six-month period ended June 30, 2007.

We are active in Venezuela, Angola and the Middle East. As each of these areas has significant oilreserves, the availability of funding for infrastructure in these markets is highly dependent on the priceof oil. As oil prices remain high, government funding for infrastructure tends to increase. However, ifoil prices were to suffer a material reduction, this would likely reduce available government spendingfor infrastructure in these markets and likely reduce our revenues accordingly.

Our revenues in other emerging markets, including Peru and Argentina, are impacted by GDPgrowth in these countries, as well as by financing alternatives for infrastructure development in thesemarkets. For example, we have financed projects in Peru with funding from multilateral financialinstitutions, including the IDB and CAF, as well as with long-term funding from domestic capitalmarkets offerings in Peru which are subscribed to by Peruvian pension funds and insurance companies.If GDP growth in emerging markets countries were to falter or available financing were to be reducedor eliminated, this would adversely affect our revenues in these markets. We believe that ourdiversification in various emerging markets helps to minimize risks associated with any single market.However, this diversification may not be sufficient to withstand a more widespread regional or globaleconomic downturn.

Effects of Fluctuations in Exchange Rates between Real and U.S. Dollar

Virtually all of our service and sales revenues from our international construction projects areexpressed in U.S. dollars. In 2006 and the six-month period ended June 30, 2007, our revenues from

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construction projects outside Brazil represented 66.6% and 68.4% of our total net sales and servicerevenues, respectively. When the real depreciates against the U.S. dollar, our U.S. dollar revenues,when converted to reais, decrease, adversely impacting our operating margins; conversely, when the realdepreciates against the U.S. dollar, our U.S. dollar costs, when converted to reais, decrease, positivelyimpacting our operating margins. On the other hand, when the real appreciates against the U.S. dollar,our U.S. dollar revenues, when converted into reais, increase, favorably impacting our operatingmargins; conversely, when the real appreciates against the U.S dollar, our U.S dollar costs, whenconverted into reais, decrease, adversely impacting our margins. Accordingly, we try to match revenuesand costs in the same currencies, so that we can mitigate the risks of currency fluctuations. When thisis not possible, we often enter into hedges to mitigate exchange rate fluctuations.

Any major devaluation of the real against the U.S. dollar would significantly increase our financialexpenses and our short-term and long-term indebtedness, as expressed in reais. Conversely, any majorappreciation of the real against the U.S. dollar would significantly decrease our financial expenses andour short-term and long-term indebtedness, as expressed in reais.

Our net revenues from sales and services earned outside Brazil, which enable us to generatereceivables payable in U.S. dollars, tend to provide a hedge against a portion of our U.S. dollar-denominated debt service obligations. Accordingly, we often enter into hedges to mitigate exchangerate fluctuations.

Inflation affects our financial performance by increasing some of our operating expensesdenominated in reais (and not linked to the U.S. dollar). A portion of our costs of sales and servicesrendered, however, are linked to the U.S. dollar and are not substantially affected by the Brazilianinflation rate.

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Effect of Level of Indebtedness and Interest Rates

At December 31, 2006, our total outstanding consolidated indebtedness on a consolidated basiswas R$1,175.9 million. The level of our indebtedness results in financial expenses that are reflected inour income statement. Financial expenses consist of interest expense, exchange variations of U.S.dollar- and other foreign currency-denominated debt, foreign exchange losses or gains, and other itemsas set forth in notes 2, 10 and 17 to our consolidated financial statements. In 2006, we recorded totalgross financial expenses of R$296.4 million, of which R$168.4 million consisted of interest expense,R$21.8 million of taxes (CPMF and IOF), R$33.0 million of overdue write-offs, net and R$99.7 millionconsisted of foreign exchange losses. In the six-month period ended June 30, 2007, we recorded totalgross financial expenses of R$371.9 million, of which R$102.7 million consisted of interest expense,R$11.9 million consisted of taxes (IOF, CPMF) and R$189.4 million consisted of foreign exchangegains. The interest rates that we pay depend on a variety of factors, including prevailing Brazilian andinternational interest rates and risk assessments of our company, our industry and the Brazilian andemerging market economies made by potential lenders to our company, potential purchasers of ourdebt securities and the rating agencies that assess our company and its debt securities. We also haveinterest revenue that includes restatement of receivables (R$4.3 million during the six-month periodended June 30, 2007), and exchange rate gains (R$198.7 million during the six-month period endedJune 30, 2007), as well as interest of R$80.6 million during the six-month period ended June 30, 2007totaled R$323.8 million.

Standard & Poor’s and Fitch maintain ratings of our company and our debt securities. On a globalbasis, Standard & Poor’s maintains a local currency rating of our company of ‘‘BB’’ (positive outlook)and a foreign currency rating for our company of ‘‘BB’’ (positive outlook) and on a local basisStandard & Poor’s maintains a rating for our company of ‘‘brA+’’ (positive outlook). On a global basis,Fitch maintains a local currency rating for our company of ‘‘BB+’’ (stable outlook) and a foreigncurrency rating for our company of ‘‘BB+’’ (stable outlook), and on a local basis Fitch maintains anational rating of our company of ‘‘AA (bra)’’ (stable outlook). We have not been informed of anyproposed actions by either of these rating agencies to further modify their ratings on our company orits indebtedness. Any ratings downgrades in the future would likely result in increased interest andother financial expenses relating to borrowings and debt securities and could adversely affect our abilityto obtain such financing on satisfactory terms or in amounts required by us.

Inflation and Exchange Rate Variation

Inflation and exchange rate variations have affected, and may continue to affect, our financialcondition and results of operations, as well as the value of our assets and liabilities in reais.

The following table sets forth, for the periods shown, Brazilian inflation rates and depreciation(appreciation) of the real against the U.S. dollar as measured by comparing the daily exchange ratespublished by the Central Bank on the last day of each period:

Six-month Periods ended June 30, Year ended December 31,

2007 2006 2006 2005 2004

Inflation—IGPM(1) . . . . . . . . . . 1.5% 1.4% 3.9% 1.2% 12.4%Inflation—IPC(2) . . . . . . . . . . . . 2.4% 0.1% 2.5% 4.5% 6.6%Nominal appreciation of the real

against the U.S. dollar . . . . . . 11.0% 8.4% 9.8% 13.1% 8.8%

(1) Based on the Indice Geral de Precos—Mercado (the Brazilian General Price Index—Market), orIGPM, published by the Fundacao Getulio Vargas, or the Getulio Vargas Foundation.

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(2) Based on the Indice de Precos ao Consumidor (the Brazilian Consumer Price Index), or IPC,published by Fundacao Instituto de Pesquisas Economicas, or the Economic Research InstituteFoundation.

A significant percentage of our costs and operating expenses are in reais and tend to increase withBrazilian inflation because our suppliers and service providers in Brazil generally increase prices toreflect Brazilian inflation. Certain of our cost reimbursable contracts, including many of our contractswith the Brazilian public sector, are subject to annual adjustment for inflation based on general orspecific Brazilian inflation indices. However, in periods of sharp volatility in the cost of raw materials,there may be periods before cost increases and decreases are reflected in our service revenue.

Results of Operations

Six-month period ended June 30, 2007 compared to six-month period ended June 30, 2006

The following table summarizes our historical consolidated results for the periods indicated as apercentage of net services revenue.

For the six-month periods ended June 30,

2007 2006

(unaudited)

Net services and sales revenue . . . . . . . . . . . . . . . . . . 100.0% 100.0%Cost of services rendered . . . . . . . . . . . . . . . . . . . . . . (84.7)% (86.1)%

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.3% 13.9%General and administrative expenses (including

directors’ remuneration) . . . . . . . . . . . . . . . . . . . . . (9.8)% (9.2)%Financial income (expense), net . . . . . . . . . . . . . . . . . (1.4)% (2.7)%Income before social contribution and income tax . . . . 4.0% 1.9%

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2% 1.3%

Net Services and Sales RevenueFor the six-month periods ended June 30,

2007 2006

(unaudited)(amounts expressed in millions of reais)

Gross service revenuesDomestic market . . . . . . . . . . . . . . . . . . . . . . . . . . 1,161.0 1,131.5Foreign market . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,364.6 2,141.1

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,525.6 3,272.6

Our net services and sales revenue increased by 8.0% to R$3,440.6 million during the six-monthperiod ended June 30, 2007, compared to R$3,185.9 million during the same period in 2006.

In Brazil, our net services and sales revenue increased by 3.3% during the six-month period endedJune 30, 2007 to R$1,089.3 million, compared to R$1,054.6 million during the corresponding period in2006. This increase was principally caused by growing public and private sector investments ininfrastructure projects, including the following (with revenue figures shown for the six-month periodended June 30, 2007): the Brazilian government’s Light for All Program (Luz para Todos), or Light forAll (lots 1 and 4 in the state of Minas Gerais), a program which was created by the Braziliangovernment to provide electricity services to all rural areas in Brazil (R$111 million); Companhia Valedo Rio Doce’s, or CVRD, Onca Puma mine (R$67 million); Braskem’s Bahia and Alagoas’ facilities

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(R$61 million); sports facilities for the Panamerican Games in Rio de Janeiro (R$54 million); andPetrobras’s PRA-1 oil platform (R$53 million).

Outside Brazil, our net services and sales revenue during the six-month period ended June 30,2007 increased by 10.3%to R$2,351.3 million, compared to R$2,131.3 million during the correspondingperiod in 2006. Revenues earned outside Brazil are earned in U.S. dollars and are converted into reaisusing the exchange rate prevailing on the last day of the applicable period. To minimize the impact offluctuations in exchange rates, we analyze our revenues earned outside Brazil in U.S. dollars, ratherthan in reais. At June 30, 2006, the foreign exchange rate was U.S.$1.00 to R$2.1643, while the U.S.dollar-real exchange rate at June 30, 2007 was U.S.$1.00 to R$1.9262, representing an appreciation ofthe real of 12.4%. The increase in our net services and sales revenue earned outside Brazil primarilyresulted from increased services and sales revenue in Angola (from R$432.3 million for the six-monthperiod ended June 30, 2006 to R$652.0 million for the corresponding period in 2007—principally fromthe Mercados Populares (Popular Markets) project, the Luanda Sul housing and infrastructure project,Peru (from R$191.9 million for the six-month period ended June 30, 2006 to R$316.6 million for thecorresponding period in 2007—related to the IRSA Sul and IRSA Norte tollroad projects and from theOlmos irrigation project) and in the Middle East (from R$6.2 million for the six-month period endedJune 30, 2006 to R$165.5 million for the corresponding period in 2007—related to the Djibouti PortProject).

Our increased revenues in certain markets outside Brazil were facilitated by available financingfrom: Brazilian export credit programs, such as BNDES-EXIM and PROEX-Banco do Brasil(principally Angola and Venezuela), multilateral financial institutions (principally Peru); and in Peru,from pension funds and insurance companies, including through the securitization of future paymentsdue from the Peruvian government (through international financial institutions); as well as from privateinvestors (principally in Angola). Although significant, additional infrastructure investments in emergingmarkets are needed, the availability of viable financing options of these investments has been verylimited. The recent increase in financing alternatives has facilitated our bidding for projects in certainemerging markets, which we believe will enable us to earn additional revenues in these markets.

Cost of Services Rendered

Our cost of services rendered increased by 6.2% to R$2,914.6 million during the six-month periodended June 30, 2007, compared to R$2,743.3 million during the corresponding period in 2006, whichincrease was consistent with our higher net services and sales revenue. This increase was principallycaused by an increase in our construction and engineering services (hiring additional personnel and anincrease in the cost of purchasing raw material) rendered outside Brazil during the six-month periodended June 30, 2007, when compared to the corresponding period in 2006.

Gross Margin

Our gross margin (defined as gross profit divided by net services and sales revenue) increased to15.3% during the six-month period ended June 30, 2007, compared to 13.9% during the correspondingperiod in 2006, primarily as a result of high margin projects in Angola, Ecuador, Panama and in theMiddle East.

General and Administrative Expenses

Our general and administrative expenses (including directors’ remuneration expenses) increased by16.1% during the six-month period ended June 30, 2007 compared to the corresponding period in 2006.This increase was related to an increase in our net services and sales revenue that required us to hireadditional back-office personnel and services, as well as to a 4.0% increase in the rate of inflation inBrazil as measured by the Indice Geral de Precos—Mercado (the Brazilian General Price Index—

37

Market) during the twelve-month period ended June 30, 2007. Given that many of our back-officefunctions are undertaken in Brazil, our general and administrative expenses are particularly impactedby increased inflation in Brazil. In addition, our backlog increased substantially from U.S.$5,496 millionat June 30, 2006, when compared to U.S.$10,708 million at June 30, 2007. In order to increase ourbacklog, we have to invest in market development expenses, including personnel, travel and third partyconsulting and other services, which expenses we generally expense in the period in which we incurthem.

Depreciation and Amortization

As we increased our contract backlog by 73% to R$20,626.0 million at June 30, 2007, compared toR$11,895.0 million at June 30, 2006, we also increased our fixed assets by 68% to R$753.9 million atJune 30, 2007 to R$447.7 million at June 30, 2006. Accordingly, our depreciation and amortizationexpenses increased by 23.6% to R$102.0 million during the six-month period ended June 30, 2007,compared to R$82.5 million during the corresponding period in 2006.

Financial Income (Expenses), Net

CNO’s level of debt (almost all of which is dollar-denominated) remained relatively stable atapproximately U.S.$550 million from December 31, 2005 to June 30, 2007, as did its average cost, withinterest rates ranging from 9.0% to 9.5%. Therefore, the main reason for the significant decrease infinancial expense (net) to R$48.1 million during the six-month period ended June 30, 2007, comparedto R$86.2 million during the corresponding period in 2006, was foreign exchange rate variation, arisingfrom the substantial appreciation of the real to the U.S. dollar.

Investments in Subsidiaries and Affiliates

The effect of investments in subsidiaries and affiliates recorded under the equity method was again of R$3.4 million during the six-month period ended June 30, 2007, compared with a loss ofR$3.8 million during the corresponding period in 2006. This increase is primarily attributable to theeffect of the appreciation of the real against the U.S. dollar during the six-month period ended June 30,2007, on the net assets of our foreign subsidiaries.

Non-Operating Income (Loss)

During the six-month period ended June 30, 2007, we recorded a non-operating loss ofR$5.4 million, compared to non-operating income of R$0.7 million during the corresponding period in2006. This decrease is due to losses that we incurred from the sale of used machinery, vehicles andequipment.

Income Before Income Tax and Social Contribution

Our income before income tax and social contribution increased by 127.9% from R$60.3 millionduring the six-month period ended June 30, 2006 to R$137.4 million during the corresponding periodin 2007, principally as a result of the higher gross profit we earned in 2007.

Income Tax and Social Contribution

Our income tax and social contribution expense increased from R$15.3 million during thesix-month period ended June 30, 2006 to R$77.3 million during the corresponding period in 2007. Oureffective tax rate for income tax and social contribution expenses is 34%. This increase was due to(1) our higher operating profit during the six-month period ended June 30, 2007 and (2) deferredincome taxes that we realized during the six-month period ended June 30, 2007. We also incurredR$44.5 million in deferred taxes during the six-month period ended June 30, 2007.

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Net Income

Net income during the six-month period ended 2007 increased by 2.9% to R$42.0 million,compared to R$40.8 million during the corresponding period in 2006, with income tax and socialcontribution expenses offsetting most of the increase in operating profit in 2007.

Year ended December 31, 2006 compared to the year ended December 31, 2005

The following table summarizes our historical consolidated results for the years indicated as apercentage of net services revenue.

For the year ended December 31,

2006 2005

Net services and sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0%Cost of services rendered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (86.5)% (86.6)%

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.5% 13.4%General and administrative expenses (including directors’

remuneration) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8.4)% (9.0)%Financial income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.2)% 0.2%Income before social contribution and income tax . . . . . . . . . . . . . . . . 4.8% 4.4%

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5% 2.2%

Net Services and Sales RevenueFor the year ended December 31,

2006 2005

(amounts expressed in millions ofreais)

Gross service revenuesDomestic market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,621.4 1,613.4Foreign market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,846.5 4,719.2

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,467.9 6,332.6

Our net services and sales revenue increased by 16.2% to R$7,222.8 million during 2006, comparedto R$6,214.8 million during 2005.

In Brazil, our net services and sales revenue increased by 58.8% to R$2,397.5 million in 2006,compared to R$1,510.2 million in 2005. The increase was due to projects we undertook in the followingsegments: oil and gas (Petrobras)—PRA-1 oil platform (R$362.7 million), hydroelectric—CEMIGs andLight for All (losts 1 and 4 in the state of Minas Gerais (R$229.4 million)), assembly, erection andindustrial jobs (CVRD—R$79.5 million) and Braskem (R$75.6 million); subway lines (Line 2 in theCity of Sao Paulo—R$127.4 million) and a subway line in Rio Janeiro—R$90.3 million); and an airportproject in the City of Rio Janeiro (Santos Dumont)—R$63.3 million.

Outside Brazil, our net services and sales revenue increased by 2.6% to R$4,825.3 million during2006, compared to R$4,704.6 million during 2005. The increase in our net services and sales revenueearned outside Brazil primarily resulted from increased services and sales revenue in: Venezuela (theOrinoco II Bridge—R$381 million; the Caracas Metro Line 3—R$315 million; an irrigation project—R$181 million); Angola (the Luanda Sul housing project—R$231 million in 2006)); the DominicanRepublic (the Pinalito power project—R$174 million); and Peru (the Olmos irrigation project—R$146 million in 2006).

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Our cost of services rendered increased by 16.1% to R$6,248.0 million during 2006, compared toR$5,379.5 million during 2005, which increase was consistent with the increase in our net services andsales revenue. This increase was principally caused by an increase in our construction and engineeringservices (hiring additional personnel and an increase in the cost of purchasing raw material) renderedoutside Brazil during 2006 when compared to 2005.

Gross Margin

For the reasons stated above, our gross margin of 13.1% during 2006 was consistent with our grossmargin of 13.2% in 2005.


Our general and administrative expenses increased by 8.3% to R$603.8 million during 2006,compared to R$557.5 million in 2005. This increase was related to (1) an increase in our net servicesand sales revenue that required us to hire additional personnel and services, and (2) an increase in ourbacklog that resulted in an increase in our marketing development expenses. Our general andadministrative expenses were affected both by an increase in our revenues and by the continuedappreciation of the real to the U.S. dollar during 2006. As a percentage of net services and salesrevenue, our general and administrative expenses decreased from 9.0% during 2005 to 8.4% in 2006.


While our total debt (almost all of it is denominated in U.S. dollars) remained relatively stable atapproximately U.S.$550 million in 2005 and 2006, its average cost also remained stable, with interestrates ranging from 9.0% to 9.5%. Therefore, the main reason that we recorded financial expense (net)of R$15.0 million during 2006, compared with a gain of R$11.4 million during 2005, was the exchangerate variation, arising from the real to the U.S. dollar, as well as to other currencies in the countries inwhich we operate.

Investments in Subsidiaries and Affiliates

The effect of investment in subsidiaries and affiliates recorded under the equity method was a gainof R$7.8 million during 2006, compared with a gain of R$10.9 million during 2005. This decrease wasprimarily attributable to the effects of exchange rate variations on the net assets of our subsidiaries andaffiliates located outside of Brazil.


We incurred a non-operating loss of R$27.0 million in 2005 primarily due to our write-off of aR$22.0 million accounts receivable owed to us from the Angolan government, compared to anon-operating loss of R$19.8 million that we incurred in 2006 that arose mainly from our sale orwrite-off of used machinery and equipment.

Income Before Income Tax and Social Contribution

Our earnings before interest and taxes increased by 33.5% during 2006, and this increase basicallyaccounted for the 26.0% increase in our income before income tax and social contribution in 2006,compared to 2005.

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The increase in our results of operations in Brazil and outside of Brazil in 2006 accounted for ourincrease in our income tax and social contribution. In addition, deferred taxes from 2005 alsocontributed to a higher expense in 2006.

Net Income

Our net income was R$111.6 million during 2006, compared to R$133.9 million in 2005, primarilyas a result of the increase in our income tax and social contribution in 2006.

Year ended December 31, 2005 compared to year ended December 31, 2004

The following table summarizes our historical consolidated results for the periods indicated as apercentage of net services revenue.


2005 2004

(unaudited)

Net services and sales revenue . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0%Cost of services rendered . . . . . . . . . . . . . . . . . . . . . . . . . . . (86.6)% (87.9)%

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.4% 12.1%General and administrative expenses (including directors’

remuneration) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9.0)% (7.1)%Financial income (expense), net . . . . . . . . . . . . . . . . . . . . . . 0.2% 3.5%Income before social contribution and income tax . . . . . . . . . 4.4% 8.3%

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2% 5.2%

Net Services and Sales Revenue


2005 2004

(unaudited)(amounts expressed in millions of

reais)

Gross service revenuesDomestic market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,613.4 1,262.1Foreign market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,719.2 4,590.5

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,332.6 5,852.6

Our net services and sales revenue increased by 8.0% to R$6,214.8 million during 2005, comparedto R$5,754.7 million during 2004.

In Brazil, our net services and sales revenue increased by 19.0% to R$1,510.2 million during 2005,compared to R$1,268.7 million during 2004. The increase was due to an increase in revenue from ouroil and gas projects, including projects for Petrobras (such as the PRA-1 platform, maintenance work inCampos Basin and the Fazenda Alegre gas plant), industrial projects (such as the Carajas mine forCVRD, subways in Rio de Janeiro and Sao Paulo), hydroelectric plants (Tucuruı, Capim Branco, Peixe,Irape and Picada) and certain real estate projects.

Outside Brazil, our net services and sales revenue increased by 4.9% to R$4,704.6 million during2005, compared to R$4,486.0 million during 2004.

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Our cost of services increased by 6.3% to R$5,379.5 million during 2005, compared toR$5,059.4 million during 2004, which increase was substantially consistent with our higher net servicesand sales revenue. This increase was principally caused by higher costs for construction and engineeringservices (hiring additional personnel and an increase in the cost of purchasing raw material) renderedoutside Brazil during 2005 when compared to 2004.

Gross Margin

For the reasons stated above, our gross margin increased from 12.1% in 2004 to 13.4% in 2005.


Our general and administrative expenses, including directors’ remuneration expense, increased by37.4% to R$557.5 million during 2005, compared to R$405.8 million during 2004. The increase is dueto the rise of market development expenses, which went from R$33.0 million in 2004 to R$77.7 millionin 2005.


Our financial income, net, decreased from R$202.9 million during 2004 to R$11.4 million in 2005due to a reduction in exchange rate gains.

Income from Investments in Subsidiaries and Affiliates (expenses)

Our investments in subsidiaries and affiliates increased by 129.8% from an expense ofR$36.6 million during 2004 to an income of R$10.9 million during 2005. The increase is due to anextraordinary write-off of R$29.2 million in our subsidiary Tenenge U.K.


Our non-operating income (loss) decreased by 236.4% to an expense of R$27.0 million during2005, compared to income of R$19.8 million during 2004. These results primarily related to sales ofacquisition rights of an off-shore drilling platform in 2004 and from a R$22 million write-off of assetsin Angola in 2005.

Operating Profit

Our operating profit, after interest income (expenses) and equity results decreased fromR$455.8 million during 2004 to R$300.1 million in 2005 primarily due to a decrease in our financialincome.

Income before Income Tax and Social Contribution

Our income before income tax and social contribution decreased by 42.6% to R$273.1 million,compared to R$475.6 million in 2004, primarily as a result of reduction in exchange rate gains.


Income tax and social contribution decreased from R$161.6 million in 2004 to R$124.1 million in2005 primarily due to the reduction in taxable income.

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Net Income

Our net income decreased 55.6% to R$133.9 million in 2005, compared to R$301.3 million in2004, primarily as a result of losses we incurred from variations in the exchange rates.

Liquidity and Capital Resources

Our principal cash requirements consist of the following:

• working capital needs;

• the servicing of our indebtedness, including guarantees provided in respect of the indebtednessof our finance subsidiary (OOL) and other entities (including Odebrecht Finance);

• advances to suppliers and subcontractors;

• capital expenditures related to investments in operations and maintenance of equipment andfacilities; and

• dividend payments.

Our principal sources of liquidity consist of the following:

• cash flows from operating activities;

• advances from customers;

• short-term and long-term borrowings;

• collection of overdue accounts receivable; and

• sales of non-strategic assets.

During the six-month period ended June 30, 2007, our cash flow was used primarily for investmentin property and equipment and to pay dividends. At June 30, 2007, our cash and cash equivalents,financial investments and short-term marketable securities totaled R$1,646.5 million. In July 2007, wepurchased preferred shares of Braskem in the amount of R$763 million, and at July 31, 2007, our cashand cash equivalents, financial investments and short-term marketable securities totaledR$1,115 million.

Our current assets increased by R$683.9 million to R$4,543.9 million at June 30, 2007 compared toR$3,860.0 at December 31, 2006, largely due to increases in: (1) investments and properties for sale(R$177.0 million of which will be transferred to OOG, a subsidiary of Odebrecht, by the end of 2008);(2) advances to suppliers and subcontractors; (3) cash and cash equivalents, financial investments andshort-term marketable securities; and (4) raw material inventories. While the increase in the advancesto our suppliers and subcontractors and our raw material inventories resulted mainly from newconstruction contracts that we entered into, these new contracts also resulted in a R$178.3 millionincrease in advances that we received from suppliers and subcontractors and for a R$140.5 millionincrease in short-term advances received from our clients. In addition, long-term advances that wereceived from our clients increased by R$625.5 million to R$1,667.9 million at June 30, 2007 comparedto R$1,042.4 million at December 31, 2006.

We record four types of trade accounts receivable in our accounting records: (1) regular;(2) claims; (3) contractual; and (4) overdue.

• Regular trade accounts receivable are mostly short-term receivables arising in the ordinarycourse of our business, and they have historically represented, on average, 70 days of revenue,which our management believes is standard for the construction industry and the markets inwhich we operate.

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• Claims accounts receivables typically relate to amounts due from clients for changes in theoriginal, contracted scope of work. We account for a claim as a receivable in our financialstatements after we enter into an agreement with respect to the amount with our client or, oncertain occasions, when an independent appraiser agrees with our assessment of the likelihoodof our collection and the amount of the claim.

• Contractual accounts receivables relate to contractual obligations that we have not yet invoiced,but have been recorded in accordance with the percentage of completion method for recognitionof revenues for a particular construction project.

• Overdue (trade account) receivables were generated between 1988 and 1994, a period of veryhigh inflation in Brazil, when we, like many Brazilian construction companies, performed workfor Brazilian governmental authorities and state-owned entities, and disagreements aroseregarding the type of indexation to inflation that would be used to adjust amounts owed to us.At June 30, 2007, December 31, 2006 and December 31, 2005, we had R$652.4 million,R$668.0 million and R$710.9 million, respectively, of these overdue accounts receivable. AtJune 30, 2007, our overdue receivables represented 8.8% of our total assets. Most of ouroverdue accounts receivable are the subject of protracted litigation, and in certain cases, we arenegotiating settlement agreements with these clients.

We had consolidated working capital (current assets minus current liabilities) of R$1,562.0 millionat June 30, 2007, compared with consolidated working capital of R$1,118.6 million at December 31,2006. The increase in our working capital is primarily due to increases in our: (1) cash, financialinvestments and short-term marketable securities; (2) investments and properties for sale, (3) advancesto our suppliers and subcontractors; and (4) raw material inventories, in each case, during thesix-month period ended June 30, 2007.

At June 30, 2007, our total debt was R$1,142.4 million, consisting of R$299.9 million in short-termfinancings and R$842.5 million in long-term financings. At December 31, 2006, our total debt wasR$1,175.9 million, consisting of R$272.7 million in short-term financings and R$903.2 million inlong-term financings. Our real-denominated debt at June 30, 2007 was R$92.7 million, and our foreign-currency denominated debt (including the current portion of long-term debt) on this date wasR$1,049.7 million. 11.7% of our total debt at June 30, 2007 was secured by collateral.

The 10% increase in our short-term debt at June 30, 2007 compared to December 31, 2006 wasprimarily due to the reallocation of long-term debt (the portion of long-term debt that became current)to short-term debt in the amount of R$22.8 million, which was partially offset by the appreciation ofthe real against the U.S. dollar during this period. The 6.7% decrease in our long-term debt at June 30,2007, compared to December 31, 2006 was due to the combined effects of: (1) the reallocation ofcertain of our long-term debt to short-term debt; (2) additional equipment financing that we incurred;and (3) the appreciation of the real against the U.S. dollar.

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The following table sets forth, at June 30, 2007, our outstanding principal long-term debt (excludingthe current portion of long-term debt) obligations in foreign-currencies and reais maturing in the yearsending December 31, 2008, 2009, 2010 and 2011 and thereafter.

Maturing by December 31,

2008 2009 2010 2011 and after

(in millions of reais)(1)

Local Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.0 23.0 11.4 1.0Foreign Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3 361.7 19.7 405.4Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.3 384.7 31.1 406.4

(1) Indebtedness denominated in U.S. dollars was translated for convenience only using the commercialselling rate as reported by the Central Bank at June 30, 2007 for reais into U.S. dollars of R$1.9262 toU.S.$1.00. See ‘‘Presentation of Financial and Other Information’’ and ‘‘Exchange Rates.’’

Perpetual Notes

On September 24, 2005, OOL issued 9.625% perpetual notes in an aggregate principal amount ofU.S.$200.0 million, solely outside of the United States pursuant to Regulation S. We provided anunconditional guarantee of the perpetual notes, which have no maturity date but are callable by OOLon its quarterly interest payment dates commencing on the fifth anniversary of their issuance date. Theperpetual notes include covenants that restrict our and our subsidiaries’ ability to create liens and allowus to consolidate or merge with, or transfer all or substantially all of its assets to, another entity only ifwe comply with certain requirements. The perpetual notes do not include any financial covenants.

Medium-Term Note Program

On February 18, 2004, OOL established a medium-term note program that was unconditionallyguaranteed by us, permitting OOL to issue up to U.S.$250.0 million in aggregate principal amount ofnotes with maturities of up to five years from date of issuance. We subsequently increased themaximum aggregate principal amount that OOL would be permitted to issue to U.S.$500.0 million. Asof June 30, 2007, the outstanding principal amount of medium-term notes outstanding wasU.S.$153.4 million (R$295.5 million).

On August 9, 2007, OOL successfully concluded a cash ‘‘exit’’ tender offer and consent solicitationrelating to its U.S.$150.0 million 11.50% notes due 2009, which notes were issued under themedium-term note program. OOL received tenders and consents in respect of U.S.$116,056,000 inaggregate principal amount of notes, representing approximately 77.37% of the aggregate principalamount of the outstanding medium-term notes, not including notes then-held by OOL or its affiliates.Out of this total, U.S.$107,475,000 of notes were tendered (with a ‘‘deemed consent’’ for certainproposed amendments) and U.S.$8,581,000 remained as noteholders but agreed to consent to theseamendments. The notes were amended to conform the covenants and events of default of these notesto the respective covenants and events of default set forth in OOL’s outstanding 9.625%U.S.$200.0 million perpetual notes.

Standby Facility

On May 18, 2006, OOL entered into a U.S.$300.0 million revolving credit facility agreement withcertain financial institutions party thereto, as lenders. We provided an unconditional guarantee of thisfacility. We are entitled to draw amounts under this facility prior to February 2010, unless otherwiseextended by the mutual agreement. Outstanding principal amounts under the facility accrue interest at therate of one-month LIBOR plus 1.15% per annum. A commitment fee is payable monthly on undrawnamounts under this facility at 0.65% per annum. As of June 30, 2007, we had not drawn any amountsunder the facility.

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Norbe VI Credit Agreement

On May 31, 2007, our indirect subsidiary Odebrecht Drilling Services LLC entered into a syndicatednon-recourse credit facility of up to U.S.$430.0 million arranged by ABN Amro Bank N.V. to finance theconstruction and development of the Norbe VI drilling platform. Under this facility, a group ofparticipating international financial institutions have agreed to provide Odebrecht Drilling Services with aseries of loans ranging from U.S.$10.0 million to U.S.$50.0 million, depending on the individualcommitments of each institution under the facility. Odebrecht Drilling Services may only take out two loansper month under this facility for the duration of the construction of the platform. Each loan bears interestat the Eurodollar rate plus a margin ranging from 1.25% to 2.50% per annum, which is adjusted inaccordance with several factors defined under the facility. The facility is secured by, among other things, amortgage on the platform and certain of Odebrecht Drilling Services’ receivables.

In addition, Odebrecht Drilling Services is subject to certain covenants under this credit facility,including maintaining financial ratios (such as debt service coverage ratios), as well as restrictions onindebtedness, investments, liens, mergers and consolidations, asset sales and related party transactions.In addition, the facility sets out restrictions on the use of proceeds from the loans and on theplatform’s construction and maintenance, as well as certain hedging obligations based on theoutstanding amount of principal under the loans.

As of the date of this offering circular, Odebrecht Drilling Services had executed definitive loanagreements under this facility in an outstanding principal amount of approximately U.S.$150.0 million.

Capital Expenditures

Our consolidated capital expenditures totaled R$248.3 million during the six-month period endedJune 30, 2007 and R$92.7 million during the corresponding period in 2006. During the years endedDecember 31, 2006, 2005 and 2004, our consolidated capital expenditures totaled R$560.4 million,R$237.4 million and R$197.5 million, respectively. Our consolidated capital expenditures generally havebeen made to purchase machinery, vehicles and equipments. For the six-month period endedDecember 31, 2007, we have budgeted R$156 million for capital expenditures, and in 2008, we havebudgeted approximately R$395 million in capital expenditures, primarily for investments in machinery,vehicles and equipments.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements.

Market Risk

We are exposed to a number of market risks arising from our normal business activities. Suchmarket risks principally involve the possibility that changes in currency exchange rates or interest rateswill adversely affect the value of our financial assets and liabilities or future cash flows and earnings.Market risk is the potential loss arising from adverse changes in market rate and prices. We enter intoderivatives and other financial instruments for other than speculative purposes, in order to manage andreduce the impact of fluctuations in foreign currency exchange rates. We have established policies andprocedures for risk assessment and approval, reporting and monitoring of derivative financial activities.

A significant level of our liabilities and a large portion of its operating expenses are denominatedin of linked to U.S. dollars or to other foreign currencies. We believe that our exposure to lossescaused by exchange rate variations between the real and the U.S. dollar (or such other currencies) islargely mitigated by the significant level of our revenues from projects outside Brazil in U.S. dollars orother foreign currencies (representing 67.1% of our total revenues during the six-month period endedJune 30, 2007) and its non-Brazilian assets with a book value of approximately U.S$2.0 billion as of

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June 30, 2007. In the event that the real were to devalue by 10% against the U.S. dollar during 2007 ascompared to the real/U.S. dollar exchange rate at December 31, 2006, our financial expenses indexed tothe dollar in 2007 would increase by approximately R$9 million, and our financial income wouldincrease by approximately R$7 million. In the event that the average interest rate applicable to ourfinancial assets and debt in 2007 were 1% higher than the average interest rate in 2006, our financialincome would increase by approximately R$16 million, and our financial expenses would increase byapproximately R$11 million.

We and our subsidiaries participate in transactions involving swap operations for the purpose ofhedging against the effects on the exposure in currency and interest rate fluctuations. On June 30,2007, the nominal value of the outstanding swap totaled R$161.5 million, and income of R$3.4 million.

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BUSINESS

We are the largest engineering and construction company in Latin America as measured by 2006gross revenues. We engage in the construction of large-scale infrastructure and other projects, includingthe construction of highways, railways, power plants, bridges, tunnels, subways, buildings, port facilities,dams, manufacturing and processing plants, as well as mining and industrial facilities. We provide avariety of integrated engineering, procurement and construction services to clients in a broad range ofindustries, both in Brazil and internationally. These capabilities enable us to provide clients, individuallyor as part of a consortium, with single-source, turnkey project responsibility for complex constructionprojects. We concentrate our construction activities on infrastructure projects in Brazil and in severalinternational markets, principally in Latin America and Angola, which include projects sponsored bythe public and private-sector, including concession-based projects.


We believe we are:






Company History

We were founded in 1944 and commenced our operations in the northeastern region of Brazil,where we were active in the construction of industrial plants, warehouses, small dams, highways,buildings and canals. In 1970, we began to expand our operations into southern Brazil, concentratinginitially in Rio de Janeiro with the construction of the headquarters of Petrobras in 1970; Brazil’s firstnuclear power plant, the Central Nuclear de Angra dos Reis in 1971; the Rio de Janeiro internationalairport in 1971; and the Rio de Janeiro State University in 1972. In Peru, we won the contract for theconstruction of the Charcani Hydroelectric Plant in 1979. In the early 1980s, we began to expand ourwork in projects located outside Brazil. In 1984, we began the construction of the CapandaHydroelectric Project on Angola’s Kwanza river, and in 1991 we started the construction of thesouthern extension of the Metromover, part of Miami’s urban mass transportation system. In 1996, theOdebrecht Group reorganized its holdings into two principal business areas: (1) engineering andconstruction through our company; and (2) chemicals and petrochemicals through Braskem S.A. In2004, we began operations in the Middle East, completing two projects in Iraq with the United StatesArmy Corps of Engineers with a total cost of U.S.$86 million.

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Our Competitive Strengths

We believe that our main competitive strengths include the following:

Leadership Position

We are the largest engineering and construction company in Latin America as measured by 2006gross revenues. Our geographic diversification, extensive operations and leading market share in Brazilenables us to capitalize on opportunities as they arise. We are owned by the Odebrecht Group, which isone of the 10 largest Brazilian-owned private sector conglomerates based on gross sales revenue in2006. The Odebrecht Group is also the controlling shareholder of Braskem S.A., the largestpetrochemical company in Latin America, based on average annual production capacity in 2006, andone of the six largest Brazilian-owned private sector industrial companies based on net sales revenue in2006. We are able to take advantage of important synergies between us and our affiliates, such asconstructing facilites for Braskem S.A. in the Brazilian states of Bahia and Alagoas.

Financial Strength

We believe that our financial performance has been consistent, enabling us to rely primarily on ourcash flow from operations to grow our business. Our EBITDA margins (EBITDA as a percentage ofour net sales and services revenue) for the last three fiscal years ended December 31, 2006 were 7.2%,7.3% and 7.6%, respectively. We are focused on maintaining the relatively strong financial position wehave compared to our Brazilian competitors.

Diversification

We have expanded our business internationally in order to broaden our client base and diversifythe risk inherent in relying heavily on the Brazilian market, as well as to increase our revenuedenominated in dollars and other currencies. At June 30, 2007, we had 135 on-going projects:Brazil (75); Angola (23); Venezuela (9); Peru (6); Portugal (5); the Dominican Republic (4); the UnitedStates (3); Ecuador (2); Panama (2); Mexico (2); the Middle East (2); Argentina (1); and Bolivia (1).

The percentage of our gross service revenue derived from international projects increased fromapproximately 30% in 1992 to approximately 67% for the six-month period ended June 30, 2007. Ourdiversification provides us with revenue growth opportunities, while adequately managing our exposureto market and other risks.

Strong and Diversfied Backlog

We define backlog to include contracts that we have signed for a particular project and for whichan identified source of funding exists but have not recognized as revenue. As of June 30, 2007, (1) ourbacklog represented approximately U.S.$10.7 billion or three years of future work and (2) we estimatethat 40% of our total backlog is scheduled to be completed between July 1, 2007 to June 30, 2008. Ourbacklog includes a diversified portfolio of engineering and construction projects among variousinfrastructure sectors, different types of construction works and numerous countries. This diversificationenables us to manage political risks associated with specific economic sectors and countries or regions.

Experienced and Professional Management Team with Strong Entrepeneurial Culture

Our management team has considerable industry experience and knowledge. We provide ourmanagement with ongoing training throughout their careers, and maintain a results-oriented corporateculture, with clear visions and responsibilities. We have decentralized the negotiation andadministration of each of our project contracts. An experienced on-site project manager is responsiblefor administering the implementation of each project contract in accordance with the project’s budget.

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Each of our project managers and other on-site employees is compensated based upon meetingdesignated project milestones and financial targets, which motivate them to meet their project budgets.We believe that planned delegation and decentralized decision-making enable us to better understandand satisfy our clients’ needs.

Our Strategy

We intend to focus on continuing to achieve steady growth and to build our competitive strengthsin order to maintain and increase our leadership in Brazil and selected other international engineeringand construction markets. The principal components of our strategy are:

Managing Political Risk

We have operated for more than two decades in many countries that have significant levels ofpolitical risk. We are currently active in Angola, Argentina, Bolivia, Brazil, the Dominican Republic,Ecuador, Panama, Peru, the Middle East and the United States. In addition, we are seeking furtheropportunities in the Middle East and North Africa (including Libya) and in certain other countries inwhich significant levels of political risk exist. For example, we have established an office in the UnitedArab Emirates and have completed the construction of a port facility in the Republic of Djibouti ineastern Africa for a client located in the United Arab Emirates, and we have just started anotherproject for this client in this port in Djibouti. We attribute our success in countries with significantlevels of political risk to the following competitive strengths:

• In countries in which we operate with significant political risk concerns, such as Latin Americancountries and Angola, we usually bid on and perform projects that are funded under Braziliantrade credit or multilateral agency credit facilities. The Brazilian government offers exportfinancing for construction and engineering services related to projects undertaken in many ofthese countries, which we rely upon as an important source of funding for our projects locatedin these countries, together with support from multilateral financial institutions, including CAF,and the IDB. Our management believes that the higher margins we are able to earn fromprojects in these countries compensate us for the political risks that we may be subject to as aresult.

• We attempt to mitigate political risk through our experience and knowledge of the local marketsin which we are active and by entering into joint ventures with local companies and using localsubcontractors, suppliers and labor. By establishing partnerships with local companies andemploying local subcontractors, suppliers and labor, we attempt to integrate our operations intothe communities in which we operate.

• We generally establish long-term operations in countries in which we are active and seekappropriate project opportunities that meet our rigorous risk management criteria. Ourlong-term presence in countries such as Peru (28 years), Angola (23 years), Ecuador (21 years)and Venezuela (15 years), including during periods of social unrest or war, and our involvementin high visibility projects that are important to a country’s economy and development haveearned us goodwill with the governments of these countries. Accordingly, while otherconstruction companies avoid operating in certain of the countries in which we are active, ourmanagement believes that our extensive experience in these countries, our diversification andour extensive contractual risk assessment and risk sharing with other project participants allowsus to effectively manage the political risks presented by construction projects in these countries.In addition, to help cover certain risks, we have a comprehensive portfolio of insurance policies.

• Our strategy involves concentrating our business into more profitable markets and projects.When our management no longer believes that a particular market continues to meet ourlong-term objectives, we act to close or phase out our operations in these markets. In the 1990s,

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for example, we closed offices in the United Kingdom, Germany and South Africa andsubstantially reduced our operations in Colombia.

Enhancing Human Resources

We will continue to focus on recruiting and retaining motivated and knowledgeable employees. Webelieve that our continued growth and financial success is directly related to the experience of ourconstruction and engineering project managers, as well as our ability to attract and train our otheremployees to develop the skills necessary to manage and execute future projects.

Pursuing International Opportunities

We are the market leader for engineering and construction projects in Brazil, Angola and certainother countries in Latin America and will continue to pursue business opportunities and strategicalliances in selected projects that will improve our market share and competitiveness. We intend toleverage our experience to broaden our presence in selective international markets and to pursue anddevelop growth opportunities in these markets.

Focusing on Complex Large-Scale Construction Opportunities and Concession Projects

We seek to continue to focus on large-scale infrastructure and other complex, tailor-madeconstruction projects in Brazil. We believe there will be significant opportunities in the coming years forus in the Brazilian power, oil, transportation, water supply, sanitation and other infrastructure sectors.We believe that our domestic market knowledge, human and material resources, size, experience andexpertise enable us to continue to compete effectively for large and complex projects in Brazil. Inaddition to infrastructure projects in Brazil, we intend to concentrate our construction activities onconcession-based projects, principally in Latin America.

Offering Our Customers Differentiated Services

We will continue to seek to differentiate our company from our competitors through our capacityto offer our clients a complete range of services in the markets where we operate. Our capabilitiesencompass not only construction expertise and innovations that help to reduce completion time andimprove cost and quality controls but also extend to our substantial experience in arranging financingfor many of our engineering and construction projects.

Principal Subsidiaries

We conduct our engineering and construction operations in more than 15 countries. Our principalsubsidiaries are:

OSEL—Odebrecht Servicos no Exterior Ltd.

OSEL—Odebrecht Servicos no Exterior Ltd., or OSEL, a Cayman Islands company, is a holdingcompany for certain of our offshore subsidiaries, including our Angolan subsidiary.

Bento Pedroso Construcoes S.A.

Bento Pedroso Construcoes S.A., or BPC, is a Portuguese corporation, and was acquired by theOdebrecht Group in 1988. It is involved principally in the construction of public and private works andthe supply of related services in Portugal.

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Odebrecht Construction, Inc.

Odebrecht Construction, Inc., or OCI, a Florida corporation, is involved principally in theconstruction of public and private works and the supply of related services in the United States.

Operations

We have completed various important engineering and construction projects in differentinfrastructure sectors in Brazil, Latin America, Portugal, Angola and the United States.

Engineering, Procurement and Construction Services

We provide a variety of integrated engineering, procurement and construction services to clients ina broad range of industries, both in Brazil and outside Brazil. These capabilities enable us to provideclients, individually or as part of a consortium, with single-source, turnkey project responsibility forcomplex construction projects. In addition to turnkey projects, we provide services pursuant to varioustypes of contractual arrangements, including contracts offered on a fixed-price, unit price, cost-plus andlump-sum basis. To the extent that we undertake projects as part of a consortium, we are often theleader of the consortium, a position that typically involves the largest scope of work and in some casesenables us to exercise greater influence to manage the risks and control the timing and execution of theproject.

As part of our integrated engineering, procurement and construction services, we provide a widerange of basic and detailed engineering services. Basic engineering involves preparation of thetechnological specifications of the project, while detailed engineering involves preparation of thedetailed drawings and construction specifications and identification of lists of materials necessary forthe project. Our complex turnkey contracts frequently require the application of a combination ofengineering disciplines and expertise, including civil, mechanical, chemical and electrical engineering.Each project is coordinated by an experienced project manager, who is assigned a task force ofengineers and personnel with the appropriate expertise necessary for the implementation of the project.

Our integrated engineering, procurement and construction projects often require us to preparetechnical studies and assist clients in selecting the appropriate technologies and, in certain cases, inproviding the technology for the project. We are also responsible for determining the materials andequipment necessary to complete the project and in making arrangements to procure these materialsand equipment. Most projects require that we and our partners in the project provide all of theresources necessary for the project, including technical and administrative personnel, equipment,materials and subcontractors.

We also provide project management services for certain projects, whereby we assume completeresponsibility for the management and supervision of the work being performed by other engineeringand construction contractors and suppliers. To help coordinate our engineering activities, we useadvanced computerized techniques that produce three-dimensional models for design, analysis anddrafting applications.

Heavy and Industrial Construction

We are engaged in the construction, engineering and procurement of various infrastructureprojects and manufacturing and processing plants. Work typically includes demolition, clearing,excavation, drainage, embankment fill, structural concrete construction, erection of buildings andmanufacturing plants, concrete and asphalt paving and tunneling. We concentrate our constructionactivities on infrastructure projects in Brazil and in several international markets, principally in LatinAmerica and Angola, which include projects sponsored by the public and private-sector, includingconcession-based projects.

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The following table sets forth our consolidated gross revenue by contract type for the six-monthperiods ended June 30, 2007 and 2006, and for 2006, 2005 and 2004 (in millions of reais):

For the six-month For the year endedperiods ended June 30, December 31,

2007 2006 2006 2005 2004

(unaudited)(in millions of reais) (in millions of reais)

Contract TypeDams & power plants(1) . . . . . . . . . . . . . . . . . . . . . . . . 572 398 977 969 1,160Transportation(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,306 1,301 2,842 2,825 2,912Building & manufacturing plants(3) . . . . . . . . . . . . . . . . 524 364 823 237 257Assembly & erection(4) . . . . . . . . . . . . . . . . . . . . . . . . . 516 504 1,165 969 377Infrastructure(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608 706 1,661 1,333 1,147

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,526 3,273 7,468 6,333 5,853

(1) Including transmission lines.

(2) Ports and airports, bridges, tunnels and overpasses, roads, highways, railways, subways and masstransportation.

(3) Residential buildings and condos, hotels and resorts, stadiums, hospitals, prisons, schools, theaters,commercial and industrial buildings and governmental buildings.

(4) Industrial assembly, onshore and offshore platforms, oil & gas related works.

(5) Sewage and solid waste systems, water treatment plants, canals and irrigation.

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The following table sets forth our consolidated gross revenue by location for the six-month periodsended June 30, 2007 and 2006, and for 2006, 2005, and 2004 (in millions of reais):

For the six-month For the year endedperiods ended June 30, December 31,

2007 2006 2006 2005 2004

(unaudited)(in millions of reais) (in millions of reais)

LocationBrazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,161 1,132 2,621 1,613 1,263Other Latin American countries . . . . . . . . . . . . . . . . . . . 1,308 1,255 2,786 2,505 1,954United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 149 321 325 398Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 273 652 763 948Angola . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678 457 1,065 1,035 1,078Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 7 23 92 212

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,526 3,273 7,468 6,333 5,853

We have expanded our business internationally in order to broaden our client base and diversifythe risk inherent in relying heavily on the Brazilian market, as well as to increase our revenuedenominated in dollars and other currencies. Selective international expansion is an important goal forus. The percentage of our gross service revenue derived from international projects increased from 30%in 1992 to approximately 65% in 2006. Since 2003, our Brazilian operations have recoveredsignificantly, and our gross service revenue derived from international projects decreased, in relativeterms, from 81% in 2003 to 67% for the six-months ending June 30, 2007.

In the pursuit of our goal of achieving greater balance between domestic and internationallygenerated revenues, we have invested over the past 28 years in increasing our expertise, technology,equipment and human resources that we make available to our international projects. In order tomitigate risks associated with projects located outside Brazil, we seek to undertake projects inconjunction with local partners. We also have established alliances with international constructioncompanies such as Parsons and Haskell in the United States, and ABB, ACS Dragados and Impregiloin Europe, among others. We have consolidated our operations in Europe (mainly in Portugal) and inthe United States (mainly in Florida). In addition, we generally count on financing from multilateralagencies such as the IDB, CAF and the Brazilian National Development Bank (Banco Nacional deDesenvolvimento Economico e Social, or BNDES), among others.

Major Projects

We have played an active role in the development of the infrastructure sector in Brazil andelsewhere in Latin America as well as in Angola, Portugal and other markets in which we have beenactive. As of June 30, 2007, we had a total of 135 projects underway, 60 of which were located outsideBrazil.

Brazil

We currently have a diversified portfolio of projects in a wide range of sectors in Brazil, including:

• Performing maintenance services on Petrobras’ oil platforms located in the Campos Basin(Macae-Rio de Janeiro) and working on the Paulınia Petrochemical Project in Sao Paulo(Braskem/Petrobras);

• Building Petrobras’ office headquarters in Vitoria (Espırito Santo) and working on the PetrobrasREVAP refinery (Sao Paulo) and on the Petrobras Plangas (natural gas production) in Rio deJaneiro;

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• Constructing the Simplıcio Hydroelectric Power Plant (Minas Gerais/Rio de Janeiro), theDardanelos Hydroelectric Power Plant (Mato Grosso), the Baguari Hydroelectric Power Plant(Minas Gerais) and the Sao Salvador Hydroelectric Power Plant (Tocantins);

• Constructing the Goiania Airport in the state of Goias and expanding the Santos DumontAirport in the state of Rio de Janeiro;

• Constructing lots 1 and 4 of the ‘‘Light for All’’ program, in the state of Minas Gerais;

• Working for Companhia Vale do Rio Doce, or CVRD, in connection with several projects,including the Rio das Oncas mine, the Carajas mine and the Litoranea Sul railway;

• Constructing Metro lines 2 and 4 in the state of Sao Paulo and the Ipanema Metro in the stateof Rio de Janeiro;

• Constructing the Rodoanel (Ring Round Highway) in the state of Sao Paulo; and

• Developing the Quintas de Sauıpe Real Estate Project, the Sauıpe Golf Project and building theMundo Plaza (offices and residential), each of them located in the state of Bahia.

Angola

We have an established presence in Angola where we have been operating for over 23 yearsprimarily in infrastructure projects, currently including the construction of: (1) Vias Expressas—ahighway construction program; (2) Luanda Water, a project for supplying water to more than onemillion people in Angola’s capital city and the Luanda Sul Infrastructure Project; (3) the BenguelaWater Project; (4) the Capanda Hydroelectric Project—Phase II, as well as (5) shopping centers,commercial buildings, houses and condos, representing a backlog of approximately U.S.$1.5 billion atJune 30, 2007. During Angola’s 40-year civil war, work on the Capanda Hydroelectric Project (Firstphase) was halted and recommenced twice. There is limited payment risk associated with this project asongoing funding is provided in U.S. dollars by PROEX—Banco do Brasil, a Brazilian government-funded export financing program. We also do not incur any payment risk associated with our otherpublic on-going projects in Angola, which are also funded in part by Brazilian export credit agencies.Under an agreement between Brazil and Angola, amounts advanced by PROEX are repaid by Angolathrough oil exports from Brazil.

Our management believes that increased political stability in Angola following the end of its civilwar, coupled with increasing revenues from oil exports and Angola’s significant existing infrastructureneeds, should provide us with additional opportunities in infrastructure projects in Angola in thecoming years. These factors are coupled with the efforts of the Brazilian government to establish closerrelations with Angola and the Brazilian government’s commitment to increase the volume of Brazilianservice exports funded by export credit facilities.

Venezuela

We have operated in Venezuela for the past 15 years despite political and economic volatilities inVenezuela during this period. We are currently engaged in the following projects: (1) the Orinoco IIIBridge Project (the Orinoco II Bridge Project was finished in 2006), with a total cost ofU.S.$992.0 million; (2) the El Diluvio Irrigation Project, which is being partially financed by BNDES;(3) the Tocoma Hydroelectric Power Plant, which is being partially financed by the IDB; (4) theCaracas Metro—Line 3, Line 4 and Line 5 (this project was recently awarded to us and represents aU.S.$645 million backlog; and the Metro Los Teques, which is being partially financed by CAF.

Our current strategy in Venezuela is to consolidate our work under contract and successfullycomplete that work, while at the same time seeking additional contracts. In order to mitigate the risksassociated with contracts in progress or to be commenced in Venezuela we seek: (1) contracts with

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financing that protect us from exchange rate fluctuations; (2) contracts that have been approved by,and are included in the Venezuelan federal government’s approved budget; (3) projects that areconsidered priorities for Venezuela; (4) contracts that generate (or are expected to generate)substantial employment in Venezuela; and (5) projects that pay us a significant down payment.

Our bid success rate for Venezuelan operations is high and reflects our selectivity in bidding fornew work in Venezuela. We have a large and diversified backlog in Venezuela, which currently ranksthe country, together with Angola, as our two most important foreign markets in terms of futurerevenues.

Other Countries in Latin America

We view Latin American countries as prospective markets for new opportunities where we canleverage Brazilian geopolitical relations and contribute to meeting the significant basic infrastructureneeds in the region. In addition to Venezuela, we currently have a strong presence in Peru, Argentina,Equador, the Dominican Republic, Panama and Mexico. Among our projects in Latin America include:(1) the Trasvase Olmos Irrigation Project, the IIRSA Norte road, the IIRSA Sur road—Tramos 2 and3—and the Melchiorita Port, each located in Peru and representing a total backlog of approximatelyU.S.$494 million at June 30, 2007; (2) the Palomino Hydroelectric Power Plant (U.S.$160 millionbacklog at June 30, 2007), the Samana Aqueduct (U.S.$82 million backlog at June 30, 2007), and thePinalito Hydro Power Plant, each located in the Dominican Republic; (3) the Baba HydroelectricPower Plant, in Ecuador; (4) the recently awarded works in connection with the North and South gaspipelines in Argentina, representing a U.S.$1,848 million backlog at June 30, 2007; (5) the recentlyawarded Maden-Colon road (U.S.$203 million backlog at June 30, 2007) and the Remigio RojasIrrigation Project, both in Panama; and (6) the Hydro-Agrıcola Michoaclan irrigation project and theMinatitlan Refinery, both in Mexico.

United States

We commenced operations in the United States 16 years ago, where we have completedapproximately 50 projects in California, Florida, North Carolina, South Carolina and Louisiana with atotal cost of over U.S.$2 billion. In the United States, we have shifted from contractor to constructionmanagement work and are concentrating our operations in Florida, particularly in connection withlow-risk/low margin projects. This approach enables us to minimize our risk while gaining technicalexpertise in the United States. The largest projects currently in our United States’ backlog are theexpansion of the Miami International Airport South Terminal and the construction of the MiamiInternational Airport North Terminal, a contract with a total cost of U.S.$1.0 billion.

Portugal

Over the last several years, through our subsidiary BPC we have been involved in some of themost important construction projects in Portugal, including the Lisbon Metro and the Lusoponte BridgeProject. BPC has also participated directly in bridge and road concessions covering a total of 459 km,including several large toll-road concessions: (1) Beiras Litoral IP-5; (2) Norace—Auto-estrada Norte;(3) Grande Porto; and (4) Costa da Prata.

Middle East

We completed the construction of a port facility (U.S.$28 million) in Djibouti for a client locatedin the United Arab Emirates, and we were recently awarded the construction of a port containerterminal (U.S.$90 million) located in the same port. In addition, we completed two projects in Iraqwith the United States Army Corps of Engineers with a total cost of U.S.$86 million.

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Backlog

We define backlog to include contracts that we have signed for a particular project and for whichan identified source of funding exists. To include a construction contract in our backlog, we assume thateach party will satisfy all of its respective obligations under the construction contract and payments tous under the contract will be made on a timely basis consistent with historical experience. For contractsthat are not for a fixed price, we estimate and update the related backlog based upon the estimatedamount of work to be completed through periodic consultation with our customer. For projects inwhich we act as project manager, we only include our scope of work in connection with each project incalculating our backlog. For projects related to unconsolidated joint ventures, we only include ourpercentage ownership of the joint venture’s backlog.

Although our internal accounting systems update our backlog data on a consolidated basismonthly, backlog is not necessarily indicative of our future operating results, as backlog figures aresubject to substantial fluctuations. Projects included in backlog are often extremely complex, uniqueand likely to vary in contract value and timing. The termination or modification of one or more largecontracts or the addition of contracts to backlog may have an important effect on our backlog.

As of June 30, 2007:

• Our backlog represented approximately three years of future work at our current rates ofrevenue; and

• We estimated that 40% of our total backlog is scheduled to be completed between July 1, 2007to June 30, 2008.

The following table sets forth our consolidated backlog for Brazil and outside Brazil as of June 30,2007 and 2006, and as of December 31, 2006, 2005 and 2004 (in millions of U.S.$):

As ofJune 30, As of December 31,

2007 2006 2005 2004

(unaudited)(in millions of U.S.$)

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,504 2,436 1,614 1,354Outside Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,204 4,657 2,325 2,334

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,708 7,093 3,939 3,688

From 1989 to 1997, our consolidated backlog reflected an approximately 50⁄50 split betweencontracts to be performed in Brazil and contracts to be performed outside Brazil. Since 1998 and until2003, the progressive devaluation of the realreduced the value in US dollars of contracts to beperformed in Brazil. In addition, the decrease in the percentage of backlog represented by contracts tobe performed in Brazil was also partly due to reduced investments in infrastructure and otherconstruction projects in Brazil from 1998 to 1992. However, these trends have been gradually changingin light of the appreciation of the real against the US dollar and increased investment in Brazil’sinfrastructure.

During the last three and a half years, we have successfully secured important projects not only inBrazil, but also in Argentina, Venezuela, Angola, Peru, the United States, Mexico, the DominicanRepublic, Ecuador, Panama and the Middle East. New projects awarded during the six-month periodended June 30, 2007 had a total cost of U.S.$5,174 million, of which U.S.$654 million is for projectslocated in Brazil and U.S.$4,520 million is for projects located outside Brazil. These projects include:(1) the Petrobras Gas Plant (U.S.$112 million in Rio de Janeiro); (2) the Onca Puma mine (for CVRDin the state of Para, U.S.$109 million); (3) the works in Argentina for its North and South gas pipelines(U.S.$1,872 million); (4) Phase II of the El Diluvio Irrigation Project (U.S.$587 million, in Venezuela);

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(5) the Tocoma Hydroelectric Power Plant (U.S.$ 484 million, in Venezuela); (6) the Vias Expressashighways in Angola (U.S.$417 million); (7) the U.S.$251 million amendment to the North Terminalcontract—Miami Airport; (8) the Maden-Colon road in Panama (U.S.$216 million; (9) new works forthe Luanda Water System (Angola, U.S.$133 million); and (10) the Belas Business II building inAngola (U.S.$87 million).

The following table sets forth our backlog by country and type of contract as of June 30, 2007 (inmillions of U.S.$):

Building/ PowerManufacturing Plants/ Assembly &

Country Transportation Plants Dams Erection Infrastructure Total

(Unaudited)(in millions of U.S.$)

Brazil . . . . . . . . . . . . . . . . . . . . . . . . 676 390 651 733 54 2,504Venezuela . . . . . . . . . . . . . . . . . . . . . 1,710 — 484 — 659 2,853Argentina . . . . . . . . . . . . . . . . . . . . . — — — 1,848 — 1,848Angola . . . . . . . . . . . . . . . . . . . . . . . 556 630 25 — 288 1,499Peru . . . . . . . . . . . . . . . . . . . . . . . . . 437 — — — 118 555USA . . . . . . . . . . . . . . . . . . . . . . . . . 520 2 — — — 522Dominican Republic . . . . . . . . . . . . . . — — 179 — 82 261Panama . . . . . . . . . . . . . . . . . . . . . . . 203 — — — 29 232Mexico . . . . . . . . . . . . . . . . . . . . . . . — — — 99 119 218Ecuador . . . . . . . . . . . . . . . . . . . . . . . — — 94 — — 94Bolivia . . . . . . . . . . . . . . . . . . . . . . . . 29 — — — — 29Portugal . . . . . . . . . . . . . . . . . . . . . . . 23 — — — — 23Middle East . . . . . . . . . . . . . . . . . . . . 70 — — — — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . 4,224 1,022 1,433 2,680 1,349 10,708

Other Activities

Although it is not our core business, we participate in companies that conduct mineral prospectingand exploration in the diamond sector. Our indirect wholly-owned subsidiary Odebrecht MiningServices Inc., or OMSI, holds 16.4% of the Catoca Project, which undertakes prospecting, exploration,treatment and sale of diamonds and other minerals in connection with the Catoca Project (located inthe Luanda Sul Province of Angola). The Catoca Project has been granted permission from theAngolan government to exploit diamonds mined from the Catoca Kimberlite area. In addition, OMSIholds 50.0% of Sociedade de Desenvolvimento Mineiro de Angola, S.A.R.L., or SDM. SDM conductsprospecting, exploration, treatment and sale of diamonds extracted in an area of the HydrographicBasin of Cuango River in respect of which the Angolan government has granted its permission.

Bidding and Contracts

Bidding Rules

We obtain contracts for new projects primarily through competitive bidding in response tosolicitations by government agencies, public announcements by private-sector entities, invitations whenshort-listed for private projects and, to a lesser extent, through direct negotiation. The volume of workgenerally available in the market at the time of the bid, the size of our backlog at the time, the locationand complexity of the project to be executed and the level of competition for the project are all factorsthat may affect our competitiveness in a particular bidding process.

Most contracts for public sector projects in Brazil and in most jurisdictions outside Brazil areobtained through a mandatory competitive bidding process. The bidding process begins with an

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invitation by the public authority to tender bids based on model contractual terms and on a plan settingforth the basic requirements of the project. For each project, potential bidders are required topre-qualify in relation to relevant experience and engineering capability with respect to the type ofproject being considered and in relation to financial wherewithal. Due to our size, experience andengineering capabilities, we generally are able to satisfy most pre-qualification requirements. Proposalsare usually judged on the basis of cost and technical quality. In Brazil, companies are not permitted tobid on public contracts if they have outstanding obligations to Brazilian governmental entities unlessany such obligations are being contested in good faith. To comply with this requirement, wecontinuously monitor our tax payment status and the status of our other obligations due to Braziliangovernment entities.

Contracts for private-sector projects tend to be awarded not only on bid prices and relevantexperience, but also with regard to long-term relationships with the client and to the range of servicesand technical solutions being offered. As part of the shift to private-sector investment in infrastructurefacilities in Brazil and in certain jurisdictions outside Brazil, many Brazilian and international publicand private-sector clients have begun to require that their projects be constructed on a turnkey (lumpsum) basis with financing arranged by the parties participating in the construction of the project. As aresult of the increased complexity of these projects, bids are frequently submitted by consortia. Ourability to win these bids is affected by the relative strengths and weaknesses of our partners in suchconsortium and the ability of the consortium in which we participate to obtain sufficient financing.

Contracts

We principally enter into civil engineering and construction contracts with government entities andgovernment-related entities, such as state-owned utility companies, semi-autonomous railway andsubway companies and private concessionaires of formerly government-controlled infrastructure.General provisions in these contracts tend to be similar, other than with respect to project-specificterms. Historically, many of these contracts have generally provided for payment on a unit price basis.A unit price (which we sometimes referred to as cost reimbursable) contract establishes a price per unitof work for each constituent element of the project, such as per cubic meter of earth or rock excavatedor per cubic meter of concrete poured. Contracts include estimated volumes for each unit priceelement, and our bid price reflects our estimate of the costs that we expect to incur in respect of eachwork unit. In these contracts, we are generally, however, entitled to payment based on actual volumesrequired to perform the work to contractual specifications. The contracting authority therefore assumesthe risk that the volume of units required for the project will exceed the volume estimated in thecontract (that is, that the number of units of work exceeds estimates). We, on the other hand, assumethe risk that our actual cost per unit of work may exceed our estimates used to calculate our bidpricing. Unit prices are generally subject to periodic adjustments for inflation or for changes in pricefor a particular unit of work.

Almost all of our ongoing works are based on fixed-price contracts. Our margins on fixed-pricecontracts may vary from original estimates as a result of changes in costs and productivity over theirterm, such as unanticipated increases in the cost of equipment, materials or manpower due to inflationor unforeseen events, such as client difficulties in obtaining adequate financing or requiredgovernmental permits or approvals, project modifications creating unanticipated costs or delays causedby local weather conditions or suppliers’ or subcontractors’ failure to perform. In addition, wesometime bear the risk of delays caused by unexpected conditions or events, subject to the protectionof standard force majeure provisions and insurance policies contracted for a project. Notwithstandingthe foregoing, our management believes that we have generally been successful in estimating ourproject costs accurately. Moreover, we review budgets periodically to identify any inconsistenciesbetween actual and budgeted costs. If inconsistencies are found, we generally attempt to negotiatehigher contract prices through contract amendments to recover related cost variations. In order to

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further reduce these risks, we seek to negotiate provisions in our contracts which exclude consequentialdamages, cap liquidated damages and otherwise limit our liability, as well as allow for price adjustmentsin the event of change orders or changes in law that increase the scope or cost of a project.

Upon completion of a project, the contracting party typically provides us with a provisional receiptacknowledging completion. During the 60 to 180 days that follows, the project is tested, and we may berequired, if necessary, to make repairs or alterations necessary to bring the project into compliancewith contract specifications. When the counterparty is satisfied with this process, it issues a definitivereceipt that acknowledge its acceptance of the completed project. We generally are required toguarantee our workmanship for a certain period of time after definitive acceptance of the project. Forexample, Brazilian law provides that the construction company remains responsible for a five-yearperiod following definitive acceptance of the project for any latent defect in the project. To date, wehave not experienced any claim in Brazil regarding defects in any of our completed public sectorconstruction projects following issuance of a definitive receipt. Outside Brazil, our contracts generallyprovide for a one-year warranty period following completion and testing.

In general, final payment under contracts is made following acceptance of the completed project.Many unit price and fixed-price contracts also provide for periodic payments to the contractor uponmeeting certain pre-agreed milestones. Under Brazilian law, construction companies providing servicesto Brazilian government or its agencies pay income taxes on a cash basis (when revenue is actuallyreceived).

Certain contracts to which we are a party deviate from the provisions described above. Forexample, certain contracts include requirements to purchase certain goods and services locally and maybe governed by the local law of the jurisdiction in which the project is located. Our engineering andconstruction contracts also frequently contain advance payment provisions (which is a risk mitigationmeasure) and often require performance bonds, letters of credit and/or performance bonds to coverperformance and potential labor claims.

Insurance and Guarantees

One of the tools that our management applies to mitigate risks associated with our operations foreach project is to obtain risk management advice, insurance and guarantees from Odebrecht Corretorade Seguros Ltda., or OCS, a wholly-owned subsidiary of Odebrecht. OCS operates as an in-housebroker in respect of insurance policies and surety bonds for our projects within Brazil. For projectsexecuted outside Brazil, OCS works together with several international insurance companies, includingMarsh, Inc. as its international insurance and surety broker, and American International Group (AIG),Chubb International Surety, Swiss Reinsurance Company, Zurich Group and Zurich North America assome of its surety companies. We follow OCS’ guidelines on insurance guarantees. These guidelinesrequire insurance policies to cover multiple risks, such as property and construction all-risk (includingenvironmental, geological and force majeure events), third party liability, personnel, life and equipment.These guidelines also recommend that the purchase of additional insurance be considered on acase-by-case basis.

We are also required, in the majority of the markets in which we operate, to provide aperformance bond to guarantee the completion of our contracts. Outside the United States, themaximum level of such guarantees varies from 5.0% to 30.0% of the total value of the contract. Incontrast, in the United States, such guarantees ordinarily cover 100% of the total value of the contract.Guarantees for companies in the Odebrecht Group can be provided through two different methods:

• posting a surety bond; and/or

• providing standby letters of credit.

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Following OCS’ guidelines on insurance guarantees, we generally prefer to use and post a suretybond. If we post a surety bond, the bond will remain in place for the entire term of the contract,including the maintenance period (typically one year) following the completion of construction.However, the specific terms of each performance bond are individually negotiated and therefore mayvary.

The Odebrecht Group has an approximate U.S.$3.5 billion revolving surety bond facility availableto companies in the Group for performance, retention, maintenance, advance payment and other typesof surety bonds customarily given on behalf of contractors operating outside Brazil and increasingly,within Brazil. The Odebrecht Group allocates costs under this facility to Odebrecht Group companies’on-going projects on a pro-rata basis based on the aggregate amount of surety bonds used by theseprojects.

We may also enter into indemnity agreements with joint venture partners or other members of aconsortium in order to attempt to limit our liability.

On September 19, 2007, the Inter-American Development Bank, or IDB, approved a partial creditguarantee of U.S.$200 million for the American International Group, or AIG, covering up to 50% ofits net exposure to a portfolio of surety bonds for existing and new eligible projects undertaken by usand our subsidiaries in various IDB borrowing member countries in Latin America and the Caribbean.

In the construction industry, a contractor’s historical technical performance and level of successmay be judged based on claims filed and paid by insurance companies on contract fully or partiallycompleted by the contractor. From 1990 through June 30, 2007, we had completed approximatelyU.S.$12 billion of successful bonded contracts without Odebrecht’s surety bond providers having had topay any claim in relation to work performed by us or our subsidiaries.

Contract Administration and Dispute Resolution

To reduce the aggregate volume of our overdue receivables, we have decentralized the negotiationand administration of our construction contracts to the project manager and other personnel directlyinvolved with each contract. The project manager is responsible for the day-to-day management of theproject and is required to submit (and update periodically) to management a detailed action plan forthe project that outlines each step along the critical path of completion for the project. We believe thatthis decentralization, or planned delegation, enable us to effectively manage project costs and resolvingmost disputes with the project owner on an informal basis.

Supplies

Our principal raw material supply needs include cement, steel, explosives, fuel and timber. Webelieve that there are a sufficient number of suppliers for these materials in Brazil and in the othermarkets in which we operate. We are not dependent on a single supplier (or a small number ofsuppliers).

Since 1992, we have entered into non-exclusive, master supply contracts with certain largeinternational suppliers of equipment and other suppliers that we use, including Caterpillar, Komatsu,Atlas Copco, Dynapac, Volvo, Liebherr, Ingersoll-Rand, Herrenknecht and others. In effect, thesearrangements are in the nature of ‘‘requirements’’ contracts: so long as quality is maintained, prices arecompetitive, schedules are met and performance specifications are achieved, we intend to buy ourrequirements for certain types of equipment from these suppliers. We work closely with these suppliersin order to achieve: (1) just-in-time delivery of necessary equipment when feasible and warehousing ofequipment by suppliers if we do not require immediate delivery; (2) preferential and faster supplierresponse to specific equipment needs; (3) cost savings from high volume purchases and improvedpayment conditions; and (4) on-going relations with important international suppliers.

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Competition

We are the largest engineering and construction company in Latin America as measured by 2006revenues. According to ENR, we were ranked (by total revenues in 2006) as the 49th leading WorldGlobal Contractors and 21st among the leading World International Contractors (considering onlyrevenues outside the contractor’s home country). Most of our ongoing construction projects wereawarded through a competitive bidding process. While price generally is the most important factor thatdetermines whether we will be awarded a contract through competitive bidding procedures, otherimportant factors in competitive bidding procedures include health, safety and environmental protectionrecords, service quality, technological capacity and performance, as well as reputation, experience,access to funding sources and client relationships. In some cases, we can even be invited by one of ourcompetitors to joint-venture with it in a particular project. The number of competitors for a contractwill depend on a number of factors, including scale, complexity and scheduling of the project. In Brazil,our principal competitors include Andrade Gutierrez S.A, Camargo Correa S.A, Queiroz Galvao S.Aand Construtora OAS Ltda. A variety of other companies may bid on specific types of projects or onprojects in specific regions of Brazil, but we believe that we have a competitive advantage with respectto other Brazilian engineering and construction companies as a result of our experience, reputation,capacity, efficiency, trained personnel, size, financial resources and technological capabilities.

We also face competition from international construction companies in Brazil as a result ofliberalization of Brazilian government rules that had previously limited foreign competitors. Theparticipation of international companies in the Brazilian market has typically been through consortiathat include a local partner. While international firms are seeking to increase their presence in theBrazilian construction industry, we believe that domestic players benefit from better knowledge of localmarket practices, business relationships with local suppliers and labor, established client relationshipsand reputation and name recognition within the industry and Brazil. Depending on the project, we mayalso enter into consortia with other Brazilian companies, including with our principal competitors.

Internationally, we generally compete with some of the largest contractors in the world, as well aslocal firms based in some of the markets in which we operate. We believe that we are able to makecompetitive bids in Brazil and internationally for three principal reasons. First, our engineeringcapabilities and experience enable us to accurately assess the nature and extent of the work required tocomplete projects, to create efficient engineering plans and, on occasion, to offer more cost-effectivealternatives to proposed plans of governmental authorities in invitations for bids. Second, ourdecentralized management approach has generally allowed us to efficiently manage projects. Third, ourprojects are often eligible for funding from the Brazilian government for service exports and frommultilateral financial institutions.

Employees

As of June 30, 2007, we had 38,945 employees, 17,104 of whom were employed in Brazil and21,841 of whom were employed outside Brazil. A significant percentage of our non-managementemployees were members of unions. We believe that we have good relations with our employees andthe unions to which our employees belong.

As part of our human resources policy, we provide all employees with life and health insurance.We and our subsidiaries have entered into an agreement with ODEPREV—Odebrecht Previdencia, orODEPREV, a private pension fund established by Odebrecht, as plan sponsor. ODEPREV offers itsparticipants an optional plan, which is a defined contribution plan in which monthly and periodicparticipant contributions and annual and monthly sponsor contributions are made to individual pensionsavings accounts. Prior to October 2003, in addition to the optional plan, ODEPREV offered a basicplan, which covered life and disability risks that were fully covered by insurance companies, while theinsurance premium was paid by us. On October 1, 2003, the Secretaria de Previdencia Complementar (a

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Brazilian federal government authority responsible for the supervision of pension funds in Brazil)agreed with our request to cancel the basic plan. We replaced the basic plan with a life insurance planunder the same terms and conditions.

The Board of Trustees of ODEPREV annually the plan’s cost and the parameters for contributionsto be made by the participants and their employers. With regard to the payment of benefits defined inthe Optional Plan, the actuarial liability of ODEPREV is limited to the total value of the quotas heldby its participants, and as a defined contribution plan, there may be no obligation or responsibility fromthe sponsoring company to ensure a minimum level of benefits to retiring participants. Thecontributions of our company and our subsidiaries for 2006 amounted to R$7.9 million (the sameamount for 2005).

Property, Plant and Equipment

As of June 30, 2007, the net book value of our property, plant and equipment was R$753.9 million(U.S.$391.4 million). We believe that all of our facilities and equipment are in good operatingconditions.

The engineering and construction business requires extensive production equipment andspecialized machinery. Production equipment includes tractors, trucks, cranes, asphalt and concreteproduction equipment, tunnel-boring machines, drilling tractors and topography equipment. In recentyears, we have emphasized the use of multi-purpose equipment, which can be used in multiple projects.Specialized machinery tends to be specifically designed and limited for use in a particular project. Wepurchase equipment, lease equipment and enter into sale-and-leaseback arrangements, as we deemappropriate.

Taxes

Income Tax

We are generally subject to Brazilian federal income tax at an effective rate of 25.0%, which is thestandard corporate tax rate in Brazil. As of June 30, 2007, we had deferred income tax credits totalingR$103.9 million (recorded as current and long-term assets).

Social Contribution on Profit

We are subject to a federal contribution on profits at an effective rate of 9.0%, the standard ratein Brazil. The rate fluctuated between 9.0% and 12.0% in 2000 and has been 9.0% since January 1,2001. This tax is not deductible for federal income tax purposes.

Other Taxes

We are subject to a number of Brazilian and foreign taxes in addition to Brazilian corporateincome tax and the social contribution tax, some of which are described below.

Contribution for Social Security Financing and Social Integration Program (COFINS/PIS)

COFINS finances special social programs through the collection of a federal tax on gross revenue.COFINS was previously charged on a cumulative basis at a rate of 3.0% of our gross revenue, and wassubsequently increased to 7.6% of our gross revenue. However, the effective increase in the tax rate forour company is much lower than 7.6% due to a change in the methodology for calculating COFINSthat went into effect simultaneously with the tax increase. Under the current methodology, COFINS ischarged on a non-cumulative basis, meaning that we may deduct a ratable portion of certain creditsrelated to materials and other costs from our gross revenue, thereby effectively lowering our effectivetax rate.

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PIS finances special social programs in Brazil through the collection of a federal tax on grossrevenue. PIS may be charged on a cumulative or non-cumulative basis, depending on the type ofactivities performed by the taxpayer. A taxpayer may be subject to both taxation regimes, in case theydevelop different kinds of activities. We pay PIS on a non-cumulative basis at a rate of 1.65%.

Provisional Tax on Bank Accounts

CPMF, is a provisional tax imposed on all financial transactions involving the transfer of fundsfrom a bank account in Brazil. The CPMF tax rate has fluctuated between 0.2% and 0.38% since theadoption in 1997, and since March 18, 2001, the rate has been 0.38%. The Brazilian Congress hasextended the applicability of this tax until December 31, 2007 and is now discussing an additionalextension.

Legal and Regulatory Matters

Litigation and Other Adversarial Dispute Resolution

We are involved in a number of legal and arbitration proceedings arising in the ordinary course ofour businesses. This litigation includes, among others, civil litigation regarding property damage andother similar claims, and litigation brought by former employees. Our management does not believethat any of these proceedings would have a material adverse effect on our operations of financialcondition in adversely determined against us or our subsidiaries. We are also involved in several classactions (acoes civis publicas and acoes populares) arising in the ordinary course of our business, relatedto the construction services we render to the government. Our management does not believe any ofthese proceedings would materially affect our operations or financial condition.

As of June 30, 2007, we had recorded an aggregate provision of R$113.8 million in our currentand long-term liabilities to cover: (1) legal indemnity expenditures related to employee terminationcosts, which is not unusual in our line of business, with the provision based on our history of similardisbursements and the opinion of our external counsel; and (2) expenses related to labor, tax and civilclaims that have little chance of a favorable outcome, according to our management and external legaladvisers. In addition, we and our principal subsidiaries are party to labor, civil and tax claims in theapproximate aggregate amount of R$281 million for which we have not recorded any provision forlosses, because, in the opinion of our management and our legal advisers, a decision in connection withthese claims is likely to be favorable with no resulting material losses related thereto.

Regulatory

The construction sector in Brazil is not regulated by a particular federal or state agency. We mustregister each contract on which we commence work with the applicable Regional Council ofEngineering and Architecture (Conselho Regional de Engenharia e Arquitetura). In addition, we arerequired to obtain all necessary licenses (excluding environmental licenses, which are generally obtainedby the project owner) related to each project that we perform in Brazil as a condition ofpre-qualification. In relation to work performed outside Brazil, we are obliged to comply with allapplicable regulations imposed on local and state level and to obtain all necessary permits.

Environmental Matters

We enter into a large portion of our contracts with public sector entities. Pursuant to applicablelaw in Brazil and in other jurisdictions in which we operate, environmental studies and licenses arerequired as conditions to the commencement of the bidding process for public sector projects. Private-sector projects are likewise subject to similar requirements with studies and licenses required beforeany construction is authorized. Large infrastructure construction projects are also sometimes subject tostricter standards imposed by international agencies such as the World Bank and the IFC. Such studies

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and licenses are commissioned and obtained by the project owner (a government authority or a privateentity).

We believe that, to the extent applicable to us and to our project operations, we are substantiallyin compliance with the parameters set forth in these licenses and studies and do not anticipatesignificant difficulty in maintaining our ongoing compliance with environmental regulations. In addition,a substantial portion of our business is carried outside Brazil, in some cases under stricter and broaderenvironmental regulations than those imposed by Brazil. Our management is not aware of anyenvironmental actions or claims that are pending or threatened against us or our subsidiaries that couldhave a material adverse effect on our operations of financial condition on a consolidated basis.

Safety

Our policy establishes that the management is in charge of each project is primarily responsible forcompliance with our company’s requirements and the performance targets concerning protection andsafety of all our workers. The same requirements apply equally to our subcontractors and partners oneach of our construction contracts.

Our occupational health and safety management system was OHSAS 18001 Certified by theBureau Veritas Quality International initially on December 12, 2002. Subject to the continuedsatisfactory operation of our safety management system, this certification is valid for a period of threeyears. Revalidation of our safety management system certification occurred in August 2005. OHSAS18001 certification requires us to be proactive in identifying potential hazards and evaluating andcontrolling work-related risks. Certification and compliance with international standards foroccupational health and safety practices allows us to reduce risk, remain in compliance with legalrequirements and improve our overall performance.

Corporate Reorganization

We believe that one of the main drivers of our future growth both in Brazil and abroad will besynergies between us and the Odebrecht Group, with an emphasis on (1) engineering and constructionagreements for infrastructure projects with Private and Public Partnerships (Parcerias Publico-Privadas),or PPPs and (2) projects in the oil and gas and real estate industries, in which the Odebrecht Groupmay participate as an equity investor.

More than U.S.$1 billion of our existing portfolio of engineering and construction agreementsoriginated from equity interests held either by us or by other companies in the Odebrecht Group.

Because our management intends to continue to focus on the engineering and constructionbusiness, we are currently undergoing a corporate reorganization involving the transfer of certain assetsand equity interests in our infrastructure, oil and gas and real estate businesses to other companies ofthe Odebrecht Group, which are or will become subsidiaries of Odebrecht. As part of this ongoingcorporate restructuring, the following two Brazilian limited liability companies have been established assubsidiaries of Odebrecht: (1) OII, which has been focusing on the infrastructure sector; (2) OOG,which has been focusing on the oil and gas industry; and (3) OEI, a current subsidiary of CNO, OEI,which has been focusing on the real estate sector. Prior to the end of 2008, OEI will become asubsidiary of Odebrecht.

OII

In June 2005, Odebrecht formed OII to act as the Odebrecht Group’s investment vehicle ininfrastructure projects that require sponsor equity support. The principal objectives of OII are: (1) toinvest in projects that offer attractive risk-return profiles, such as ‘‘build, own, operate and transfer’’concessions and PPPs, in the energy, transportation, water and sanitation industries; (2) to focus on

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infrastructure opportunities in markets that have well-developed legal and regulatory systems; (3) tohave us as its preferred but not exclusive contractor with full responsibility for related completion risks;(4) to attract potential strategic and financial partners to act as operators, and that have technologicalexpertise and/or capital; and (5) to offer a variety of sophisticated legal and financial structures,including the efficient allocation of risk among project participants and the ability to use differentfinancing sources, such as multilateral and other development agencies, commercial banks, capitalmarkets and insurance companies.

OII currently has projects located in several, different countries and at different stages ofdevelopment. In addition, OII currently has projects that are under analysis and development in Brazil,Peru, Ecuador, Panama, Portugal and Angola. OII currently holds equity interest in the followingprojects:

TotalEquity Total Equity

Total Estimated Equity OII Invested InvestedInitial Concession Project to be Investment Shareholding up to up toYear of Period Cost Invested Period (total June 30, June 30, CurrentEquity (No. of (in (in (No. of equity 2007 (in 2007 (in Stage of

Project Investment Country Industry years) millions) millions) Years) capital %) millions) millions) Development

Saneamento Rio Claro . 2006 Brazil Sanitation 30 R$131 R$14 5 54.0% — R$4 Structuring

Concessionaria Jaguaribe . 2006 Brazil Sanitation 18 R$264 R$26 2 95.0% — R$3 Structuring

Trasvase Olmos . . . . . 2004 Peru Irrigation 20 R$500 R$40 3 65.0% R$244 R$24 Construction

Norte: 32.4%.Highway Sur T2:

IIRSA Norte, IIRSA Sur, with tolls 45.0%. SurTramo 2 and IIRSA (1,655 T3: 45.0%Sur, Tramo 3 . . . . . 2005 Peru km) 25 R$1540 R$75 4 (1) R$590 R$34 Construction

Capivari . . . . . . . . . 2007 Brazil Sanitation 22 R$51 R$5 2 90.0% — — Structuring

Highwaywith

Via Parque (Praia do bridgePaiva) . . . . . . . . . 2006 Brazil and toll 30 R$66 R$33 — 99.0% — — Structuring

(1) In addition, we hold 17.4% of the total equity interests of IIRSA Norte and 25.0% of the total equity interest of both Tramo 2 and Tramo 3.

Other projects, certain of which are currently under construction, are recorded on our balancesheet and on the balance sheets of certain of our affiliates. We have already transferred our equityinterest in the Capivari project to OII, and we expect to transfer our equity interests in the followingprojects to OII beginning in October 2007.

Total Odebrecht NetInitial Year Concession Project Shareholding Current Total Revenues Incomeof Equity Period (No. Cost (in (total equity stage of Assets (in (in before Tax

Project Investment Country Industry of Years) millions) capital %) Development millions) millions) (in millions)

Water andAguas de Limeira . . . 1995 Brazil Sanitation 30 R$61 100.0% Operating R$57.5 R$26.7 R$7.3

Lumina Engenharia EnvironmentalAmbiental Ltda. . . . 2004 Brazil Engineering — — 100.0% Operating R$111.6 R$5.4 R$6.8

Rio das Ostras . . . . . 2007 Brazil Sanitation 17 R$348 100.0% Structuring R$0.01 — —

The total project cost of OII’s infrastructure projects, including projects in development,construction and operating are currently projected to amount to R$3 billion and are currently projectedto require equity infusions from OII in the total amount of R$163 million (which includes R$35 millionto be invested in Rio das Ostras) during the next two years. Debt raised for the projects is generallynon-recourse and investment grade.

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OOG

In November 2006, OOG, a subsidiary of Odebrecht S.A, was incorporated to undertake projectsin the oil and gas industry. The principal objectives of OOG are to focus on investments in the oil andgas segment to: (1) develop and operate oil fields in Brazil, Latin America and Africa; and(2) construct and lease ships and oil drilling platforms in Brazil.

The demand for energy must significantly increase in the next 20 years as a result of consistentworldwide growth. Most of this increased demand for energy is expected to be supplied by fossil fuel.Due to restrictions in certain countries, such as Iraq, Iran and Saudi Arabia, to make onshoreinvestments, there is strong growth potential for investments in deep-water oil drilling, which we believewill significantly increase the capacity of semi-submersibles and drilling vessels with record utilizationrates.

Because of the current strong demand for energy and a deficit of companies that develop andoperate oil fields, OOG will seek to provide integrated solutions for the oil and gas industry, fromengineering and offshore services to the development of oil fields.

OOG intends to operate through long-term agreements with leading companies, particularly inBrazil, Venezuela and Angola.

OOG will own and operate Norbe VI, a 2,000 meter deep offshore drilling platform that iscurrently being constructed by a third party. The total cost is estimated to be approximatelyU.S.$530 million, of which U.S.$430 million is being financed by several financial institutions through a10-year non-recourse project financing. This platform is expected to be ready within approximatelythree years and will be chartered to Petrobras pursuant to a seven-year lease agreement that has beenexecuted and that subsequently may be renewed for an additional seven year period. This project willrequire R$200 million of equity investment, of which 90% has already been invested. As of June 30,2007, this asset was recorded on our balance sheet under the line item ‘‘Investments and Real EstateProperty to be Sold,’’ in the amount of R$177.0 million (U.S.$91.9 million), and we expect to transferthis asset to OOG prior to the end of 2008.

Another oil and gas asset recorded on our balance sheet is our equity interest in North SeaProduction Company (NSPC). In 1995, we, indirectly through our subsidiary, Tenenge UK, entered intoa partnership agreement with A.P. Moller-Maersk Group a Danish company, to construct the FloatingProduction Storage and Offloading (FPSO) Vessel MacCulloch, which would be leased to the ConocoOil Company. As of June 30, 2007, we recorded this equity interest in our balance sheet under the lineitem ‘‘Fixed Assets’’ in the amount of R$18.0 million (U.S.$9.4 million), and we expect to transfer thisasset to OOG prior to the end of 2008. The result of our equity interests in NSPC as of June 30, 2007was R$4.2 million and at December 31, 2006 was R$8.4 million.

We also expect to transfer to OOG, prior to the end of 2008, a project currently being developedunder the name ‘‘Bloco 16’’, which is being drilled in an oil field in Angola with total assets ofapproximately R$19.1 million. In addition, we intend to transfer to OOG a contract with Shell doBrasil S.A. to construct an oil platform under the name ‘‘Plataforma Itapua’’ and certain other assetsthat are currently owned by us. As of June 30, 2007, these assets totaled approximately R$11.5 millionand generated net revenues of R$13.9 million and a loss before taxes of R$1.0 million. AtDecember 31, 2006, these assets totaled approximately R$11.3 million and generated net revenues ofR$9.6 million and income before taxes of R$2.9 million.

OEI

OEI is currently one of our subsidiaries and was incorporated to focus on the real estate industryin Brazil. The Brazilian real estate industry is currently experiencing strong growth due to:

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(1) improved macro-economic conditions; (2) expansion of the mortgage industry; (3) a reduction ininterest rates; and (4) a housing deficit.

We intend to transfer our equity interest in OEI to Odebrecht by the end of 2008. OEI currentlydoes not have its own assets, as all of Odebrecht’s real estate developments are now undertaken byCNO. At June 30, 2007, the projects we intend to transfer to OEI had net revenues of R$98.1 million(R$99.3 million at December 31, 2006), total assets of R$151.2 million (R$102.9 million atDecember 31, 2006), income of R$24.1 million (R$9.0 million at December 31, 2006) and a backlog ofR$542 million.

We also have several other real estate projects under consideration, including projects underanalysis in the following cities in Brazil: Recife (Resort Reserva do Paiva, in the pre-construction stage),Salvador, Rio de Janeiro and Sao Paulo.

Odebrecht also entered into a 50/50 joint-venture called Bairro Novo with Gafisa, one of thelargest residential real estate developers in Brazil, to jointly develop, manage and built residentialprojects targeting the middle-low segment (low income groups). This economic group representsapproximately 80% of the number of houses and more than 90% of the housing deficit (6.5 millionunits) in Brazil. Projects will target families with a monthly income of up to 7 times the Brazilianminimum wage and that depend on special financial products from public and private financialinstitutions to finance the purchase of the real estate.

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THE ISSUER

Odebrecht Finance Ltd. is a wholly-owned subsidiary of Odebrecht S.A. and was incorporated inthe Cayman Islands as an exempted company with limited liability on January 30, 2007 for an unlimitedperiod. The registered office of the issuer is located at the offices of M&C Corporate Services Limited,P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands.

Odebrecht Finance Ltd. is governed under the laws of Cayman Islands registered and filed onnumber 181323. According to its laws, in a company limited by share as the Issuer, the liability of eachmember is limited to the amount from time to time unpaid on such member’s shares. The share capitalof Odebrecht Finance is 1,500,000.00 divided into 1,500,000 shares of a par value of US$1.00 each.

The object for which the Company is established are unrestricted and without limitation, include toenter into and conduct financial transactions to participate in pension funds, and the company shallhave full power and authority to carry out any object not prohibited by the Companies Law (2004Revision) or as the same may be revised from time to time or any other law of Cayman Islands, asreferred in its Memorandum of Association.

The issuer does not have subsidiaries or proportion of participation in any undertaking.

The issuer is not required by Cayman Islands law to publish, and has not published, financialstatements for any period. The directors of Odebrecht Finance Ltd. are Adriano Chaves Juca Rolim,Alvaro Pereira Novis, Marcelo Bahia Odebrecht, Newton Sergio de Souza and Paulo Henyan YueCesena.

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MANAGEMENT

Management of CNO

Pursuant to our by-laws (estatuto social), and Brazilian Corporation Law, we are currentlyadministered by our executive officers (Diretoria). We currently have 11 executive officers. Ourexecutive officers are responsible for determining our operating policies and guidelines for our businessand our subsidiaries. We do not have a board of directors.

Each of our executive officers is elected for a two-year term and is eligible for re-election. Each ofour executive officers was elected at our general shareholders’ meeting held on April 27, 2007. Ourarticles of association do not include any citizenship or residency requirements.

Our management structure also includes regional managers who have responsibility for thedifferent regions in which we operate. Project managers are appointed to manage individual projectsand are given a high level of autonomy to, among other responsibilities, manage allocated projectsindependently, select equipment and personnel, contract for insurance and arrange for financing. See‘‘Business—Contract Administration.’’

The following table sets forth the names and positions of our current executive officers.

Name Position

Marcelo Bahia Odebrecht . . . . . . . . . . . Chief Executive OfficerPaulo Oliveira Lacerda de Melo . . . . . . . Vice-PresidentAdriano Chaves Juca Rolim . . . . . . . . . . Executive OfficerBenedicto Barbosa da Silva Junior . . . . . Executive OfficerCarlos Jorge Hupsel de Azevedo . . . . . . Executive OfficerPaulo Henyan Yue Cesena . . . . . . . . . . . Chief Financial OfficerCarlos Roberto Mendonca Alves Dias . . Executive OfficerHenrique Serrano do Prado Valladares . . Executive OfficerJoao Antonio Pacıfico Ferreira . . . . . . . . Executive OfficerMarcio Faria da Silva . . . . . . . . . . . . . . Executive OfficerMarcos Luiz Abreu de Lima . . . . . . . . . Executive Officer

Summarized below is information regarding the business experience, areas of expertise andprincipal outside business interests of each of our executive officers:

Marcelo Bahia Odebrecht—Mr. Odebrecht joined us in 1992. He holds a degree in civilengineering from Universidade Federal da Bahia, a master in finance from Pontifıcia UniversidadeCatolica do Rio e Janeiro and a masters degree in business administration from the Institute forManagement Development (IMD) in Switzerland. In 1998, he was appointed Business Developmentand Investment Director of Odebrecht Quımica S.A. In January 2002, he was appointed as our chiefexecutive officer.

Paulo Oliveira Lacerda de Melo—Mr. Lacerda has been our executive officer responsible forBrazil since 1996. He previously served as the chief executive officer of Tenenge Overseas Corporationfrom 1993 to 1996 and acted as our officer responsible for Angola from 1989 to 1992. On September 2,1997, Mr. Lacerda was appointed as the Vice-President of our executive committee. He has also been amember of BPC’s administrative council since December 28, 1998. He holds a civil engineering degreefrom the Escola Politecnica da Fundacao de Ensino Superior de Pernambuco.

Adriano Chaves Juca Rolim—Mr. Juca has been our general counsel since July 2002. He wasgeneral counsel of OPP Quımica S.A. from May 14, 2001 until April 30, 2002 and a member of theboard of directors of Trikem S.A. from April 30, 1999 until May 14, 2001. He holds a law degree fromthe Pontifıcia Universidade Catolica de Salvador and a masters degree in comparative jurisprudence

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from New York University School of Law. He served as assistant to the general counsel of Odebrechtfrom July 1991 to January 1993. During 1993 and 1994, he served as general counsel of CMWEquipamentos S.A., an Odebrecht Group company, and he was a visiting attorney at Clifford Chancefrom June 1995 through September 1995. He acted as general counsel of Stelar Telecom Ltda., anOdebrecht Group company, from October 1995 to September 1997.

Benedicto Barbosa da Silva Junior—Mr. Silva Junior joined the Odebrecht Group in 1985 and wasappointed as an executive officer of our company on September 4, 1998. He holds a civil engineeringdegree from the Escola de Engenharia de Lins—Sao Paulo.

Carlos Jorge Hupsel de Azevedo—Mr. Hupsel has been our executive officer for Planning andDevelopment since July 18, 1989. He has also been a member of BPC’s administrative council sinceSeptember 2, 1998. He holds a civil engineering degree from the Universidade Federal da Bahia.

Paulo Henyan Yue Cesena—Mr. Cesena has been our chief financial officer since January 2007.Prior to becoming our chief financial officer, he was the head of our project finance and riskmanagement group. Mr. Cesena joined the Odebrecht Group in 1998, working at both Braskem S.A.and with us. He received a degree in chemical engineering from the University of Sao Paulo and amasters in business administration from INSEAD in France.

Carlos Roberto Mendonca Alves Dias—Mr. Dias has been an executive officer of our companysince May 2, 1997. He has been our Senior Officer for Institutional Relations since 1995. He waspreviously the Senior Foreign Relations Officer at Odebrecht from 1992 to 1994. He is an economistwho holds a degree from the Universidade Federal da Bahia.

Henrique Serrano do Prado Valladares—Mr. Valladares joined the Odebrecht Group as a traineein 1977. In 1992, he was appointed as an executive officer of our company and in 1998 was electedPresident of BPC. In May 2002, he became responsible for our energy business. Mr. Valladares holds adegree in civil engineering from the Universidade Federal da Bahia.

Joao Antonio Pacıfico Ferreira—Mr. Ferreira has been an executive officer of our company sinceMay 2, 1991. He was our Senior Officer for Brazil from 1994 to 1996. He holds a civil engineeringdegree from the Universidade Federal de Pernambuco.

Marcio Faria da Silva—Mr. Silva has been an executive officer of our company since September 2,1997. He was the Senior Officer for Tenenge Overseas Corporation from 1994 to 1996. He is a civilengineer and graduated in 1977 from the Escola de Engenharia da Fundacao Mineira de Educacao eCultura.

Marcos Luis Abreu de Lima—Mr. Lima joined the Odebrecht Group in 1978 and since then hasbeen acting as Chief Risk Officer for the Odebrecht Group. On May 3, 1999, he was appointed as anexecutive officer of our company. He holds degrees in economics, business administration andaccounting from Pontifıcia Universidade Catolica de Minas Gerais.

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PRINCIPAL SHAREHOLDERS

As of June 30, 2007, the aggregate amount of our issued and outstanding capital stock wasR$1,313.4 million, represented by 148,090,839 common shares and 107,737,914 preferred shares. Ourpreferred shares have no voting rights, but would rank ahead of common shares in the event of ourliquidation. Each common share entitles the holder thereof to one vote at our shareholders’ meetings.We have no established authorized share capital.

As June 30, 2007, all of our total capital was wholly owned by Odebrecht, which, in turn, iscontrolled by ODBINV S.A. ODBINV S.A is a Brazilian corporation controlled by KieppeParticipacoes e Administracao Ltda. (which owns 62.3% of the voting capital of ODBINV S.A). KieppeParticipacoes e Administracao Ltda. is a Brazilian limited liability company that is wholly-owned by theOdebrecht family. Certain members and officers of Odebrecht own the remaining capital of ODBINVS.A.

Dividends

Pursuant to Brazilian Corporation Law, and in accordance with the third paragraph of Article 21of our by-laws, we are required to make a minimum dividend payment to all of our shareholders duringeach fiscal year amounting to 25.0% of our annual net income during the previous fiscal year. We maydeclare and pay dividends in an amount greater than 25.0% of our annual net income, subject only tothe limitation that such dividends may not exceed such net income and any distributable reservesavailable from previous fiscal years.

On December 31, 2006, our executive officers approved the declaration of the distribution ofdividends on net income for 2006 in an amount totaling R$53.0 million (U.S.$27.5 million). OnJune 30, 2007, we distributed a special dividend to our shareholders, based on our reserve account forinvestments, in the aggregate amount of R$53.0 million (U.S.$27.5 million).

The table below sets forth our history of payment of dividends for the indicated period:

Year ended December 31,

2002 2003 2004 2005 2006

(in millions of reais)Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211,014 208,214 257,081 239,000 84,080

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RELATED PARTY TRANSACTIONS

The following summarizes the material transactions that we have engaged in with other OdebrechtGroup companies.

In the ordinary course of our business, we engage in a variety of transactions with our subsidiaries,affiliates and other Odebrecht Group companies. Financial information with respect to certain materialrelated party transactions is set forth in note 7 to our financial statements.

We also maintain inter-company credit arrangements, through a cash management agreement withOdebrecht and certain of its subsidiaries in order to facilitate temporary cash infusions and other flowsof funds to meet working capital requirements and to distribute cash to shareholders pending thedeclaration of dividends at the end of each fiscal year. This agreement expires on December 31, 2008.

As of June 30, 2007, we were owed, in total, R$589.0 million (R$498.7 million as of December 31,2006) in inter-company transactions with Odebrecht and other affiliates, of which R$530.8 millionrelated to transactions with Odebrecht. As of June 30, 2007, we owed R$9.0 thousand (R$24.0 millionas of December 31, 2006) in inter-company transactions with affiliates of Odebrecht.

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TERMS AND CONDITIONS

The Notes will bear the following terms and conditions. Certain capitalized terms used in theseTerms and Conditions are defined in Section 13 hereof.

1. Status

This Note constitutes a direct, unconditional, unsubordinated and unsecured obligation of theIssuer and ranks pari passu with all other present and future unsubordinated and unsecured obligationsof the Issuer, except as the foregoing may be limited by bankruptcy, insolvency, reorganization,moratorium or other similar laws relating to or affecting the enforcement of creditors’ rights generallyor by general equitable principles (regardless of whether enforcement is considered in a proceeding inequity or at law).

This Note will be unconditionally and irrevocably guaranteed (the ‘‘Guarantee’’) by ConstrutoraNorberto Odebrecht S.A. (the ‘‘Guarantor’’). The Guarantee will constitute the direct, general andunconditional senior obligation of the Guarantor that will at all times rank at least equally with allother present and future unsecured senior obligations of the Guarantor, except for any obligations thatmay be preferred by provisions of law that are both mandatory and of general application.

2. Interest Rate

(a) General

This Note will bear interest to which has been paid or duly provided for at the fixed rate perannum, or at the rate per annum determined pursuant to the interest rate formula, until the principalthereof is paid or made available for payment. Interest will be payable on each Interest Payment Dateand at Maturity. ‘‘Maturity’’ means the date, if any, on which the principal of, or premium, if any, on,this Note becomes due and payable in full in accordance with the terms hereof and of the Indenture,whether on the Stated Maturity Date specified in this Note or earlier by declaration of acceleration,call for redemption, repayment or otherwise.

(b) Fixed Rate Notes

This Note shall bear interest at the rate or rates per annum so specified (the ‘‘Fixed Rate(s) ofInterest’’) payable in arrears on the Interest Payment Date(s) (as specified in this Note) in each yearand on the Stated Maturity Date so specified if that does not fall on an Interest Payment Date. TheInterest Payment Dates shall be semi-annual. The first payment of interest will be made on the InterestPayment Date. If any Interest Payment Date or the date of Maturity falls on a day that is not aBusiness Day, the required payments of principal, premium, if any, and interest, if any, with respect tosuch Note will be made on the next succeeding Business Day as if made on the date such payment wasdue, and no interest will accrue on such payment for the period from and after such Interest PaymentDate or the date of Maturity, as the case may be, to the date of such payment on the next succeedingBusiness Day.

Interest shall be calculated on the basis of a 360-day year consisting of 12 months of 30 days eachand, in the case of an incomplete month, the number of days elapsed.

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(c) Additional Notes

The Issuer may, without the consent of existing Holders of Notes, issue further Notes having thesame terms and conditions as the Notes except the offering price. Additional Notes issued in thismanner will be consolidated and form a single series with the previously outstanding Notes.

3. Payment of Principal and Interest

Payments of interest will be made by mailing a check to the Holder at the address of such Holderappearing on the Register (as defined in the Indenture) at the close of business on the 15th calendarday (whether or not a Business Day) prior to any due date for the payment of interest on such Note(the ‘‘Regular Record Date’’); provided, however, that (a) interest payable at Maturity shall be payableto the Person to whom principal shall be payable and (b) the first payment of interest on any Noteoriginally issued between a Regular Record Date for such Note and the succeeding Interest PaymentDate shall be made on the Interest Payment Date following the next succeeding Regular Record Datefor such Note to the Holder. Notwithstanding the foregoing, at the option of the Issuer, all payments ofinterest on the Notes may be made by wire transfer of immediately available funds to an account at abank located within the United States as designated by each Holder not less than 15 calendar daysprior to the applicable payment date. A Holder of U.S.$10,000,000 or more in aggregate principalamount of Notes of like tenor and terms with the same Interest Payment Date may demand paymentby wire transfer but only if appropriate payment instructions have been received in writing by anyPaying Agent with respect to such Note not less than 15 calendar days prior to the applicable paymentdate. In the event that payment is so made in accordance with instructions of the Holder, such wiretransfer shall be deemed to constitute full and complete payment of such principal, premium and/orinterest on the Notes.

Such designation will be made by filing the appropriate information with the Trustee at itsSpecified Office (as defined in the Indenture), and, unless revoked, any such designation made withrespect to any Note by a Holder will remain in effect with respect to any further payments with respectto such Note payable to such Holder. If a payment with respect to any such Note cannot be made bywire transfer because the required designation has not been received by the Trustee on or before therequisite date or for any other reason, a notice will be mailed to the Holder at its registered addressrequesting a designation pursuant to which such wire transfer can be made and, upon the Trustee’sreceipt of such a designation, such payment will be made within 15 calendar days of such receipt.Payment of the principal, premium, if any, and interest, if any, due with respect to any CertificatedNote on the Stated Maturity Date will be made in immediately available funds upon surrender of suchNote at the Specified Office of any Paying Agent with respect to that Note and accompanied by wiretransfer instructions; provided that the Certificated Note is presented to such Paying Agent in time forsuch Paying Agent to make such payments in such funds in accordance with its normal procedures.

The Issuer will pay any administrative costs imposed by banks in connection with making paymentsby wire transfer, but any tax, assessment or governmental charge imposed upon payments will be borneby the Holders of the Notes in respect of which such payments are made.

Notwithstanding anything to the contrary in this Section 3, (1) if this Note is a Global Notedeposited with a custodian for, and registered in the name of a nominee of, The Depository TrustCompany (‘‘DTC’’), principal and interest payments on this Note will be made to DTC, as theregistered Holder of this Note in accordance with DTC’s applicable procedures and (2) if this Note is aGlobal Note deposited with a common depositary for, and registered in the name of a nominee for,Euroclear Bank S.A./N.V., as operator of the Euroclear System (‘‘Euroclear’’) and/or ClearstreamBanking, societe anonyme (‘‘Clearstream Banking’’), principal and interest payments on this Note will be

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made to Euroclear and/or Clearstream Banking, as the registered Holder(s) of this Note in accordancewith the applicable procedures of Euroclear and/or Clearstream Banking.

The Issuer and the Guarantor shall at all times maintain a paying agent in an EU member statethat will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/ECor any other Directive implementing the conclusions of the ECOFIN Council meeting of26-27 November 2000.

If the Issuer or the Guarantor defaults in a payment of interest on the Notes, the Issuer or theGuarantor will pay the defaulted interest (plus interest on such defaulted interest at the rate specifiedin Section 5(a) to the extent lawful) in any lawful manner not inconsistent with the requirements of anyStock Exchange on which the Notes may be listed, and upon such notice as may be required by suchexchange.

The Issuer or the Guarantor may pay the defaulted interest to the Persons who are Holders on asubsequent special record date, which date will be at least five Business Days prior to the payment dateof such defaulted interest. The Issuer or the Guarantor will fix or cause to be fixed such special recorddate and payment date, and, at least 15 days before any such special record date, the Issuer or theGuarantor will deliver to each Holder, with a copy to the Trustee, a notice that states the specialrecord date, the payment date and the amount of defaulted interest to be paid.

4. Redemption and Repurchase

(a) Redemption and Maturity

Unless previously redeemed, or purchased and canceled, this Note shall be redeemed in U.S.dollars at its principal amount on the Stated Maturity Date.

(b) Optional Redemption

(i) On or prior to October 18, 2012, the Notes may be redeemed in whole or in part at any time,at the Issuer’s option, at a ‘‘make-whole’’ redemption price equal to the greater of:

(x) 100% of the principal amount of the Notes to be redeemed; or

(y) the sum of the present values of the remaining scheduled payments of principal andinterest on the Notes from the redemption date to the Stated Maturity Date discounted, in eachcase, to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve30-day months) at the Treasury Rate plus 50 basis points;

(ii) On or after October 18, 2012, the Notes may be redeemed in whole or in part at any time atthe Issuer’s option, at the redemption prices (expressed as percentages of their principal amount atmaturity), during the 12 month period commencing on October 18 of any year set forth below.

Year Redemption Price

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.75%2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.50%2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.25%2015 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%

plus in the case of either clause (i) or (ii), any interest accrued but not paid and additional amounts, ifany, to the date of redemption; provided, however, that if the Notes are redeemed in part, at leastU.S.$100,000,000 million aggregate principal amount of the Notes must remain outstanding following

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any partial redemption. For the avoidance of doubt, any calculation of the remaining scheduledpayments of principal and interest pursuant to clause (ii) of the preceding sentence shall not includeinterest accrued as of the applicable redemption date.

(c) Optional Tax Redemption

The Notes will be redeemable, at the Issuer’s option, in whole, but not in part, upon giving notless than 30 nor more than 60 days’ notice to the Holders (which notice will be irrevocable) at 100% ofthe principal amount thereof, plus accrued interest and any Additional Amounts payable with respectthereto, only if the Issuer or the Guarantor has or shall become obligated to pay Additional Amounts(x) with respect to such Notes, as a result of any change in, or amendment to, the laws, treaties, orregulations of The Cayman Islands or any political subdivision or governmental authority thereof ortherein having power to tax, or any change in the application or official interpretation of such laws,treaties or regulations, or (y) with respect to the Guarantee, in excess of the Additional Amounts thatthe Guarantor would pay if payments by it were subject to deduction or withholding at a rate of 15%,or 25% in the case of beneficiaries located in tax haven jurisdictions for purposes of Brazilian tax law,in each case determined without regard to any interest, fees, penalties or other similar additions to tax,as a result of any change in, or amendment to, the laws, treaties or regulations of Brazil or any politicalsubdivision or governmental authority thereof or therein having power to tax, or any change in theapplication or official interpretation of such laws, treaties or regulations, which change or amendment(either in clause (x) or (y)) occurs after the date of issuance of the Notes.

No such notice of redemption will be given earlier than 60 days prior to the earliest date on whichthe Issuer or the Guarantor would be obligated to pay such Additional Amounts if a payment inrespect of such Notes or the Guarantee were then due. Prior to the publication or mailing of anynotice of redemption of the Notes as described above, the Issuer or the Guarantor shall deliver anopinion of an independent legal counsel of recognized standing stating that the Issuer or the Guarantorwould be obligated to pay Additional Amounts due to the changes in tax laws, treaties or regulations orin the application or official interpretation thereof. The Trustee shall accept such opinion as sufficientevidence of the satisfaction of the conditions precedent set forth above, in which event it will beconclusive and binding on the Holders.

(d) Repurchase

The Issuer or any of its affiliates may at any time purchase Notes at any price or prices in theopen market or otherwise. Notes so purchased may be held or resold or, at the Issuer or any of itsaffiliates’ discretion, surrendered to the Trustee for cancellation.

(e) Procedure for Payment upon Redemption

If notice of redemption has been given in the manner set forth herein, the Notes to be redeemedshall become due and payable on the optional redemption date specified in such notice and uponpresentation and surrender of the Notes at the place or places specified in such notice, the Notes shallbe paid and redeemed by the Issuer at the places and in the manner and currency therein specified andat the redemption price therein specified together with accrued any interest to the redemption date.From and after the optional redemption date, if monies for the redemption of Notes called forredemption shall have been made available at the Specified Office of the Trustee for redemption onthe optional redemption date, the Notes called for redemption shall cease to bear interest, and the onlyright of the Holders of such Notes shall be to receive payment of the redemption price together withaccrued any interest to the optional redemption date as aforesaid.

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5. Covenants

For so long as any of the Notes remain outstanding or any amount remains unpaid on any of theNotes, the Issuer or the Guarantor will, and will cause its Subsidiaries to, comply with the terms of thecovenants described below.

(a) Payment of Principal, Premium, If Any, and Interest

The Issuer will punctually pay the principal of an interest on the Notes on the dates and in themanner provided in Paragraphs 2 and 3 of the Notes. One Business Day prior to any Stated MaturityDate, the Issuer will irrevocably deposit with the Trustee or the other Paying Agents money sufficientto pay such principal and interest.

The Issuer will pay interest on overdue principal at the rate borne by the Notes plus 1% perannum, and it will pay interest on overdue installments of interest at the same rate to the extent lawful.

No interest will be payable hereunder in excess of the maximum rate permitted by applicable law.

(b) Maintenance of Office or Agency

The Issuer and the Guarantor shall maintain an office or agency in the Borough of Manhattan,The City of New York, where notices to and demands upon the Issuer and the Guarantor in respect ofthe Indenture and the Notes may be served. Initially this office will be at the offices of NationalCorporate Research, Ltd., located at 225 West 34th Street, Suite 910 New York, NY 10122, and theIssuer and the Guarantor will agree not to change the designation of such office without prior notice tothe Trustee and designation of a replacement office in the Borough of Manhattan, The City ofNew York.

(c) Money for Note Payments to Be Held in Trust

If the Issuer or the Guarantor shall at any time act as its own Paying Agent, it shall, on or beforeeach due date of the principal of, premium, if any, on or interest on any of the Notes, segregate andhold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal,premium, if any, or interest so becoming due until such sums will be paid to such Persons or otherwisedisposed of as herein provided and will promptly notify the Trustee of its action or failure so to act.

Whenever the Issuer or Guarantor shall have one or more Paying Agents for the Notes, it shall, onor before each due date of the principal of, premium, if any, on or interest on any Notes, irrevocablydeposit with a Paying Agent a sum sufficient to pay the principal, premium, if any, or interest sobecoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal of,or interest, and (unless such Paying Agent is the Trustee) the Issuer or Guarantor will promptly notifythe Trustee of such action or any failure so to act.

Each Paying Agent, subject to the provisions of this Section 5(c), will:

(i) hold all sums held by it for the payment of the principal of or interest on Notes in trustfor the benefit of the Persons entitled thereto until such sums will be paid to such Persons orotherwise disposed of as herein provided;

(ii) give the Trustee notice of any default by the Issuer or Guarantor (or any other obligorupon the Notes) in the making of any payment of principal or interest; and

(iii) at any time during the continuance of any such default, upon the written request of theTrustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

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The Issuer or Guarantor will cause each Paying Agent (other than the Principal Paying Agent andthe Luxembourg Paying Agent) to execute and deliver an instrument in which such Paying Agent shallagree with the Trustee to act as a Paying Agent in accordance with this Section 5(c).

The Issuer or Guarantor may at any time, for the purpose of obtaining the satisfaction anddischarge of the Notes or for any other purpose, pay, or by Issuer Order direct any Paying Agent topay, to the Trustee all sums held in trust by the Issuer or Guarantor or such Paying Agent, such sumsto be held in trust by the Issuer or Guarantor or such Paying Agent, such sums to be held by theTrustee upon the same trusts as those upon which such sums were held by the Issuer or Guarantor orsuch Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent willbe released from all further liability with respect to such sums.

Any money deposited with the Trustee or any Paying Agent, or then held by the Issuer orGuarantor, in trust for the payment of the principal of or interest on any Note and remainingunclaimed for two years after such principal or interest has become due and payable will be paid to theIssuer or Guarantor at the request of the Issuer or Guarantor, or (if then held by the Issuer orGuarantor) will be discharged from such trust; and the Holder of such Note will thereafter, as anunsecured general creditor, look only to the Issuer or Guarantor for payment thereof, and all liabilityof the Trustee with respect to such trust money, and all liability of the Issuer or the Guarantor astrustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, beforebeing required to make any such payment, shall, upon request and at the expense of the Issuer or theGuarantor, cause to be published once, in a newspaper published in the English language, customarilypublished on each Business Day and of general circulation in (i) the Borough of Manhattan, The Cityof New York and (ii) for so long as such Notes are listed on any Stock Exchange, upon publication inEnglish in a leading newspaper of general circulation in the country in which such Stock Exchange islocated, notice that such money remains unclaimed and that, after the date specified therein, which willnot be less than 30 days from the date of such publication, any unclaimed balance of such money thenremaining will be repaid to the Issuer or the Guarantor.

(d) Maintenance of Corporate Existence

The Issuer and the Guarantor will, and will cause each of their Subsidiaries to, (1) maintain ineffect its corporate existence and all registrations necessary therefor; provided that these restrictionswill not prohibit any transactions permitted by Section 5(m) or the merger of any Subsidiary with orinto the Guarantor or with or into any other Wholly Owned Subsidiary of the Guarantor; and (2) takeall reasonable actions to maintain all rights, privileges, titles to property, franchises and the likenecessary or desirable in the normal conduct of its business, activities or operations; provided, however,that neither the Guarantor nor its Subsidiaries will be prevented from discontinuing those operations orsuspending the maintenance of those properties which, in the reasonable judgment of the Guarantor asevidenced by a resolution of the Board of Directors, are no longer necessary or useful in the conductof the Guarantor’s business or that of its Subsidiaries; and provided, further, that such discontinuationof operations or maintenance will not be materially disadvantageous to the Holders of the Notes.

(e) Payment and Taxes and Claims

The Issuer and the Guarantor will, and will cause each of their Subsidiaries to, pay all taxes,assessments and other governmental charges imposed upon it or any of its property and assets inrespect of any of its franchises, businesses, income or profits before any penalty or interest accruesthereon, and pay all claims (including claims for labor, services, materials and supplies) for sums whichhave become due and payable and which by law have or might become a Lien upon its property andassets; provided, however, that any such payment will not be required unless the failure to make suchpayment would have a material adverse effect upon the financial condition of the Guarantor and its

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Subsidiaries considered as one enterprise or an adverse effect on the performance of the Guarantor’sobligations under this Note or under the Indenture; and provided, further, that no such charge or claimneed be paid while it is contested in good faith by appropriate proceedings promptly initiated anddiligently conducted and if appropriate reserves or other provisions will have been made therefor.

(f) Maintenance of Properties

The Guarantor will, and will cause each of its Subsidiaries to, maintain, preserve and protect all ofits material properties and equipment necessary in the operation of its principal business in good orderand condition, subject to wear and tear in the ordinary course of business.

(g) Additional Amounts

(1) All payments by the Issuer or the Guarantor in respect of the Notes and the Guaranteewill be made free and clear of, and without withholding or deduction for or on account of, anypresent or future taxes, duties, assessments, fees or other governmental charges of whatever nature(and any fines, penalties or interest related thereto) imposed or levied by or on behalf of TheCayman Islands or Brazil or, in each case, any political subdivision thereof or taxing authoritytherein (each, a ‘‘Taxing Jurisdiction’’), unless such withholding or deduction is required by law. Inthat event, the Issuer or the Guarantor will pay to each holder such additional amounts(‘‘Additional Amounts’’) as may be necessary in order that every net payment made by the Issueror the Guarantor on each Note after deduction or withholding for or on account of any present orfuture tax, penalty, fine, duty, assessment or other governmental charge imposed upon or as aresult of such payment by the Taxing Jurisdiction will not be less than the amount then due andpayable on such Note. The foregoing obligation to pay Additional Amounts, however, will notapply to:

(A) any tax, assessment or other governmental charge which would not have beenimposed but for the existence of any present or former connection between such Holder (orbetween a fiduciary, settlor, beneficiary, member or shareholder of such holder, if such holderis an estate, a trust, a partnership or a corporation), on the one hand, and the TaxingJurisdiction, on the other hand, including, without limitation, such holder (or such fiduciary,settlor, beneficiary, member or shareholder) being or having been a citizen or resident thereofor being or having been engaged in a trade or business or present therein or having, or havinghad, a permanent establishment therein, but not including the mere receipt of such paymentor the ownership or holding of such Note;

(B) any tax, assessment or other governmental charge which would not have been soimposed but for the presentation by such Holder for payment (where presentation is required)on a date more than 30 days after the date on which such payment became due and payableor the date on which payment thereof is duly provided for, whichever occurs later;

(C) the extent that the taxes, duties, assessments or other governmental charges wouldnot have been imposed but for the failure of such Holder to comply with any certification,identification or other reporting requirements concerning the nationality, residence, identity orconnection with the Taxing Jurisdiction of the Holder if (a) such compliance is required orimposed by statute, regulation or other applicable law of such Taxing Jurisdiction as aprecondition to exemption from all or a part of such tax, assessment or other governmentalcharge and (b) at least 30 days prior to the date on which the Issuer or the Guarantor appliesthis clause (c) the Issuer or the Guarantor will have notified all Holders of Notes that someor all Holders of Notes shall be required to comply with such requirement;

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(D) a tax, assessment or other governmental charge imposed on a payment to anindividual and required to be made pursuant to the European Union Directive on the taxationof savings, which was adopted on June 3, 2003, or any law implementing or complying with, orintroduced in order to conform to, that directive;

(E) any tax, assessment or governmental charge imposed on a Note presented forpayment by or on behalf of a Holder who would have been able to avoid that withholding ordeduction by presenting the relevant Note to another Paying Agent in a member state of theEuropean Union;

(F) any estate, inheritance, gift, sales, transfer or personal property tax or similar tax; or

(G) any combination of items (A) through (F) above.

(2) The Issuer or the Guarantor shall also pay any present or future stamp, court ordocumentary taxes or any other excise taxes, charges or similar levies which arise in anyjurisdiction from the execution, delivery, registration or the making of payments in respect of theNotes, excluding any such taxes, charges or similar levies imposed by any jurisdiction outside ofany Taxing Jurisdiction other than those resulting from, or required to be paid in connection with,the enforcement of the Notes following the occurrence of any Default or Event of Default (eachas defined below).

(3) No Additional Amounts shall be paid with respect to a payment on a Note or under theGuarantee to a Holder that is a fiduciary or partnership or other than the sole beneficial owner ofsuch payment to the extent a beneficiary or settlor with respect to such fiduciary or a member ofsuch partnership or beneficial owner would not have been entitled to receive payment of theAdditional Amounts had the beneficiary, settlor, member or beneficial owner been the Holder ofthe Note.

(4) The Issuer or the Guarantor will provide the Trustee with the official acknowledgment ofthe relevant taxing authority (or, if such acknowledgment is not available, a certified copy thereof,if available) evidencing the payment of taxes in any Taxing Jurisdiction in respect of which theIssuer or the Guarantor has paid any Additional Amounts. Copies of such documentation will bemade available to the Holders of the Notes or the Paying Agents, as applicable, upon requesttherefor.

All references in this Offering Circular to principal of and interest on the Notes will include anyAdditional Amounts payable by the Issuer or the Guarantor, in respect of such principal and suchinterest.

(5) The Issuer or the Guarantor will:

(A) at least 10 Business Days prior to the first Interest Payment Date for any Notes (andat least 10 Business Days prior to each succeeding Interest Payment Date or any redemptiondate or Maturity Date if there has been any change with respect to the matters set forth inthe below-mentioned officer’s certificate), deliver to the Trustee and each Paying Agent anofficer’s certificate (i) specifying the amount, if any, of taxes described in this Section 5(g)imposed or levied by or on behalf of any Taxing Jurisdiction (the ‘‘Relevant WithholdingTaxes’’) required to be deducted or withheld on the payment of principal or interest on theNotes to Holders and the Additional Amounts, if any, due to Holders in connection with suchpayment, and (ii) certifying that the Issuer or the Guarantor will pay such deduction orwithholding;

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(B) prior to the due date for the payment thereof, pay any such Relevant WithholdingTaxes, together with any penalties or interest applicable thereto;

(C) within 15 days after paying such Relevant Withholding Taxes, deliver to the Trusteeand each Paying Agent evidence of such payment and of the remittance thereof to therelevant taxing or other authority as described in this Section 5(g); and

(D) pay any Additional Amounts due to Holders on any Interest Payment Date,redemption date or date of Maturity to the Trustee in accordance with the provisions of thisSection 5(g).

(6) Each of the Issuer or the Guarantor hereby covenants to indemnify the Trustee and eachPaying Agent for, and to hold each harmless against, any loss, liability or expense reasonablyincurred without gross negligence, bad faith or willful misconduct on such Person’s part, arising outof or in connection with actions taken or omitted by any of them in reliance on any officer’scertificate furnished pursuant to this Section 5(g) or the failure of the Trustee or any Paying Agentfor any reason (other than its own gross negligence, bad faith or willful misconduct) to receive ona timely basis any such officer’s certificate or any information or documentation requested by it orotherwise required by applicable law or regulations to be obtained, furnished or filed in respect ofsuch Relevant Withholding Taxes. The Issuer or the Guarantor will make available to any Holderrequesting the same, evidence that the applicable Relevant Withholding Taxes have been paid.

(7) Any officer’s certificate required by this Section 5(g) to be provided to the Trustee andeach Paying Agent will be deemed to be duly provided if sent by facsimile to the Trustee and eachPaying Agent.

(8) All references in this Note to principal of and interest hereon shall include anyAdditional Amounts payable by the Issuer or the Guarantor in respect of such principal and suchinterest.

(h) Available Information

For as long as the Notes are ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) under theSecurities Act, the Issuer will, to the extent required, furnish to any holder of the Notes holding aninterest in a restricted Global Note, or to any prospective purchaser designated by such holder, uponrequest of such holder, financial and other information described in paragraph (d)(4) of Rule 144Awith respect to the Issuer to the extent required in order to permit such holder to comply withRule 144A with respect to any resale of its Note, unless during that time, the Issuer is subject to thereporting requirements of Section 13 or 15(d) of the Exchange Act, or is exempt from reportingpursuant to Rule 12g3-2(b) under the Exchange Act and no such information about the Issuer isotherwise required pursuant to Rule 144A.

(i) Limitation on Debt

The Guarantor will not, and will not permit any Subsidiary to, incur, directly or indirectly, anyDebt unless the pro forma Net Debt to EBITDA Ratio at the date of such issuance is less than 3.75to 1.0.

Notwithstanding the preceding paragraph, the Guarantor or any Subsidiary may issue the followingDebt (‘‘Permitted Debt’’):

(1) the Notes and the Guarantee;

(2) Debt outstanding on the date on which the Notes were originally issued;

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(3) Debt, the proceeds of which are used to refinance any Debt permitted by clause (1) or(2) above or permitted by the first paragraph above; provided, however, that (a) the principalamount of the Debt so issued does not exceed the principal amount of the Debt so refinanced and(b) the Debt so issued (i) does not mature prior to the stated maturity of the Debt so refinanced,(ii) has an Average Life equal to or greater than the remaining Average Life of the Debt sorefinanced and (iii) is pari passu or subordinated in right of payment to the Debt so refinanced;

(4) Debt owed to and held by a: (i) Wholly Owned Subsidiary or a Substantially WhollyOwned Subsidiary; provided, however, that any subsequent issuance or transfer of any CapitalStock that results in such Wholly Owned Subsidiary or such Substantially Wholly Owned Subsidiaryceasing to be a Wholly Owned Subsidiary or a Substantially Wholly Owned Subsidiary or anytransfer of such Debt (other than to a Wholly Owned Subsidiary or a Substantially Wholly OwnedSubsidiary, as the case may be) shall be deemed, in each case, to constitute the issuance of suchDebt by the Guarantor and (ii) Subsidiary to the extent that such Debt is subordinated to the priorpayment of all obligations with respect to the Notes and the Guarantee;

(5) Debt of a Subsidiary owed to or held by the Guarantor;

(6) Debt of the Guarantor or any Subsidiary pursuant to (a) interest rate swap or similaragreements designed to protect the Guarantor or such Subsidiary against fluctuations in interestrates or interest rate indices in respect of Debt of the Guarantor or such Subsidiary to the extentthe notional principal amount of such obligation does not exceed the aggregate principal amountof the Debt to which such interest rate contracts relate and (b) foreign exchange or commodityhedge, exchange or similar agreements designed to protect the Guarantor or such Subsidiaryagainst fluctuations in foreign currency exchange rates or commodity prices in respect of foreignexchange or commodity exposures incurred by the Guarantor or such Subsidiary:

(7) Debt of the Guarantor or any Subsidiary incurred to pay all or a portion of the purchaseprice of the acquisition or lease of equipment, vehicles and services used in the ordinary course ofthe business of the Guarantor or its Subsidiaries; provided that such Debt is incurred within360 days prior to or after any such acquisition (or addition, improvement or construction);

(8) Debt of the Guarantor or any Subsidiary incurred for the purpose of financing all or partof the costs of the acquisition, construction or development of a project, provided that this clausemay be used for that portion of such Debt for which the lenders in relation to such Debt agree tolimit their recourse in respect of such Debt to assets (including equity interests and contracts)and/or revenues of such project, and any portion of such Debt for which the lenders requirerecourse to the Guarantor must otherwise be permitted pursuant to this covenant;

(9) All obligations of the Guarantor or any Subsidiary for the reimbursement of any obligoron any letter of credit, banker’s acceptance, surety bond or similar credit transaction; provided thatif at any time after the issuance of such letter of credit, surety bond or other similar credittransaction there is a drawing thereunder, such drawing must, as of the date thereof, thenotherwise be permitted pursuant to this covenant;

(10) Debt of the Guarantor and/or its Subsidiaries incurred on or after the date on which theNotes were originally issued not otherwise permitted in an aggregate principal amount at any timeoutstanding not to exceed U.S.$150.0 million (or the equivalent amount thereof at the time ofdetermination).

For purposes of determining compliance with this covenant:

(i) in the event that an item of Debt meets the criteria of more than one of the types ofDebt described above, including the first paragraph above, the Guarantor, in its sole discretion,

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may classify, and from time to time may reclassify, such item of Debt, in any manner that complieswith this covenant; and

(ii) Debt permitted by this covenant (including the first paragraph above), need not bepermitted solely by reference to one provision permitting such Debt but may be permitted in partby one such provision and in part by one or more other provisions of this covenant permitting suchDebt.

For purposes of determining compliance with any U.S. dollar denominated restriction on theincurrence of Debt, the U.S. dollar equivalent principal amount of Indebtedness denominated in aforeign currency shall be calculated based on the relevant currency exchange rate determined on thedate of incurrence, in the case of term Debt, or first committed, in the case of revolving credit Debt.Notwithstanding any other provision of this covenant, neither the Guarantor nor any Subsidiary shall,with respect to any outstanding Debt incurred, be deemed to be in violation of this covenant solely as aresult of fluctuations in the exchange rates of currencies.

(j) Limitation on Liens

The Guarantor shall not, and shall not permit any Subsidiary to, create, incur, assume or permit toexist any Lien upon any of the property or assets now owned or hereafter acquired by the Guarantoror any such Subsidiary (including any Capital Stock or Debt of the Guarantor or any Subsidiary),except for (i) Permitted Liens or (ii) to the extent that, contemporaneously therewith, provision is madeto secure the Notes equally and ratably with the obligation that is secured by any such Lien for so longas such obligation is so secured.

(k) Limitation on Transactions with Affiliates

The Guarantor or any of its Subsidiaries shall not enter into any transaction (or series of relatedtransactions) with any Affiliates, including any Investment, either directly or indirectly, unless suchtransaction or series of related transactions are on terms no less favorable to the Guarantor, or suchSubsidiary, as the case may be, than those that could have been obtained in a comparable arm’s-lengthtransaction with an unrelated third party. Notwithstanding the foregoing, this Section 5(k) shall notapply to any loan or similar financial transaction (or series of related transactions) entered into for thepurpose of performing cash management or other financial management functions by the Guarantor orany Subsidiary with any of the other Subsidiaries or related parties.

(l) Limitation on Consolidation, Merger or Transfer of Assets

(1) The Guarantor shall not consolidate with or merge with or into, or convey, transfer orlease all or substantially all of its assets to, any Person, unless:

(A) The resulting, surviving or transferee Person (if not the Guarantor) shall be a Personorganized and existing under the laws of Brazil or the United States of America, any Statethereof or the District of Columbia or any other country that is a member country of theEuropean Union or of the Organization for Economic Co-operation and Development andsuch Person shall expressly assume, by a supplement to the Indenture, executed and deliveredto the Trustee, all obligations under the Notes and the Indenture;

(B) Immediately after giving effect to such transaction (and treating any Debt thatbecomes an obligation of the resulting, surviving or transferee Person as a result of suchtransaction as having been incurred by such Person at the time of such transaction), noDefault will have occurred and be continuing; and

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(C) The Guarantor shall have delivered to the Trustee an officers’ certificate and anopinion of independent legal counsel of recognized standing, each stating that suchconsolidation, merger or transfer and such supplement to the Indenture, if any, comply withthe Notes and the Indenture.

The Trustee will accept such certificate and opinion as sufficient evidence of the satisfaction of theconditions precedent set forth in clause (C) above, in which event it shall be conclusive and binding onthe Holders.

(2) Upon any consolidation or merger, or any sale, assignment, conveyance, transfer, lease ordisposition of all or substantially all of the properties and assets of the Guarantor in accordancewith Section 5(l)(1) in which the Guarantor is not the continuing obligor under this Note and theIndenture, the surviving or transferor Person will succeed to, and be substituted for, and mayexercise every right and power of, the Guarantor under this Note and the Indenture with the sameeffect as if such successor had been named as the Guarantor herein and therein. When a successorassumes all the obligations of its predecessor under this Note and the Indenture, the predecessorwill be released from those obligations; provided that in the case of a transfer by lease, thepredecessor will not be released from the payment of principal and interest on this Note.

(3) If, upon any such consolidation of the Guarantor with or merger of the Guarantor intoany other corporation, or upon any conveyance, lease or transfer of the property of the Guarantorsubstantially as an entirety to any other Person, any property or assets of the Guarantor wouldthereupon become subject to any Lien, then unless such Lien could be created pursuant toSection 5(j) without equally and ratably securing this Note, the Guarantor, prior to orsimultaneously with such consolidation, merger, conveyance, lease or transfer, will as to suchproperty or assets, secure the outstanding Notes (together with, if the Guarantor will so determine,any other Debt of the Guarantor now existing or hereinafter created which is not subordinate inright of payment to the Notes) equally and ratably with (or prior to) the Debt which upon suchconsolidation, merger, conveyance, lease or transfer is to become secured as to such property orassets by such Lien, or will cause such Notes to be so secured.

(m) Limitation on Agreements Restricting Dividend Payments

The Guarantor shall not, and shall not permit any Subsidiary to, directly or indirectly, enter into orpermit to exist any agreement or other arrangement that prohibits, restricts or imposes any conditionupon the ability of any Subsidiary to pay dividends or other distributions with respect to any shares ofits Capital Stock or to make or repay loans or advances to the Guarantor or any other Subsidiary;provided that the foregoing will not apply to:

(1) restrictions and conditions imposed by applicable law;

(2) restrictions and conditions existing on the date of the Indenture and will apply to anyextension or renewal of, or any amendment or modification expanding the scope of, any suchrestriction or condition;

(3) customary restrictions and conditions contained in agreements relating to the sale of aSubsidiary pending that sale; provided that those restrictions and conditions apply only to theSubsidiary that is to be sold and that sale is permitted by the Indenture;

(4) restrictions and conditions with respect to any Subsidiary that have been entered into topermit such Subsidiary to make an Investment instead of a Restricted Payment so long as suchInvestment is made within 12 months of the date that the Restricted Payment would have beenotherwise declared and paid by such Subsidiary;

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(5) restrictions and conditions imposed on any Subsidiary of the Guarantor in loandocumentation executed in connection with any Permitted Lien for the purpose of financing of allor any part of the cost of the acquisition, construction or development of a project that limits theability of such Subsidiary to make a Restricted Payment to the Guarantor or any other Subsidiaryof the Guarantor;

(6) existing with respect to any person, or to the properties or assets of any person, at thetime or within 365 days following the date that the person is acquired by the Guarantor or anySubsidiary of the Guarantor, which encumbrances or restrictions: (i) are not applicable to anyother person or the properties or assets of any other person; and (ii) were not put in place inanticipation of such event (other than in connection with the financing for the acquisition of suchperson), and any extensions, renewals, replacements or refinancings of any of the foregoing;

(7) with respect to any Subsidiary of the Guarantor and imposed pursuant to an agreementthat has been entered into for the sale or disposition of all or substantially all of the Capital Stockof, or properties or assets of, such Subsidiary;

(8) with respect to any Subsidiary of the Guarantor and imposed pursuant to a customaryprovision in a joint venture or other similar agreement with respect to such Subsidiary that wasentered into in the ordinary course of business; and

(9) imposed by the standard loan documentation in connection with any loans to anySubsidiary of the Guarantor from (i) Banco Nacional de Desenvolvimento Economico e Social—BNDES, or any other Brazilian government development bank or credit agency or (ii) anyinternational or multilateral development bank, government-sponsored agency, export-import bankor official export-import credit insurer.

(n) Repurchase of Notes upon a Change of Control

Not later than 30 days following a Change of Control that results in a Ratings Decline, theGuarantor will make an Offer to Purchase all outstanding Notes at a purchase price equal to 101% ofthe principal amount plus accrued interest to the date of purchase.

An ‘‘Offer to Purchase’’ must be made by written offer, which will specify the principal amount ofnotes subject to the offer and the purchase price. The offer must specify an expiration date (the‘‘Expiration Date’’) not less than 30 days or more than 60 days after the date of the offer and asettlement date for purchase (the ‘‘Purchase Date’’) not more than five Business Days after theexpiration date. The offer must include information concerning the business of the Guarantor and itsSubsidiaries which the Guarantor in good faith believes will enable the holders to make an informeddecision with respect to the Offer to Purchase. The offer will also contain instructions and materialsnecessary to enable holders to tender notes pursuant to the offer. The Guarantor will comply withRule 14e-1 under the Exchange Act (to the extent applicable) and all other applicable laws in makingany Offer to Purchase, and the above procedures will be deemed modified as necessary to permit suchcompliance.

A holder may tender all or any portion of its notes pursuant to an Offer to Purchase, subject tothe requirement that any portion of a note tendered must be in a multiple of U.S.$1,000 principalamount and that the minimum holding of any holder must be no less than U.S.$100,000. Holders shallbe entitled to withdraw notes tendered up to the close of business on the Expiration Date. On thePurchase Date the purchase price will become due and payable on each note accepted for purchasepursuant to the Offer to Purchase, and interest on Notes purchased will cease to accrue on and afterthe Purchase Date.

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The Guarantor agrees to obtain all necessary consents and approvals from the Central Bank forthe remittance of funds outside of Brazil prior to making any Offer to Purchase. Any failure to obtainsuch consents and approvals shall constitute an Event of Default.

(o) Reporting Requirements

The Guarantor and the Issuer will provide the Trustee with the following reports (and will alsoprovide the Trustee with sufficient copies of the following reports referred to in clauses (1) through(4) for distribution, at their expense, to all Holders of Notes):

(1) an English language version of the Issuer’s annual audited non-consolidated financialstatements prepared in accordance with International Financial Reporting Standards or BrazilianGAAP, as the case may be, promptly upon such statements becoming available but not later than120 days after the close of its fiscal year;

(2) an English language version of the Guarantor’s annual audited consolidated financialstatements prepared in accordance with Brazilian GAAP, promptly upon such statements becomingavailable but not later than 120 days after the close of its fiscal year;

(3) simultaneously with the delivery of each set of financial statements referred to in clauses(1) and (2) above, an officers’ certificate stating whether an Event of Default or Default exists onthe date of such certificate and, if an Event of Default or Default exists, setting forth the detailsthereof and the action being taken or proposed to take with respect thereto;

(4) without duplication, English language versions or summaries of such other reports ornotices as may be filed or submitted by (and promptly after filing or submission by) the Issuer andthe Guarantor with the Luxembourg Stock Exchange or any other stock exchange on which theNotes may be listed (in each case, to the extent that any such report or notice is generallyavailable to their security holders or the public in Brazil) or; and

(5) as soon as is practicable and in any event within ten calendar days after any director orexecutive officer of the Issuer’s or the Guarantor’s becomes aware of the existence of an Event ofDefault or Default, an officers’ certificate setting forth the details thereof and what action theIssuer or the Guarantor proposes to take with respect thereto.

(p) Further Assurances

Upon request of the Trustee, the Issuer will execute and deliver such further instruments andundertake such further reasonable action as may be reasonably required to carry out the purposes ofthis Note and the Indenture. In addition, the Issuer shall use its best efforts to obtain anyauthorizations required from time to time under applicable law or regulation (including from theBrazilian Central Bank and the CVM with respect to the Notes or the Indenture.

(q) Waiver of Certain Covenants

The Issuer or the Guarantor may omit in any particular instance to comply with any term,provision or condition set forth in Sections 5(f), (i), (j), (k), (l), (m)(3), (n), (o) or (p), inclusive, ifbefore or after the time for such compliance the Holders of at least a majority in principal amount ofthe outstanding Notes waive such compliance in such instance with such term, provision or condition,or generally waive compliance with such term, provision or condition, but no such waiver will extend toor affect such term, provision or condition except to the extent so expressly waived, and, until suchwaiver will become effective, the obligations of the Issuer or the Guarantor in respect of any such term,provisions or conditions will remain in full force and effect.

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(r) Covenant Suspension

From and during any time that:

(a) the notes have an Investment Grade rating from any two Rating Agencies, and

(b) no Default has occurred and is continuing, the Guarantor and its Subsidiaries will not besubject to the following provisions of the indenture:

‘‘—Limitation on Debt’’

‘‘—Limitation on Transactions with Affiliates;’’ and

‘‘—Limitation on Agreements Restricting Dividend Payments’’

(collectively, the ‘‘Suspended Covenants’’).

In the event that the Guarantor and its Subsidiaries are not subject to the Suspended Covenantsfor any period of time as a result of the foregoing, and on any subsequent date (the ‘‘Reversion Date’’)the Notes cease to have an Investment Grade Rating from any two Rating agencies, then theGuarantor and its Subsidiaries will thereafter again be subject to the Suspended Covenants. The periodof time between the Suspension Date and the Reversion Date is referred to as the ‘‘SuspensionPeriod.’’ Notwithstanding that the Suspended Covenants may be reinstated, no Default or Event ofDefault will be deemed to have occurred as a result of a failure to comply with any of the SuspendedCovenants during the Suspension Period (or upon termination of the Suspension Period or after thattime based solely on events that occurred during the Suspension Period).

On the Reversion Date, all Debt incurred during the Suspension Period will be classified to havebeen incurred pursuant to the first paragraph of ‘‘—Limitation on Debt’’ or one of the clauses set forthin paragraphs (1) through (10) of ‘‘—Limitation on Debt’’ (to the extent such Debt would be permittedto be incurred thereunder as of the Reversion Date and after giving effect to the Debt incurred priorto the Suspension Period and outstanding on the Reversion Date). To the extent such Debt would notbe permitted to be incurred pursuant to ‘‘—Limitation on Debt,’’ such Debt will be deemed to havebeen outstanding on the Issue Date, so that it is classified as permitted under clause (2) of‘‘—Limitation on Debt.’’

6. Events of Default

‘‘Event of Default’’ means, when used herein, any one of the following events (whatever the reasonfor such Event of Default and whether it will be voluntary or involuntary or be effected by operation oflaw or pursuant to, or as a result of any failure to obtain, any authorization, order, rule, regulation,judgment or decree of any governmental or administrative body or court):

(1) the Issuer or the Guarantor fails to pay any amount of (a) principal in respect of theNotes on the due date for payment thereof or (b) interest in respect of the Notes and such failurecontinues for a period of 30 days;

(2) the Guarantor fails to comply with any of the covenants under ‘‘Limitation on Debt,’’ or‘‘Limitation on Liens,’’ and such failure continues for 30 days after the written notice specifiedbelow;

(3) the Issuer or the Guarantor defaults in the performance or observance of any of its otherobligations under or in respect of the Notes or the Guarantee (other than those referred to inclauses (1) and (2) of this Section 6 and such default remains unremedied for 60 days after thewritten notice specified below;

(4) the Issuer, the Guarantor or any Significant Subsidiary defaults under any mortgage,indenture or instrument under which there may be issued or by which there may be secured or

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evidenced any Debt for money borrowed by the Company, the Guarantor or any such SignificantSubsidiary (or the payment of which is guaranteed by the Company, the Guarantor or any suchSignificant Subsidiary) whether such Debt or guarantee now exists, or is created after the date ofthis Indenture, which default (a) is caused by failure to pay principal of or premium, if any, orinterest on such Debt after giving effect to any grace period provided in such Debt on the date ofsuch default (‘‘Payment Default’’) or (b) results in the acceleration of such Debt prior to itsexpress maturity and, in each case, the principal amount of any such Debt, together with theprincipal amount of any other such Debt under which there has been a Payment Default or thematurity of which has been so accelerated, totals U.S.$30,000,000 (or the equivalent thereof at thetime of determination) or more in the aggregate;

(5) one or more final judgments or decrees for the payment of money in excess ofU.S.$30,000,000 (or the equivalent thereof at the time of determination) (other than judgmentscovered by enforceable insurance policies issued by reputable and creditworthy insurancecompanies) in the aggregate are rendered against the Issuer, the Guarantor or any SignificantSubsidiary and are not paid (whether in full or in installments in accordance with the terms of thejudgment) or otherwise discharged and, in the case of each such judgment or decree, either (a) anenforcement proceeding has been commenced by any creditor upon such judgment or decree andis not dismissed within 30 days following commencement of such enforcement proceedings or(b) there is a period of 60 days following such judgment during which such judgment or decree isnot discharged, waived or the execution thereof stayed;

(6) the Issuer or the Guarantor or any of its Significant Subsidiaries becomes insolvent or isunable to pay its debts as they fall due (after giving effect to any applicable grace period);

(7) (i) the Issuer, the Guarantor or any Significant Subsidiary pursuant to or within themeaning of any Bankruptcy Law:

(A) commences a voluntary case or files a request or petition for a writ of execution toinitiate bankruptcy proceedings or have itself adjudicated as bankrupt;

(B) applies for or consents to the entry of an order for relief against it in an involuntary case;

(C) applies for or consents to the appointment of a Custodian of it or for any substantial partof its property;

(D) makes a general assignment for the benefit of its creditors;

(E) proposes or agrees to an accord or composition in bankruptcy between itself and itscreditors; or

(F) files for a reorganization of its debts (judicial or extrajudicial recovery); or

(ii) A court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(A) is for relief against the Issuer, the Guarantor or any Significant Subsidiary in aninvoluntary case;

(B) appoints a Custodian of the Issuer, the Guarantor or any Significant Subsidiary or for anysubstantial part of the property of the Company, the Guarantor or any Significant Subsidiary;

(C) orders the winding up, or liquidation of the Issuer, the Guarantor or any SignificantSubsidiary;

(D) adjudicates the Issuer, the Guarantor or a Significant Subsidiary as bankrupt or insolvent;

(E) ratifies an accord or composition in bankruptcy between the Issuer, the Guarantor or aSignificant Subsidiary and the respective creditors thereof; or

(F) grants a judicial or extrajudicial recovery to the Issuer, the Guarantor or a SignificantSubsidiary;

and the order or decree remains unstayed and in effect for 60 days;

(8) the Guarantee is not (or is claimed by the Guarantor not to be) in full force and effect.

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A Default under clause (2) or (3) of this Section 6 is not an event of default until the Trustee orthe Holders of at least 25% in principal amount of the Notes outstanding notify the Issuer and theGuarantor of the Default and the Guarantor does not cure such Default within the time specified afterreceipt of such notice.

If an Event of Default (other than an Event of Default specified in clause (6) of Section 6) occursand is continuing, the Trustee or the Holders of not less than 25% in principal amount of the Notesthen outstanding may declare all unpaid principal of (or in the case of the Original Issue DiscountNotes, the Amortized Face Amount) and accrued interest on all Notes to be due and payableimmediately, by mailing a notice in writing to the Issuer and the Guarantor, and upon any suchdeclaration such amounts will become due and payable immediately. If an Event of Default specified inclause (7) of Section 6 occurs and is continuing, then the principal of (or in the case of the OriginalIssue Discount Notes, the Amortized Face Amount) and accrued interest on all Notes will become andbe immediately due and payable without any declaration or other act on the part of the Trustee or anyholder.

At any time after a declaration of acceleration has been made and before a judgment or decreefor payment of the money due has been obtained by any Holder, the Holders of a majority in principalamount of the Notes by written notice to the Issuer may rescind or annul such declaration if:

(i) the Issuer has paid or deposited with the Trustee and the other Paying Agents a sumsufficient to pay (a) all overdue interest (including any Additional Amounts) on outstanding Notes,(b) all unpaid principal of the Notes that has become due otherwise than by such declaration ofacceleration and (c) to the extent that payment of such interest (including any AdditionalAmounts) is lawful, interest on such overdue interest (including any Additional Amounts) asprovided herein and (d) all sums paid or advanced by the Trustee and the reasonable andduly-documented compensation, expenses, disbursements and advances of the Trustee, its agentsand counsel; and

(ii) all Events of Default have been cured or waived as provided in Section 7 other than thenonpayment of principal that has become due solely because of acceleration.

No such rescission will affect any subsequent Default or Event of Default or impair any rightconsequent thereto.

7. Meetings, Modification and Waiver

The Indenture contains provisions for convening meetings of Holders of Notes to consider mattersaffecting their interests. A meeting of the Holders of Notes may be called by the Trustee, the Issuer orthe Holders of at least 25% in principal amount of the outstanding Notes.

Modifications and amendments to the Indenture and the Notes may be made by the Issuer and theTrustee with the consent of the Holders of not less than a majority in aggregate principal amount ofthe Notes at the time outstanding that are affected by such amendment, but no such modification oramendment may, without the consent of the Holder of each Note affected thereby:

(1) change the stated maturity or the principal of or interest on any such Note, or reduce theprincipal amount of any such Note or the rate of interest thereon, if any, or any premium orprincipal payable upon redemption thereof, or change any place where, or change the currency inwhich, any such Note or the interest, if any, thereon is payable, or impair the right to institute suitfor the enforcement of any such payment on or after the stated maturity, if any, thereof or thedate any such payment is otherwise due and payable (or, in the case of redemption, on or after theredemption date);

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(2) reduce the percentage in aggregate principal amount of such outstanding Notes, theconsent of whose Holders is required for any such amendment or modification to such Notes orthe Indenture, or the consent of whose Holders is required for any waiver (of compliance withcertain provisions of the Indenture or certain defaults thereunder and their consequences)provided for in the Indenture;

(3) change any obligation on the Issuer’s or the Guarantor’s part to maintain an office oragency in the places and for the purposes specified in such Notes and the Indenture; or

(4) amend or modify certain provisions of such Notes or the Indenture pertaining to thewaiver by Holders of such Notes of past defaults, amendments or modifications to such Notes orthe Indenture with the consent of the Holders of such Notes and the waiver by Holders of suchNotes of certain covenants, except to increase any specified percentage in aggregate principalamount required for any actions by Holders of Notes or to provide that certain other provisions ofthe Notes or the Indenture cannot be modified or waived without the consent of the Holder ofeach such Note affected thereby.

It will not be necessary for the consent of the Holders under the preceding paragraph to approvethe particular form of any proposed amendment, but it will be sufficient if such consent approves thesubstance thereof. After an amendment under the preceding paragraph becomes effective, the Issuerwill mail to the Holders a notice briefly describing such amendment. The failure to give such notice toall Holders, or any defect therein, will not impair or affect the validity of an amendment under thepreceding paragraph.

The Holders of a majority in aggregate principal amount of the outstanding Notes may waive onbehalf of the Holders of all Notes an existing Default or Event of Default and its consequences except(i) a Default or Event of Default in the payment of the principal of, premium, if any, on or interest ona Note or (ii) a Default or Event of Default in respect of a provision that under Section 16.1 of theIndenture or Section 7 of this Note cannot be modified or amended without the consent of the Holderof each outstanding Note. When a Default or Event of Default is waived, it is deemed cured, but nosuch waiver will extend to any subsequent or other Default or Event of Default or impair anyconsequent right.

The Issuer and the Trustee may, without the vote or consent of any Holder of Notes, modify oramend the Indenture or the Notes for the purpose of:

(a) adding to the covenants of the Issuer for the benefit of the Holders of the Notes;

(b) surrendering any right or power conferred upon the Issuer;

(c) securing the Notes pursuant to the requirements thereof or otherwise;

(d) evidencing the succession of another corporation to the Issuer and the assumption by anysuch successor of the covenants and obligations of the Issuer in the Notes and in the Indenturepursuant to any merger, consolidation or sale of assets;

(e) correcting any ambiguity, inconsistency or defective provision contained in the Indentureor in the Notes;

(f) making any modification, or granting any waiver or authorization of any breach orproposed breach of any of the terms and conditions of the Notes or any other provisions of theIndenture in any manner which the Issuer and the Trustee may determine and which does notadversely affect the interest of any Holders of Notes in any material respect; or

(g) making any modification which is of a minor or technical nature or correcting a manifesterror.

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The Trustee will designate the record date for determining the Holders of Notes entitled to vote atany meeting and will provide notice to Holders of Notes in the manner set forth in the Indenture. Thequorum at any meeting of Holders of Notes called to adopt a resolution will be Persons holding orrepresenting a majority in aggregate principal amount of the outstanding Notes the vote or consent ofwhich is required to adopt such resolution and at any adjourned meeting will be Persons holding orrepresenting 25% in aggregate principal amount of the outstanding Notes the vote or consent of whichis required to adopt such resolution. Any instrument given by or on behalf of any Holder of a Note inconnection with any consent to any such modification, amendment or waiver will be irrevocable oncegiven and will be conclusive and binding on all subsequent Holders of such Note. Any modifications,amendments or waivers to the Indenture or to the terms and conditions of any Notes will be conclusiveand binding on all Holders of such Notes, whether or not they have given such consent or were presentat any meeting.

The Holder of a Note may, at any meeting of Holders of Notes at which such Holder is entitled tovote, cast one vote for each U.S. dollar in principal amount of the Notes held by such Holder in whichsuch Notes are denominated. Where Notes are denominated in one or more Specified Currencies otherthan U.S. dollars, the U.S. dollar equivalent of such Notes shall be calculated at the Market ExchangeRates on the date of such meeting or, in the case of written consents or notices, on such dates as theIssuer shall designate for such purpose. The information about the trustee are displayed at the backcover page of this offering memorandum. Copies of the contracts relating to this representation will beavailable during normal business hours for inspection at the offices of the trustee.

8. Replacement of Notes

Notes that become mutilated, destroyed, stolen or lost will be replaced upon delivery thereof tothe Trustee or delivery to the Issuer and the Trustee of evidence of the loss, theft or destructionthereof satisfactory to the Issuer and the Trustee. In the case of a lost, stolen or destroyed Note, anindemnity satisfactory to the Trustee and the Issuer may be required at the expense of the Holder ofsuch Note before a replacement Note will be issued. Upon the issuance of any new Note, the Issuermay require the payment of a sum sufficient to cover any tax or other governmental charge that maybe imposed in relation thereto and any other expenses (including the fees and the expenses of theTrustee, its counsel and its agents) connected therewith.

9. Notices

Notices to Holders of Notes will be deemed to be validly given (i) if sent by first class mail tothem (or, in the case of joint Holders, to the first-named in the Register) at their respective addressesas recorded in the Register, and will be deemed to have been validly given on the fourth Business Dayafter the date of such mailing and (ii) for so long as such Notes are listed on any Stock Exchange, andso long as and to the extent the rules of such Stock Exchange so require, upon publication in Englishin a leading daily newspaper of general circulation in the country in which such Stock Exchange islocated. In the case of Global Notes, such notices shall instead be sent to DTC, Euroclear orClearstream Banking, as the case may be, or their nominees, as the Holder thereof, and such clearingagency or agencies will communicate such notices to its participants in accordance with their standardprocedures. As long as the notes are listed on the official list of the Luxembourg Stock Exchange andits rules so require the Issuer also give notices to the holders of the Notes by publication in a dailynewspaper of general circulation in Luxembourg (D’wort). If publication in Luxembourg isimpracticable, the Issuer will make the publication elsewhere in Western Europe. By daily newspaper,the Issuer means a newspaper that is published on each day, other than Sunday or holiday Luxembourgor, when applicable, elsewhere in Western Europe. The notes may be also published on the website ofLuxembourg Stock Exchange (www.bourse.lu)

Neither the failure to give notice nor any defect in any notice given to any particular Holder of aNote shall affect the sufficiency of any notice with respect to any other Notes.

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10. Currency Indemnity

Any amount received or recovered in a currency other than the currency (the ‘‘DenominationCurrency’’) in which such Note is denominated or in which such amount is payable, whether as a resultof, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the winding up ordissolution of the Issuer or otherwise (the ‘‘Judgment Currency’’), by the Holder of this Note in respectof any sum expressed to be due to it from the Issuer or the Guarantor hereunder shall constitute adischarge of the Issuer only to the extent of the amount of the denomination currency that the Holderis able to purchase with the amount so received or recovered in the judgment currency on the date ofthat receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first dateon which it is practicable to do so). The Issuer agrees that it will indemnify the relevant Holder againstany loss arising or resulting from any variation in rates of exchange between (i) the rate of exchange atwhich the denomination currency is converted into the judgment currency for the purpose of suchjudgment or order, winding up, dissolution or otherwise and (ii) the rate of exchange at which suchHolder would have been able to purchase the denomination currency with the amount of the judgmentcurrency actually received by such Holder if such Holder had utilized such amount of judgmentcurrency to purchase the denomination currency as promptly as practicable upon such Holder’s receiptthereof. This indemnity will constitute a separate and independent obligation from the other obligationscontained in the terms and conditions of the Notes, will give rise to a separate and independent causeof action, will apply irrespective of any indulgence granted from time to time and will continue in fullforce and effect notwithstanding any judgment, order, claim or proof for a liquidated sum or sums inrespect of amounts due in respect of the relevant Note or under any such judgment, order, claim orproof. The term ‘‘rate of exchange’’ will include an allowance for any customary or reasonable premiumsand costs of exchange payable in connection with the purchase of, or conversion into, the relevantcurrency.

11. Prescription

Claims against the Issuer or the Guarantor for payments under the Notes or the Guarantee shallbe prescribed unless made within a period of five years from the relevant payment date.

12. Governing Law, Jurisdiction, Service of Process

The Indenture, the Notes and the Guarantee are governed by, and will be construed in accordancewith, the laws of the State of New York.

The Issuer and the Guarantor have irrevocably submitted to the non-exclusive jurisdiction of anystate or federal court sitting in the Borough of Manhattan, City and State of New York for thepurposes of any action or proceeding arising out of or related to the Notes, the Guarantee or theIndenture. The Issuer and the Guarantor have irrevocably waived, to the fullest extent permitted bylaw, any objection which it may have to the laying of the venue of any such action or proceedingbrought in such a court and any claim that any such action or proceeding brought in such a court hasbeen brought in an inconvenient forum and any right to which it may be entitled on account of placeof residence or domicile. The Issuer and the Guarantor have agreed that final judgment in any suchaction or proceeding brought in such court shall be conclusive and binding upon such party and may beenforced in any court to the jurisdiction of which such party is subject by a suit upon such judgment;provided, however, that service of process is effected upon such Person in the manner specified in thefollowing paragraph or as otherwise permitted by law.

As long as any Note remains outstanding, the Issuer and the Guarantor will at all times have anauthorized agent in the Borough of Manhattan, City and State of New York, upon whom process maybe served in any legal action or proceeding arising out of or relating to the Notes. Service of processupon such agent and written notice of such service mailed or delivered to the party being joined insuch action or proceeding shall, to the extent permitted by law, be deemed in every respect effective

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service of process upon such party in any such legal action or proceeding. The Issuer and theGuarantor has each appointed National Corporate Research, Ltd., located at 225 West 34th Street,Suite 910 New York, NY 10122 as its agent for service of process in any proceedings in the Borough ofManhattan, City and State of New York.

Service of process personally delivered upon the agents specified in the preceding paragraph andwritten notice of such service delivered to the Issuer and the Guarantor shall be deemed in everyrespect effective service of process upon the Issuer and the Guarantor, provided, however, that nonotice by mail on the Issuer and the Guarantor or any of its agents shall be deemed effective service ofprocess.

13. Certain Definitions

As used in this Note, the following terms have the meanings indicated below:

‘‘Additional Amounts’’ has the meaning specified in Section 5(g).

‘‘Advance Transaction’’ means an advance from a financial institution involving either (i) a foreignexchange contract (ACC—Adiantamento sobre Contrato de Cambio) or (ii) an export contract (ACE—Adiantamento sobre Contrato de Exportacao).

‘‘Affiliate’’ means, with respect to any specified Person, (1) any other Person which, directly orindirectly, is in control of, is controlled by or is under common control with such specified Person or(2) any other Person who is a director or officer (a) of such specified Person, (b) of any subsidiary ofsuch specified Person or (c) of any Person described in clause (1) above. For purposes of thisdefinition, ‘‘control’’ of a Person means the power, direct or indirect, to direct or cause the direction ofthe management and policies of such Person, whether by contract or otherwise, and the terms‘‘controlling’’ and ‘‘controlled’’ have meanings correlative to the foregoing.

‘‘Asset Disposition’’ means any sale, lease, transfer or other disposition (or series of related sales,leases, transfers or dispositions) of shares of Capital Stock of a Subsidiary (other than executiveofficers’ qualifying shares), property or other assets (each, a ‘‘disposition’’) by the Guarantor or any ofthe Guarantor’s Subsidiaries, including any disposition by means of a merger, consolidation or similartransaction, other than (1) a disposition of property or assets at Fair Market Value in the ordinarycourse of business, (2) a disposition by a Subsidiary to the Guarantor or by the Guarantor or aSubsidiary to a Wholly Owned Subsidiary and (3) a disposition of obsolete assets in the ordinary courseof business.

‘‘Average Life’’ means, when applied to any Debt at the time of determination, the number of yearsobtained by dividing (1) the product obtained by multiplying (a) the total of all then remaininginstallment or other required payments of principal, including payment at final maturity, in respectthereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse betweensuch date and the making of such payment by (2) the then outstanding principal amount of such Debt.

‘‘Bankruptcy Law’’ means (i) Title 11, United States Code or any similar U.S. federal or state lawfor the relief of debtors or the administration or liquidation of debtors’ estates for the benefit of theircreditors, and (ii) the Brazilian Bankruptcy Law or any similar Cayman Islands or Brazilian federal orstate law for the relief of debtors or the administration or liquidation of debtors’ estates for the benefitof their creditors.

‘‘Brazilian GAAP’’ means, collectively, the accounting principles prescribed by Brazilian CorporateLaw, the rules and regulations issued by applicable regulators, including the CVM, as well as thetechnical releases issued by the Brazilian Institute of Accountants (Instituto Brasileiro de Contadores),in each case as in effect from time to time. Notwithstanding the preceding sentence and any otherprovision of the Indenture described herein to the contrary, Brazilian GAAP shall be used for purposesof all calculations and determinations in respect of the covenants in Sections 5(i), 5(j), 5(k), 5(m) and5(n) and all defined terms associated therewith.

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‘‘Business Day’’ means any day other than a Saturday, a Sunday or a legal holiday or a day onwhich banking institutions or trust companies are authorized or obligated by law to close in The City ofNew York or Sao Paulo, Brazil.

‘‘Capital Stock’’ means, as applied to any Person, means any and all shares, interests, rights topurchase, warrants, options, participations or other equivalents of or interests in (however designated),including any Preferred Stock, but excluding any debt securities convertible into or exchangeable forsuch equity.

‘‘Change of Control’’ means:

(1) any ‘‘person’’ or ‘‘group’’ (as such terms are used for purposes of Sections 13(d) and14(d) of the Exchange Act, other than Permitted Holders) is or becomes the ‘‘beneficial owner’’(as such term is used in Rules 13d-3 under the Exchange Act), directly or indirectly, of more than50% of the total voting power of the Voting Stock of the Guarantor, including as a result of anymerger or consolidation transaction including the Guarantor; or

(2) Permitted Holders, directly or indirectly, cease to have the power to direct or cause thedirection of the management and policies of the Guarantor, whether through the ownership ofvoting securities, by contract or otherwise.

‘‘Consolidated Net Income’’ means, for any period, the aggregate net income (or loss) of TheGuarantor and its Subsidiaries for such period determined on a consolidated basis in conformity withGAAP.

‘‘Contingent Obligation’’ means any obligation, contingent or otherwise, of any person directly orindirectly guaranteeing any Debt or other obligation of any person and any obligation, direct orindirect, contingent or otherwise, of such person (1) to purchase or pay (or advance or supply funds forthe purchase or payment of) such Debt or other obligation of such person (whether arising by virtue ofpartnership arrangements, or by agreement to keep well, to purchase assets, goods, securities orservices, to take or pay, or to maintain financial statement conditions or otherwise) or (2) entered intofor purposes of assuring in any other manner the obligee of such Debt or other obligation of thepayment thereof or to protect such obligee against loss in respect thereof (in whole or in part);provided, however, that the term ‘‘Contingent Obligations’’ shall not include endorsements forcollection or deposit in the ordinary course of business.

‘‘Custodian’’ means any receiver, trustee, assignee, liquidator, custodian or similar official underany Bankruptcy Law.

‘‘CVM’’ means the Brazilian Comissao de Valores Mobiliarios (Securities Commission).

‘‘Debt’’ means, as applied to any Person, without duplication:

(1) the principal of and premium, if any, in respect of (a) indebtedness of such Person formoney borrowed and (b) indebtedness evidenced by notes, debentures, bonds or other similarinstruments for the payment of which such Person is responsible or liable;

(2) all obligations of such Person issued or assumed as the deferred purchase price ofproperty, all conditional sale obligations of such Person and all obligations of such Person underany title retention agreement (but excluding trade accounts payable or other short-term obligationsto suppliers payable within 180 days, in each case arising in the ordinary course of business);

(3) all obligations of such Person for the reimbursement of any obligor on any letter ofcredit, banker’s acceptance, surety bond or similar credit transaction (other than obligations withrespect to letters of credit securing obligations (other than obligations described in (1) and(2) above) entered into in the ordinary course of business of such Person to the extent such lettersof credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed nolater than the third Business Day following receipt by such Person of a demand for reimbursementfollowing payment on the letter of credit);

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(4) the amount of all obligations of such Person with respect to the redemption, repaymentor other repurchase of any Redeemable Stock (but excluding any accrued dividends);

(5) all Hedging Obligations;

(6) all obligations of the type referred to in clauses (1) through (5) of other Persons and alldividends of other Persons for the payment of which, in either case, such Person is responsible orliable, directly or indirectly, as obligor, guarantor or otherwise, including by means of anyContingent Obligation (other than obligations of other Persons that are customers or suppliers ofsuch Person for which such Person is or becomes so responsible or liable in the ordinary course ofbusiness to (but only to) the extent that such Person does not, or is not required to, make paymentin respect thereof); and

(7) all obligations of the type referred to in clauses (1) through (5) of other Persons securedby any Lien on any property or asset of such Person (whether or not such obligation is assumed bysuch Person), the amount of such obligation being deemed to be the lesser of the value of suchproperty or assets or the amount of the obligation so secured.

‘‘Default’’ means any event which is, or after notice or passage of time or both would be, an Eventof Default.

‘‘EBITDA’’ means, for any period:

(a) the Guarantor’s consolidated net services and sales revenue minus

(b) the Guarantor’s consolidated cost of sales and services rendered minus

(c) the Guarantor’s consolidated general and administrative expenses including directors’remuneration plus

(d) any depreciation or amortization included in consolidated cost of sales and servicesrendered or general and administrative expenses plus

(e) the Guarantor’s other consolidated operating income minus

(f) the Guarantor’s other consolidated operating expenses,

as each such item is reported on the most recent consolidated financial statements delivered by theGuarantor and prepared in accordance with Brazilian GAAP. ‘‘Equity Interests’’ means all Capital Stockand all warrants or options with respect to, or other rights to purchase, Capital Stock, but excludingDebt convertible into equity.

‘‘Exchange Act’’ means the U.S. Securities Exchange Act of 1934, as amended.

‘‘Hedging Obligations’’ of any Person means the obligations of such Person pursuant to any interestrate swap agreement, foreign currency exchange agreement, interest rate collar agreement, option orfutures contract or other similar agreement or arrangement designed to protect such Person againstchanges in interest rates or foreign exchange rates.

‘‘Incur’’ means, with respect to any Debt or Capital Stock, to incur, create, issue, assume orGuarantee such Debt or Capital Stock. If any Person becomes a Subsidiary on any date after the dateof the indenture, the Debt and Capital Stock of such Person outstanding on such date will be deemedto have been Incurred by such Person on such date for purposes of the covenant described under thecaption ‘‘—Covenants—Limitation on Debt.’’ The accretion of original issue discount or payment ofinterest in kind will not be considered an Incurrence of Debt.

‘‘Interest on Capital’’ means juros sobre capital proprio paid pursuant to Brazilian Law No. 9249/95as may be amended or replaced.

‘‘Investment’’ means, for any Person, (a) the acquisition (whether for cash, property, assets,services, securities or otherwise) of Capital Stock, bonds, notes, debentures, partnership or other

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ownership interests or other securities of any other Person or any agreement to make any suchacquisition (including any ‘‘short sale’’ or any sale of any securities at a time when those securities arenot owned by the Person entering into that sale, and including advances made to a corporation withrespect to any future capital increase to be made by that corporation), (b) the making of any depositwith, or advance, loan or other extension of credit to, any other Person (including the purchase ofproperty or assets from another Person subject to an understanding or agreement, contingent orotherwise, to resell that property or those assets to that Person), but excluding any such advance, loanor extension of credit having a term not exceeding 90 days arising in connection with the sale ofinventory or supplies by that Person in the ordinary course of business or (c) the entering into of anyContingent Obligation.

‘‘Investment Grade’’ means BBB- or higher by S&P, Baa3 or higher by Moody’s or BBB- or higherby Fitch, or the equivalent of such global ratings by S&P, Moody’s or Fitch.

‘‘issue’’ means issue, assume, Guarantee, incur or otherwise become liable for; provided, however,that any Debt or Capital Stock of a Person existing at the time such Person becomes a Subsidiary(whether by merger, consolidation, acquisition or otherwise) shall be deemed to be issued by suchSubsidiary at the time it becomes a Subsidiary; and the term ‘‘issuance’’ has a corresponding meaning.

‘‘Issuer Order’’ means a written order signed in the name of the Company by the Chief ExecutiveOfficer, the Chief Financial Officer or any other executive officer performing decision-making functionsfor the Company.

‘‘Lien’’ means any mortgage, pledge, security interest, conditional sale or other title retentionagreement or other similar lien.

‘‘Net Debt’’ means, as of any date of determination, the aggregate amount of Debt, less OrdinaryCourse Debt, of the Guarantor and its consolidated Subsidiaries less the sum of (without duplication)the amounts set out in the line items ‘‘Cash and banks,’’ ‘‘Financial investments’’ and short-term‘‘Marketable securities’’ in all cases determined in accordance with Brazilian GAAP on a consolidatedbasis and as set forth in the most recent consolidated balance sheet of the Guarantor.

‘‘Net Debt to EBITDA Ratio’’ means, at any time, the ratio of (1) Net Debt at that time to(2) EBITDA for the then most recently concluded period of four consecutive fiscal quarters; provided,however, that:

(1) if since the beginning of that period the Guarantor or any Subsidiary has made any AssetDisposition, the EBITDA for that period will be reduced by an amount equal to the EBITDA (ifpositive) directly attributable to the shares, property or other assets that are the subject of thatAsset Disposition for that period, or increased by an amount equal to the EBITDA (if negative)directly attributable thereto for that period;

(2) if since the beginning of that period the Guarantor or any Subsidiary (by merger orotherwise) has made an Investment in any Subsidiary (or any Person that becomes a Subsidiary) oran acquisition of property or assets, including any acquisition of property or assets occurring inconnection with a transaction causing a calculation to be made hereunder, which constitutes all orsubstantially all of an operating unit of a business, EBITDA for that period will be calculated aftergiving pro forma effect thereto (including the issuance of any Debt) as if that Investment oracquisition occurred on the first day of that period; and

(3) if since the beginning of that period any Person (that subsequently became a Subsidiaryor was merged with or into the Guarantor or any Subsidiary since the beginning of that period)has made any Asset Disposition or any Investment that would have required an adjustmentpursuant to clauses (1) and (2) above if made by the Guarantor or any Subsidiary during thatperiod, EBITDA for that period will be calculated after giving pro forma effect thereto as if thatAsset Disposition or Investment occurred on the first day of that period.

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For purposes of this definition, whenever pro forma effect is to be given to an acquisition ofproperty or assets or an Asset Disposition, the amount of EBITDA associated therewith and the proforma calculations described above will be determined in good faith by the Guarantor’s chief financialor accounting officer. ‘‘Odebrecht Group’’ means Odebrecht S.A. or (except with respect to thedefinition of Permitted Holders) any of its respective Affiliates.

‘‘Ordinary Course Debt’’ means Debt specified in clause (3) of the definition of ‘‘Debt’’ andPermitted Debt specified in clauses (7) and (8) of the definition of ‘‘Permitted Debt.’’

‘‘Permitted Holders’’ means any or all of the following:

(a) the Odebrecht Group; and

(b) any Person both the Capital Stock and the Voting Stock of which (or in the case of atrust, the beneficial interests in which) are owned more than 50% by the Odebrecht Group.

‘‘Permitted Liens’’ means, with respect to any Person:

(1) any Lien existing on the date of the Amended Notes, and any extension, renewal orreplacement thereof or of any Lien referred to in clause (2), (3) or (4) below; provided, however,that the total amount of Debt so secured is not increased;

(2) any Lien on any property or assets (including Capital Stock of any Person) securing Debtincurred solely for purposes of financing the acquisition, construction or improvement of suchproperty or assets after the date of the Amended Notes; provided that (i) the aggregate principalamount of Debt secured by the Liens shall not exceed (but may be less than) the cost (i.e.,purchase price) of the property or assets so acquired, constructed or improved and (ii) the Lien isincurred before, or within 120 days after the completion of, such acquisition, construction orimprovement and does not encumber any other property or assets of the Guarantor or anySubsidiary; and provided, further, that to the extent that the property or asset acquired is CapitalStock, the Lien also may encumber other property or assets of the Person so acquired;

(3) any Lien securing Debt for the purpose of financing all or part of the cost of theacquisition, construction or development of a project; provided that the Liens of such Debt arelimited to assets (including Capital Stock of the project entity) and/or revenues of such project;and provided, further, that the Lien is incurred before, or within 120 days after the completion of,that acquisition, construction or development and does not apply to any other property or assets ofthe Guarantor or any Subsidiary;

(4) any Lien existing on any property or assets of any Person before that Person’s acquisitionby, merger into or consolidation with the Guarantor or any Subsidiary after the date of theAmended Notes; provided that (i) the Lien is not created in contemplation of or in connectionwith such acquisition, merger or consolidation, (ii) the Debt secured by the Liens may not exceedthe Debt secured on the date of such acquisition, merger or consolidation, (iii) the Lien shall notapply to any other property or assets of the Guarantor or any of its Subsidiaries and (iv) the Lienshall secure only the Debt that it secures on the date of such acquisition, merger or consolidation;

(5) any Lien imposed by law that was incurred in the ordinary course of business, including,without limitation, carriers’, warehousemen’s and mechanics’ liens and other similar encumbrancesarising in the ordinary course of business, in each case for sums not yet due or being contested ingood faith by appropriate proceedings;

(6) any pledge or deposit made in connection with workers’ compensation, unemploymentinsurance or other similar social security legislation, any deposit to secure appeal bonds inproceedings being contested in good faith to which the Guarantor or any Subsidiary is a party,good faith deposits in connection with bids, tenders, contracts (other than for the payment of

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Debt) or leases to which the Guarantor or any Subsidiary is a party or deposits for the payment ofrent, in each case made in the ordinary course of business;

(7) any Lien in favor of issuers of surety bonds or letters of credit issued pursuant to therequest of and for the account of the Guarantor or any Subsidiary in the ordinary course ofbusiness;

(8) any Lien securing taxes, assessments and other governmental charges, the payment ofwhich are not yet due or are being contested in good faith by appropriate proceedings and forwhich such reserves or other appropriate provisions, if any, have been established as required byBrazilian GAAP;

(9) minor defects, easements, rights-of-way, restrictions and other similar encumbrancesincurred in the ordinary course of business and encumbrances consisting of zoning restrictions,licenses, restrictions on the use of property or assets or minor imperfections in title that do notmaterially impair the value or use of the property or assets affected thereby, and any leases andsubleases of real property that do not interfere with the ordinary conduct of the business of theGuarantor or any Subsidiary, and which are made on customary and usual terms applicable tosimilar properties;

(10) any rights of set-off of any Person with respect to any deposit account of the Guarantoror any Subsidiary arising in the ordinary course of business;

(11) any Liens granted to secure borrowings from, directly or indirectly,(i) Banco Nacional deDesenvolvimento Economico e Social—BNDES, or any other Brazilian governmental developmentbank or credit agency or (ii) any international or multilateral development bank, government-sponsored agency, export-import bank or official export-import credit insurer;

(12) any Liens on the inventory or receivables of the Guarantor or any Subsidiary securing theobligations of such Person under any lines of credit or working capital facility or in connectionwith any structured export or import financing or other trade transaction; provided that theaggregate principal amount of Debt incurred that is secured by receivables that shall fall due inany calendar year shall not exceed (i) with respect to transactions secured by receivables fromexport sales, 80% of the Guarantor’s consolidated gross revenues from export sales for theimmediately preceding calendar year or (ii) with respect to transactions secured by receivablesfrom domestic (Brazilian) sales, 80% of such Person’s consolidated gross revenues from saleswithin Brazil for the immediately preceding calendar year; and provided, further, that AdvanceTransactions shall not be deemed transactions secured by receivables for purpose of the abovecalculation; and

(13) in addition to the foregoing Liens set forth in clauses (1) through (12) above, Lienssecuring Debt of the Guarantor or any Subsidiary (including, without limitation, guarantees of theGuarantor or any Subsidiary) which do not in aggregate principal amount, at any time ofdetermination, exceed the greater of U.S.$200,000,000 or 15% of Total Consolidated Assets.

‘‘Person’’ means any individual, corporation, partnership, joint venture, trust, unincorporatedorganization or government or any agency or political subdivision thereof.

‘‘Preferred Stock’’ means, as applied to the Capital Stock of any corporation, Capital Stock of anyclass or classes (however designated) that is preferred as to the payment of dividends, or as to thedistribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation,over shares of Capital Stock of any other class of such corporation.

‘‘Rating Agency’’ means (i) S&P, (ii) Moodys or (iii) Fitch.

‘‘Rating Decline’’ means that at any time within 90 days (which period shall be extended so long asthe rating of the notes is under publicly announced consideration for possible downgrade by either

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Rating Agency) after the date of public notice of a Change of Control, or of the Guarantor’s intentionor that of any Person to effect a Change of Control, the then-applicable rating of the notes isdecreased by either Rating Agency by one or more categories; provided that any such Rating Decline isin whole or in part in connection with a Change in Control.

‘‘Redeemable Stock’’ means any Capital Stock that by its terms or otherwise is required to beredeemed on or prior to the first anniversary of the Stated Maturity Date of the Notes or isredeemable at the option of the holder thereof at any time on or prior to the first anniversary of theStated Maturity Date of the Notes.

‘‘Restricted Payment’’ means any dividend, Interest on Capital or other distribution (whether incash, securities or other property) with respect to any shares of Capital Stock of the Guarantor or anyof its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinkingfund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation ortermination of any such shares of Capital Stock of the Guarantor or any of its Subsidiaries or anyoption, warrant or other right to acquire any such shares of Capital Stock of the Guarantor or any ofits Subsidiaries.

‘‘Stated Maturity’’ means (i) with respect to any Debt, the date specified as the fixed date on whichthe final installment of principal of such Debt is due and payable or (ii) with respect to any scheduledinstallment of principal of or interest on any Debt, the date specified as the fixed date on which suchinstallment is due and payable as set forth in the documentation governing such Debt, not includingany contingent obligation to repay, redeem or repurchase prior to the regularly scheduled date forpayment.

‘‘Significant Subsidiary’’ means any Subsidiary of the Guarantor which at the time of determinationeither (1) had assets which, as of the date of the Guarantor’s most recent quarterly consolidatedbalance sheet, constituted at least 5% of the Guarantor’s total assets on a consolidated basis as of suchdate, or (2) had revenues for the 12-month period ending on the date of the Guarantor’s most recentquarterly consolidated statement of income which constituted at least 5% of the Guarantor’s totalrevenues on a consolidated basis for such period.

‘‘Subsidiary’’ means any corporation, association, partnership or other business entity of whichmore than 50% of the total voting power of shares of Capital Stock or other interests (includingpartnership interests) entitled (without regard to the occurrence of any contingency) to vote in theelection of directors, managers or trustees thereof is at the time owned or controlled, directly orindirectly, by (1) the Issuer or the Guarantor, (2) the Issuer or the Guarantor and one or moreSubsidiaries or (3) one or more Subsidiaries.

‘‘Substantially Wholly-Owned’’ means, with respect to any Subsidiary, a Subsidiary of at least 90%of the outstanding Capital Stock of which (other than director’s qualifying shares) is owned by theGuarantor or one or more Wholly Owned Subsidiaries (or a combination thereof) of the Guarantor.

‘‘Total Consolidated Assets’’ means the total amount of assets of the Guarantor and its Subsidiariesprepared in accordance with Brazilian GAAP.

‘‘Wholly Owned Subsidiary’’ means a Subsidiary all of the Capital Stock of which (other thandirectors’ qualifying shares) is owned by the Guarantor or another Wholly Owned Subsidiary.

‘‘Voting Stock’’ means, with respect to any Person, Capital Stock of any class or kind ordinarilyhaving the power to vote for the election of directors, managers or other voting members of thegoverning body of such Person.

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TAXATION

Cayman Islands Tax Considerations

The following discussion of certain Cayman Islands tax consequences of an investment in the notesis based on the advice of Maples and Calder as to Cayman Islands law. The discussion is a generalsummary of present law, which is subject to prospective and retroactive change. It assumes that theissuer will conduct its affairs in accordance with assumptions made by, and representations made tocounsel. It is not intended as tax advice, does not consider any investor’s particular circumstances, anddoes not consider tax consequences other than those arising under Cayman Islands law.

Under existing Cayman Islands laws:

(1) Payments in respect of the notes and guaranty will not be subject to taxation in the CaymanIslands and no withholding will be required on such payments to any holder of the notes andgains derived from sale of the notes will not be subject to Cayman Islands income orcorporate tax. The Cayman Islands currently have no income tax or taxation in the nature of awithholding tax, corporate or capital tax and no estate duty, inheritance tax or gift tax; and

(2) Provided notes are not executed in or brought into the Cayman Islands, no capital or stampduties are levied in the Cayman Islands on the issue or redemption of the notes. Holderswhose notes are brought into the Cayman Islands may in certain circumstances be liable topay stamp duty imposed under the laws of the Cayman Islands in respect of the notes; and aninstrument transferring title to a security which is in registered form would, if brought into orexecuted in the Cayman Islands, be subject to Cayman Islands stamp duty. Cayman Islandsstamp duty of a nominal amount would also be payable in the event that documentationrelating to the guaranty were brought into or executed in the Cayman Islands. There is noapplicable tax treaty between the United States and the Cayman Islands.

Odebrecht Finance Ltd. has been incorporated under the laws of the Cayman Islands as anexempted company and, as such, has obtained an undertaking from the Governor in Cabinet of theCayman Islands under the Tax Concessions Law (1999 Revision) in the following form:

The Tax Concessions Law

(1999 Revision)

Undertaking as to Tax Concessions

In accordance with Section 6 of the Tax Concessions Law (1999 Revision) the Governor in Cabinetundertakes with Odebrecht Finance Ltd. (the ‘‘Company’’):

(a) that no law which is hereinafter enacted in the Islands imposing any tax to be levied onprofits, income, gains or appreciations shall apply to the Company or its operations; and

(b) in addition, that no tax to be levied on profits, income, gains or appreciations or which is inthe nature of estate duty or inheritance tax shall be payable:

(i) on or in respect of the shares, debentures or other obligations of the Company; or

(ii) by way of the withholding in whole or in part of any relevant payment as defined inSection 6(3) of the Tax Concessions Law (1999 Revision).

These concessions shall be for a period of twenty years from the 13th day of February 2007.

Governor in Cabinet.

THE ABOVE DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSISOF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF THE NOTES.

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PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORSCONCERNING THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.

Brazilian Tax Considerations

The following is a general summary of the Brazilian tax considerations relating to an investment in thenotes by a non-resident of Brazil. It is based on the tax laws of Brazil as in effect on the date hereof and issubject to any change in Brazilian law that may come into effect after such date, and is applicable toOdebrecht Finance Ltd. and Construtora Norberto Odebrecht S.A. The information set forth below isintended to be a general description only and does not address all possible tax consequences relating to aninvestment in the notes.

PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THECONSEQUENCES OF PURCHASING THE NOTES, INCLUDING, WITHOUT LIMITATION, THECONSEQUENCES OF THE RECEIPT OF INTEREST AND THE SALE, REDEMPTION ORREPAYMENT OF THE NOTES OR COUPONS.

Generally, a holder that is an individual, entity, trust or organization resident or domiciled outsideBrazil for tax purposes (‘‘non-Brazilian holder’’) is taxed in Brazil only when income is derived fromBrazilian sources or gains are realized on the disposition of assets located in Brazil. Therefore, basedon the fact that Odebrecht Finance Ltd. is considered for tax purposes as domiciled abroad, anyincome (including interest and original issue discount, if any) paid by Odebrecht Finance Ltd. inrespect of the notes issued by it in favor of non-Brazilian holders are not subject to withholding ordeduction in respect of Brazilian income tax or any other taxes, duties, assessments or governmentalcharges in Brazil, provided that such payments are made with funds held by such entity outside ofBrazil. It is expected that the notes will be issued without original issue discount.

If, Construtora Norberto Odebrecht S.A. makes payments as guarantor in connection with thenotes to a non-Brazilian holder, such payments will not be subject to tax in Brazil. However, in view ofthe lack of specific legal guidance in this regard, Brazilian tax authorities could attempt to imposewithholding income tax at the rate of 15% (or 25%, in case the beneficiary is located in a tax havenjurisdiction (i.e., countries which do not impose any income tax or which impose it at a maximum ratelower than 20% or where the laws impose restrictions on the disclosure of ownership composition orsecurities ownership)), or at a lower rate provided for in any applicable tax treaty between Brazil andthe country of the beneficiary. Investors should note that there is no tax treaty between Brazil and theUnited States.

Capital gains generated outside Brazil as a result of a transaction between two non-residents ofBrazil with assets located in Brazil are subject to tax in Brazil, according to article 26 of LawNo. 10,833, enacted on December 29, 2003. Based on the fact that the notes are not issued by aBrazilian company and, thus, the notes will not fall within the definition of assets located in Brazil forpurposes of Law No. 10,833, gains on the sale or other disposition of the notes made outside Brazil bya non-Brazilian holder to another non-Brazilian holder are not subject to Brazilian taxes. However,considering the general and unclear scope of this legislation and the absence of judicial guidance inrespect thereto, we cannot assure prospective investors that such interpretation of this law will prevailin the courts of Brazil.

In case the notes are deemed to be located in Brazil, gains recognized by a non-Brazilian holderfrom the sale or other disposition of the notes to a non-resident in Brazil may be subject to income taxin Brazil at a rate of 15% or 25%, if such non-Brazilian holder is located in a tax haven jurisdiction,unless a lower rate is provided for in an applicable tax treaty between Brazil and the country where thenon-Brazilian holder of the payment has its domicile. If the notes are purchased from a non-resident inBrazil by a resident in Brazil, the same tax rate will be applied regardless of where the notes aredeemed to be located.

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All fund transfers in connection with financial transactions in Brazil are subject to the temporarycontribution on financial transactions (CPMF), which is levied at a rate of 0.38% on any bank accountwithdrawals or debits. The CPMF burden is incurred by the Brazilian payor. The CPMF expires onDecember 31, 2007, although the Brazilian federal government may extend it or transform the CPMFinto a permanent tax. Consequently, payments made by the Construtora Norberto Odebrecht S.A. asguarantor will be subject to the CPMF.

Pursuant to Decree No. 4,494/2002, conversion into Brazilian currency of proceeds received by aBrazilian entity and the conversion into foreign currency of proceeds received in reais are subject totaxation of foreign exchange transactions (IOF/Cambio). Currently, except in limited cases, the IOF/Cambio is 0%, although the Brazilian federal government may increase such rate up to 25%.

Generally, there is no stamp, transfer or other similar tax in Brazil with respect to the transfer,assignment or sale of any debt instrument outside Brazil (including the notes) nor any inheritance, giftor succession tax applicable to the ownership, transfer or disposition of the notes, except for gift andinheritance taxes imposed in some states of Brazil on gifts and bequests by individuals or entities notdomiciled or residing in Brazil to individuals or entities domiciled or residing within such Brazilianstates.

United States Federal Income Tax Considerations

The following is a description of the material U.S. federal income tax consequences that may berelevant with respect to the acquisition, ownership and retirement of notes by a holder thereof. Thisdescription only applies to notes held as capital assets and does not address, except as set forth below,aspects of U.S. federal income taxation that may be applicable to holders that are subject to special taxrules, such as:

• financial institutions;

• insurance companies;

• real estate investment trusts;

• regulated investment companies;

• grantor trusts;

• holders that will hold a note through partnerships or other pass through entity;

• tax-exempt organizations;

• dealers or traders in securities or currencies;

• holders that will hold a note as part of a position in a straddle or as part of a hedging,conversion or integrated transaction for U.S. federal income tax purposes; or

• holders that have a functional currency other than the U.S. dollar.

Moreover, this description does not address the U.S. federal estate and gift tax or alternativeminimum tax consequences of the acquisition, ownership or retirement of notes and does not addressthe U.S. federal income tax treatment of holders that do not acquire notes as part of the initialdistribution at their initial issue price which will equal the first price at which a substantial amount ofthe notes is sold for money to the public (not acting in the capacity of underwriters, placement agentsor wholesalers). Each prospective purchaser should consult its tax advisor with respect to the U.S.federal, state, local and foreign tax consequences of acquiring, holding and disposing of notes.

This description is based on the U.S. Internal Revenue Code of 1986, as amended, existing andproposed U.S. Treasury Regulations, administrative pronouncements and judicial decisions, each as

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available and in effect on the date hereof. All of the foregoing are subject to change, possibly withretroactive effect, or differing interpretations which could affect the tax consequences described herein.

For purposes of this description, a U.S. Holder is a beneficial owner of notes who for U.S. federalincome tax purposes is:

• an individual citizen or resident of the United States;

• a corporation organized in or under the laws of the United States or any State thereof, includingthe District of Columbia;

• an estate the income of which is subject to U.S. federal income taxation regardless of its source;or

• a trust (1) that validly elects to be treated as a United States person for U.S. federal income taxpurposes or (2)(a) the administration over which a U.S. court can exercise primary supervision and(b) all of the substantial decisions of which one or more United States persons have the authority tocontrol.

A Non-U.S. Holder is a beneficial owner of notes that is neither a U.S. Holder nor a partnership(or other entity that is treated as a partnership for U.S. federal income tax purposes).

If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes)holds the notes, the tax treatment of the partnership and a partner in such partnership generally willdepend on the status of the partner and the activities of the partnership. Such partner or partnershipshould consult its own tax advisor as to its consequences of holding notes.

INTERNAL REVENUE SERVICE CIRCULAR 230 DISCLOSURE

PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE HEREBY INFORM YOUTHAT THE DESCRIPTION SET FORTH HEREIN WITH RESPECT TO U.S. FEDERAL TAXISSUES WAS NOT INTENDED OR WRITTEN TO BE USED, AND SUCH DESCRIPTION CANNOTBE USED BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAYBE IMPOSED ON THE TAXPAYER UNDER THE U.S. INTERNAL REVENUE CODE. SUCHDESCRIPTION WAS WRITTEN TO SUPPORT THE MARKETING OF THE NOTES. TAXPAYERSSHOULD SEEK ADVICE BASED ON THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROMAN INDEPENDENT TAX ADVISOR.

Interest

It is expected and this discussion assumes that the notes will be issued with no more than a deminimis amount of original issue discount, or OID, for federal income tax purposes. Therefore, if youare a U.S. Holder, interest paid to you on a note, including, any amount withheld in respect of anytaxes and any additional amounts, will be includible in your gross income as ordinary interest income inaccordance with your usual method of tax accounting. In addition, interest on the notes will be treatedas foreign source income for your U.S. federal income tax purposes. For U.S. foreign tax creditlimitation purposes, interest on the notes generally will constitute ‘‘passive income,’’ or, in the case ofcertain U.S. Holders, ‘‘general category income.’’ Additionally, a foreign tax credit for foreign taxesimposed with respect to the notes may be denied where you do not meet a minimum holding periodrequirement during which you are not protected from risk of loss. The rules governing the foreign taxcredit are complex. You are urged to consult your tax advisor regarding the availability of the foreigntax credit under your particular circumstances.

The issuer may redeem all or part of the notes at any time on or after October 18, 2012 by, insome cases, paying a specified premium (see ‘‘Description of Notes—Redemption and Repurchase—Optional Redemption’’). U.S. Treasury Regulations regarding notes issued with OID contain special

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rules for determining the maturity date and the stated redemption price at maturity of a debtinstrument where the issuer of such debt instrument has an unconditional option to make paymentsunder such debt instrument under an alternative payment schedule. Under such rules, it is assumedthat the issuer of such debt instrument will exercise an option to redeem a debt instrument if suchexercise will lower the yield to maturity of such debt instrument. Since the terms of our option toredeem the notes on or after October 18, 2012 by, in some case, paying a specified premium would notlower the yield to maturity of the notes, we will disregard this optional redemption provision indetermining the amount or timing of any OID inclusions thereon.

The issuer may redeem the notes in whole or in part, at any time prior to October 18, 2012 at 100%of their principal amount plus a ‘‘make whole’’ (see ‘‘Terms and Conditions—Redemption and Maturity—Optional Redemption’’). We believe that as of the expected issue date for the notes, the likelihood that theissuer will exercise such right is remote. In addition, in the event of a change of control (see ‘‘Terms andConditions—Repurchase of Notes Upon a Change of Control’’), the issuer may be obligated to payamounts in excess of stated interest on the notes. Under U.S. Treasury Regulations regarding the issue ofnotes issued with OID, the possibility that any such payments in excess of stated interest will be made willnot affect the amount of interest income a U.S. Holder recognizes if there is only a remote chance, as ofthe date the notes were issued, that such payments will be made. We believe that the likelihood that theissuer will be obligated to make any such payments is remote. Therefore, we do not intend to treat thepotential payment of a premium pursuant to the change of control provisions as part of the yield tomaturity of any notes. Our determination is not, however, binding on the U.S. Internal Revenue Service, orthe IRS, and if the IRS were to challenge this determination, you may be required to accrue income onnotes that you own in excess of stated interest, and to treat as ordinary income rather than capital gain anyincome realized on the taxable disposition of notes before the resolution of the contingency. In the eventthis contingency were to occur, it would affect the amount and timing of the income that you recognize. Ifthe issuer pays a premium pursuant to the change of control provision, you will be required to recognizethe premium as income.

Subject to the discussion below under the caption ‘‘—U.S. Backup Withholding and InformationReporting,’’ if you are a Non-U.S. Holder, payments to you of interest on a note generally will not besubject to U.S. federal income tax unless the income is effectively connected with your conduct of atrade or business in the United States.

Additional Notes

The issuer may issue additional notes as described under ‘‘Terms and Conditions—Interest Rate—Additional Notes.’’ Such additional notes may be issued with OID. Purchasers of notes after the date ofany additional issuance will not be able to differentiate between notes sold as part of the additionalissuance and notes issued prior to that date. Therefore, purchasers of notes after an additional issuancemay be required to accrue OID for U.S. federal income tax purposes with respect to their notes. Thismay affect the price of outstanding notes following an additional issuance. Because of the possibleapplication of the U.S. federal income tax rules regarding OID to an additional issuance of notes,purchasers are advised to consult their tax advisors prior to purchasing notes.

Sale, Exchange or Retirement

If you are a U.S. Holder, upon the sale, exchange or retirement of a note you will recognize taxablegain or loss equal to the difference, if any, between the amount realized on the sale, exchange orretirement, other than accrued but unpaid interest which will be taxable as interest, and your adjusted taxbasis in the note. Your adjusted tax basis in a note generally will equal the cost of the note to you, and anysuch gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, the maximummarginal U.S. federal income tax rate applicable to the gain will be lower than the maximum marginal U.S.federal income tax rate applicable to ordinary income (other than certain dividends) if your holding period

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for the notes exceeds one year (i.e., such gain is long-term capital gain). Any gain or loss realized on thesale, exchange or retirement of a note generally will be treated as U.S. source gain or loss, as the case maybe. The deductibility of capital losses is subject to limitations.

If any gain from the sale or exchange of notes is subject to Brazilian tax, U.S. Holders may not beable to credit such taxes against their U.S. federal income tax liability under the U.S. foreign tax creditlimitations of the U.S. Internal Revenue Code, because such gain generally would be U.S. sourceincome, unless such tax can be credited (subject to applicable limitations) against tax due on otherincome treated as derived from foreign sources.

Subject to the discussion below under the caption ‘‘—U.S. Backup Withholding and InformationReporting,’’ if you are a Non-U.S. Holder, any gain realized by you upon the sale, exchange orretirement of a note generally will not be subject to U.S. federal income tax, unless:

• the gain is effectively connected with your conduct of a trade or business in the United States; or

• if you are an individual Non-U.S. Holder, you are present in the United States for 183 days or morein the taxable year of the sale, exchange or retirement and certain other conditions are met.

U.S. Backup Withholding and Information Reporting

Backup withholding and information reporting requirements apply to certain payments of principalof, and interest on, an obligation and to proceeds of the sale or redemption of an obligation, to certainnon-corporate holders of notes that are U.S. persons. Information reporting generally will apply topayments of principal of, and interest on, notes, and to proceeds from the sale or redemption of, noteswithin the United States, or by a U.S. payor or U.S. middleman, to a holder of notes that is a U.S.person (other than an exempt recipient, including a corporation, and certain other persons). The payorwill be required to withhold backup withholding on payments made within the United States, or by aU.S. payor or U.S. middleman, on a note to a holder of a note that is a U.S. person, other than anexempt recipient, such as a corporation, if the holder fails to furnish its correct taxpayer identificationnumber or otherwise fails to comply with, or establish an exemption from, the backup withholdingrequirements. Payments within the United States, or by a U.S. payor or U.S. middleman, of principaland interest to a holder of a note that is not a U.S. person will not be subject to backup withholdingand information reporting requirements if an appropriate certification is provided by the holder to thepayor and the payor does not have actual knowledge or a reason to know that the certificate isincorrect. The backup withholding tax rate is 28% for taxable years through 2010.

Backup withholding is not an additional tax. You generally will be entitled to credit any amountswithheld under the backup withholding rules against your U.S. federal income tax liability or to a refund ofthe amounts withheld provided the required information is furnished to the IRS in a timely manner.

The above description is not intended to constitute a complete analysis of all tax consequencesrelating to the ownership of notes. Prospective purchasers of notes should consult their own taxadvisors concerning the tax consequences of their particular situations.

European Union Savings Directive (Directive 2003/48/EC)

The Council of the European Union adopted a directive on the taxation of savings income(Directive 2003/48/EC). Pursuant to the directive, each member state of the E.U. will be required, froma date not earlier than July 1, 2005, to provide to the tax authorities of the other member statesinformation regarding payments of interest (or other similar income) paid by persons within itsjurisdiction to individual residents of such other member states, except that Belgium, Luxembourg, andAustria will instead operate a withholding system in relation to such payments until such time as theE.U. is able to enter into satisfactory information exchange agreements with several non-E.U. countries.In addition, the Council has approved a draft agreement with Switzerland pursuant to whichSwitzerland would impose withholding tax on non-Swiss source interest payments paid by personswithin its jurisdiction to individual residents of the E.U., and would share a portion of the revenue withthe recipients’ countries of residence.

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PLAN OF DISTRIBUTION

Under the terms and subject to the conditions contained in an purchase agreement datedOctober 18, 2007, we have agreed to sell to the initial purchasers named below, the following respectiveprincipal amounts of the notes:

Initial Purchasers Principal Amount

Credit Suisse Securities (USA) LLC . . . . . . . . . . . . . . . . . . . . . . U.S.$100,000,000Deutsche Bank Securities Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.$200,000,000

The purchase agreement provides that initial purchasers are obligated to purchase all of the notesif any are purchased. The purchase agreement also provides that if an initial purchaser defaults thepurchase commitments of non-defaulting initial purchasers may be increased or the offering may beterminated.

The initial purchasers propose to offer the notes initially at the offering price on the cover page ofthis offering circular and may also offer the notes to selling group members at that price less a sellingconcession. After the offering the representative may change the offering price and concession anddiscount to broker/dealers.

The notes have not been and will not be registered under the Securities Act and may not beoffered or sold within the United States or to, or for the account or benefit of, U.S. persons except toqualified institutional buyers in reliance on Rule 144A under the Securities Act and to persons inoffshore transactions in reliance on Regulation S under the Securities Act. Each of the initialpurchasers has agreed that, except as permitted by the purchase agreement, it will not offer, sell ordeliver the notes (i) as part of its distribution at any time or (ii) otherwise until 40 days after the laterof the commencement of the offering and the closing date, within the United States or to, or for theaccount or benefit of, U.S. persons, and it will have sent to each broker/dealer to which it sells thenotes in reliance on Regulation S during such 40-day period, a confirmation or other notice detailingthe restrictions on offers and sales of the notes within the United States or to, or for the account orbenefit of, U.S. persons. Terms used in this paragraph have the meanings given to them byRegulation S under the Securities Act. Resales of the notes are restricted as described under ‘‘TransferRestrictions.’’

In addition, until 40 days after the commencement of the offering, an offer or sale of notes withinthe United States by a broker/dealer (whether or not it is participating in the offering), may violate theregistration requirements of the Securities Act if such offer or sale is made otherwise than pursuant toRule 144A.

The notes are a new issue of securities with no established trading market. The notes are expectedto be made eligible for trading in PORTAL. One or more of the initial purchasers intend to make asecondary market for the notes. However, they are not obligated to do so and may discontinue makinga secondary market for the notes at any time without notice. No assurance can be given as to howliquid the trading market for the notes will be.

In connection with the offering the initial purchasers, may engage in stabilizing transactions,syndicate covering transactions and penalty bids in accordance with Regulation M under the ExchangeAct.

• Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizingbids do not exceed a specified maximum.

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• Syndicate covering transactions involve purchases of the notes in the open market after thedistribution has been completed in order to cover syndicate short positions. A short position ismore likely to be created if the initial purchasers are concerned that there may be downwardpressure on the price of the notes in the open market after pricing that could adversely affectinvestors who purchase in the offering.

• Penalty bids permit the representatives to reclaim a selling concession from a syndicate memberwhen the notes originally sold by the syndicate member are purchased in a stabilizing transactionor a syndicate covering transaction to cover syndicate short positions.

• In passive market making, market makers in the notes who are initial purchasers or prospectiveinitial purchasers may, subject to limitations, make bids for or purchases of the notes until thetime, if any, at which a stabilizing bid is made.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effectof raising or maintaining the market price of the notes or preventing or retarding a decline in themarket price of the notes. As a result the price of the notes may be higher than the price that mightotherwise exist in the open market. These transactions, if commenced, may be discontinued at any time.

Credit Suisse Securities (USA) LLC may make the notes available for distribution on the Internetthrough a proprietary Web site and/or a third-party system operated by MarketAxess Corporation, anInternet-based communications technology provider. MarketAxess Corporation is providing the systemas a conduit for communications between Credit Suisse Securities (USA) LLC and its customers and isnot a party to any transactions. MarketAxess Corporation, a registered broker-dealer, will receivecompensation from Credit Suisse Securities (USA) LLC based on transactions conducted through thesystem. Credit Suisse Securities (USA) LLC will make the notes available to its customers through theInternet distributions, whether made through a proprietary or third-party system, on the same terms asdistributions made through other channels.

We expect that delivery of the notes will be made against payment therefor on or about the closingdate specified on the cover page of this offering circular, which will be the fifth business day followingthe date of pricing of the notes (this settlement cycle being referred to as ‘‘T+5’’). Under Rule 15c6-1of the U.S. Securities and Exchange Commission under the Exchange Act, trades in the secondarymarket generally are required to settle in three business days, unless the parties to that trade expresslyagree otherwise. Accordingly, purchasers who wish to trade the notes on the date of pricing or the nextsucceeding business day will be required, by virtue of the fact that the notes initially will settle in T+5,to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement andshould consult their own advisor.

Selling Restrictions

The notes are offered for sale in those jurisdictions in the United States, Europe, Asia andelsewhere where it is lawful to make such offers.

Each of the initial purchaser has represented and agreed that it has not offered, sold or deliveredand will not offer, sell or deliver any of the notes directly or indirectly, or distribute this prospectussupplement or the accompanying prospectus or any other offering material relating to the notes, in orfrom any jurisdiction except under circumstances that will result in compliance with the applicable lawsand regulations thereof and that will not impose any obligations on us except as set forth in thepurchase agreement.

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Brazil

The notes have not been, and will not be, registered with the CVM. The notes may not be offeredor sold in Brazil, except in circumstances that do not constitute a public offering or distribution underBrazilian lawsand regulations.

Cayman Islands

No invitation may be made to the public in the Cayman Islands to subscribe for notes unless at thetime of invitation the issuer is listed on the Cayman Islands Stock Exchange.

United Kingdom

Each of the initial purchasers severally represents and agrees that:

• it has only communicated or caused to be communicated and will only communicate or cause tobe communicated any invitation or inducement to engage in investment activity (within themeaning of section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) receivedby it in connection with the issue or sale of any notes in circumstances in which section 21(1) ofthe FSMA does not apply to us; and

• it has complied and will comply with all applicable provisions of the FSMA with respect toanything done by it in relation to the notes in, from or otherwise involving the United Kingdom.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented theProspectus Directive (each, a ‘‘Relevant Member State’’), each initial purchaser represents and agreesthat with effect from and including the date on which the Prospectus Directive is implemented in thatRelevant Member State (the ‘‘Relevant Implementation Date’’) it has not made and will not make anoffer of notes to the public in that Relevant Member State prior to the publication of a prospectus inrelation to the notes which has been approved by the competent authority in that Relevant MemberState or, where appropriate, approved in another Relevant Member State and notified to thecompetent authority in that Relevant Member State, all in accordance with the Prospectus Directive,except that it may, with effect from and including the Relevant Implementation Date, make an offer ofSecurities to the public in that Relevant Member State at any time,

(a) to legal entities which are authorized or regulated to operate in the financial markets or, ifnot so authorized or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (1) an average of at least 250 employees duringthe last financial year; (2) a total balance sheet of more than A43,000,000 and (3) an annual netturnover of more than A50,000,000, as shown in its last annual or consolidated accounts;

(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in theProspectus Directive) subject to obtaining the prior consent of the manager for any such offer; or

(d) in any other circumstances which do not require the publication by the Issuer of a prospectuspursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an ‘‘offer of notes to the public’’ in relation to anynotes in any Relevant Member State means the communication in any form and by any means ofsufficient information on the terms of the offer and the notes to be offered so as to enable an investorto decide to purchase or subscribe the notes, as the same may be varied in that Member State by anymeasure implementing the Prospectus Directive in that Member State and the expression Prospectus

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Directive means Directive 2003/71/EC and includes any relevant implementing measure in eachRelevant Member State.

Japan

The initial purchasers will not offer or sell any of our notes directly or indirectly in Japan or to, orfor the benefit of any Japanese person or to others, for re-offering or re-sale directly or indirectly inJapan or to any Japanese person, except in each case pursuant to an exemption from the registrationrequirements of, and otherwise in compliance with, the Securities and Exchange Law of Japan and anyother applicable laws and regulations of Japan. For purposes of this paragraph, ‘‘Japanese person’’means any person resident in Japan, including any corporation or other entity organized under the lawsof Japan.

Hong Kong

The initial purchasers and each of their affiliates have not (i) offered or sold, and will not offer orsell, in Hong Kong, by means of any document, our notes other than (a) to ‘‘professional investors’’ asdefined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made underthat Ordinance or (b) in other circumstances which do not result in the document being a ‘‘prospectus’’as defined in the Companies Ordinance (Cap. 32 of Hong Kong or which do not constitute an offer tothe public within the meaning of that Ordinance or (ii) issued or had in its possession for the purposesof issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong orelsewhere any advertisement, invitation or document relating to our notes which is directed at, or thecontents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted todo so under the securities laws of Hong Kong) other than with respect to our securities which are orare intended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’as defined in the Securities and Futures Ordinance any rules made under that Ordinance. The contentsof this document have not been reviewed by any regulatory authority in Hong Kong. You are advised toexercise caution in relation to the offer. If you are in any doubt about any of the contents of thisdocument, you should obtain independent professional advice.

Singapore

This offering circular or any other offering material distributed by them relating to the notes hasnot been and will not be registered as a prospectus with the Monetary Authority of Singapore, and thenotes will be offered in Singapore pursuant to the exemptions under Section 274 and Section 275 ofthe Securities and Futures Act, Chapter 289 of Singapore (the ‘‘SFA’’). Accordingly, this offeringmemorandum and any other document or material in connection with the offer or sale, or invitationfor the subscription or purchase, of the notes may not be circulated or distributed, nor may the notesbe offered or sold, or be made the subject of an invitation for subscription or purchase, whetherdirectly or indirectly, to persons in Singapore other than (1) to an institutional investor underSection 274 of the SFA, (2) to a relevant person under Section 275(1) and/or any person underSection 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFAor (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provisionof the SFA.

Germany

Each person who is in possession of this offering circular is aware of the fact that no German salesprospectus (Verkaufsprospekt) within the meaning of the Securities Sales Prospectus Act (Wertpapier-Verkaufsprospektgesetz, the ‘‘Act’’) of the Federal Republic of Germany has been or will be publishedwith respect to our notes. In particular, each initial purchaser has represented that it has not engagedand has agreed that it will not engage in a public offering in (offentliches Angebot) within the meaning

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of the Act with respect to any of our notes otherwise than in accordance with the Act and all otherapplicable legal and regulatory requirements.

France

The notes are being issued and sold outside the Republic of France and that, in connection withtheir initial distribution, it has not offered or sold and will not offer or sell, directly or indirectly, anynotes to the public in the Republic of France, and that it has not distributed and will not distribute orcause to be distributed to the public in the Republic of France this offering circular or any otheroffering material relating to the notes, and that such offers, sales and distributions have been and willbe made in the Republic of France only to qualified investors (investisseurs qualifies) in accordancewith Article L.411-2 of the Monetary and Financial Code and decret no. 98-880 dated 1st October,1998.

Netherlands

Our notes may not be offered, sold, transferred or delivered in or from the Netherlands as part oftheir initial distribution or at any time thereafter, directly or indirectly, other than to, individuals orlegal entities situated in The Netherlands who or which trade or invest in securities in the conduct of abusiness or profession (which includes banks, securities intermediaries (including dealers and brokers),insurance companies, pension funds, collective investment institution, central governments, largeinternational and supranational organizations, other institutional investors and other parties, includingtreasury departments of commercial enterprises, which as an ancillary activity regularly invest insecurities; hereinafter, ‘‘Professional Investors’’), provided that in the offer, prospectus and in any otherdocuments or advertisements in which a forthcoming offering of our notes is publicly announced(whether electronically or otherwise) in The Netherlands it is stated that such offer is and will beexclusively made to such Professional Investors. Individual or legal entities who are not ProfessionalInvestors may not participate in the offering of our notes, and this offering circular or any otheroffering material relating to our notes may not be considered an offer or the prospect of an offer tosell or exchange our notes.

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NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the notes in Canada is being made only on a private placement basis exemptfrom the requirement that we prepare and file a prospectus with the securities regulatory authorities ineach province where trades of the notes are made. Any resale of the notes in Canada must be madeunder applicable securities laws which will vary depending on the relevant jurisdiction, and which mayrequire resales to be made under available statutory exemptions or under a discretionary exemptiongranted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legaladvice prior to any resale of the notes.

Representations of Purchasers

By purchasing the notes in Canada and accepting a purchase confirmation a purchaser isrepresenting to us and the dealer from whom the purchase confirmation is received that:

• the purchaser is entitled under applicable provincial securities laws to purchase the noteswithout the benefit of a prospectus qualified under those securities laws,

• where required by law, that the purchaser is purchasing as principal and not as agent,

• the purchaser has reviewed the text below under ‘‘Transfer Restrictions,’’ and

• the purchaser acknowledges and consents to the provision of specified information concerning itspurchase of the notes to the regulatory authority that by law is entitled to collect theinformation.

Further details concerning the legal authority for this information is available on request.

Rights of Action—Ontario Purchasers Only

Under Ontario securities legislation, certain purchasers who purchase a security offered by thisoffering circular during the period of distribution will have a statutory right of action for damages, orwhile still the owner of the notes, for rescission against us in the event that this offering circularcontains a misrepresentation without regard to whether the purchaser relied on the misrepresentation.The right of action for damages is exercisable not later than the earlier of 180 days from the date thepurchaser first had knowledge of the facts giving rise to the cause of action and three years from thedate on which payment is made for the notes. The right of action for rescission is exercisable not laterthan 180 days from the date on which payment is made for the notes. If a purchaser elects to exercisethe right of action for rescission, the purchaser will have no right of action for damages against us. Inno case will the amount recoverable in any action exceed the price at which the notes were offered tothe purchaser and if the purchaser is shown to have purchased the securities with knowledge of themisrepresentation, we will have no liability. In the case of an action for damages, we will not be liablefor all or any portion of the damages that are proven to not represent the depreciation in value of thenotes as a result of the misrepresentation relied upon. These rights are in addition to, and withoutderogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoingis a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to thecomplete text of the relevant statutory provisions.

Enforcement of Legal Rights

All of our and the issuer’s directors and officers as well as the experts named herein are locatedoutside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of

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process within Canada upon us or those persons. All or a substantial portion of our assets and theassets of those persons may be located outside of Canada and, as a result, it may not be possible tosatisfy a judgment against us or those persons in Canada or to enforce a judgment obtained inCanadian courts against us or those persons outside of Canada.

Taxation and Eligibility for Investment

Canadian purchasers of the notes should consult their own legal and tax advisors with respect tothe tax consequences of an investment in the notes in their particular circumstances and about theeligibility of the notes for investment by the purchaser under relevant Canadian legislation.

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TRANSFER RESTRICTIONS

The notes (including the guaranty) have not been registered under the Securities Act and may not beoffered or sold within the United States or to, or for the account or benefit of, U.S. persons exceptpursuant to an exemption from, or in a transaction not subject to, the registration requirements of theSecurities Act. Accordingly, the notes are being offered and sold only to (1) ‘‘qualified institutional buyers’’(as defined in Rule 144A under the Securities Act) (‘‘QIBs’’) in compliance with Rule 144A and(2) outside the United States to persons other than U.S. persons (‘‘foreign purchasers’’), which term shallinclude dealers or other professional fiduciaries in the United States acting on a discretionary basis forforeign beneficial owners (other than an estate or trust), in reliance upon Regulation S under theSecurities Act.

By its purchase of notes, each purchaser of notes will be deemed to:

(1) represent that it is purchasing the notes for its own account or an account with respect towhich it exercises sole investment discretion and that it and any such account is (a) a QIB, and isaware that the sale to it is being made in reliance on Rule 144A or (b) a foreign purchaser that isoutside the United States (or a foreign purchaser that is a dealer or other fiduciary as referred toabove);

(2) acknowledge that the notes have not been registered under the Securities Act and may notbe offered or sold within the United States or to, or for the account or benefit of, U.S. persons exceptas set forth below;

(3) if it is a person other than a foreign purchaser outside the United States, agree that if itshould resell or otherwise transfer the notes within the time period referred to in Rule 144(k) underthe Securities Act after the original issuance of the notes, it will do so only (a) to us, (b) to a QIB incompliance with Rule 144A or (c) outside the United States in compliance with Rule 904 under theSecurities Act;

(4) agree that it will deliver to each person to whom it transfers notes notice of any restriction ontransfer of such notes;

(5) if it is a foreign purchaser outside the United States, (a) understand that the notes will berepresented by the Regulation S global note and that transfers are restricted and (b) represent andagree that it will not sell short or otherwise sell, transfer or dispose of the economic risk of the notesinto the United States or to a U.S. person; if it is a QIB, it understands that the notes offered inreliance on Rule 144A will be represented by the restricted global note;

(6) understand that until registered under the Securities Act, the notes (other than those issuedto foreign purchasers or in substitution or exchange therefor) will bear a legend to the following effectunless otherwise agreed by us and the holder thereof:

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, ASAMENDED (THE ‘‘SECURITIES ACT’’) AND MAY NOT BE OFFERED, SOLD, PLEDGED OROTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWINGSENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THEACQUIRER

(1) REPRESENTS THAT

(A) IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A ‘‘QUALIFIEDINSTITUTIONAL BUYER’’ (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIESACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACHSUCH ACCOUNT OR

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(B) IT IS NOT A U.S. PERSON (WITHIN THE MEANING OF REGULATION S UNDER THESECURITIES ACT) AND

(2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL,PLEDGE OR OTHERWISE TRANSFER THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN,EXCEPT IN ACCORDANCE WITH THE SECURITIES ACT AND ANY APPLICABLESECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND ONLY

(A) TO THE COMPANY,

(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVEUNDER THE SECURITIES ACT,

(C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144AUNDER THE SECURITIES ACT,

(D) IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OFREGULATION S UNDER THE SECURITIES ACT, OR

(E) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144UNDER THE SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THEREGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH 2(E)ABOVE, THE COMPANY RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCHLEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BEREQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADEIN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY RULE 144 EXEMPTIONFROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; and

(7) acknowledge that we and the initial purchasers will rely upon the truth and accuracy of theforegoing acknowledgments, representations and agreements, and agree that if any of theacknowledgements, representations or warranties deemed to have been made by it by its purchase ofnotes are no longer accurate, it shall promptly notify us and the initial purchasers; if they are acquiringnotes as a fiduciary or agent for one or more investor accounts, they represent that they have soleinvestment discretion with respect to each such account and they have full power to make theforegoing acknowledgments, representations and agreements on behalf of each such account.

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VALIDITY OF NOTES

The validity of the notes and the guaranty offered and sold in this offering will be passed upon for usby White & Case LLP, and for the initial purchasers by Clifford Chance US LLP. Certain matters ofBrazilian law relating to the notes will be passed upon for the initial purchasers by Souza, Cescon,Avedissian, Barrieu e Flesch Advogados. Certain matters of Cayman law will be passed upon for us byMaples and Calder.

INDEPENDENT ACCOUNTANTS

Our consolidated financial statements as of and for the years ended December 31, 2006, 2005 and2004, prepared in accordance with Brazilian GAAP are included elsewhere in this offering circular, andhave been audited by PricewaterhouseCoopers Auditores Independentes, independent accountants, asstated in their report appearing herein (which contains an explanatory paragraph regarding ourrelationships and transactions with related parties and the organizational restructuring in progress and anexplanatory paragraph regarding the translation of the financial statement to U.S. dollars).

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LISTING AND GENERAL INFORMATION

1. The notes have been accepted for clearance through DTC, Euroclear and ClearstreamLuxembourg. The CUSIP, the Common Code and ISIN numbers for the notes are as follows:

Regulation S Rule 144AGlobal Note Global Note

CUSIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G6710EAA8 675758AA4Common Code . . . . . . . . . . . . . . . . . . . . . . . . 032648134 032648193ISIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . USG6710EAA85 US675758AA43

2. Copies of our latest audited consolidated annual financial statements and unaudited quarterlyconsolidated financial statements may be obtained during normal business hours at the offices of thetrustee and any paying agent, including the principal paying agent. Copies of Odebrecht Finance Ltd.’smemorandum and articles of association and by-laws and our estatuto social (by-laws), as well as theindenture (including forms of notes and the guarantee), will be available during normal business hoursfree of charge at the offices of the trustee and any paying agent, including the principal paying agent.

3. Except as disclosed in this offering circular, there has been no material adverse change in ourfinancial position since June 30, 2007, the date of our latest unaudited financial statements included inthis offering circular.

4. Except as disclosed in this offering circular, we are not involved in any litigation or arbitrationproceedings relating to claims or amounts that are material in the context of this offering, nor so far aswe are aware is any such litigation or arbitration pending or threatened.

5. PricewaterhouseCoopers Auditores Independentes has agreed to the inclusion of its reports inthis offering circular in the form and context in which they are included.

6. We have applied to list the notes on the Official List of the Luxembourg Stock Exchange andto trade the notes on the Euro MTF market of the Luxembourg Stock Exchange.

7. The issuance of the notes was authorized in accordance with the issuer’s articles ofassociation, and the issuance of the guaranty was authorized pursuant to a shareholders’ meeting datedOctober 2nd, 2007.

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INDEX TO FINANCIAL STATEMENTS

Unaudited Consolidated Interim Financial Statements—CNOLimited Review Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3Consolidated Balance Sheets at June 30, 2007 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4Consolidated Statements of Income for the six-month periods ended June 30, 2007 and 2006 . . . F-6Consolidated Statements of Changes in Stockholder’s Equity for the six-month periods ended

June 30, 2007 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7Consolidated Statements of Changes in Financial Position for the six-month period ended

June 30, 2007 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9Notes to the Consolidated Financial Statements at June 30, 2007 and 2006 . . . . . . . . . . . . . . . . F-10

Audited Consolidated Financial Statements—CNOReport of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-36Consolidated Balance Sheets at December 31, 2006 and 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . F-37Consolidated Statements of Income for the years ended December 31, 2006 and 2005 . . . . . . . . F-39Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31,

2006 and 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-40Consolidated Statements of Changes in Financial Position for the years ended December 31,

2006 and 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-42Notes to the Consolidated Financial Statements at December 31, 2006 and 2005 . . . . . . . . . . . . F-43

Audited Consolidated Financial Statements—CNOReport of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-67Consolidated Balance Sheets at December 31, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . F-68Consolidated Statements of Income for the years ended December 31, 2005 and 2004 . . . . . . . . F-70Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31,

2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-71Consolidated Statements of Changes in Financial Position for the years ended December 31,

2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-73Notes to the Consolidated Financial Statements at December 31, 2005 and 2004 . . . . . . . . . . . . F-75

F-1

Construtora NorbertoOdebrecht S.A.

and its Subsidiaries

Financial Statementsat June 30, 2007 and 2006

and Report of Independent Accountantson Limited Review

Report of Independent Accountants on Limited Review

To the Board of Directors and StockholdersConstrutora Norberto Odebrecht S.A. and its subsidiaries

1 We have carried out limited reviews of the accompanying consolidated balance sheets ofConstrutora Norberto Odebrecht S.A. and its subsidiaries as of June 30, 2007 and 2006, and of therelated consolidated statements of income, of changes in stockholders’ equity and of changes infinancial position for the six-month periods then ended. These financial statements are theresponsibility of the Company’s management. Our responsibility is to issue a report on thesefinancial statements.

2 Our reviews were conducted in accordance with specific standards established by the Institute ofIndependent Auditors of Brazil (IBRACON) and mainly comprised the application of analyticalreview procedures to financial data and inquiries of personnel responsible for accounting andfinancial matters about the criteria applied in the preparation of the financial statements. Becausethese procedures do not comprise an audit carried out in accordance with approved Brazilianauditing standards, we do not express an opinion on these financial statements.

3 Based on our limited reviews, we are not aware of any material modifications that should be madeto the financial statements reviewed by us in order for them to be in accordance with accountingpractices adopted in Brazil.

4 The Company is an integral part of the group of companies which form the OdebrechtOrganization and conducts significant financial transactions with its parent and other Organizationcompanies, under the conditions described in Note 7 to the financial statements. Also, theCompany continues to be involved in the reorganization of its corporate structure, as described inNote 1(ii).

5 The accompanying financial statements expressed in U.S. dollars give effect to the translation ofthe financial statements in Brazilian reais, on the basis described in Note 2(h). This translationshould not be construed as representing that the amounts in Brazilian reais represent, or havebeen, or could be, converted into U.S. dollars.

Salvador, September 3, 2007

PricewaterhouseCoopersAuditores IndependentesCRC 2SP000160/O-5 ‘‘F’’ RJ

Felipe Edmond AyoubContador CRC 1SP187402/O-4 ‘‘S’’ RJ

F-3

Construtora Norberto Odebrecht S.A. and its Subsidiaries

Consolidated Balance Sheets at June 30

Unaudited

In thousands of reais and thousands of U.S. dollars

2007 2006

US$ R$

Assets

Current assetsCash and banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283,245 545,586 270,397Financial investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505,761 974,197 381,408Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,758 126,664 587,829Trade accounts receivable (Note 3) . . . . . . . . . . . . . . . . . . . . . . . 563,640 1,085,684 1,123,906Advances to suppliers, subcontractors and others . . . . . . . . . . . . . 166,357 320,436 143,872Investments and properties for sale (Note 2 (c)) . . . . . . . . . . . . . 126,152 242,994 54,141Deferred income tax and social contribution (Note 12) . . . . . . . . 31,596 60,861 126,265Taxes recoverable (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,896 178,937 140,138Inventories (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,350 399,398 372,307Current accounts with consortium members . . . . . . . . . . . . . . . . 16,822 32,403 21,597Eletrobras credits (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,681 238,234Other accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,194 260,409 59,452Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,544 78,094 45,453

2,358,996 4,543,897 3,326,765

Non current assetsLong-term receivablesMarketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,356 129,741 137,744Odebrecht Organization companies (Note 7) . . . . . . . . . . . . . . . . 305,762 588,958 500,643Trade accounts receivable (Note 3) . . . . . . . . . . . . . . . . . . . . . . . 417,153 803,520 862,878Investments and properties for sale . . . . . . . . . . . . . . . . . . . . . . 44,456 85,632 60,529Deferred income tax and social contribution (Note 12) . . . . . . . . 22,348 43,047 113,273Taxes recoverable (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,634 20,484 22,361Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,884 7,482 13,096Judicial bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,115 29,115 21,383Other accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,585 47,353 61,480

911,293 1,755,332 1,793,387

Permanent assetsInvestments (Note 8)

Associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,584 31,945 21,374Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,227 150,680 262,853

Property and equipment (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . 391,400 753,915 447,707Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,338 164,379 133,671

571,549 1,100,919 865,605

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,841,838 7,400,148 5,985,757

F-4


Consolidated Balance Sheets at June 30

Unaudited


2007 2006

US$ R$

Liabilities and stockholders’ equity

Current liabilitiesDebts (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,693 299,896 104,490Suppliers and subcontractors . . . . . . . . . . . . . . . . . . . . . . . . . . . 499,466 962,072 817,572Taxes, rates, salaries and payroll charges . . . . . . . . . . . . . . . . . . . 178,598 344,016 290,106Provisions for contingencies (Note 11) . . . . . . . . . . . . . . . . . . . . 28,965 55,792 59,332Advances from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 565,177 1,088,644 760,167Current accounts with consortium members . . . . . . . . . . . . . . . . 17,369 33,456 17,999Other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,801 198,014 141,019

1,548,069 2,981,890 2,190,685

Non current liabilitiesLong-term liabilitiesOdebrecht Organization companies (Note 7) . . . . . . . . . . . . . . . . 5 9 566Debts (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437,413 842,545 1,061,223Advances from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865,912 1,667,919 461,967Deferred income tax and social contribution (Note 12) . . . . . . . . 102,831 198,073 169,990Suppliers and subcontractors . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,066 65,618 49,624Provisions for contingencies (Note 11) . . . . . . . . . . . . . . . . . . . . 31,637 60,940 119,061Exceptional Installment Program (PAEX) (Note 11(ii)) . . . . . . . . 32,420 62,447 0Provision for losses on investments (Note 8) . . . . . . . . . . . . . . . . 7,492 14,432 14,737Other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,674 30,190 10,718

1,527,450 2,942,173 1,887,886

Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,589 24,248 8,314

Stockholders’ equityCapital (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681,863 1,313,405 1,798,405Capital reserve (Note 12(f)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,912 11,388Revenue reserves (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,208 85,154 79,576Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,747 41,890 20,891

753,730 1,451,837 1,898,872

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . 3,841,838 7,400,148 5,985,757

In these financial statements certain (local currency) amounts have been translated into UnitedStates dollars at the rate of R$ 1.9262 to the dollar. Such translations should not be construed asrepresentations that the (local currency) amounts represent, or have been or could be converted into,United States dollars at that or any other rate.

The accompanying notes are an integral part of these financial statements.

F-5


Consolidated Statements of IncomeSix-month periods ended June 30

Unaudited


2007 2006

US$ R$

Gross service revenuesDomestic market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602,734 1,160,987 1,131,495Foreign market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,227,604 2,364,611 2,141,107

1,830,338 3,525,598 3,272,602Taxes and contributions on services . . . . . . . . . . . . . . . . . . . . . (44,151) (85,044) (86,700)Net service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,786,187 3,440,554 3,185,902Cost of services rendered . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,513,126) (2,914,583) (2,743,250)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273,061 525,971 442,652Operating expenses

General and administrative expense . . . . . . . . . . . . . . . . . . . . (172,613) (332,488) (285,624)Directors’ remuneration expense . . . . . . . . . . . . . . . . . . . . . . (3,140) (6,048) (5,998)

Operating profit before the equity interestsand financial results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,308 187,435 151,030

Results from investments in associated companiesEquity in the results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,635 3,149 (4,489)Provision for losses on investments . . . . . . . . . . . . . . . . . . . . . 154 297 744Dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Financial resultFinancial revenue (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . 168,112 323,817 198,130Financial expenses (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . (193,086) (371,922) (284,322)

Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,123 142,776 61,096Non-operating results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,827) (5,445) (701)

Income before social contribution, income taxand minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,296 137,331 60,395Social contribution (Note 12(a)) . . . . . . . . . . . . . . . . . . . . . . . (6,562) (12,640) (3,138)Income tax (Note 12(a)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,615) (64,749) (12,153)

Income before minority interest . . . . . . . . . . . . . . . . . . . . . . . . . 31,119 59,942 45,104Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,372) (18,052) (4,213)

Net income for the six-month period . . . . . . . . . . . . . . . . . . . . . 21,747 41,890 40,891



F-6


Consolidated Statement of Changes in Stockholders’ Equity Unaudited

In thousands of reais, except dividends per share

Capitalreserve

Note (12 (f)) Revenue reserves

Tax Investments RetainedCapital incentives Legal (statutory) earnings Total

At December 31, 2005 . . . . . . . . . . 1,798,045 79,576 31,080 1,908,701Capital increase . . . . . . . . . . . . . . . 360 360Net income for the six-month

period . . . . . . . . . . . . . . . . . . . . 40,891 40,891Extraordinary dividends—R$ 0.089

per share (Note 13 (b)) . . . . . . . (31,080) (31,080)Apropriation:

Prepaid dividends—R$ 0.057 pershare (Note 13 (b) . . . . . . . . . (20,000) (20,000)

At June 30, 2006 . . . . . . . . . . . . . . 1,798,405 79,576 20,891 1,898,872

At December 31, 2006 . . . . . . . . . . 1,313,405 11,388 85,154 52,999 1,462,946Net income for the six-month


per share (Note 13 (b)) . . . . . . . (52,999) (52,999)

At June 30, 2007 . . . . . . . . . . . . . . 1,313,405 11,388 85,154 41,890 1,451,837


F-7


Consolidated Statement of Changes in Stockholders’ Equity Unaudited

In thousands of U.S. dollars except dividends per share

Capitalreserve

Note (12 (f)) Revenue reserves

Tax Investments RetainedCapital incentives Legal (statutory) earnings Total

At December 31, 2006 . . . . . . . . . . 681,863 5,912 44,208 27,515 759,498Net income for the six-month


per share (Note 13 (b)) . . . . . . . (27,515) (27,515)

At June 30, 2007 . . . . . . . . . . . . . . 681,863 5,912 44,208 21,747 753,730



F-8


Consolidated Statements of Changes in Financial PositionSix-month periods ended June 30

Unaudited


2007 2006

US$ R$

Financial resources were provided by:Operations

Net income for the six-month period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,747 41,890 40,891Expenses (income) not affecting working capital:

Income tax and social contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,122 44,538 (21,731)Equity in the results of associated companies . . . . . . . . . . . . . . . . . . . . . (4,728) (9,108) 230Provision for losses on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . (154) (297) (744)Increase of construction contracts revenue (see Note 2 (b)) . . . . . . . . . . . . (40,900) (78,782) (43,613)Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,965 102,022 82,526Residual value of permanent asset disposals . . . . . . . . . . . . . . . . . . . . . . 14,518 27,965 33,664Interest and monetary and exchange variations on long-term assets and

liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,133) (29,147) (51,538)Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,372 18,052 4,213

60,809 117,133 43,898Shareholder

Capital increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360360

Third partiesIncrease in long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,154 693,726 9,253Transfer from long-term to current assets . . . . . . . . . . . . . . . . . . . . . . . . 19,814 38,164 63,241

Working capital of companies included in and/or excluded from theconsolidation, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,820 121,004

442,788 852,894 72,494Total funds provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503,597 970,027 116,752Financial resources were used for:

Odebrecht Organization companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,220 148,742 71,289Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,406 6,560 88,491Permanent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,497 27,924 15,820Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,909 248,305 92,667Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,120 46,459 73,528

Transfer from long-term to current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 25,231 48,599 444,491Dividends payed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000Working capital of companies included in and/or excluded from the

consolidation, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,683Total funds used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273,383 526,589 812,969Increase (decrease) in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,214 443,438 (696,217)

Changes in working capitalCurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355,064 683,924 (71,740)Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,850 240,486 624,477

Increase (decrease) in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,214 443,438 (696,217)



F-9


Notes to the Financial Statements at June 30, 2007 and 2006

Unaudited

All amounts in thousands of reais and thousands of U.S. dollars unless otherwise indicated

1 Operations Context

The main operations of the Company, an integral part of the Odebrecht Organization with legalheadquarters in Rio de Janeiro and administrative headquarters in Sao Paulo, include the planning andexecution of engineering projects of all types and specialties as contractor, administrator or other roles;technical installations of civil engineering, industrial assembly, consulting, planning, assistance andtechnical studies; rendering of administrative or technical services; urban and rural real estate ventures,investments in other companies for the purpose of greater development, stability and profitability, otherrelated activities, including import and export, rental and purchase and sale of equipment andtransportation.

Through its branches, the Company operates directly in Venezuela, Angola, Ecuador, DominicanRepublic, Colombia, Mexico, United Arab Emirates, Bolivia, Argentina, Peru, Costa Rica, Panama andAlgeria. In addition to the countries above, the Company operates through its direct and indirectsubsidiaries in Portugal, United States, Iraq, Djibouti, England, Chile, Uruguay, Spain and Libya.

In the heavy civil construction segment, the Company and its main, indirect, subsidiary company inBrazil, CBPO Engenharia Ltda. (‘‘CBPO’’), develop construction projects involving highways, railways,nuclear, hydroelectric and thermoelectric plants, port installations, dams, and other industrial andinfrastructure projects.

The main projects currently in progress in Brazil are: PRA-1 Platform, CVRD Carajas, Line 4 ofthe Sao Paulo Subway, Ipanema Subway in Rio de Janeiro, Energy for All Program in Minas Gerais,Rio das Ostras Sanitation Project, Remodeling of Santos Dumont Airport, Sao Salvador hydroelectricplant and several contracts to render services in petroleum platforms and petrochemical plants. Themain overseas projects are located in Venezuela (lines 3 and 4 of the Caracas Subway, Los TequesSubway, El Diluvio irrigation project, bridge over the Orinoco River and Tocoma hydroelectric plant),the United States (Miami Airport North Terminal), Dominican Republic (Northeast aqueduct—2ndstage, Pinalito and Palomino hydroelectric plants and Samana Sanitation Project), Ecuador (SanFrancisco and Baba hydroelectric plants), Angola (hydroelectric plant, shopping mall and infrastructureprojects), and Peru (highway works and irrigation project).

The Company and its subsidiaries mainly operate with surety bonds to obtain and performcontracts in Brazil and abroad, arranged with the support of OCS—Odebrecht Administradora eCorretora de Seguros Ltda., an Odebrecht Organization company, through strategic long-term allianceswith first line insurance companies and brokers in the global insurance market. At June 30, 2007, theamounts of contractual guarantees issued was equivalent to R$ 4,574,492—US$ 2,374,879 (2006—R$ 3,007,288—US$ 1,389,497).

(i) Participation in the diamond sector

Through its subsidiaries, the Company also conducts mineral prospecting and exploration. Itswholly-owned subsidiary Odebrecht Mining Services, Inc. (‘‘OMSI’’) holds 16.4% of the investeeSociedade Mineira de Catoca, Limitada (‘‘Catoca’’), which conducts prospecting, exploration, treatmentand sale of diamonds and other minerals in the Catoca Project in the Lunda Sul Province of Angola,having a concession from the Angolan Government to exploit diamonds mined from the Catocakimberlite area, and also holds 50% of Sociedade de Desenvolvimento Mineiro de Angola, S.A.R.L.

F-10


Notes to the Financial Statements at June 30, 2007 and 2006 (Continued)

Unaudited


1 Operations Context (Continued)

(‘‘SDM’’), which conducts prospecting, exploration and sale of diamonds extracted in a concession areagranted by the Angolan Government in the Hydrographic Basin of the Cuango River (Angola).

Currently, SDM, together with its parent company, has already entered into an agreement for theconcession of diamond exploitation to be extracted from kimberlites in the Muanga region, and iscarrying out research and development, key to the extension of its operations. At June 30, 2007, theindirect holding of the Company in SDM represents R$ 47,241 US$ 24,526—(2006—R$ 54,987).Management believes that the business of the investee will maintain its normal course of operations,taking into consideration the future success of the kimberlites extraction.

(ii) Optimization of the corporate structure

Continuing with the corporate restructuring process which started in 2004 for the optimization ofthe Odebrecht organizational structure, the concentration of the current accounts in the Company asthe manager of the current account agreement and central management of the cash balancesmaintained by the companies in the group, and the corporate segregation of the engineering andconstruction segments and the investments in infrastructure and oil and gas, the following maincorporate activities were performed in 2006 and 2007:

• On April 3 and 4, the Company sold to Odebrecht Investimentos em Infra-estrutura Ltda.(‘‘OII’’), controlled by the Company’s parent, part of its interests in the companiesConcesionaria Interoceanica Sur-Tramo 2 S.A., Concesionaria Interoceanica Sur-Tramo 3 S.A.and Concesionaria IIRSA Norte S.A. by the book equity amount on March 31, 2006, ofR$ 2,806—US$ 1,312, R$ 4,446—US$ 2,080 and R$ 1,936—US$ 906, respectively. The controlof such investees was transferred to Oll, due to such sales.

• On June 30, 2006, there was a partial spin-off of CBPO net worth, in the amount of R$ 3,318—US$ 1,552 on the base date of May 31, 2006. Such spin-off had two destinations: part of thespun-off portion, in the amount of R$ 360—US$ 169, was merged into the Company, thengenerating an increase in the corporate capital of the same amount, and another part, in theamount of R$ 2,958—US$ 1,384, was merged into Odebrecht Participacoes S.A. (‘‘ODBPAR’’), acompany of the Odebrecht Organization, investee of the Company’s parent. The portion mergedinto the Company comprises the permanent assets related to CBPO environmental engineeringbusiness and the portion merged into ODBPAR mainly comprises the asset balance of thecurrent account maintained with Belgravia and ‘‘Eurobonds’’ debts issued by CBPO, currentlyheld by the Company’s subsidiaries.

Moreover, within the optimization context of the corporate structure: (a) a spin-off of theCompany’s equity (as described in Note 13), and (b) a spin-off of the Company’s parent companyOdebrecht S.A. (‘‘ODB’’), followed by the merger of the spun-off portion into the Company, asdescribed in Note 18 was performed.

(iii) Equalization of Financial position

The improvement in the Brazilian economic scenario and consequent decrease in the risksassociated with Brazil allowed the Company to obtain long-term credits in the international financial

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market at interest rates significantly lower than those previously practiced. Within this context, in 2004and 2005 the Company obtained various long-term loans, including the issue of Perpetual Bonds in2005 (see Note 10 (i) (b)), which permitted it to pay down or prepay short-term, higher cost financings,as well as to create a substantial reserve of funds. With the addition of funds arising from significantreceipts of advances from customers and invoices during the last quarter of 2006, these represent thebalance of cash and financial investments at the end of the period.

In June 2006, Standard & Poor’s improved the Company’s corporate credit rating in the BrazilianNational Scale from ‘‘BrA-’’ to ‘‘BrA’’, keeping the positive expectations. In November 2006,Standard & Poor’s once again improved the Company’s corporate credit rating on the BrazilianNational Scale from ‘‘BrA’’ to ‘‘BrA+’’, keeping the positive expectations. In June 2006 Standard &Poor’s reaffirmed its Global Scale ‘‘BB-’’ (in local and foreign currency) for the corporate credit ratingsattributed to the Company, while it changed the rating expectations from stable to positive. On July 23,2007, Fitch Ratings assigned a ‘‘BB+’’ long-term foreign and local currency issuer default rating and‘‘AA (bra)’’ long-term national rating to the Company. In both cases, the outlook on the ratings isstable.

2 Financial Statements presentation and significant accounting practices

The financial statements of the Company and its subsidiaries were prepared and are presented inaccordance with accounting practices adopted in Brazil.

In the preparation of the financial statements, it is necessary to utilize estimates to record certainassets, liabilities and other transactions. Therefore, the financial statements include various estimatesrelating to the selection of the useful lives of property and equipment, measurement of services earnedunder long-term contracts, provisions for contingent liabilities, determination of provisions for incometax and other matters. Although these estimates have been made with the highest accuracy possible,they may be different from actual data and amounts.

(a) Determination of results of operations

The results are determined on the accrual basis of accounting.

(b) Construction contracts

Revenues from construction contracts are recognized taking into consideration the progress of eachcontract at the balance sheet date. The method used to determine progress considers the ratio betweencosts incurred to date and total budgeted costs per contract. If the revenue of certain contracts cannotbe measured reliably under this method, the Company and its subsidiaries take into consideration thephysical measurements to account for the revenue.

(c) Current and non-current assets

Financial investments (maturing in up to 90 days) and marketable securities are stated at cost plusaccrued income up to the balance sheet date, and mainly comprise quotas in fixed interest funds andbank deposit certificates of foreign financial institutions.

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2 Financial Statements presentation and significant accounting practices (Continued)

The allowance for doubtful accounts is established at an amount considered sufficient bymanagement after analyzing the operations and taking into consideration the economic scenarios of thecountries, past experience, specific portfolio risks and negotiations in progress, as well as administrativeor judicial collection proceedings.

Inventories of parts and materials to be used for construction work and for sale are stated ataverage purchase cost, lower than replacement cost or net realizable value. The inventories of finishedgoods and raw materials relating to the diamond exploitation and sale business in Angola (Note 1 (i)),are recorded at the average cost of extraction.

Properties and equipment not used in operations, as well as investments for sale, are recorded incurrent and non-current assets based on management’s expectations regarding the timing of the sale ofthese assets and the current stage of the negotiations. The balance recorded in current assetscorresponds mainly to the investment in Hidropastaza S.A. interest held by the Company’s branch inEcuador, which will be sold by its book value to Hydroagoyan, in the amount of R$ 65,766—US$ 34,143 and in Odebrecht Oil Services Ltd. interest, held by the Company’s subsidiary CBPOOverseas Ltd. (Note 1 (ii)), in the amount of R$ 176,978—US$ 91,879. The balance recorded innoncurrent assets corresponds mainly to the investment in Aguas de Limeira S.A., in the amount ofR$ 32,527—US$ 16,887 held by the indirect subsidiary company Lumina Engenharia Ambiental Ltda.,current in a negotiation process with OII, controlled by the Company’s parent company, within thecontext of the corporate structure optimization mentioned in Note 1 (ii). The Company has notconsolidated such investments, due to the intention to sell and negotiations stage.

Other assets are stated at cost or realizable value including, when applicable, accrued income andmonetary variations or, in the case of prepaid expenses, at cost.

(d) Permanent assets

Permanent assets are stated at cost plus restatements up to 1995, and take into consideration thefollowing aspects:

• Investments in associated companies are recorded using the equity method. Other investmentsare carried at cost.

• Depreciation of property and equipment is recorded on the straight-line method at the ratesmentioned in Note 9, which take into consideration the economic useful lives of the assets.

• Deferred contract costs incurred prior to contract acceptance and in the same year that thecontracts were accepted are amortized over the period of the execution of the projects. Deferredcharges relating to the development of software are amortized over five years.

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(e) Current and non-current liabilities

These liabilities are stated at known or estimated amounts including accrued charges and monetaryadjustments, when applicable.

The provisions for losses on investments in investees are constituted based on such companies’negative net worth (net capital deficiency) and classified in long-term liabilities, with a counterentry toequity in results of associated companies.

Contingency provisions are recorded based on: (i) existing law; (ii) the need to eliminatecontingent gains from the tax credit compensation arising from the judicial litigations and(iii) indemnity payment estimates regarded as probable.

(f) Taxes on income

Income tax and social contribution on net income are calculated at the rates established by theapplicable legislation. The expense for income tax and social contribution is recorded on the accrualbasis, with deferred taxes being calculated on differences between the accounting and tax bases ofassets and liabilities, including the effects of deferrals of unrealized revenues from contracts withgovernment entities and exchange adjustment on unrealized/settled balances, as permitted by taxlegislation, as well as on tax and social contribution losses.

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(g) Consolidated financial statements

(i) The consolidated financial statements were prepared in conformity with accounting practicesadopted in Brazil, and comprise the financial statements of the Company and the subsidiaries inwhich direct and indirect holdings are maintained, in addition to the overseas branches:

Direct andindirect

holding (%)

Country 2007 2006

Belgravia Empreendimentos Imobiliarios S.A. . . . . . . . . . . . . . . . . . . . . . . Brazil 100.00 100.00Bento Pedroso Construcoes S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 100.00 100.00Brazilian Libyan Construction and Development Company(a) . . . . . . . . . . . . Libya 60.00CBPO Engenharia Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100.00 100.00CBPO Ingenierıa de Venezuela C.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Venezuela 100.00 100.00CBPO Overseas Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Islands 100.00 100.00Centaurus Participacoes S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100.00 100.00Conirsa S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Peru 70.00 70.00Constructora Norberto Odebrecht de Colombia Ltda. . . . . . . . . . . . . . . . . . Colombia 100.00 100.00Constructora Norberto Odebrecht del Ecuador S.A. . . . . . . . . . . . . . . . . . . Ecuador 100.00 100.00Constructora Odebrecht Chile S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chile 100.00 100.00Constructora Odebrecht Uruguay S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . Uruguay 100.00 100.00Construtora Norberto Odebrecht de Bolivia S.A. . . . . . . . . . . . . . . . . . . . . Bolivia 100.00 100.00Construtora Norberto Odebrecht de Panama S.A.(b) . . . . . . . . . . . . . . . . . . Panama 100.00Construtora Norberto Odebrecht S.A.—Argelia(a) . . . . . . . . . . . . . . . . . . . Algeria 100.00Construtora Norberto Odebrecht S.A.—Angola . . . . . . . . . . . . . . . . . . . . . Angola 100.00 100.00Construtora Norberto Odebrecht S.A.—Argentina . . . . . . . . . . . . . . . . . . . . Argentina 100.00 100.00Construtora Norberto Odebrecht S.A.—Bolivia . . . . . . . . . . . . . . . . . . . . . . Bolivia 100.00 100.00Construtora Norberto Odebrecht S.A.—Colombia . . . . . . . . . . . . . . . . . . . . Colombia 100.00 100.00Construtora Norberto Odebrecht S.A.—Costa Rica . . . . . . . . . . . . . . . . . . . Costa Rica 100.00 100.00Construtora Norberto Odebrecht S.A.—Emirados Arabes . . . . . . . . . . . . . . . Arab Emirates 100.00 100.00Construtora Norberto Odebrecht S.A.—Equador . . . . . . . . . . . . . . . . . . . . Ecuador 100.00 100.00Construtora Norberto Odebrecht S.A.—Espanha . . . . . . . . . . . . . . . . . . . . Spain 100.00 100.00Construtora Norberto Odebrecht S.A.—Mexico . . . . . . . . . . . . . . . . . . . . . Mexico 100.00 100.00Construtora Norberto Odebrecht S.A.—Panama . . . . . . . . . . . . . . . . . . . . . Panama 100.00 100.00Construtora Norberto Odebrecht S.A.—Peru . . . . . . . . . . . . . . . . . . . . . . . Peru 100.00 100.00Construtora Norberto Odebrecht S.A.—Republica Dominicana . . . . . . . . . . . Dominican Republic 100.00 100.00Construtora Norberto Odebrecht S.A.—Uruguai . . . . . . . . . . . . . . . . . . . . . Uruguay 100.00 100.00Construtora Norberto Odebrecht S.A.—Venezuela . . . . . . . . . . . . . . . . . . . Venezuela 100.00 100.00CBPO Engenharia Ltda.—Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . Argentina 100.00 100.00CBPO Engenharia Ltda.—Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chile 100.00 100.00CBPO Engenharia Ltda.—Peru . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Peru 100.00 100.00CBPO Engenharia Ltda.—Uruguai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Uruguay 100.00 100.00CBPO Engenharia Ltda.—Venezuela(a) . . . . . . . . . . . . . . . . . . . . . . . . . . Venezuela 100.00Dhawahi Almadeena Construction LLC . . . . . . . . . . . . . . . . . . . . . . . . . . USA 100.00 100.00Dominicana Ingenierıa y Construccion S.A. . . . . . . . . . . . . . . . . . . . . . . . . Dominican Republic 100.00 100.00Energipar Captacao S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100.00 100.00Lumina Engenharia Ambiental Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100.00 100.00Multitrade S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 99.99 99.99

(a) BranchCompany formed in the 1st six-month period of 2007.

(b) Company formed in the 2nd six-month period of 2006.

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Direct andindirect

holding (%)

Country 2007 2006

Odebrecht Angola Projectos e Servicos Ltda. . . . . . . . . . . . . . . . . . . . Angola 100.00 100.00Odebrecht Construction International, Inc. . . . . . . . . . . . . . . . . . . . . . USA 100.00 100.00Odebrecht Construction, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . USA 100.00 100.00Odebrecht Djibouti SAZF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Djibouti 100.00 100.00Odebrecht Empreendimentos Imobiliarios Ltda. . . . . . . . . . . . . . . . . . Brazil 100.00 100.00Odebrecht Engenharia e Construcao S.A. . . . . . . . . . . . . . . . . . . . . . . Brazil 100.00 100.00Odebrecht Ingenierıa y Construccion de Mexico, S de RL de CV.(c) . . . . Mexico 100.00 100.00Odebrecht Ingenierıa y Construccion de Espana, S.L.(a) . . . . . . . . . . . . Spain 100.00 0.00Odebrecht Mining Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Islands 100.00 100.00Odebrecht Oil and Gas Angola Limited . . . . . . . . . . . . . . . . . . . . . . . Cayman Islands 100.00 100.00Odebrecht Oil and Gas Services Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom 100.00 100.00Odebrecht Oil Services Ltd.(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Islands 0.00 100.00Odebrecht Overseas Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bahamas 100.00 100.00Odebrecht Peru Ingenierıa y Construccion S.A.C. . . . . . . . . . . . . . . . . Peru 100.00 100.00OSEL—Odebrecht Servicos no Exterior Ltd. . . . . . . . . . . . . . . . . . . . . Cayman Islands 100.00 100.00Tenenge (UK) Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . England 100.00 100.00Tenenge Overseas Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Islands 100.00 100.00Companies proportionally consolidatedCETREL-LUMINA Tecnologia e Engenharia Ambiental Ltda. . . . . . . . Brazil 50.00 50.00Sociedade de Desenvolvimento Mineiro de Angola, S.A.R.L. . . . . . . . . . Angola 50.00 50.00Sociedade Mineira de Catoca Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . Angola 16.40 16.40Proyectos Ebramex S. de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . Mexico 33.33 33.33Mina-Trico.S.de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico 33.33 33.33Participacoes Energeticas S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 50.00 50.00Obras Civis, L.N.2.2. ACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 63.90 63.90BPC, CBPO, Somague, Profabril, Kaiser e Acer, ACE . . . . . . . . . . . . . Portugal 49.75 49.75Obras Civis, L.N. 2.1. ACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 40.00 40.00Lismercado Construcoes—Bento Pedroso, Somague, H.Hagen, ACE . . . . Portugal 40.00 40.00Somague, BPC, Engil, SPIE em ACE . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 26.32 26.32Somague, BPC, Engil, SPIE-S.B.E.S.—Prolongamento da Linha

Vermelha do Metropolitano, ACE . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 26.32 26.32Somague-Bento Pedroso-Necso-Dragados, ACE . . . . . . . . . . . . . . . . . . Portugal 25.00 25.00Edifer, Soconstroi, BPC, Somague e Acciona, ACE . . . . . . . . . . . . . . . Portugal 20.00 20.00Norace—Construtoras das Auto-estradas do Norte, ACE . . . . . . . . . . . Portugal 17.34 17.34Vianor—Construtoras das Auto-estradas da Costa de Prata, ACE . . . . . Portugal 17.25 17.25Lusitania—Construtoras das Auto-estradas das Beiras Litoral e Alta,

ACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 17.25 17.25Portuscale—Construtoras das Auto-estradas do Grande Porto, ACE . . . . Portugal 17.25 17.25TACE—Construcao da Travessia Rodoviaria de Tejo, ACE . . . . . . . . . . Portugal 16.67 16.67Agrupamento para a Construcao da Segunda Travessia do Tejo, ACE . . . Portugal 14.34 14.34Xingu—Socio Ambiental Ltda.(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 33.33 0.00

(a) BranchCompany formed in the 1st six-month period of 2007.(b) Company formed in the 2nd six-month period of 2006.(c) Company has changed its corporate name from Odebrecht Oil and Gas Mexico, S.R.L. de CV to Odebrecht

Ingenierıa y Construccion de Mexico, S de RL de CV.(d) Company not included in the consolidation of the financial statements as of June 30, 2007 due to the

intention to sell and negotiations stage of the sale (see Note 1 (ii)).

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(ii) Information on the main direct and indirect subsidiaries included in the consolidation:

Number of shares orquotas directly or Adjusted stockholders’ Adjusted net income (loss)

indirectly held equity for the six month

2007 2006 2007 2006 2007 2006

US$ R$ US$ R$

Bento Pedroso Construcoes S.A. . . . . . . . 7,399,859 7,399,859 112,806 217,287 174,943 6,401 12,329 6,585CBPO Engenharia Ltda. . . . . . . . . . . . . 2,327,379 2,327,379 395,633 762,069 702,437 (927) (1,785) 13,743Odebrecht Construction, Inc. . . . . . . . . . 75,806,032 47,806,032 90,464 174,251 120,500 (537) (1,034) 1,440Odebrecht Overseas Ltd. . . . . . . . . . . . . 165,213,213 165,213,213 106,714 205,553 201,790 29,812 57,423 (83,364)Odebrecht Peru Ingenieria y Construccion

S.A.C. . . . . . . . . . . . . . . . . . . . . . . 4,357,442 4,357,442 37,885 72,975 75,040 6,247 12,033 25,049OSEL—Odebrecht Servicos no Exterior

Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 100,000,000 100,000,000 158,880 306,034 345,758 1,697 3,269 (152,414)Sociedade de Desenvolvimento Mineiro de

Angola, S.A.R.L. . . . . . . . . . . . . . . . . 225,000 225,000 49,051 94,482 109,973 2,718 5,236 2,014Sociedade Mineira de Catoca Ltda. . . . . . 1 1 112,790 217,256 237,042 55,692 107,274 129,707

(iii) The investors’ interests in the investees’ net worth and results, balances of intercompany assets,liabilities, income and expenses are eliminated on consolidation. Minority interests in stockholders’equity and net income for the period are presented separately. The asset, liability, income andexpense accounts of jointly-controlled subsidiaries are consolidated in proportion to the totalownership of their capital.

The financial statements of the foreign subsidiaries and branches were translated (i) from localcurrency into U.S. dollars, when applicable (highly inflationary countries without proper instruments foraccounting recognition of inflationary effects), based on the official exchange rates on the date of thefinancial statements or on the date of the transactions, depending on the nature of the accountingcomponent involved (monetary or not), and then converted into Brazilian Reais based on the officialrate of the U.S. dollar on the date of the financial statements, or (ii) from local currency into BrazilianReais based on the official exchange rate on the date of the financial statements, when the subsidiary isnot based in a highly inflationary country, or if it is the case, with proper instruments for accountingrecognition of inflationary effects according to Pronouncement XVIII—Foreign Corporate Investmentsof IBRACON—Institute of Independent Auditors of Brazil (IBRACON). Moreover, such financialstatements were adjusted to the accounting practices adopted in Brazil.

(h) Convenience translation into US dollars

The accounting records are maintained in reais. The financial information in U.S. dollars ispresented solely for the convenience of the reader and has been translated from the amounts in theJune 30, 2007 local currency financial statements, using the exchange rate prevailing on that date ofR$ 1.9262: US$ 1.00. Such translation should not be construed as representing that the amounts inreais represent, or have been, or could be, converted in U.S. dollars at that or at any other rate.

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3 Trade accounts receivable

2007 2006

US$ R$

Public sectorFederal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,493 492,130 679,154State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291,281 561,065 681,218Municipal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,352 229,896 212,533

666,126 1,283,091 1,572,905Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314,667 606,113 413,879

980,793 1,889,204 1,986,784Less: Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563,640 1,085,684 1,123,906Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417,153 803,520 862,878

As part of its policy to mitigate performance risks in developing countries, the Company requiresadvances from customers before starting a project (down payment). Such advances are deducted fromeach invoice through the end of the contract.

The balances of trade accounts receivable were calculated taking into consideration the contractualterms, specific portfolio risks and negotiations in progress, including administrative and judicialcollection processes, in order to recover amounts due for services rendered, including financial charges.Furthermore, taking into consideration the history of minimal losses that the Company and itssubsidiaries have incurred, management does not expect losses on realization of such receivables andbelieves that, as a result of these actions, the recognition of amounts in addition to those recorded mayoccur when sufficient evidence exists to support a reasonable expectation that the correspondingamounts will be received. Trade accounts receivable include R$ 652,408—US$ 338,702 (2006—R$ 701,910) of overdue receivables under judicial collection, where the major part has receivedfavorable judgments, and R$ 65,253—US$ 33,877 (2006—R$ 121,448) of overdue receivables which theCompany is attempting to collect through administrative actions with the debtors.

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Unaudited


4 Taxes recoverable

2007 2006

US$ R$

Current assetsSocial contributions recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.466 2.824 9.427Withholding IR, CSL, PIS and COFINS from invoicing and withholding

IR on earnings from financing investments and invoicing . . . . . . . . . . 12.889 24.827 44.958Prepaid Income Tax by overseas branches and subsidiaries . . . . . . . . . . 5.430 10.460 43.574Foreign branches/ subsidiaries value added taxes

Construtora Norberto Odebrecht S.A.—Ecuador . . . . . . . . . . . . . . . . 2.243 4.320 14.903Construtora Norberto Odebrecht S.A.—Venezuela . . . . . . . . . . . . . . 55.058 106.052Odebrecht Peru Ingenierıa Y Construccion S.A.C. . . . . . . . . . . . . . . . 9.764 18.807Other investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.095 4.035 1.654

Other taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.951 7.612 25.62292.896 178.937 140.138

Long-term receivablesSocial contributions recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.511 6.762 6.653Foreign branches value add . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.269Withhold IR on dividends abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.796 11.165Other taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.327 2.557 1.439

10.634 20.484 22.361

5 Inventories

2007 2006

US$ R$

Finished products(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,846 13,187 10,171Raw materials(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,957 3,769 7,419Materials to be used in construction works . . . . . . . . . . . . . . . . . . . . . . 95,059 183,102 161,887Marketable properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,319 54,549 34,063Imports and exports in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,225 58,220 79,938Inventories in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,272 10,154 8,871Advances to suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,672 76,417 69,958

207,350 399,398 372,307

(i) These basically refer to the diamond inventories of the jointly-controlled entities SDM and Catoca.

6 Eletrobras credits

On October 23, 2006 according to the ‘‘Contract of Assignment of Credit Rights Subject to aLegal Action with a Judgment made Final and Unappealable’’, Odebrecht Investimentos S.A. (merged

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6 Eletrobras credits (Continued)

into Odebrecht S.A.) sold to the Company, the credit rights arising from the proceedings number2001.34.00.029764-8, which was judged in a final and unappealable decision in 2006, originally filed byOPP Quımica S.A. (merged into Braskem S.A) against Centrais Eletricas Brasileiras S.A.—Eletrobras(‘‘Eletrobras’’). Such assignment had the net amount of R$ 238,234—US$ 123,681, after deducting thefees of the lawyers contracted to accompany the legal action. The Company paid the amountcorresponding to such sale in cash, in the amount of R$ 149,959—US$ 77,852, and the remainingbalance was used by the Company in the amount of R$ 88,275—US$ 45,829, to partially reduce thereceivables from ODB (currently ODBPAR Investimentos S.A.) regarding the Current AccountAgreement existing between the parties.

According to the final and unappealable decision, Eletrobras was obliged to (i) monetarily adjustthe payments made by the plaintiff from 1977 up to 1994, as Eletrobras Compulsory Loan (‘‘ECE’’)determined by Law number 4.156/62, using the monetary adjustment rate decided on in such legaldecision; (ii) pay interest at the rate of 6% per year, according to the Law number 5.073/66, on thedifference in the monetary adjustment; and (iii) reimburse the legal costs and pay the loss of suit fees.

In addition to the final and unappealable decision, the following events have occurred in respect tothe legal action: (i) the credit execution proposition against Eletrobras, in the amount of R$ 261,557—US$ 135,789; (ii) the payment in court, by Eletrobras, of part of the executed amount of R$ 71,187—US$ 36,957; and (iii) filing of the opposition by Eletrobras, with the purpose of discussing the criteriafor calculating the amount of the remaining balance, and offering the nominative preferred shares of asubsidiary in guarantee sufficient to cover the remaining difference amount. No material gains or lossesare expected as a result of this settlement.

7 Odebrecht Organization companies

FinancialBalances incomeLong-term Long-term (expenses),receivables liabilities net

CBPO Malaysia SDN BHD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,199ODBPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530,760 17,794ODB International Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,339Aguas de Limeira S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,479 (99)Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,181 9 (1,208)Total—2007—R$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588,958 9 16,487

Total—2007—US$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305,762 5 8,559

Total—2006—R$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,643 566

The main balances with Odebrecht Organization are governed by the contractual instrument‘‘Current Account Agreement and single cash management’’, entered into by all Organization

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7 Odebrecht Organization companies (Continued)

companies, which has an expiration date in 3 years, maturity date on December 31, 2008, and have thefollowing characteristics:

Company Financial charges Nature of the operations

ODBPAR Long-term interest rate (‘‘TJLP’’) Transfer of funds, creditin the domestic market assignments and liabilities

assumption

8 Investments

(a) Information on the investees

On June 30, 2006, resulting from the intention to sell and negotiations stage of the sale of theassociated company North Sea Production Company (‘‘NSPC’’), the Company had classified suchinvestment in non-current assets (long-term receivables) in the amount of R$ 1,376—US$ 714.However, due to the slowness of such negotiations, also driven by the extension of NSPC’s agreementwith its sole customer for oil exploitation in the North Sea, this investment was reclassified topermanent assets, in the subgroup ‘‘associated companies’’, on June 30, 2007, in the amount ofR$ 18,099—US$ 9,396. Losses are not expected on the eventual realization of such asset.

The account ‘‘other investments’’ is mainly represented by the investments of the indirectsubsidiary BPC, headquartered in Portugal, in highway concession companies, all recorded under thecost method. The balances are comprised as follows:

2007 2006

US$ R$

Aenor—Auto Estradas do Norte, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,103 40,648 48,914Lusolisboa—Auto Estradas da Grande Lisboa S.A. . . . . . . . . . . . . . . . . . 4,401 8,477Lusoscut—Auto Estradas da Costa de Prata, S.A. . . . . . . . . . . . . . . . . . . 7,515 14,475 15,368Lusoscut—Auto Estradas das Beiras e Alta, S.A. . . . . . . . . . . . . . . . . . . . 19,655 37,860 34,739Lusoscut—Auto Estradas do Grande Porto S.A. . . . . . . . . . . . . . . . . . . . 14,350 27,641 19,722Operadora Lusoscut BLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 4Operadora Lusoscut Costa de Prata . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 4Operadora Lusoscut GP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 11 12Operanor—Operacao e Manutencao de Auto-Estradas, S.A. . . . . . . . . . . . 2 4 4Operadora GL—Operacao e Manutencao de Auto-Estradas, S.A. . . . . . . . 2 4 —Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,189 21,552 144,086

78,227 150,680 262,853

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8 Investments (Continued)

(b) Provision for losses on investments2007 2006

US$ R$

UMON—Engenharia de Montagem Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,704 7,135 7,220Construtores AKAL BYL S.R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . 439 846 3,298TENCON—Comercio Participacoes Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,353 2,607 2,607Concessionaria IRSA Norte S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,055 2,033Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 941 1,811 1,612

7,492 14,432 14,737

9 Property and equipment

2007 2006 %

AnnualAccumulated depreciation

Cost depreciation Net Net rates

R$ R$ US$ R$

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.697 3.477 6.697 6.673Buildings and installations . . . . . . . . . . . . . 65.983 (25.437) 21.050 40.546 52.589 4Machinery and equipment . . . . . . . . . . . . . 737.451 (338.360) 207.191 399.091 239.930 10 to 20Vehicles and ships . . . . . . . . . . . . . . . . . . . 312.026 (97.118) 111.571 214.908 69.417 25Furniture and fixtures . . . . . . . . . . . . . . . . 111.149 (56.861) 28.184 54.288 44.566 10Advances to suppliers and other . . . . . . . . . 57.027 (18.642) 19.927 38.385 34.532 0 to 10

1.290.333 (536.418) 391.400 753.915 447.707

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10 Debts

2007 2006

Financial institution/type of loans Currency Annual Financial charges US$ R$

Bonds Perpetuos(i)(b) . . . . . . . . US$ 9.63% + EV 200,428 386,064 433,786Medium-Term Note

Programme(i)(a)(1) . . . . . . . . . US$ 11.50% + EV 153,413 295,504 337,608Medium-Term Note

Programme(i)(a)(4) . . . . . . . . . A 6.875% + EV 81,205 156,418 175,753IKB Deustche Bank . . . . . . . . . . US$ Libor + 0.95% + EV 12,599 24,268 33,082BCP Investimento S.A. . . . . . . . . A 4.95% to 5.27% + EV 23,631 45,518 50,975BSN Portugal S.A. . . . . . . . . . . . A 4.67% to 5.27% + EV 10,829 20,858 22,145Banco Nacional de Paris . . . . . . . US$ Libor + 0.80% + EV 12,266 23,626 6,819BBVA Bancomer S.A. . . . . . . . . US$ Libor + 0.85% + EV 9,086 17,501 6,372Banco Totta de Angola S.A.R.L. . . US$ Libor + 2.00% to 7.00% + EV 10,430 20,090 15,744Deutsche Bank S.A. . . . . . . . . . . A 4.54% + EV 1,475 2,842 26,807Banco Internacional de Credito . . US$ Libor + 7.50% + EV 1,076 2,073 3,263Banco Fomento de Angola

S.A.R.L. . . . . . . . . . . . . . . . . US$ Libor + 4.00% to 7.00% + EV 3,352 6,457 1,862Commerce Bank N.A. . . . . . . . . US$ Libor + 4.92% + EV 14 27 1,947Banco Africano de Investimento . . US$ 9.50% + EV 1,782BBVA Trade Finance . . . . . . . . . US$ 3.93% to 4.85% + EV 12,322 23,735Caixa Geral de Depositos S.A. . . . A 3.54% + EV 1,904Banco de Credito del Peru . . . . . US$ 7.50% + EV 12,465 24,011Banco de Bogota . . . . . . . . . . . . Colombian peso 11.50% + EV 414 798

TJLP + 0.90% to 5.80%, pre-fixedSeveral Brazilian financial interest of 9.45% to 14.00% and

institutions . . . . . . . . . . . . . . R$ UMBNDES + 9.13% 48,101 92,651 45,864

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593,106 1,142,441 1,165,713Less: long-term . . . . . . . . . . . . . 437,413 842,545 1,061,223

Current liabilities . . . . . . . . . . . 155,693 299,896 104,490

Abbreviations used:

EV Exchange variationLIBOR London Interbank Offered RateTJLP Long-term Interest RateUMBNDES BNDES monetary unit

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10 Debts (Continued)

(i) Additional information

(a) On February 18, 2004, OOL placed the amount of US$ 250,000 in the international financialmarket through a Medium-Term Notes Program, falling due in up to five years from the issuedate. Subsequently, on October 1, 2004, the total amount of this program was increased toUS$ 500,000. Under the program, OOL carried out the following issues, all of whichguaranteed by the Company:

(1) On February 25, 2004, in the amount of US$ 150,000, maturing in February 2009. Theoutstanding balance amounted to US$ 153,413—R$ 295,504 at June 30, 2007 (2006—R$ 337,608);

(2) On September 29, 2004, in the amount of US$ 15,000, maturing in February 2009. Thedebt was subsequently assumed by ODB International Corporation (‘‘ODBIC’’), asubsidiary of the Company’s parent company, pursuant to a Debt Assumption Agreemententered into by the parties, with the consent of the creditors;

(3) On October 4, 2004, in the amount of A 65,000 thousand, maturing in October 2007. Thebalance of this transaction, plus accrued interest, amounts to A66,067 thousand (equal toR$ 172,256) on June 30, 2007 and, considering the impact of a swap transaction fromeuros to U.S. dollars, amounts to R$ 156,418—US$ 81,205 on June 30, 2007 (2006—R$ 175,753); and

(4) On November 14, 2005, in the amount of US$ 15,000, maturing in February 2010. Thisdebt was subsequently assumed by ODBIC, a subsidiary of the Company’s parentcompany, pursuant to a Debt Assumption Agreement entered into by the parties, with theconsent of the creditors.

On August 9, 2007, OOL redeemed in advance part of the Medium-Term Notes maturingin February 2009. See further details in Note 18 (b).

(b) On September 24, 2005, OOL raised US$ 200,000 in the European, Asian and NorthAmerican international financial markets in Perpetual Bonds. Such Bonds have no maturitydate but provide to the issuer a call option, after 5 years from the issuance date, with annualinterest equivalent to 9.625% paid quarterly. The issue costs, in the amount of US$ 4,135 wereaccounted for as prepaid expenses, and are amortized over the term of the call option (5years). This operation is guaranteed by the Company, and the balance with accrued intereston June 30, 2007 is R$ 386,064—US$ 200,428 (2006—R$ 433,786).

(c) On May 18, 2006, OOL raised with financial entities in the local and international market, acredit line called ‘‘Revolving Credit Facility Agreement’’ in the total amount of US$ 300,000maturing in February 2010, with financial charges equivalent to LIBOR plus 1.15% p.a. Incase the credit line is not in use, the financial charge is 0.65% p.a. payable monthly. Thiscredit line has not been used since it was contracted.

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(ii) Composition of the long-term debt per year of maturity

The long-term amounts are due as follows:2007 2006

US$ R$

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,5752008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,545 20,312 22,9282009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,739 384,737 396,5332010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,155 31,118 13,9812011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,627 6,986 2,8612012 and thereafter . . . . . . . . . . . . . . . . . . . . . . . 207,347 399,392 434,345

437,413 842,545 1,061,223

(iii) Restrictive clauses

The Bonds issuances previously mentioned have certain restrictive clauses, which are beingcomplied with by the Company.

11 Provisions for contingencies

(i) The Company and its subsidiaries have provisions of R$ 55,792—US$ 28,965 (2006—R$ 59,332) in current liabilities and R$ 58,027—US$ 30,125 (2006—R$ 57,940) in long-termliabilities to cover (i) legal indemnity expenditures related to layoffs of employees, which isusual and inherent to its line of activity; the provision is based on the history of similarmonthly disbursements; and (ii) labor, tax and civil claims which in the opinion ofmanagement and its legal advisors have little chance of a favorable outcome. In addition, theCompany and its subsidiaries are defending labor, civil and tax claims of approximatelyR$ 280,617—US$ 145,684 (2006—R$ 89,000), for which no provision for losses has beenrecorded because management and legal advisors believe that no significant losses therefromare probable on the final decision of such actions.

(ii) The Company and its subsidiary CBPO have an injunction which granted them the right notto pay the Social Contribution on Revenues (COFINS) on income other than billings and theright not to pay the increase of 1% in the COFINS rate on billings, based on the provisions ofLaw 9.718/98. When Law 10.833/03 was enacted, the Company and CBPO started to regularlypay COFINS as from February 2004. In addition, the subsidiary CBPO was granted aninjunction giving it the right not to pay the Social Integration Program Contribution (PIS) onother income, based on the provisions of Law 9.718/98 (upon enactment of Law 10.637/02, thisinvestee started to pay PIS in January 2003). The unpaid amounts were recorded monthly inthis account and updated for the related late charges until the Company and the subsidiarywould be awarded a final decision. On September 15, 2006 the Company and CBPO withdrewtheir claims challenging the increase in the COFINS rate and included the debts in theExceptional Installment Program (PAEX) introduced by Provisional Measure 303 of June 29,2006. The accounting balance corresponding to such proceeding is R$ 62,473—US$ 32,433,

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11 Provisions for contingencies (Continued)

which will be divided into 130 monthly installments (debts due up to February 28, 2003) or120 months (debts due from March 1, 2003 up to December 31, 2005). Of this balance,R$ 62,447—US$ 32,420 is recorded under non-current liabilities and the remaining R$ 26—US$ 13, under current liabilities. On June 30, 2007, the provision related to the challenging ofthe levy of COFINS Tax on other revenues, which is still in progress, amounts to R$ 2,913—US$ 1,512.

(iii) Since 2003, the Company’s branch in Ecuador has been inspected by the Internal RevenueService (local equivalent to the Brazilian Federal Revenue Secretariat) relating to income taxreturns filed from 1999 to 2002 and 2004. As a result of these inspections, the Ecuadorian taxauthorities assessed this branch for additional amounts in relation to income tax and tax onadded value, of approximately US$ 4,364 (R$ 8,406) e US$ 321 (R$ 618), respectively (notincluding interest, arrears fines and other potential charges). Management, considering thatthere are sufficient grounds for a favorable outcome, and based on the opinion of its externallegal advisors, did not set up a provision to cover potential losses arising from this matter.

12 Income Tax and Social Contribution

(a) Composition of the effects on income—reversal (expense)2007 2006

US$ R$

Deferred social contribution . . . . . . . . . . . . . . . . . (6,233) (12,006) 9,396Current social contribution . . . . . . . . . . . . . . . . . . (329) (634) (3,470)Income tax return adjustment . . . . . . . . . . . . . . . . (9,064)Total social contribution . . . . . . . . . . . . . . . . . . . . (6,562) (12,640) (3,138)

Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . (15,560) (29,972) 26,101Current income tax . . . . . . . . . . . . . . . . . . . . . . . . (1,000) (1,926) (10,389)Income tax return adjustment . . . . . . . . . . . . . . . . (25,217)Foreign income tax (branches and subsidiaries) . . . (17,055) (32,851) (36,273)Credits of income tax paid by foreign branches and

subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,625Total income tax . . . . . . . . . . . . . . . . . . . . . . . . . . (33,615) (64,749) (12,153)

(i) Due to the Brazilian taxation of profits earned abroad in 2005, compensated with therecognition of credits arising from income tax paid by foreign branches and subsidiaries in2005, recorded in 2006.

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12 Income Tax and Social Contribution (Continued)

(b) Balances of deferred income tax and social contribution

The asset balances relate to income tax and social contribution on the tax losses and the negativecalculation basis, respectively, and on the temporary differences arising mainly from the Company andits indirect subsidiary CBPO. The liability balances relate to income tax and social contribution onunrealized profits on sales to government entities and the effects of exchange variations, mainly in theCompany and its indirect subsidiary CBPO.

The composition of the deferred income tax and social contribution accounts on June 30, is asfollows:

(i) Income tax

2007 2006

DeferredOn other income andtemporary exchange Accumulateddifferences variation tax losses Total Total

In R$Current assets . . . . . . . . . 17,349 28,145 45,494 88,457Long-term receivables . . . 31,042 1,281 32,323 81,494Long-term liabilities . . . . (115,770) (115,770) (97,462)

In US$Current assets . . . . . . . . . 9,007 14,612 23,619Long-term receivables . . . 16,116 665 16,781Long-term liabilities . . . . (60,103) (60,103)

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(ii) Social Contribution2007 2006

DeferredOn other income andtemporary exchange Accumulateddifferences variation tax losses Total Total

In R$Current assets . . . . . . . . . . . . . . . . . . . . . . . . . 3,575 11,792 15,367 37,808

Long-term receivables . . . . . . . . . . . . . . . . . 10,724 10,724 31,779Long-term liabilities . . . . . . . . . . . . . . . . . . . (82,303) (82,303) (72,528)

In US$Current assets . . . . . . . . . . . . . . . . . . . . . . . 1,856 6,121 7,977Long-term receivables . . . . . . . . . . . . . . . . . 5,567 5,567Long-term liabilities . . . . . . . . . . . . . . . . . . . (42,728) (42,728)

(c) Recoverability of recorded deferred assets

The Company and its indirect subsidiary CBPO base the recoverability of the net asset balances ofdeferred income tax and social contribution on the profit forecasts for the next three years. Thisforecast includes, as basic assumptions, the continuing increase in the order backlog (portfolio ofrevenues already contracted by the Company and CBPO) in recent years; the gains to be earned fromthe disposal of assets not pertaining to the Engineering and Construction activity, the increasedinvestment in Brazil’s electric power and infrastructure sectors, and the increased participation of theCompany and CBPO in real estate ventures, as well as the recognition, for tax purposes, of theoperating results of foreign subsidiaries as from December 31, 2002. Additionally, the Company,together with its main subsidiary operating in Brazil, CBPO, have realized and cumulatively reducedtheir net balance of deferred income tax and social contribution assets in the past five years

(d) Foreign income tax

The income tax expense incurred abroad is represented primarily by the taxes generated byoperation in Angola, in the amount of R$ 25,706—US$ 13,345 (2006—Angola—R$ 16,019 andPortugal—R$ 2,353).

(e) Tax credits arising from the income tax paid by foreign branches and subsidiaries

The statement of income for the six-month period ended June 30, 2006, records R$ 33,625—US$ 17,457, of credits related to the income tax amounts paid by the Company branches in Venezuela,Ecuador, Peru, Angola and Argentina, and taxed in Brazil, pursuant to the applicable income taxlegislation. These amounts were offset against the income tax amounts payable relating by these foreignoperation profits.

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(f) Fiscal incentive—corporate income tax

The Company, by means of the constitutive report number 0219/2006, of October 9, 2006, issuedby the Agencia de Desenvolvimento do Nordeste—ADENE of the Ministry of National Integrationacquired the right to 75% reduction benefit, up to the base year of 2016 (calendar year of 2015), onthe income tax payable on the profits arising from the manufacture and assembly of the pumpingmodules comprising a sea platform for oil exploitation hired by Petroleo Brasileiro S.A.—Petrobras.The manufacture and assembly plant is installed at Vila de Sao Roque de Paraguacu, in the city ofMaragogipe, State of Bahia.

At the end of each year, if there is profit arising from the incentived operations, the amountcorresponding to the income tax is recorded as a current expense with credit to a capital reserveaccount which can only be used to increase capital or compensate losses. In June 30, 2007 the Fiscalincentive amount to R$ 11,388—US$ 5,912.

13 Stockholders’ Equity

(a) Capital

As of June 30, 2007, the Company’s capital, subscribed and paid-up entirely by Brazilianindividuals and corporations, was comprised by 148,090,839 (2006—202,883,287) common shares and107,737,914 (2006—147,215,203) preferred shares with no par value.

On December 31, 2006, within the context of the reorganization mentioned in the Note 1 (ii), theExtraordinary General Meeting approved the decision for the partial spin-off of the Company’s equity,followed by the merger of the spun-off portion into ODBPAR, the net assets being represented by partof the creditor balance the Company maintained at that time with ODBPAR, in the amount ofR$ 485,000—US$ 251,791.

The following main objectives of the partial split-up of the Company according to the Protocol andJustification are:

(i) reduction of the current account balance between the Company and ODBPAR;

(ii) adjustment of the Company’s equity structure so that the economic-financial performanceindicators, measured against its net worth, are aligned with those presented by companiesoperating in its segment on a global basis.

(b) Share rights

Preferred shares, which are non-voting, have priority in the event of capital reimbursement uponliquidation and, based on Law 10,303/01, the preferred and common shares have the same right withregards to the receipt of dividends. All stockholders are assured an annual dividend of at least 25% ofthe adjusted net income for the year, calculated in accordance with Brazilian corporate legislation.

On June 30, 2007 the Company distributed special dividends, based on the reserve for investments,in the amount of R$ 52,999—US$ 27,515 (2006—R$ 31,080). Also, on June 30, 2006, the Companyanticipated dividends proposed for such year, in the amount of R$ 20,000—US$ 10,383 upon the Board

F-29



Unaudited


13 Stockholders’ Equity (Continued)

of Directors approval. This distribution was approved by the Ordinary General Meeting. Such amountswere paid, pursuant to the use of the current account held between the Company and ODBPAR.

(c) Appropriation of net income

According to the Company’s by-laws, appropriations are made to revenue reserves as describedbelow. The utilization of the remaining balance after these appropriations and distribution of dividendswill be decided at the Annual Shareholders’ Meeting.

(i) Legal reserve

This reserve is established through the appropriation of 5% of net income of each year until thereserve equals 20% of total capital or until its balance, plus capital reserves, exceeds 30% of totalcapital.

(ii) Reserve for investments (statutory)

This is established through the appropriation of up to 70% of the net income for the year, until,together with the legal reserve, it reaches 100% of the corporate capital.

14 Financial result

2007 2006

US$ R$

Financial revenueFinancial investments revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,831 80,575 64,731Odebrecht Organization companies financial charges . . . . . . . . . . . . 8,849 17,045Exchange variation revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,174 198,733 113,619Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,258 27,464 19,780

168,112 323,817 198,130

Financial expensesDebts financial charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (53,336) (102,735) (102,412)Exchange variation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (98,310) (189,364) (107,340)Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,440) (79,823) (74,570)

(193,086) (371,922) (284,322)

15 Insurance coverage

The identification, mitigation, management of risks and contracting of insurance are handled in aconsistent manner by the Company and its subsidiaries, and comply with the policies of the OdebrechtOrganization. The Company is supported by OCS—Odebrecht Administradora e Corretora deSeguros Ltda., and its consultants, brokers and first line domestic and foreign partner insurancecompanies, to assure the contracting at adequate prices of the appropriate cover for each contract orventure, at amounts considered sufficient to cover possible losses. At June 30, 2007, the insurance

F-30



Unaudited


15 Insurance coverage (Continued)

coverage of the Company and its subsidiaries amounts to US$ 11,382,328—R$ 21,924,640 (2006—US$ 7,203,630—R$ 15,590,816), including the ‘‘Surety Bond’’ (Note 1).

16 Private pension plan

The Company and its subsidiaries have entered into an agreement with ODEPREV—OdebrechtPrevidencia, a private pension fund established by the parent company Odebrecht S.A., and is one ofthe sponsoring companies. ODEPREV offers its participants, members of the sponsoring Company, theOptional Plan, a defined contribution plan in which monthly and periodic participant contributions andmonthly and annual sponsor contributions are made to individual pension savings accounts.

In relation to the benefit payments established for the Optional Plan, the ODEPREV obligationsare limited to the total value of the participants’ quotas and, in conformity with the rules of the definedcontribution plan, no obligations or responsibilities can be required from the sponsoring companies toguarantee minimum levels of benefits to the retired participants. The contributions of the Companyand its subsidiaries for the first half of 2007 total R$ 4,560—US$ 2,367 (2006—R$ 4,617).

As the ODEPREV plan is a defined contribution plan, under which the risk of receiving benefits isthe full responsibility of the participants, the Company’s management has determined that theprovisions of Accounting Standard NPC 26 of the Institute of Independent Auditors of Brazil(IBRACON), ‘‘Accounting for Benefits to Employees’’ relating to defined benefit plans are notapplicable to such plan.

17 Financial instruments

(a) General considerations

The Company and its subsidiaries participate in transactions involving financial instruments for thepurpose of managing the cash resources of their operations, hedging against the effects of foreignexchange fluctuations on the consolidated exposure in currency and interest rate fluctuations. Theserisks are managed through financial market mechanisms that minimize the exposure of the companies’assets and liabilities, protecting their profitability and equity.

(b) Market value

The main financial instruments of the Company and its subsidiaries are trade accounts receivable,financial investments, marketable securities, suppliers, loans and long-term liabilities, current accountswith other Odebrecht Organization companies (see further details in Note 7) and derivative financialinstruments.

The market values of the financial instruments of the Company and its subsidiaries approximatetheir book values at June 30, 2007 and 2006. The market values of these financial instruments wereobtained by calculating their present values, taking into account current market interest rates forsimilar terms and risks. The most significant shareholding interests held by the Company and itssubsidiaries are not quoted in the market.

F-31



Unaudited


17 Financial instruments (Continued)

(c) Credit risk

At June 30, 2007, the Company and its subsidiaries had overdue accounts receivable amounting toR$ 717,661—US$ 372,579 (2006—R$ 823,358)) for services rendered to government entities.Historically, the Company and its subsidiaries have collected the amounts owed by these entities,including those overdue for one year or more. The collection of these overdue amounts fromgovernment entities occurs through payment or the receipt of government bonds or other governmentassets. As a way of mitigating these risks, the Company and its subsidiaries have applied a greaterdegree of selectivity when accepting customers, and have increased the sales revenues from privatecustomers or public sector customers which the Company considers to have the capacity to generaterevenues independently and which do not rely on government budgets to pay their liabilities (mainlycompanies with both public and private shareholders) and have been a party to contracts in whichpayments are financed by export agencies, multilateral agencies, commercial banks, private pensionfunds and private investors. In order to reduce the volume of overdue receivables, the Company and itssubsidiaries have adopted a policy of decentralizing the administrative collection negotiations withcustomers, delegating this responsibility to the administrative levels responsible for the monitoring ofeach contract. If these administrative actions are not successful, the collection of these amounts willoccur through court actions.

(d) Price risk

A significant number of the contracts in which the Company and its subsidiaries are engaged arefixed-price contracts. The actual profit margins on these contracts may differ from the marginsestimated at the time the costs were budgeted and the contract price was proposed because of:significant unexpected increases in the costs of equipment, materials to be used or labor, relating toinflationary effects or other unexpected events; problems encountered by the customer to obtain thenecessary financing of the contract or to obtain Government authorizations or approvals; projectchanges resulting in unexpected costs; and delays caused by bad weather or the non-performance ofsubcontractors and/or contracted suppliers. To minimize the price risk, the fixed-price contractsperformed by the Company and its subsidiaries have their budgets periodically revised to reflectinconsistencies noted between actual and budgeted costs. The Company and its subsidiaries follow apolicy of negotiating claims to increase contract prices through contract amendments to recovervariations from the contracted price, recorded in the books when the contract amendment is signed.

(e) Exposure in foreign currency

The Company, through its branches, subsidiaries and associated companies, has operations asdescribed in Note 1, of which part is denominated in U.S. dollars, with little exposure to localcurrencies, restricted to certain specific countries. In addition, certain loans of the Company and itssubsidiaries obtained abroad are denominated in foreign currencies, as mentioned in Note 10, as wellas liabilities to suppliers and other balances with related parties, as mentioned in Note 7.

F-32



Unaudited



(f) Interest rate and currency swaps contracts

The Company and its subsidiaries participate in transactions involving swap operations for thepurpose of hedging against the effects on the exposure in currency and interest rate fluctuations. OnJune 30, 2007, the nominal value of the outstanding swap amounts to R$ 161,478—US$ 83,832, with anincome of R$ 3,446—US$ 1,789 (2006—R$ 181,449, expense of R$ 8,446).

(g) Other financial derivatives

The Company does not currently utilize financial derivatives other than the swap transactionsmentioned above.

18 Subsequent Events

(a) On July 3, 2007, the Extraordinary General Meeting approved the partial split-off of ODB’sshareholders’ equity followed by the merger of the portion spun off by the Company, with theincrease of its capital stock by R$ 103—US$ 54 upon the issue of 11,668 common shares and 8,488preferred shares.

In accordance with the Appraisal Report on the Accounting and Technical Net Assets of ODB,issued by independent experts for July 3, 2007, the spun off net assets are represented by: (i) 59,185convertible debentures, with no guarantee, issued by Braskem S.A. (‘‘Braskem’’), single series of the 1st

issue, fully subscribed by ODB, amounting to R$ 1,195,577—US$ 620,692; (ii) obligations with BNDESPARTICIPACOES S.A.—BNDESPAR (‘‘BNDESPAR’’) and the National Bank for Economic andSocial Development (‘‘BNDES’’), related to 60,574 non-convertible debentures issued by ODB, withsecured and unsecured guarantee, in two series, the first being a simple one and the second subject toan Exchange Clause, amounting to R$ 412,951—US$ 214,386 and R$ 249,266—US$ 129,408,respectively; and (iii) a portion of the intercompany payables of ODB with its subsidiary ODBPAR,amounting to R$ 533,257—US$ 276,844.

The main objectives of this operation, provided for in the terms of the Protocol and Justificationof the Spin Off of ODB, are:

(i) reallocation of assets and liabilities with the reduction of the intercompany account balancebetween ODBPAR and the Company presented in its consolidated financial statements so asto keep it within the minimum levels that are historically accepted by its creditors; and

(i) reduction of the level of exposure of the Company’s assets in transactions with related partiesas a result of the abovementioned reduction of the intercompany account balance, which wasnot seen as positive by its creditors and the financial market in which the Company goes toraises funds.

Subsequently, on July 31, 2007, the Company exercised the option to convert the debentures issuedby Braskem and received as a result of the abovementioned spin off into shares issued by Braskem,becoming the holder of 25,832,198 common shares and 51,664,397 preferred shares of this subsidiary ofODB. In this conversion, a premium of R$ 33,861—US$ 17,579 was generated. On the same date, theCompany settled its obligations with BNDESPAR and BNDES arising from the issue of debentures by

F-33



Unaudited


18 Subsequent Events (Continued)

ODB. For the payment of the 2nd series, R$ 228,169—US$ 118,456 was paid upon the delivery of19,669,795 preferred shares of Braskem. As this delivery was based on the strike price determined uponthe issue of these debentures by ODB, a loss in the amount of R$ 54,458—US$ 28,272 was recognizedin relation to the equity value of these shares.

(b) On August 9, 2007, OOL redeemed in advance approximately 72% of the Medium-Term Notesthat mature in February 2009. The purpose of this operation was to obtain from investorstheir consent to match the restrictive clauses existing in this issue to those for the PerpetualBonds. The amount paid in the operation was US$ 107,475 (R$ 207,018) plus a premium ofUS$ 9,737 (R$ 18,755) and interest of US$ 5,631 (R$ 10,846).

* *

F-34


and Subsidiaries

Financial Statementsat December 31, 2006 and 2005

and Report of Independent Accountants

Report of Independent Accountants

To the Board of Directors and StockholdersConstrutora Norberto Odebrecht S.A.

1 We have audited the accompanying consolidated balance sheets of Construtora NorbertoOdebrecht S.A. and its subsidiaries as of December 31, 2006 and 2005, and the relatedconsolidated statements of income, of changes in stockholders’ equity and of changes in financialposition for the years then ended. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements.The audits of the financial statements of the jointly-controlled entities and associated companiesreferred to in Note 2(g)(i) were carried out by other independent auditors and our opinion withrespect to their profits in the year ended December 31, 2006 and consolidated total assets at thatdate, in the amounts of R$ 4,463 thousand and R$ 86,895 thousand, respectively (December 31,2005—profit of R$ 13,076 thousand and total assets of R$ 181,669 thousand), is based exclusivelyon the reports of the other independent auditors.

2 We conducted our audits in accordance with approved Brazilian auditing standards which requirethat we perform the audit to obtain reasonable assurance about whether the financial statementsare fairly presented in all material respects. Accordingly, our work included, among otherprocedures: (a) planning our audit taking into consideration the significance of balances, thevolume of transactions, and the accounting and internal control systems of the Companies,(b) examining, on a test basis, evidence and records supporting the amounts and disclosures in thefinancial statements, and (c) assessing the accounting practices used and significant estimates madeby management, as well as evaluating the overall financial statement presentation.

3 Based on our audits and on the reports of the other independent auditors, in our opinion thefinancial statements audited by us mentioned in paragraph 1 present fairly, in all material respects,the consolidated financial position of Construtora Norberto Odebrecht S.A. and its subsidiaries atDecember 31, 2006 and 2005, the consolidated results of operations, changes in stockholders’equity and changes in financial position for the years then ended, in accordance with accountingpractices adopted in Brazil.

4 The Company and its subsidiaries are an integral part of the group of companies that form theOdebrecht Organization and conduct material financial transactions with the Company’s parentcompany and other Odebrecht organization companies, under the conditions described in Note 7to the financial statements. Additionally, the Company continues to be involved in the optimizationof its corporate structure, as describe in Note 1(iii) and 13 to the financial statements.

5 The accompanying financial statements expressed in U.S. dollars give effect to the translation ofthe financial statements expressed in reais, on the basis described in Note 2 (h). This translationshould not be construed as representing that the amounts in reais actually represent or have been,or could be, converted into U.S. dollars.

Salvador, March 23, 2007



F-36


Consolidated Balance Sheets at December 31


2006 2005

US$ R$

AssetsCurrent assets

Cash and banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349,344 746,897 324,868Financial investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,965 547,253 445,118Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,388 195,387 655,131Trade accounts receivable (Note 3) . . . . . . . . . . . . . . . . . . . . . . . 533,032 1,139,622 1,073,083Advances to suppliers, subcontractors and others . . . . . . . . . . . . . 66,439 142,047 123,943Investments and properties for sale . . . . . . . . . . . . . . . . . . . . . . 27,005 57,736 1,973Deferred income tax and social contribution (Note 12) . . . . . . . . 27,730 59,286 131,281Taxes recoverable (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,232 203,605 126,102Inventories (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,739 285,934 307,979Current accounts with consortium members . . . . . . . . . . . . . . . . 13,466 28,790 15,806Eletrobras credits (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,428 238,234Other accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,388 167,594 142,700Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,258 47,589 50,521

1,805,414 3,859,974 3,398,505

Non current assetsLong-term receivables

Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,639 140,337 70,665Odebrecht Organization companies (Note 7) . . . . . . . . . . . . . . 233,247 498,681 464,283Trade accounts receivable (Note 3) . . . . . . . . . . . . . . . . . . . . . 327,878 701,003 852,495Investments and properties for sale . . . . . . . . . . . . . . . . . . . . . 24,839 53,106 137,083Deferred income tax and social contribution (Note 12) . . . . . . . 17,088 36,533 66,810Taxes recoverable (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,383 20,061 9,122Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,179 8,935 17,376Judicial bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,646 20,622 16,187Other accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,014 44,930 42,348

712,913 1,524,208 1,676,369

Permanent assetsInvestments (Note 8)

Associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,198 60,288 9,465Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,316 152,474 196,137

Property and equipment (Note 9) . . . . . . . . . . . . . . . . . . . . . . 366,863 784,353 444,593Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,464 152,791 126,313

537,841 1,149,906 776,508

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,056,168 6,534,088 5,851,382

F-37


Consolidated Balance Sheets at December 31 (Continued)


2006 2005

US$ R$

Liabilties and stockholders’ equityCurrent liabilities

Debts (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,573 272,750 108,419Suppliers and subcontractors . . . . . . . . . . . . . . . . . . . . . . . . . . 369,919 790,886 722,118Taxes, rates, salaries and payroll charges . . . . . . . . . . . . . . . . . 210,739 450,560 229,367Management profit sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,800 12,400 12,400Provisions for contingencies (Note 11) . . . . . . . . . . . . . . . . . . . 24,430 52,231 55,469Advances from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443,458 948,113 331,234Current accounts with consortium members . . . . . . . . . . . . . . . 26,330 56,294 32,341Other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,980 158,170 74,860

1,282,229 2,741,404 1,566,208

Non current liabilitiesLong-term liabilities

Odebrecht Organization companies (Note 7) . . . . . . . . . . . . 11,217 23,981 566Debts (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422,446 903,190 1,170,526Advances from customers . . . . . . . . . . . . . . . . . . . . . . . . . . 487,541 1,042,363 850,054Deferred income tax and social contribution (Note 12) . . . . . 65,136 139,262 162,667Suppliers and subcontractors . . . . . . . . . . . . . . . . . . . . . . . . 23,011 49,197 46,884Provisions for contingencies (Note 11) . . . . . . . . . . . . . . . . . 28,359 60,632 116,406Exceptional Installment Program (PAEX) (Note 11 (ii)) . . . . 28,299 60,504Provision for losses on investments . . . . . . . . . . . . . . . . . . . 7,062 15,099 16,568Other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,417 28,685 8,479

1,086,488 2,322,913 2,372,150

Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,192 6,824 4,323

Stockholders’ equityCapital (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614,315 1,313,405 1,798,045Capital reserve (Note 12(f)) . . . . . . . . . . . . . . . . . . . . . . . . . . 5,326 11,388Revenue reserves (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . 64,618 138,154 110,656

684,259 1,462,947 1,908,701


In these financial statements certain (local currency) amounts have been translated into United Statesdollars at the rate of R$ 2.1380 to the dollar. Such translations should not be construed asrepresentations that the (local currency) amounts represent, or have been or could be converted into,United States dollars at that or any other rate.


F-38


Consolidated Statements of IncomeYears Ended December 31


2006 2005

US$ R$

Gross service revenuesDomestic market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.226.081 2.621.362 1.613.412Foreign market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.266.819 4.846.458 4.719.235

3.492.900 7.467.820 6.332.647Taxes and contributions on services . . . . . . . . . . . . . . . . . . . (114.626) (245.070) (117.837)

Net service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.378.274 7.222.750 6.214.810Cost of services rendered . . . . . . . . . . . . . . . . . . . . . . . . . . (2.922.375) (6.248.037) (5.379.490)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455.899 974.713 835.320

Operating expensesGeneral and administrative expense . . . . . . . . . . . . . . . . . . . (276.470) (591.093) (545.049)Directors’ remuneration expense . . . . . . . . . . . . . . . . . . . . . (5.957) (12.736) (12.483)

Operating profit before the equity interests and financial results . 173.472 370.884 277.788

Results from investments in associated companiesEquity in the results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.494 11.746 11.164Provision for losses on investments . . . . . . . . . . . . . . . . . . . (1.802) (3.852) (336)Dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 11

Financial resultFinancial revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131.606 281.372 390.601Financial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (138.645) (296.424) (379.234)

Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170.126 363.729 299.994

Non-operating results (Note 14) . . . . . . . . . . . . . . . . . . . . . (9.246) (19.768) (27.002)

Income before social contribution and income tax . . . . . . . . . . . . 160.880 343.961 272.992

Social contribution (Note 12 (a)) . . . . . . . . . . . . . . . . . . . . . (20.781) (44.429) (26.649)Income tax (Note 12 (a)) . . . . . . . . . . . . . . . . . . . . . . . . . . (79.639) (170.269) (97.522)

Income before the management profit sharing and minorityinterest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.460 129.263 148.821

Management profit sharing . . . . . . . . . . . . . . . . . . . . . . . . . (5.800) (12.400) (12.400)Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.472) (5.285) (2.707)

Net income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.188 111.578 133.714



F-39


Consolidated Statement of Changes in Stockholders’ Equity

In thousands of reais, except dividends per share

Capital reserveNote (12 (f)) Revenue reserves

Investments RetainedCapital Tax incentives Legal (statutory) earnings Total

At December 31, 2004 . . . . . . . . . . . . . . . 1,318,518 72,890 143,052 1,534,460Capital increase . . . . . . . . . . . . . . . . . 479,527 479,527Extraordinary dividends—R$ 0.408 per

share . . . . . . . . . . . . . . . . . . . . . . . (143,052) (143,052)Net income for the year . . . . . . . . . . . 133,714 133,714Appropriations:

Prepaid dividends—R$ 0.274 pershare . . . . . . . . . . . . . . . . . . . . . . (95,948) (95,948)

Transfer to reserves . . . . . . . . . . . . . 6,686 31,080 (37,766)

At December 31, 2005 . . . . . . . . . . . . . . . 1,798,045 79,576 31,080 1,908,701

Capital increase . . . . . . . . . . . . . . . . . 360 360Partial split (Note 13 (a)) . . . . . . . . . . (485,000) (485,000)Extraordinary dividends—R$ 0.121 per

share (Note 13 (b)) . . . . . . . . . . . . . (31,080) (31,080)Net income for the year . . . . . . . . . . . 111,578 111,578Constituition of capital reserve . . . . . . . 11,388 11,388Appropriations:

Prepaid dividends—R$ 0.207 pershare (Note 13 (b)) . . . . . . . . . . . (53,000) (53,000)


At December 31, 2006 . . . . . . . . . . . . . . . 1,313,405 11,388 85,154 53,000 1,462,947

F-40


Consolidated Statement of Changes in Stockholders’ Equity (Continued)

In thousands of U.S. dollars except dividends per share

Capital reserveNote (12 (f)) Revenue reserves

Investments RetainedCapital Tax incentives Legal (statutory) earnings Total

At December 31, 2005 . . . . . . . . . . . . . . . 840,994 37,220 14,537 892,751Capital increase . . . . . . . . . . . . . . . . . 169 169Partial split (Note 13 (a)) . . . . . . . . . . (226,848) (226,848)Extraordinary dividends—R$ 0.121 per

share (Note 13 (b)) . . . . . . . . . . . . . (14,537) (14,537)Net income for the year . . . . . . . . . . . 52,188 52,188Constituition of capital reserve . . . . . . . 5,326 5,326Appropriations:

Prepaid dividends—R$ 0.207 pershare (Note 13 (b)) . . . . . . . . . . . (24,790) (24,790)


At December 31, 2006 . . . . . . . . . . . . . . . 614,315 5,326 39,828 24,790 684,259



F-41


Consolidated Statements of Changes in Financial PositionYears Ended December 31


2006 2005

US$ R$

Financial resources were provided by:Operations

Net income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.188 111.578 133.714Expenses (income) not affecting working capital:

Income tax and social contribution . . . . . . . . . . . . . . . . . . . . 54.742 117.039 55.031Equity in results of associated companies . . . . . . . . . . . . . . . (5.494) (11.746) (512)Provision for losses on Investments . . . . . . . . . . . . . . . . . . . . 1.802 3.852 336Decrease (increase) of construction contracts revenue (see

Note 2 (b)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (118.924) (254.257) 119.458Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 83.783 179.127 178.899Residual value of permanent asset disposals . . . . . . . . . . . . . 56.133 120.012 56.847Interest and monetary and exchange variations on long-term

assets and liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . (40.353) (86.273) (182.207)Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.472 5.285 2.707

86.349 184.617 364.273Third parties

Increase in long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . 348.093 744.222 653.077Transfer from long-term to current assets . . . . . . . . . . . . . . . 62.891 134.460 51.918Tax incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.326 11.388

416.310 890.070 704.995Total funds provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502.659 1.074.687 1.069.268

Financial resources were used for:Odebrecht organization companies . . . . . . . . . . . . . . . . . . . . . . . 193.479 413.658 105.631Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90.660 193.831 39.097Permanent assets

Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.500 39.554 54.072Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262.094 560.358 237.396Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64.348 137.577 58.760

Transfer from long-term to current liabilities . . . . . . . . . . . . . . . . 204.340 436.878 463.782Working capital of companies included in and/or excluded from

the consolidation, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.068 6.559 16.432Total funds used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 836.489 1.788.415 975.170

Increase (decrease) in working capital . . . . . . . . . . . . . . . . . . . . . . (333.830) (713.728) 94.098

Changes in working capitalCurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215.841 461.468 13.325Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549.671 1.175.196 (80.773)

Increase (decrease) in working capital . . . . . . . . . . . . . . . . . . . . . . (333.830) (713.728) 94.098



F-42


Notes to the Financial Statements at December 31, 2006 and 2005


1 Operations Context

The main operations of the Company, an integral part of Odebrecht organization with legalheadquarters in Rio de Janeiro and administrative headquarters in Sao Paulo, include the planning andexecution of engineering projects of all types and specialties as contractor, administrator or other roles;technical installations of civil engineering, industrial assembly, consulting, planning, assistance andtechnical studies; rendering of administrative or technical services; urban and rural real estate ventures,investments in other companies for the purpose of greater development, stability and profitability, otherrelated activities, including import and export, rental and purchase and sale of equipment andtransportation.

Through its branches, the Company operates directly in Venezuela, Angola, Ecuador, DominicanRepublic, Colombia, Mexico, United Arab Emirates, Bolivia, Argentina, Peru and Costa Rica. Inaddition to the countries above, the Company operates through its direct and indirect subsidiaries inPortugal, United States, Iraq, Djibouti, England, Chile and Uruguay.

In the heavy civil construction segment, the Company and its main, indirect, subsidiary company,CBPO Engenharia Ltda. (‘‘CBPO’’), develop construction projects involving highways, railways, nuclear,hydroelectric and thermoelectric plants, port installations, dams, and other industrial and infrastructureprojects.

The main projects currently in progress in Brazil are: PRA-1 Platform, CVRD Carajas, Ponta daMadeira, Line 4 of the Sao Paulo Subway, Ipanema Subway in Rio de Janeiro, Energy for All Programin Minas Gerais, Ostras River Sanitation Project, Remodeling of Santos Dumont Airport,Joao Havelange Olympic Stadium and several contracts to render services in petroleum platforms andpetrochemical plants. The main overseas projects are located in Venezuela (lines 3 and 4 of theCaracas Subway, Los Teques Subway, El Diluvio irrigation project and bridge over the Orinoco River),the United States (North and South Miami Airport Terminals), Portugal (highway concessions),Dominican Republic (Northeast aqueduct -2nd stage and Samana, Pinalito and Palomino hydroelectricplants), Ecuador (San Francisco and Baba Hydroelectric Plants), Angola (hydroelectric plant, shoppingmall and infrastructure projects), and Peru (highway works and irrigation project).

The Company and its subsidiaries mainly operate with surety bonds to obtain and performcontracts in Brazil and abroad, obtained with the support of OCS—Odebrecht Administradora eCorretora de Seguros Ltda., an Odebrecht Organization company, through strategic long-term allianceswith first line insurance companies and brokers in the global insurance market. At December 31, 2006,the amounts of contractual guarantees issued was equivalent to R$ 4,282,829—US$ 2,003,194 (2005—R$ 2,280,727—US$ 974,378).

(i) Operations in Venezuela

In 2006, 20% (2005—19%) of the net service revenues recorded in the Company’s consolidatedfinancial statements arise from the operations in Venezuela.

Effective February, 2003, as a result of the new system for the management of foreign currencyadopted in the country, the exchange rate was fixed, and the official quotation is currentlyBs 2,150:US$ 1. The change in the official exchange rate, in 2005, generated for the Venezuelan branchand indirect subsidiary a gain of approximately R$ 18,000—US$ 8,419.

F-43


Notes to the Financial Statements at December 31, 2006 and 2005 (Continued)



(ii) Participation in the diamond sector

Through its subsidiaries, the Company also conducts mineral prospecting and exploration. Itswholly-owned subsidiary Odebrecht Mining Services, Inc. (‘‘OMSI’’) holds 16.4% of the investeeSociedade Mineira de Catoca, Limitada (‘‘Catoca’’), which conducts prospecting, exploration, treatmentand sale of diamonds and other minerals in the Catoca Project in the Lunda Sul Province in Angola,having a concession from the Angolan Government to exploit diamonds mined from the Catocakimberlite area, and also holds 50% of Sociedade de Desenvolvimento Mineiro de Angola, S.A.R.L.(‘‘SDM’’), which conducts prospecting, exploration and sale of diamonds extracted in a concession areagranted by the Angolan Government in the Hydrographic Basin of the Cuango River (Angola).

Currently, SDM, together with its parent company, has already entered into an agreement for theconcession of diamond exploitation to be extracted from kimberlites in the Muanga region, and iscarrying out research and development, key to the extension of its operations. At December 31, 2006,the indirect holding of the Company in SDM represents R$ 51,150—US$ 23,924—(2005—R$ 58,378).Management believes that the business of the investee will maintain its normal course of operations,taking into consideration the future success of the kimberlites extraction.

(iii) Optimization of the corporate structure

Continuing with the corporate restructuring process which started in 2004 for the optimization ofthe Odebrecht organizational structure, the concentration of the current accounts in the Company asthe manager of the current account agreement and central management of the cash balancesmaintained by the companies in the group, and the corporate segregation of the engineering andconstruction segments and the investments in infrastructure, the following corporate activities wereperformed in 2006:

• On April 3 and 4, the Company sold to Odebrecht Investimentos em Infra-estrutura Ltda.(‘‘OII’’), controlled by the Company’s parent, part of its interests in the companiesConcesionaria Interoceanica Sur-Tramo 2 S.A., Concesionaria Interoceanica Sur-Tramo 3 S.A.and Concesionaria IIRSA Norte S.A. by the book equity amount on March 31, 2006, ofR$ 2,806—US$ 1,312, R$ 4,446—US$ 2,080 and R$ 1,936—US$ 906, respectively. The controlof such investees was transferred to Oll, due to such sales.

• On June 30, there was a partial spin-off of CBPO net worth, in the amount of R$ 3,318—US$ 1,552 on the base date of May 31, 2006. Such spin-off had two destinations: part of thespun-off portion, in the amount of R$ 360—US$ 169, was merged into the Company, thengenerating an increase in the corporate capital of the same amount, and another part, in theamount of R$ 2,958—US$ 1,384, was merged into Odebrecht Participacoes S.A. (‘‘ODBPAR’’), acompany of the Odebrecht Organization, investee of the Company’s parent. The portion mergedinto the Company comprises the permanent assets related to CBPO environmental engineeringbusiness and the portion merged into ODBPAR mainly comprises the asset balance of thecurrent account maintained with Belgravia and ‘‘Eurobonds’’ debts issued by CBPO, currentlyheld by the Company’s subsidiaries

Moreover, within the optimization context of the corporate structure, a spin-off of the Company’sequity was performed as described on Note 13.

F-44





(iv) Equalization of Financial position

The improvement in the Brazilian economic scenario and consequent decrease in the risksassociated with Brazil allowed the Company to obtain long-term credits in the international financialmarket at interest rates significantly lower than those previously practiced. Within this context, in 2004and 2005 the Company obtained various long-term loans, including the issue of Perpetual Bonds in2005 (see Note 10 (i) (b)), which permitted it to pay down or prepay short-term, higher cost financings,as well as to create a substantial reserve of funds. With the addition of funds arising from significantreceipts of advances from customers and invoices during the last quarter of the year, these representthe balance of cash and financial investments at the end of the year.

In this respect, the Medium-Term Notes issued in February, September and October 2004 and inNovember 2005 (Note 10 (i) (a)), as well as the Perpetual Bonds issued in September 2005 (Note 10(i) (b)), by the indirect subsidiary Odebrecht Overseas Ltd. (‘‘OOL’’), are designed to lengthen thedebt maturity profile, matching it with the Company cash generation.

In June 2006, Standard & Poor´s improved the Company’s corporate credit rating in the BrazilianNational Scale from ‘‘BrA-’’ to ‘‘BrA’’, keeping the positive expectations. In November 2006,Standard & Poor’s once again improved the Company’s corporate credit rating on the BrazilianNational Scale from ‘‘BrA’’ to ‘‘BrA+’’, keeping the positive expectations. In June 2006 Standard &Poor’s reaffirmed its Global Scale ‘‘BB-’’ (in local and foreign currency) for the corporate credit ratingsattributed to the Company, while it changed the rating expectations from stable to positive.

2 Financial Statements presentation, significant accounting practices




The results are determined on the accrual basis of accounting.


Revenues from construction contracts are recognized taking into consideration the progress of eachcontract at the balance sheet date. The method used to determine progress considers the ratio betweencosts incurred to date and total budgeted costs per contract. If the revenue of certain contracts cannotbe measured reliably under this method, the Company and its subsidiaries take into consideration thephysical measurements to account for the revenue.

F-45




2 Financial Statements presentation, significant accounting practices (Continued)

(c) Current and non-current assets



Inventories of parts and materials to be used for construction work and for sale are stated ataverage purchase cost, lower than replacement cost or net realizable value. The inventories of finishedgoods and raw materials relating to the diamond exploitation and sale business in Angola (seeNote 1 (ii)), are recorded at the extraction average cost.

Properties and equipment not used in operations, as well as investments for sale, are recorded incurrent and non-current assets based on management’s expectations regarding the timing of the sale ofthese assets and the current stage of the negotiations. The balance recorded in current assetscorresponds mainly to the Hidropastaza S.A. interest held by the Company’s branch in Ecuador.



Permanent assets are stated at cost plus restatements up to 1995, and take into consideration thefollowing aspects:

• Investments in associated companies are recorded using the equity method. Other investmentsare carried at cost.



(e) Current and non-current liabilities

These liabilities are stated at known or estimated amounts including accrued charges and monetaryadjustments, when applicable.

The provisions for losses on investments in investees are constituted based on such companies’negative net worth (net capital deficiency) and classified in long-term liabilities, with a counterentry toequity in results of associated companies.

Contingency provisions are recorded based on: (i) existing law; (ii) the need to eliminatecontingent gains from the tax credit compensation arising from the judicial litigations and(iii) indemnity payment estimates regarded as probable.

F-46





(f) Taxes on income

Income tax and social contribution on net income are calculated at the rates established by theapplicable legislation. The expense for income tax and social contribution is recorded on the accrualbasis, including deferred taxes calculated on differences between the accounting and tax bases of assetsand liabilities, including the effects of deferrals of unrealized revenues from contracts with governmententities and exchange adjustment on unrealized/settled balances, as permitted by tax legislation, as wellas on tax and social contribution losses.


(i) The financial statements of the main subsidiary/associated companies included in the consolidationof the financial statements/equity method calculation as of December 31, 2006 and 2005 wereaudited or reviewed by our independent auditors, except for the investees shown in the tablebelow, which were or are being audited by other auditors:

Direct and Adjustedindirect stockholders’ equity

holding (%) Results for the year (net capital deficiency) Total Assets

2006 2005 2006 2005 2006 2005 2006 2005

US$ R$ US$ R$ US$ R$

Akal B y L, S.de R.L. de C.V.(b) . . 50.00% 50.00% 1,862 3,980 776 (4,925) (10,529) (11,705) 543 1,160 8,675BPC, CBPO, Somague, Profabril,

Kaiser e Acer, ACE . . . . . . . . . 49.75% 50.00% (302) (646) (302) (646) 595 1,272 2,586Hidropastaza S.A. (Note 2 (c))(a) . . 20.00% 20.00% 117,806 251,869 166,613 389,586 832,934 631,431Lusitania—Construtoras das Auto-

estradas das Beiras Litoral e Alta,ACE . . . . . . . . . . . . . . . . . . . 17.25% 17.25% 2,087 14,213 30,388 255,266

North Sea Production Company(Note 8)(a) . . . . . . . . . . . . . . . 49.95% 49.95% 10,898 23,299 (4,344) 14,062 30,064 11,671 59,202 126,574 126,213

Obras Civis, L.N.2.1.ACE . . . . . . . 40.00% 40.00% 761 1,627 3,531 761 1,627 3,531 1,604 3,429 10,329Odebrecht Ingenierıa Y

Construccion de Mexico, S de RLde CV. . . . . . . . . . . . . . . . . . . 100.00% 100.00% (4,513) (9,650) (3,365) (4,558) (9,746) (20,033) 683 1,461 3,076

Portuscale—Construtoras das Auto-estradas do Grande Porto, ACE . . 17.25% 17.25% 1,830 71,111 152,036 336,411

Somague, BPC, Engil, SPIE-S.B.E.S.—Prolongamento daLinha Vermelha doMetropolitano, ACE . . . . . . . . . 26.32% 26.32% 7,618 16,287 8,322 7,618 16,287 8,318 25,109 53,683 54,918

Somague-Bento Pedroso-Nesco-Dragados, ACE . . . . . . . . . . . . 25.00% 25.00% 29,961 29,961 731 1,562 31,467

TACE—Construcao da TravessiaRodoviaria de Tejo, ACE . . . . . . 16.67% 16.67% (429) (917) 5,848 (429) (917) 5,845 49,937 106,766 95,497

Vianor—Construtoras das Auto-estradas da Costa de Prata, ACE . 17.25% 17.25% (803) 14,406 30,800 40,773

Norace—Construtoras das Auto-estradas do Norte, ACE . . . . . . . 17.34% 17.34% 2,715 42,595 91,068 166,702

(a) Non-consolidated investment due to the absence of Company control

(b) Non-consolidated investment as the company is in the liquidation process

F-47





(ii) The consolidated financial statements were prepared in conformity with accounting practicesadopted in Brazil and comprise the financial statements of the Company and the subsidiaries inwhich direct and indirect holdings are maintained, in addition to the overseas branches:

Direct andindirect

holding (%)

Country 2006 2005

Belgravia Empreendimentos Imobiliarios S.A. . . . . . . . . . . . . . . . . . . . Brazil 100,00 100,00Bento Pedroso Construcoes S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 100,00 100,00CBPO Engenharia Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100,00 100,00CBPO Ingenierıa de Venezuela C.A. . . . . . . . . . . . . . . . . . . . . . . . . . Venezuela 100,00 100,00CBPO Overseas Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Island 100,00 100,00Centaurus Participacoes S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100,00 100,00Concessionaria Interoceanica Sur-Tramo 2(a) . . . . . . . . . . . . . . . . . . . . Peru 70,00Concessionaria Interoceanica Sur-Tramo 3(a) . . . . . . . . . . . . . . . . . . . . Peru 70,00Concessionaria Transvase Olmos S.A.(a) . . . . . . . . . . . . . . . . . . . . . . . Peru 100,00Conirsa S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Peru 70,00 70,00Constructora Norberto Odebrecht de Colombia Ltda. . . . . . . . . . . . . . . Colombia 100,00 100,00Constructora Norberto Odebrecht del Ecuador S.A. . . . . . . . . . . . . . . . Ecuador 100,00 100,00Constructora Odebrecht Chile S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . Chile 100,00 100,00Constructora Odebrecht Uruguay S.A. . . . . . . . . . . . . . . . . . . . . . . . . Uruguay 100,00 100,00Construtora Norberto Odebrecht de Bolivia S.A. . . . . . . . . . . . . . . . . . Bolivia 100,00 100,00Construtora Norberto Odebrecht de Panama S.A.(b) . . . . . . . . . . . . . . Panama 100,00 100,00Construtora Norberto Odebrecht de S.A.—Angola . . . . . . . . . . . . . . . . Angola 100,00 100,00Construtora Norberto Odebrecht de S.A.—Bolivia . . . . . . . . . . . . . . . . Bolivia 100,00 100,00Construtora Norberto Odebrecht de S.A.—Chile . . . . . . . . . . . . . . . . . Chile 100,00 100,00Construtora Norberto Odebrecht de S.A.—Arab Emirates . . . . . . . . . . . Arab Emirates 100,00 100,00Construtora Norberto Odebrecht de S.A.—Ecuador . . . . . . . . . . . . . . . Ecuador 100,00 100,00Construtora Norberto Odebrecht de S.A.—Mexico . . . . . . . . . . . . . . . . Mexico 100,00 100,00Construtora Norberto Odebrecht de S.A.—Panama . . . . . . . . . . . . . . . Panama 100,00 100,00Construtora Norberto Odebrecht de S.A.—Peru . . . . . . . . . . . . . . . . . Peru 100,00 100,00Construtora Norberto Odebrecht de S.A.—Dominican Republic . . . . . . . Dominican Republic 100,00 100,00Construtora Norberto Odebrecht de S.A.—Venezuela . . . . . . . . . . . . . . Venezuela 100,00 100,00Dhawahi Almadeena Construction LLC . . . . . . . . . . . . . . . . . . . . . . . USA 100,00 100,00Dominicana Ingenierıa y Construccion S.A. . . . . . . . . . . . . . . . . . . . . . Dominican Republic 100,00 100,00Energipar Captacao S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100,00 100,00Lumina Engenharia Ambiental Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100,00 100,00Multitrade S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 99,99 99,99

(a) Company partially sold to OII in the 1st six-month period of 2006.


F-48





Direct andindirect

holding (%)

Country 2006 2005

Odebrecht Angola Projectos e Servicos Ltda. . . . . . . . . . . . . . . . . . . . . . . Angola 100,00 100,00Odebrecht Construction International, Inc. . . . . . . . . . . . . . . . . . . . . . . . . USA 100,00 100,00Odebrecht Construction, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . USA 100,00 100,00Odebrecht Djibouti SAZF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Djibouti 100,00 100,00Odebrecht Drilling Services LLC(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . USA 100,00Odebrecht Empreendimentos Imobiliarios Ltda. . . . . . . . . . . . . . . . . . . . . Brazil 100,00 100,00Odebrecht Engenharia e Construcao S.A. . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100,00 100,00Odebrecht Ingenierıa Y Construccion de Mexico, S de RL de CV.(c) . . . . . . . Mexico 100,00 100,00Odebrecht Ingenierıa Y Construccion de Espana, S.L.(b) . . . . . . . . . . . . . . Spain 100,00Odebrecht Mining Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Island 100,00 100,00Odebrecht Oil and Gas Angola Limited . . . . . . . . . . . . . . . . . . . . . . . . . Angola 100,00 100,00Odebrecht Oil and Gas Services Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom 100,00 100,00Odebrecht Oil Services Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Island 100,00 100,00Odebrecht Overseas Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bahamas 100,00 100,00Odebrecht Peru Ingenierıa Y Construccion S.A.C. . . . . . . . . . . . . . . . . . . Peru 100,00 100,00OSEL—Odebrecht Servicos no Exterior Ltd. . . . . . . . . . . . . . . . . . . . . . . Cayman Island 100,00 100,00Tenenge (UK) Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . England 100,00 100,00Tenenge Overseas Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Island 100,00 100,00

Companies proportionally consolidatedCETREL-LUMINA Tecnologia e Engenharia Ambiental Ltda . . . . . . . . . . Brazil 50,00 50,00Sociedade de Desenvolvimento Mineiro de Angola, S.A.R.L. . . . . . . . . . . . Angola 50,00 50,00Sociedade Mineira de Catoca Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Angola 16,40 16,40Concessionaria IIRSA Norte S.A.(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Peru 49,80Proyectos Ebramex S. de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico 33,33 33,33Mina-Trico.S.de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico 33,33 33,33Participacoes Energeticas S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 50,00 50,00Obras Civis, L.N.2.2. ACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 63,90 63,90BPC, CBPO, Somague, Profabril, Kaiser e Acer, ACE . . . . . . . . . . . . . . . . Portugal 49,75 49,75Obras Civis, L.N. 2.1. ACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 40,00 40,00Lismercado Construcoes—Bento Pedroso, Somague, H.Hagen, ACE . . . . . . Portugal 40,00 40,00Somague, BPC, Engil, SPIE em ACE . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 26,32 26,32Somague, BPC, Engil, SPIE-S.B.E.S.-Prolongamento da Linha Vermelha do

Metropolitano, ACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 26,32 26,32Somague-Bento Pedroso-Necso-Dragados, ACE . . . . . . . . . . . . . . . . . . . . Portugal 25,00 25,00Edifer, Soconstroi, BPC, Somague e Acciona, ACE . . . . . . . . . . . . . . . . . . Portugal 20,00 20,00Norace—Construtoras das Auto-estradas do Norte, ACE . . . . . . . . . . . . . . Portugal 17,34 17,34Vianor—Construtoras das Auto-estradas da Costa de Prata, ACE . . . . . . . . Portugal 17,25 17,25Lusitania—Construtoras das Auto-estradas das Beiras Litoral e Alta, ACE . . . . Portugal 17,25 17,25Portuscale—Construtoras das Auto-estradas do Grande Porto, ACE . . . . . . Portugal 17,25 17,25TACE—Construcao da Travessia Rodoviaria de Tejo, ACE . . . . . . . . . . . . . Portugal 16,67 16,67Agrupamento para a Construcao da Segunda Travessia do Tejo, ACE . . . . . Portugal 14,34 14,34

(a) Company partially sold to OII in the 1st six-month period of 2006.


(c) Company has changed its corporate name from Odebrecht Oil and Gas Mexico, S.R.L. de CV to OdebrechtIngenierıa Y Construccion de Mexico, S de RL de CV.

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(iii) Information on the main direct and indirect subsidiaries included in the consolidation:Number of shares or

quotas directly or Adjusted Adjusted net incomeindirectly held stockholders’ equity (loss) for the year

2006 2005 2006 2005 2006 2005

US$ R$ US$ R$

Bento Pedroso Construcoes S.A. . . . . . . . . . . 7.399.859 7.399.859 103.693 221.696 175.193 23.433 50.099 19.756CBPO Engenharia Ltda. . . . . . . . . . . . . . . . 2.327.379 2.338.595 357.417 764.158 947.064 35.154 75.159 95.622Odebrecht Construction International, Inc. . . . 100 100 55.019 117.631 128.764 7.989 17.081 (6.384)Odebrecht Overseas Ltd. . . . . . . . . . . . . . . . 165.213.213 165.213.212 76.903 164.418 308.395 (54.851) (117.271) (93.828)Odebrecht Peru Ingenieria y Construccion

S.A.C. . . . . . . . . . . . . . . . . . . . . . . . . . 4.357.442 4.357.442 31.351 67.029 51.535 7.762 16.594 22.808OSEL—Odebrecht Servicos no Exterior Ltd. 100.000.000 100.000.000 157.182 336.056 538.775 (72.995) (156.062) 42.896Sociedade de Desenvolvimento Mineiro de

Angola, S.A.R.L. . . . . . . . . . . . . . . . . . . 225.000 225.000 46.333 99.060 116.758 (3.549) (7.587) 5.146Sociedade Mineira de Catoca Ltda. . . . . . . . . 1 1 158.497 338.867 320.138 108.904 232.836 195.203

(iv) The investors’ interests in the investees’ net worth and results, balances of intercompany assets,liabilities, income and expenses are eliminated on consolidation. Minority interests in stockholders’equity and net income for the period are presented separately. The asset, liability, income andexpense accounts of jointly-owned subsidiaries are consolidated in proportion to the totalownership of their capital.

The financial statements of the foreign subsidiaries and branches were translated (i) from localcurrency into U.S. dollars, when applicable (highly inflationary countries without proper instruments foraccounting recognition of inflationary effects), based on the official exchange rates on the date of thefinancial statements or on the date of the transactions, depending on the nature of the accountingcomponent involved (monetary or not), and then converted into Brazilian Reais based on the officialrate of the U.S. dollar on the date of the financial statements, or (ii) from local currency into BrazilianReais based on the official exchange rate on the date of the financial statements, when the subsidiary isnot based in a highly inflationary country, or if it is the case, with proper instruments for accountingrecognition of inflationary effects according to Pronouncement XVIII—Foreign Corporate Investmentsof IBRACON—Institute of Independent Auditors of Brazil (IBRACON). Moreover, such financialstatements were adjusted to the accounting practices adopted in Brazil.


The accounting records are maintained in reais. The financial information in U.S. dollars ispresented solely for the convenience of the reader and has been translated from the amounts in theDecember 31, 2006 local currency financial statements, using the exchange rate prevailing on that dateof R$ 2.1380: US$ 1.00. Such translation should not be construed as representing that the amounts inreais represent, or have been, or could be, converted in U.S. dollars at that or at any other rate.

F-50




3 Trade accounts receivable

2006 2005

US$ R$

Public sectorFederal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232.058 496.139 504.703State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260.020 555.923 698.607Municipal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.457 227.605 160.018

598.535 1.279.667 1.363.328Private Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262.375 560.958 562.250

860.910 1.840.625 1.925.578Less: Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533.032 1.139.622 1.073.083

Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327.878 701.003 852.495

As part of its policy to mitigate performance risks in developing countries, the Company requiresadvances from customers before starting a project (down payment). Such advances are usually deductedfrom each invoice through the end of the contract.

The balances of trade accounts receivable were restated taking into consideration the contractualterms, specific portfolio risks and negotiations in progress, including administrative and judicialcollection processes, in order to recover amounts due for services rendered, including financial charges.Furthermore, taking into consideration the history of minimal losses that the Company and itssubsidiaries have incurred, management does not expect losses on realization of such receivables andbelieves that, as a result of these actions, the recognition of amounts in addition to those recorded mayoccur when sufficient evidence exists to support a reasonable expectation that the correspondingamounts will be received. Trade accounts receivable include R$ 668,893—US$ 312,859 (2005—R$ 710,861) of overdue receivables under judicial collection, where the major part has receivedfavorable judgments, and R$ 66,752—US$ 31,222 (2005—R$ 88,488) of overdue receivables which theCompany is attempting to collect through administrative actions with the debtors.

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4 Taxes Recoverable

2006 2005

US$ R$

Current assetsSocial contributions recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 585 32.062Withholding IR, CSL, PIS and COFINS from invoicing and withholding

IR on earnings from financing investments and invoicing . . . . . . . . . . 21.985 47.004 44.989Prepaid Income Tax by overseas branches and subsidiary . . . . . . . . . . . . 16.282 34.811 24.876Foreign branches/ subsidiaries value added tax

Construtora Norberto Odebrecht S.A.—Ecuador . . . . . . . . . . . . . . . . 8.738 18.682 6.376Construtora Norberto Odebrecht S.A.—Venezuela . . . . . . . . . . . . . . 35.812 76.567Odebrecht Peru Ingenierıa Y Construccion S.A.C. . . . . . . . . . . . . . . . 7.247 15.495Other investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.994 4.264 1.363

Other taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.900 6.197 16.436

95.232 203.605 126.102

Long-term receivablesSocial contributions recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.598 5.555 5.555Withhold IR on dividends abroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.797 12.393Other taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 988 2.113 3.567

9.383 20.061 9.122

5 Inventories

2006 2005

US$ R$

Finished products(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.139 13.126 17.350Raw materials(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.219 4.744 23.308Materials to be used in construction works . . . . . . . . . . . . . . . . 62.008 132.573 137.556Marketable properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.624 35.542 28.377Imports and exports in progress . . . . . . . . . . . . . . . . . . . . . . . . 21.316 45.575 41.932Inventories in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.243 11.210 57.185Advances to suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.190 43.164 2.271

133.739 285.934 307.979

(i) These basically refer to the diamond inventories of the jointly-controlled entities SDM and Catoca.

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6 Eletrobras Credits

On October 23, 2006 according to the ‘‘Contract of Assignment of Credit Rights Subject to aLegal Action with a Judgment made Final and Unappealable’’, Odebrecht Investimentos S.A. (mergedinto Odebrecht S.A.) sold to the Company, the credit rights arising from the proceedings number2001.34.00.029764-8, which was judged in a final and unappealable decision in 2006, originally filed byOPP Quımica S.A. (merged into Braskem S.A) against Centrais Eletricas Brasileiras S.A.—Eletrobras(‘‘Eletrobras’’). Such assignment had the net amount of R$ 238,234—US$ 111,428, after deducting thefees of the lawyers contracted to accompany the legal action. The Company paid the amountcorresponding to such sale in cash, in the amount of R$ 149,959—US$ 70,140, and the remainingbalance was used by the Company in the amount of R$ 88,275—US$ 41,289, to partially reduce thereceivables from ODBPAR Investimentos S.A. regarding the Current Account Agreement existingbetween the parties.

According to the final and unappealable decision, Eletrobras was obliged to (i) monetarily adjustthe payments made by the plaintiff from 1977 up to 1994, as Eletrobras Compulsory Loan (‘‘ECE’’)determined by Law number 4.156/62, using the monetary adjustment rate decided on in such legaldecision; (ii) pay interest at the rate of 6% per year, according to the Law number 5.073/66, on thedifference in the monetary adjustment; and (iii) reimburse the legal costs and pay the loss of suit fees.

In addition to the final and unappealable decision, the following events have occurred in respect tothe legal action: (i) the credit execution proposition against Eletrobras, in the amount of R$ 261,557—US$ 122,337; (ii) the payment in court, by Eletrobras, of part of the executed amount of R$ 71,187—US$ 33,296; and (iii) filing of the opposition by Eletrobras, with the purpose of discussing the criteriafor calculating the amount of the remaining balance, and offering the nominative preferred shares of asubsidiary in guarantee sufficient to cover the remaining difference amount. No material gains or lossesare expected as a result of this settlement.

7 Odebrecht Organization Companies

FinancialBalances incomeLong-term Long-term (expenses),receivables liabilities net

CBPO Malaysia SDN BHD . . . . . . . . . . . . . . . . . . . . . . . . 11.321ODBPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485.973 2.101ODB International Corporation . . . . . . . . . . . . . . . . . . . . . 22.386Aguas de Limeira S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.578Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.387 17 27.075

Total—2006—R$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498.681 23.981 29.176

Total—2006—US$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233.247 11.217 13.646

Total—2005—R$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464.283 566 19.689

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7 Odebrecht Organization Companies (Continued)

The main balances with Odebrecht Organization are governed by the contractual instrument‘‘Current Account Agreement and single cash management’’, entered into by all Organizationcompanies, which has an expiration date in 3 years, maturity date on December 31, 2008, and have thefollowing characteristics:

Company Financial charges Nature of the operations

ODBPAR Long-term interest rate (‘‘TJLP’’) in the Transfer of funds, credit assignments anddomestic market liabilities assumption

8 Investments

On December 31, 2005, resulting from the intention to sell and negotiations stage of the sale ofthe associated company North Sea Production Company (‘‘NSPC’’), the Company had classified suchinvestment in non-current assets (long-term receivables) in the amount of R$ 44,394—US$ 20,764.However, due to the slowness of such negotiations, also driven by the termination of NSPC’sagreement with its sole customer for oil exploitation in the North Sea, this investment was reclassifiedto permanent assets, in the subgroup ‘‘associated companies’’, on December 31, 2006, in the amount ofR$ 36,948—US$ 17,282. Losses are not expected on the eventual realization of such asset.

The account ‘‘other investments’’ is mainly represented by the investments of the indirectsubsidiary BPC, headquartered in Portugal, in highway concession companies, all recorded under thecost method. The balances are comprised as follows:

2006 2005

US$ R$

Aenor—Auto Estradas do Norte, S.A. . . . . . . . . . . . . . . . . . . . . . . . 20.565 43.967 48.930Lusolisboa—A. Estradas da Grande Lisboa S.A. . . . . . . . . . . . . . . . . 2.440 5.217Lusoscut—Auto Estradas da Costa de Prata, S.A. . . . . . . . . . . . . . . . 7.323 15.658 15.373Lusoscut—Auto Estradas das Beiras e Alta, S.A. . . . . . . . . . . . . . . . 18.160 38.827 30.982Lusoscut—Auto Estradas do Grande Porto S.A. . . . . . . . . . . . . . . . . 12.328 26.358 15.636Operanor—Operacao e Manutencao de Auto-Estradas, S.A. . . . . . . . 2 4Operadora Lusoscut—Operacao e Manutencao de Auto-Estradas S.A. . . 11 24 24Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.487 22.419 85.192

71.316 152.474 196.137

F-54




9 Property and Equipment2006 2005 %


Cost depreciation Net Net rates

R$ R$ US$ R$

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.975 3.263 6.975 10.061Buildings and installations . . . . . . . . . . . . . 71.156 (25.455) 21.375 45.701 61.645 4Machinery and equipment . . . . . . . . . . . . . 676.923 (373.253) 142.035 303.670 232.398 10 to 20Vehicles and ships . . . . . . . . . . . . . . . . . . . 300.497 (107.044) 90.483 193.453 66.258 25Furniture and fixtures . . . . . . . . . . . . . . . . 106.180 (56.420) 23.274 49.760 35.351 10Advances to suppliers and other . . . . . . . . . 203.094 (18.300) 86.433 184.794 38.880 0 to 10

1.364.825 (580.472) 366.863 784.353 444.593

10 Debts2006 2005

Financial institution/type of loans Currency Annual financial charges US$ R$

Perpetual Bonds (i) (b) . . . . . . . . . US$ 9.63% + EV 200,428 428,515 469,141Medium-Term Note

Programme (i) (a) (1) . . . . . . . . . US$ 11.50% + EV 155,990 333,506 365,125Medium-Term Note Programme

EURO (i) (a) (4) . . . . . . . . . . . . A 6.875% + EV 81,205 173,617 185,882IKB Deustche Bank . . . . . . . . . . . . US$ Libor + 0.95% + EV 27,250 58,260 38,765BCP Investimento S.A. . . . . . . . . . A 4.95% to 5.27% + EV 23,029 49,236 130,015BSN Portugal S.A. . . . . . . . . . . . . . A 4.67% to 5.13% 10,553 22,562Banco Nacional de Paris . . . . . . . . US$ Libor + 0.80% 9,094 19,444BBVA Bancomer S.A. . . . . . . . . . . US$ Libor + 0.85% + EV 8,161 17,448 8,502Banco Totta de Angola S.A.R.L. . . . US$ Libor + 2.00% to 7.00% 6,643 14,204Deutsche Bank S.A. . . . . . . . . . . . A 4.54% 6,022 12,874Banco Internacional de Credito . . . . US$ Libor + 7.50% 1,453 3,107Banco Fomento de Angola S.A.R.L. . . US$ Libor + 4.00% to 7.00% 1,033 2,208 14,908Commerce Bank N.A. . . . . . . . . . . US$ Libor + 4.92% 34 73Banco Africano de Investimento . . . US$ 9.50% + EV 10,080Banco Santander S.A. . . . . . . . . . . US$ Libor + 0.90% + EV 4,503Several Brazilian financial institutions . R$ TJLP + 1.40% to 5.80% and pre-

fixed interest of 9.45% to 14.00% 19,124 40,886 52,024

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550,019 1,175,940 1,278,945Less: long-term . . . . . . . . . . . . . . . 422,446 903,190 1,170,526

Current liabilities . . . . . . . . . . . . . 127,573 272,750 108,419

Abbreviations used:

EV Exchange variationLibor London Interbank Offered RateTJLP Long-term Interest Rate

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(i) Additional information

(a) On February 18, 2004, OOL placed the amount of US$250,000 in the international financialmarket through a Medium-Term Notes Program, falling due in up to five years from the issue date.Subsequently, on October 1, 2004, the total amount of this program was increased to US$ 500,000.Under the program, OOL carried out the following issues, all of which guaranteed by the Company:

(1) On February 25, 2004, in the amount of US$ 150,000 thousand (R$ 320,700), maturing inFebruary 2009. The outstanding balance amounted to US$ 155,990 (R$ 333,506) atDecember 31, 2006;

(2) On June 29, 2004, in the amount of US$ 60,000 (R$ 128,280), maturing in February 2009. Theissue was acquired and held in treasury by Odebrecht Servicos no Exterior Ltd. (‘‘OSEL’’).The amount was eliminated in the consolidated financial statements up to December 31, 2005.This operation was cancelled in the first semester of 2006.

(3) On September 29, 2004, in the amount of US$ 15,000 (R$ 33,070), maturing in February 2009.The debt was subsequently assumed by ODB International Corporation (‘‘ODBIC’’), asubsidiary of the Company’s parent, pursuant to a Debt Assumption Agreement entered intoby the parties, with the consent of the creditors;

(4) On October 4, 2004, in the amount of A65,000 thousand (R$ 183,316), maturing inOctober 2007. The balance of this transaction, plus accrued interest, amounts toA66,067 thousand (equal to R$ 186,326) on December 31, 2006 and, considering the impact ofa swap transaction from euros to U.S. dollars, amounts to R$ 173,617—US$ 81,205 onDecember 31, 2006; and

(5) On November 14, 2005, in the amount of US$ 15,000 (R$ 32,070), maturing in February 2010.This debt was subsequently assumed by ODBIC, a subsidiary of the Company’s parent,pursuant to a Debt Assumption Agreement entered into by the parties, with the consent ofthe creditors.

(b) On September 24, 2005, OOL raised US$ 200,000 (R$ 469,141) in the European, Asian andNorth American international financial markets in Perpetual Bonds. Such Bonds have no maturity datebut provide to the issuer a call option, after 5 years from the issuance date, with annual interestequivalent to 9.625% paid quarterly. The issue costs, in the amount of US$ 4,135 (R$ 8,841) wereaccounted for as prepaid expenses, and are amortized over the term of the call option (5 years). Thisoperation is guaranteed by the Company, and the balance with accrued interest on December 31, 2006is R$ 428,515 (US$ 200,428).

(c) On May 18, 2006, OOL raised with financial entities in the local and international market, acredit line called ‘‘Revolving Credit Facility Agreement’’ in the total amount of US$ 300,000 maturingin February 2010. This credit line has not been used since it was contracted.

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(ii) Composition of the long-term debt per year of maturity

The long term amounts are due as follows:

2006 2005

US$ R$

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228.6242008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.329 32.774 19.4472009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188.264 402.509 419.4422010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208.194 445.120 495.2782011 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . 10.659 22.787 7.735

422.446 903.190 1.170.526

(iii) Restrictive Clauses

The Bonds issuances previously mentioned have certain restrictive clauses, which are beingcomplied with by the Company.

11 Provisions for contingencies

(i) The Company and its subsidiaries have provisions of R$ 52,231—US$ 24,430 (2005—R$ 55,469) in current liabilities and R$ 58,232—US$ 27,237 (2005—R$ 57,902) in long-term liabilitiesto cover (i) legal indemnity expenditures related to layoffs of employees, which is usual and inherent toits line of activity; the provision is based on the history of similar monthly disbursements; and (ii) labor,tax and civil claims which in the opinion of management and its legal advisors have little chance of afavorable outcome. In addition, the Company and its subsidiaries are defending labor, civil and taxclaims of approximately R$ 280,617—US$ 131,252 (2005—R$ 88,898), for which no provision for losseshas been recorded because management and legal advisors believe that no significant losses therefromare probable on the final decision of such actions.

(ii) The Company and its subsidiary CBPO have an injunction which grants them the right not topay the Social Contribution on Revenues (COFINS) on income other than billings and the right not topay the increase of 1% in the COFINS rate on billings, based on the provisions of Law 9.718/98. WhenLaw 10.833/03 was enacted, the Company and CBPO started to regularly pay COFINS as fromFebruary 2004. In addition, the subsidiary CBPO was granted an injunction giving it the right not topay the Social Integration Program Contribution (PIS) on other income, based on the provisions ofLaw 9.718/98 (upon enactment of Law 10.637/02, this investee started to pay PIS in January 2003). Theunpaid amounts were recorded monthly in this account and updated for the related late charges untilthe Company and the subsidiary would be awarded a final decision. On September 15, 2006 theCompany and CBPO withdrew their claims challenging the increase in the COFINS rate and includedthe debts in the Exceptional Installment Program (PAEX) introduced by Provisional Measure 303 ofJune 29, 2006. The accounting balance corresponding to such proceeding is R$ 60,557—US$ 28,324,which was divided into 130 monthly installments (debts due up to February 28, 2003) or 120 months(debts due from March 1, 2003 up to December 31, 2005). On December 31, 2006, the provision

F-57




11 Provisions for contingencies (Continued)

regarding the challenge of PIS and COFINS on other income was R$ 2,822—US$ 1,320 (2005—R$ 2,610). The amount of R$ 60,504—US$ 28,299 relative to the PAEX balance is recorded innon-current liabilities (long-term liabilities) and the remaining R$ 53 recorded in current liabilities.

(iii) During 2003 to 2005, the Company’s branch in Ecuador was inspected by the InternalRevenue Service (local equivalent to the Brazilian Federal Revenue Secretariat) relating to income taxreturns filed from 1999 to 2002. As a result of these inspections, the Ecuadorian tax authoritiesassessed this branch for additional amounts in relation to income tax and tax on added value, ofapproximately US$ 4,039 (R$ 8,817) and US$ 320 (R$ 684), respectively (not including interest, arrearsfines and other potential charges). Management, considering that there are sufficient grounds for afavorable outcome, and based on the opinion of its external legal advisors, did not set up a provision tocover potential losses arising from this matter.


(a) Composition of the effects on income—reversal (expense)

2006 2005

US$ R$

Deferred social contribution . . . . . . . . . . . . . . . . . . . (2.660) (5.687) (6.524)Current social contribution . . . . . . . . . . . . . . . . . . . . (13.874) (29.663) (9.006)Adjustment to prior year provision(i) . . . . . . . . . . . . . (4.247) (9.079) (11.119)

Total social contribution . . . . . . . . . . . . . . . . . . . . . . (20.781) (44.429) (26.649)

Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . (15.694) (33.554) (18.088)Current income tax . . . . . . . . . . . . . . . . . . . . . . . . . . (32.689) (69.889) (23.971)Adjustment to prior year provision (i) . . . . . . . . . . . . (11.795) (25.217) (12.658)Foreign income tax (branches and subsidiaries) . . . . . . (45.808) (97.937) (69.140)Credits of income tax paid by foreign branches and

subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.347 56.328 26.335

Total income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . (79.639) (170.269) (97.522)

(i) Due to the Brazilian taxation of profits earned abroad in 2005, compensated with therecognition of credits arising from income tax paid by foreign branches and subsidiaries in 2005,recorded in 2006; accordingly, there are no impacts on net income for the year.


The asset balances relate to income tax and social contribution on the tax losses and the negativecalculation basis, respectively, and on the temporary differences arising mainly from the Company andits indirect subsidiary CBPO. The liability balances relate to income tax and social contribution onunrealized profits on sales to government entities and the effects of exchange variations, mainly in theCompany and its indirect subsidiary CBPO.

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The composition of the deferred income tax and social contribution accounts on December 31, isas follows:

(i) Income tax

2006 2005

Deferredincome and

On temporary exchange Accumulateddifferences variation tax losses Total Total

In R$Current assets . . . . . . . . . . . . . . . . . . . . 16.267 28.247 44.514 92.348Long-term receivables . . . . . . . . . . . . . . 27.535 41 27.576 53.560Long-term liabilities . . . . . . . . . . . . . . . . (71.310) (71.310) (101.138)

In US$Current assets . . . . . . . . . . . . . . . . . . . . 7.608 13.212 20.820Long-term receivables . . . . . . . . . . . . . . 12.880 19 12.899Long-term liabilities . . . . . . . . . . . . . . . . (33.354) (33.354)

(ii) Social Contribution

2006 2005

Deferredincome and

On temporary exchange Accumulateddifferences variation tax losses Total Total

In R$Current assets . . . . . . . . . . . . . . . . . . . . 2.907 11.865 14.772 38.933Long-term receivables . . . . . . . . . . . . . . 8.957 8.957 13.250Long-term liabilities . . . . . . . . . . . . . . . . (67.952) (67.952) (61.529)

In US$Current assets . . . . . . . . . . . . . . . . . . . . 1.360 5.550 6.910Long-term receivables . . . . . . . . . . . . . . 4.189 4.189Long-term liabilities . . . . . . . . . . . . . . . . (31.782) (31.782)

(c) Recoverability of recorded deferred assets

The Company and its indirect subsidiary CBPO base the recoverability of the net asset balances ofdeferred income tax and social contribution on the profit forecasts for the next three years. Thisforecast includes, as basic assumptions, the continuing increase in the order backlog (portfolio ofrevenues already contracted by the Company and CBPO) in recent years; the gains to be earned fromthe disposal of assets not pertaining to the Engineering and Construction activity, the increasedinvestment in Brazil’s electric power and infrastructure sectors, and the increased participation of theCompany and CBPO in real estate ventures, as well as the recognition, for tax purposes, of the

F-59





operating results of foreign subsidiaries as from December 31, 2002. Additionally, the Company,together with its main subsidiary operating in Brazil, CBPO, have realized and cumulatively reducedtheir net balance of deferred income tax and social contribution assets in the past five years.


The income tax expense incurred abroad is represented primarily by the taxes generated byoperations in Venezuela (R$ 40,098—US$ 18,755), Angola (R$ 28,272—US$ 13,224), Ecuador(R$ 11,532—US$ 5,394), Peru (R$ 8,999—US$ 4,209) and Portugal (R$ 17,720—US$ 8,288)operations.

(e) Tax credits arising from the income tax paid by foreign branches and subsidiaries

The statement of income for the year ended December 31, 2006, records R$ 56,328—US$ 26,346,of credits related to the income tax amounts paid by the Company branches in Venezuela, Ecuador,Peru, Angola and Argentina, and taxed in Brazil, pursuant to the applicable income tax legislation(2005—R$ 26,335). These amounts were offset against the income tax amounts payable relating bythese foreign operation profits.

(f) Fiscal incentive—corporate income tax

The Company, by means of the constitutive report number 0219/2006, of October 9, 2006, issuedby the Agencia de Desenvolvimento do Nordeste—ADENE of the Ministry of National Integrationacquired the right to 75% reduction benefit, up to the base year of 2016 (calendar year of 2015), onthe income tax payable on the profits arising from the manufacture and assembly of the pumpingmodules comprising a sea platform for oil exploitation hired by Petroleo Brasileiro S.A.—Petrobras.The manufacture and assembly plant is installed at Vila de Sao Roque de Paraguacu, in the city ofMaragogipe, State of Bahia.

At the end of each year, if there is profit arising from the incentived operations, the amountcorresponding to the income tax is recorded as a current expense with credit to a capital reserveaccount which can only be used to increase capital or compensate losses.


(a) Capital

As of December 31, 2006, the Company’s capital, subscribed and paid-up entirely by Brazilianindividuals and corporations, was comprised by 148,090,841 (2005—202,837,829) common shares and107,737,914 (2005—147,382,173) preferred shares with no par value.

On December 31, 2006, within the context of the reorganization mentioned in the Note 1 (iii), theExtraordinary General Meeting approved the decision for the partial spin-off of the Company’s equity,followed by the merger of the spun-off portion into ODBPAR, the net assets being represented by partof the creditor balance the Company maintained with ODBPAR in the amount of R$ 485,000—US$ 226,848.

F-60




13 Stockholders’ Equity (Continued)

The following main objects of the partial split-up of the Company according to the Protocol andJustification are:

(i) reduction of the current account balance between the Company and ODBPAR;

(ii) adjustment of the Company’s equity structure so that the economic-financial performanceindicators, measured against its net worth, are aligned with those presented by companiesoperating in its segment on a global basis.

(b) Share rights


On June 30, 2006 the Company distributed special dividends, based on the reserve for investments,in the amount of R$ 31,080—US$ 14,537 (2005—R$ 143,052). Also anticipated dividends wereproposed for the year ended 2006, in the amount of R$ 20,000—US$ 9,355 upon the Board ofDirectors approval, which will be presented to the Ordinary General Meeting. Such amounts were paid,pursuant to the use of the current account held between the Company and ODBPAR.

The proposed dividends for the year ended December 31, 2006, at the rate of 50% of net incomeafter transfer to the legal reserve, in the amount of R$ 33,000—US$ 15,435 (2005—R$ 95,948), net ofthe dividend prepayment mentioned above, were paid in advance as approved by the executive board,which will be submitted to the Ordinary General Meeting for ratification.



(i) Legal reserve



This is established through the appropriation of up to 79% of the net income for the year, until,together with the legal reserve, it reaches 100% of the corporate capital.

F-61




14 Non-operating results

2006 2005

US$ R$

Loss on disposal of permanent assets . . . . . . . . . . . . . . . . . . . . (6,077) (12,992) (22,383)Loss on decrease in percentage holdings in investees . . . . . . . . . (1,158) (2,476) (1,278)Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,011) (4,300) (3,341)

(9,246) (19,768) (27,002)

15 Insurance Coverage

The identification, mitigation, management of risks and contracting of insurance are handled in aconsistent manner by the Company and its subsidiaries, and comply with the policies of the OdebrechtOrganization. The Company is supported by OCS—Odebrecht Administradora e Corretora deSeguros Ltda., and its consultants, brokers and first line domestic and foreign partner insurancecompanies, to assure the contracting at adequate prices of the appropriate cover for each contract orventure, at amounts considered sufficient to cover possible losses. At December 31, 2006, the insurancecoverage of the Company and its subsidiaries amounts to US$7,692,603—R$16,446,785 (2005—US$5,978,650—R$13,994,225), including the ‘‘Surety Bond’’ (Note 1).

16 Private Pension plan


In relation to the benefit payments established for the Optional Plan, the ODEPREV obligationsare limited to the total value of the participants’ quotas and, in conformity with the rules of the definedcontribution plan, no obligations or responsibilities can be required from the sponsoring companies toguarantee minimum levels of benefits to the retired participants. The contributions of the Companyand its subsidiaries for 2006 total R$7,858—US$3,675 (2005—R$7,866).

As the ODEPREV plan is a defined contribution plan, under which the risk of receiving benefits isthe full responsibility of the participants, the Company’s management has determined that theprovisions of Accounting Standard NPC 26 of the Institute of Independent Auditors of Brazil(IBRACON), ‘‘Accounting for Benefits to Employees’’ relating to defined benefit plans are notapplicable to such plan.

F-62




17 Financial instruments


The Company and its subsidiaries participate in transactions involving financial instruments for thepurpose of managing the cash resources of their operations, as well as meeting possible cash needs andhedging against the effects of foreign exchange fluctuations on the consolidated exposure in foreigncurrency and interest rate fluctuations. These risks are managed through financial market mechanismsthat minimize the exposure of the companies’ assets and liabilities, protecting their equity.

(b) Market value

The main financial instruments of the Company and its subsidiaries are trade accounts receivable,financial investments, marketable securities, suppliers, loans and long-term liabilities, mainly loans andcurrent accounts with other Odebrecht Organization companies (see further details in Note 7).

The market values of the financial instruments of the Company and its subsidiaries approximatetheir book values at December 31, 2006 and 2005. The market values of these financial instrumentswere obtained by calculating their present values, taking into account current market interest rates forsimilar terms and risks. The most significant shareholding interests held by the Company and itssubsidiaries are not quoted in the market.

(c) Credit risk

At December 31, 2006, the Company and its subsidiaries had overdue accounts receivableamounting to R$735,645—US$344,081 (2005—R$799,349)) for services rendered to governmententities. Historically, the Company and its subsidiaries have collected the amounts owed by theseentities, including those overdue for one year or more. The collection of these overdue amounts fromgovernment entities occurs through payment or the receipt of government bonds or other governmentassets. As a way of mitigating these risks, the Company and its subsidiaries have applied a greaterdegree of selectivity when accepting customers, and have increased the sales revenues from privatecustomers or public sector customers which the Company considers to have the capacity to generaterevenues independently and which do not rely on government budgets to pay their liabilities (mainlycompanies with both public and private shareholders). In order to reduce the volume of overduereceivables, the Company and its subsidiaries have adopted a policy of decentralizing the administrativecollection negotiations with customers, delegating this responsibility to the administrative levelsresponsible for the monitoring of each contract. If these administrative actions are not successful, thecollection of these amounts will occur through court actions.

(d) Price risk

A significant number of the contracts in which the Company and its subsidiaries are engaged arefixed-price contracts. The actual profit margins on these contracts may differ from the marginsestimated at the time the costs were budgeted and the contract price was proposed because of:significant unexpected increases in the costs of equipment, materials to be used or labor, relating toinflationary effects or other unexpected events; problems encountered by the customer to obtain thenecessary financing of the contract or to obtain Government authorizations or approvals; projectchanges resulting in unexpected costs; and delays caused by bad weather or the non-performance of

F-63





subcontractors and/or contracted suppliers. To minimize the price risk, the fixed-price contractsperformed by the Company and its subsidiaries have their budgets periodically revised to reflectinconsistencies noted between actual and budgeted costs. The Company and its subsidiaries follow apolicy of negotiating claims to increase contract prices through contract amendments to recovervariations from the contracted price, recorded in the books when the contract amendment is signed.


The Company, through its branches, subsidiaries and associated companies, has operations asdescribed in Note 1, of which part is denominated in U.S. dollars, with little exposure to localcurrencies, restricted to certain specific countries. In addition, certain loans of the Company and itssubsidiaries obtained abroad are denominated in foreign currencies, as mentioned in Note 10, as wellas liabilities to suppliers and other balances with related parties, as mentioned in Note 7.

(f) Interest rate and currency swaps contracts

On December 31, 2006, the nominal value of the outstanding swap amounts to R$178,406—US$83,445, with an expense of R$965—US$451 (2005—R$203,547, income of R$18,335).



18 Subsequent Event

On January 12, 2007, an accident occurred on the worksite for the future Pinheiros station on Line4 of the Sao Paulo Subway performed by the Consorcio Via Amarela, comprising the Company’ssubsidiary CBPO and the construction companies, Construtora OAS Ltda (‘‘OAS’’), ConstrutoraQueiroz Galvao S.A. (‘‘Queiroz Galvao’’), Construcoes e Comercio Camargo Correa S.A. (‘‘CamargoCorrea’’) and Construtora Andrade Gutierrez S.A. (‘‘Andrade Guetierrez’’).

The governmental authorities, through the Instituto de Criminalıstica and the Instituto dePesquisas Tecnologicas (‘‘IPT’’), are analyzing the accident causes with designing and consultingcompanies of highest technical renown and international experience. The technical reports which willdetermine the possible causes for the accident have not been concluded yet. Despite the quality of theproject and works performance, this activity is classified as risk 4 level, the highest on the risk scale ofthe Ministry of Labor in Brazil.

Consorcio Via Amarela is composed by the top companies in Brazilian heavy construction and haswon an international bid with World Bank financing. The most competent Brazilian companies inconsulting engineering were hired for the preparation of the executive projects.

The Consortium does not expect any financial losses arising from the accident as the project isinsured for Civil Responsibility and Engineering Risks with a first line company in the insurancemarket.

F-64




18 Subsequent Event (Continued)

Such insurances are executed with the purposes of protecting, in addition to the Consortiuminterests, the third party interests directly damaged, the works contracting party (Companhia deMetropolitano de Sao Paulo (‘‘METRO’’), contracted parties and all suppliers, designers,subcontractors and other parties connected to the works.

The Civil Responsibility insurance guarantees the indemnity payment to the victims for material,moral and personal damages, arising from the accidents occurred due to the construction works.

The Engineering Risks Insurance is the type ‘‘all risks’’ and is intended to reimburse all damagesarising from engineering risks foreseen for this kind of works, until its final delivery to Metropolitanode Sao Paulo, including also, among others, coverage for damages caused by natural events,performance failure and project errors. The Engineering Risks policy also has additional coverage forsoil recomposition and rubbish removal.

* * *

F-65


and its Subsidiaries

Financial Statementsat December 31, 2005 and 2004

and Report of Independent Accountants

Report of Independent Accountants

To the Board of Directors and StockholdersConstrutora Norberto Odebrecht S.A.

1 We have audited the accompanying consolidated balance sheets of Construtora NorbertoOdebrecht S.A. and its subsidiaries as of December 31, 2005 and 2004, and the relatedconsolidated statements of income of changes in stockholders’ equity and of changes in financialposition for the years then ended. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements.The audits of the financial statements of the jointly-controlled entities and associated companiesreferred to in Note 2(g)(i) were carried out by other independent auditors and our opinion withrespect to their net income and consolidated total assets in 2005, in the amounts ofR$ 13,076 thousand and R$ 307,955 thousand, respectively (2004—loss of R$ 6,769 thousand andtotal assets of R$ 517,996 thousand), is based exclusively on the reports of the other independentauditors.

2 We conducted our audits in accordance with approved Brazilian auditing standards which requirethat we perform the audits to obtain reasonable assurance about whether the financial statementsare fairly presented in all material respects. Accordingly, our work included, among otherprocedures: (a) planning our audits taking into consideration the significance of balances, thevolume of transactions, and the accounting and internal control systems of the Companies,(b) examining, on a test basis, evidence and records supporting the amounts and disclosures in thefinancial statements, and (c) assessing the accounting practices used and significant estimates madeby management, as well as evaluating the overall financial statement presentation.

3 Based on our audits and on the reports of the other independent auditors, in our opinion thefinancial statements audited by us mentioned in paragraph 1 present fairly, in all material respects,the consolidated financial position of Construtora Norberto Odebrecht S.A. and its subsidiaries atDecember 31, 2005 and 2004, the consolidated results of operations, changes in stockholders’equity and changes in financial position, for the years then ended, in accordance with accountingpractices adopted in Brazil.

4 The Company and its subsidiaries are an integral part of the group of companies that form theOdebrecht Organization and conduct material financial transactions with the Company’s parentcompany and other Odebrecht organization companies, under the conditions described in Note 6to the financial statements. Additionally, the Company continues to be involved in the optimizationof its corporate structure, as describe in Note 1(iii).

5 The accompanying financial statements expressed in U.S. dollars give effect to the translation ofthe financial statements expressed in reais, on the basis described in Note 2(h). This translationshould not be construed as representing that the amount in reais actually represent or have been,or could be, converted into U.S. dollars.

Salvador, February 24, 2006



F-67


Consolidated Balance Sheet at December 31


2005 2004

US$* R$

AssetsCurrent assets

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,791 324,868 177,051Financial investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,164 445,118 607,882Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279,887 655,131 509,837Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458,445 1,073,083 997,378Advances to suppliers, subcontractors and others . . . . . . . . . . . . . 52,951 123,943 259,404Investments and properties for sale . . . . . . . . . . . . . . . . . . . . . . 843 1,973 214,845Deferred income tax and social contribution . . . . . . . . . . . . . . . . 56,086 131,281 66,037Taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,874 126,102 88,512Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,576 307,979 266,349Current accounts with consortium members . . . . . . . . . . . . . . . . 6,753 15,806 44,283Other accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,965 142,700 108,552Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,584 50,521 45,050

1,451,919 3,398,505 3,385,180

Long-term receivablesOdebrecht Organization companies . . . . . . . . . . . . . . . . . . . . . . 198,352 464,283 340,348Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,205 852,495 758,094Investments and properties for sale . . . . . . . . . . . . . . . . . . . . . . 58,565 137,083 21,414Deferred income tax and social contribution . . . . . . . . . . . . . . . . 28,543 66,810 140,652Taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,897 9,122 35,793Other accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,621 146,576 65,721

716,183 1,676,369 1,362,022

Permanent assetsInvestments

Associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,044 9,465 30,758Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,794 196,137 193,707

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189,940 444,593 424,802Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,964 126,313 43,646

331,742 776,508 692,913

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,499,844 5,851,382 5,440,115

F-68


Consolidated Balance Sheet at December 31 (Continued)


2005 2004

US$* R$

Liabilities and stockholders’ equityCurrent liabilities

Debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,319 108,419 412,050Suppliers and subcontractors . . . . . . . . . . . . . . . . . . . . . . . . . . . 308,505 722,118 634,075Taxes, rates, salaries and payroll charges . . . . . . . . . . . . . . . . . . . 97,991 229,367 227,720Management profit sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,298 12,400 12,600Liabilities associated with tax, labor and civil disputes . . . . . . . . . 23,698 55,469 33,834Advances from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,511 331,234 276,135Current accounts with consortium members . . . . . . . . . . . . . . . . 13,817 32,341 5,929Other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,982 74,860 44,638

669,121 1,566,208 1,646,981

Long-term liabilitiesOdebrecht Organization companies . . . . . . . . . . . . . . . . . . . . . . 242 566 4,031Debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,075 1,170,526 1,162,534Advances from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363,162 850,054 770,799Deferred income tax and social contribution . . . . . . . . . . . . . . . . 69,495 162,667 128,640Suppliers and subcontractors . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,030 46,884 58,723Liabilities associated with tax, labor and civil disputes . . . . . . . . . 49,731 116,406 110,976Provision for losses on investments . . . . . . . . . . . . . . . . . . . . . . . 7,078 16,568 16,745Other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,622 8,479 4,712

1,013,435 2,372,150 2,257,160

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,847 4,323 1,514

Stockholders’ equityCapital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 768,166 1,798,045 1,318,518Revenue reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,275 110,656 215,942

815,441 1,908,701 1,534,460


* In these financial statements certain (local currency) amounts have been translated into UnitedStates dollars at the rate of R$ 2.3407 to the dollar. Such translations should not be construed asrepresentations that the (local currency) amounts represent, or have been or could be convertedinto, United States dollars at that or any other rate.


F-69


Consolidated Statements of IncomeYears Ended December 31


2005 2004

US$* R$

Gross service revenuesDomestic market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689,286 1,613,412 1,262,117Foreign market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,016,164 4,719,235 4,590,494

2,705,450 6,332,647 5,852,611Taxes and contributions on services . . . . . . . . . . . . . . . . . . . . . . (50,343) (117,837) (97,924)

Net service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,655,107 6,214,810 5,754,687Cost of services rendered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,298,240) (5,379,490) (5,059,383)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356,867 835,320 695,304

Operating income (expenses)General and administrative expense . . . . . . . . . . . . . . . . . . . . (232,856) (545,049) (393,126)Directors’ remuneration expense . . . . . . . . . . . . . . . . . . . . . . (5,333) (12,483) (12,689)Financial income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,856 11,367 202,902From investments in subsidiaries and associated companies

Equity in the results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,770 11,164 (25,472)Provision for losses on investments . . . . . . . . . . . . . . . . . . . (144) (336) (11,149)Dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 11

Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,165 299,994 455,770

Non-operating results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,536) (27,002) 19,754

Income before social contribution and income tax . . . . . . . . . . . . 116,629 272,992 475,524

Social contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,385) (26,649) (28,838)Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,664) (97,522) (132,800)

Income before management profit sharing and minority interest . 63,580 148,821 313,886

Management profit sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,298) (12,400) (12,600)Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,156) (2,707) (126)

Net income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,126 133,714 301,160

* In these financial statements certain (local currency) amounts have been translated into UnitedStates dollars at the rate of R$ 2.3407 to the dollar. Such translations should not be construed asrepresentations that the (local currency) amounts represent, or have been or could be convertedinto, United States dollars at that or any other rate.


F-70


Consolidated Statement of Changes in Stockholders’ Equity

In thousands of reais, except net income per share

Revenue reserves

Investments RetainedCapital(*) Legal (statutory) earnings Total

At December 31, 2003 . . . . . . . . . . . . . . . . . . . 1,255,267 57,832 114,031 1,427,130

Capital increase . . . . . . . . . . . . . . . . . . . . . . . 63,251 63,251Extraordinary dividends—R$ 0.445 per share . . (114,030) (114,030)Net income for the year . . . . . . . . . . . . . . . . . 301,160 301,160Apropriation:

Prepaid dividends—R$ 0.408 per share . . . . . (143,051) (143,051)Constituition of reserves . . . . . . . . . . . . . . . 15,058 143,051 (158,109)

At December 31, 2004 . . . . . . . . . . . . . . . . . . . 1,318,518 72,890 143,052 1,534,460Capital increase . . . . . . . . . . . . . . . . . . . . . . . 479,527 479,527Extraordinary dividends—R$ 0,408 per share . . (143,052) (143,052)Net income for the year . . . . . . . . . . . . . . . . . 133,714 133,714Apropriation:

Prepaid dividends—R$ 0,274 per share . . . . . (95,948) (95,948)Constituition of reserves . . . . . . . . . . . . . . . 6,686 31,080 (37,766)

At December 31, 2005 . . . . . . . . . . . . . . . . . . . 1,798,045 79,576 31,080 1,908,701

(*) See more details related to the 2004 capital increase in Note 12(a).

F-71


Statement of Changes in Stockholders’ Equity (Continued)

In thousands of U.S. dollars, except net income per share

Revenue reserves

Investments RetainedCapital Legal (statutory) earnings Total

At December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . 563,300 31,140 61,115 655,555

Capital increase . . . . . . . . . . . . . . . . . . . . . . . . . . . 204,866 204,866Extraordinary dividends—R$ 0,408 per share . . . . . (61,115) (61,115)Net income for the year . . . . . . . . . . . . . . . . . . . . . 57,126 57,126Apropriation:

Prepaid dividends—R$ 0,274 per share . . . . . . . . (40,991) (40,991)Constituition of reserves . . . . . . . . . . . . . . . . . . . 2,856 13,279 (16,135)

At December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . 768,166 33,996 13,279 815,440



F-72


Consolidated Statement of Changes in Financial PositionYears Ended December 31


2005 2004

US$** R$

Financial resources were provided by:

OperationsNet income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,126 133,714 301,160Expenses (income) not affecting working capital

Income tax and social contribution . . . . . . . . . . . . . . . . . . . . . 23,511 55,031 161,638Investments in associated companies

Equity in the results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (219) (512) (3,723)Provision for losses on investments . . . . . . . . . . . . . . . . . . . 144 336 11,149

Decrease of construction contracts revenue (see Note 2(b)) . . . 51,035 119,458 216,353Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . 76,430 178,899 123,702Residual value of permanent asset disposals . . . . . . . . . . . . . . 24,286 56,847 280,937Interest and monetary and exchange variations on long-term

assets and liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,844) (182,207) 3,730Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,156 2,707 126

155,625 364,273 1,095,072

ShareholdersCapital increase(*) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204,865 479,527 63,251

Third partiesIncrease in long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 279,009 653,077 1,330,038Transfer from long-term receivables and permanent assets to

current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,181 51,918

301,190 704,995 1,330,038

Total funds provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661,680 1,548,795 2,488,361

F-73


Consolidated Statement of Changes in Financial PositionYears Ended December 31 (Continued)


2005 2004

US$** R$

Financial resources were used for:Odebrecht Organizational companies . . . . . . . . . . . . . . . . . . . . . . . 249,993 585,158 482,758Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,703 39,097 259,410Permanent assets

Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,101 54,072 230,264Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,421 237,396 197,525Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,104 58,760 71,748

Transfer from long-term to current liabilities . . . . . . . . . . . . . . . . . 198,138 463,782 771,097Working capital of companies included in and/or excluded from

consolidation, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,019 16,432 20,397

Total funds used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621,479 1,454,697 2,033,199

Increase in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,201 94,098 455,162

Changes in working capital

Current assetsAt the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,451,919 3,398,505 3,385,180At the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,446,225 3,385,180 2,862,263

5,694 13,325 522,917

Current liabilitiesAt the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669,121 1,566,208 1,646,981At the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . 703,628 1,646,981 1,579,226

(34,507) (80,773) 67,755

Increase in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,201 94,098 455,162

(*) In 2005, relates to a 2004 capital increase in the amount of R$ 479,477 (US$—204,843), whichgenerated a cross shareholding that, when eliminated in 2005, generated a capital increase forconsolidated financial statements purposes (Note 12 (a)).

(**) In these financial statements certain (local currency) amounts have been translated into UnitedStates dollars at the rate of R$ 2.3407 to the dollar. Such translations should not be construed asrepresentations that the (local currency) amounts represent, or have been or could be convertedinto, United States dollars at that or any other rate.


F-74


Notes to the Financial Statements at December 31, 2005 and 2004


1 Operations

The main operations of Construtora Norberto Odebrecht S.A. (‘‘the Company’’), an OdebrechtOrganization company, with legal headquarters in Rio de Janeiro and administrative headquarters inSao Paulo, include the planning and execution of engineering projects of all types as contractor,administrator or other roles. Other operations of the Company include technical installations of civilengineering, industrial assembly, consulting, planning, assistance and technical studies, rendering ofadministrative or technical services, urban and rural real estate ventures, investments in othercompanies for the purpose of greater development, stability and profitability, other related economicactivities, including import and export and, finally, the rental, purchase and sale of equipment andtransportation.

Through its branches, the Company, in addition to Brazil, operates directly in Venezuela, Angola,Ecuador, Dominican Republic, Colombia, Mexico, United Arab Emirates, Bolivia, Argentina and CostaRica. In addition to the countries above, the Company operates through its direct and indirectsubsidiaries in Portugal, United States, Iraq, Peru, Djibouti, England, Chile and Uruguay.

In the heavy civil construction segment, the Company and its main, indirect, subsidiary company,CBPO Engenharia Ltda. (‘‘CBPO’’), develop construction projects involving highways, railways, nuclear,hydroelectric and thermoelectric plants, port installations, dams, and other industrial and infrastructureprojects.

The main projects currently in progress in Brazil are: Peixe Hydroelectric Plant, PRA-1 Platform,CVRD Carajas, Tucuruı Powerhouse, BA 265 and 687 Highways, Lines 2 and 4 of the Sao PauloSubway, Ipanema Subway in Rio de Janeiro, Energy for All Program in Minas Gerais, Ostras RiverSanitation Project, and several contracts to render services in petroleum platforms and petrochemicalplants. The main foreign projects are located in Venezuela (lines 3 and 4 of the Caracas Subway, ElDiluvio irrigation project and bridge over the Orinoco River), the United States (Performing ArtsCenter—PAC and North and South Miami Airport Terminals), Portugal (highway concessions),Dominican Republic (aqueduct and Pinalito Hydroelectric Plant), Ecuador (San FranciscoHydroelectric Plant), Angola (hydroelectric plant and infrastructure), and Argentina (expansion in gaspipeline). New contracts in Peru in 2005 include highways and an irrigation project.

The Company and its subsidiaries mainly operate with surety bonds to obtain and performcontracts in Brazil and abroad, obtained with the support of OCS—Odebrecht Administradora eCorretora de Seguros Ltda., an Odebrecht Organization company, through strategic long-term allianceswith first line insurance companies and brokers in the global insurance market. At December 31, 2005,the amounts of contractual guarantees issued was R$ 2,280,727—US$ 974,378 (2004—R$ 2,847,850—US$ 1,072,879).

(i) Operations in Venezuela

In 2005, 19% (2004—23%) of net service revenues recorded in the Company’s consolidatedfinancial statements arise from operations in Venezuela.

Effective February 2003, as a result of the new system for the management of foreign currencyadopted in the country, the exchange rate was fixed, and the official quotation is currentlyBs 2,150:US$ 1,. The change in the official exchange rate, in 2005, generated for the Venezuelanbranch and indirect subsidiary a gain of approximately R$ 18,000—US$ 7,690 (2004—gain ofapproximately R$ 26,000).

F-75




1 Operations (Continued)

(ii) Participation in the diamond sector

Through its subsidiaries, the Company also conducts mineral prospecting and exploration. Itswholly-owned subsidiary Odebrecht Mining Services, Inc. (‘‘OMSI’’) holds 16.4% of the investeeSociedade Mineira de Catoca, Limitada (‘‘Catoca’’), which conducts prospecting, exploration, treatmentand sale of diamonds and other minerals in the Catoca Project in the Lunda Sul Province of Angola(Catoca has a concession from the Angolan Government to exploit diamonds mined from the Catocakimberlite area), and also holds 50% of Sociedade de Desenvolvimento Mineiro de Angola, S.A.R.L.(‘‘SDM’’), which conducts prospecting, exploration and sale of diamonds extracted in a concession areagranted by the Angolan Government in the Hydrographic Basin of the Cuango River (Angola).

Currently, SDM is negotiating with the Angolan Government the concession of new areas ofalluvion and kimberlites exploration, which are key to the extension of the useful life of the currentexploration operations. At December 31, 2005, the indirect holding of the Company in SDM representan investment by the Company of R$ 58,378—US$ 24,940 (2004—R$ 83,775). Management believesthat the business of the investee will maintain its normal course.

(iii) Optimization of the corporate structure

During 2004 and 2005, the Company and its subsidiaries transferred, within its corporate structure,certain equity interests in order to optimize the organizational structure of the Engineering andConstruction segment of the Odebrecht Organization and the concentration of the current accounts ofthe Company and its subsidiaries.

Within the scope of this restructuring, the following transfers occurred in 2004 and 2005:

• On April 7, 2004, the Company acquired from third parties the total shares of PPSPEEmpreendimentos e Participacoes S.A. (currently Odebrecht Engenharia e ConstrucaoInvestimentos S.A. (‘‘OECI’’)).

• On December 30, 2004, the wholly-owned subsidiary Odebrecht Engenharia e Construcao S.A.(‘‘OEC’’) was formed.

• On December 31, 2004, the Company acquired from third parties the total shares of TENSPEEmpreendimentos e Participacoes S.A. (currently Odebrecht Engenharia e ConstrucaoParticipacoes S.A. (‘‘OECP’’)).

• Also on December 31, 2004, the capital of the Company was increased by the parent companyOdebrecht S.A. and the subsidiary OECI, as shown in Note 12(a).

• On July 22, 2005, the parent company made a partial spin-off of its equity as of June 30, 2005,in the net amount of R$ 50—US$ 22, relating to the investment in the wholly owned subsidiaryCentaurus Participacoes S.A. (‘‘Centaurus’’), amounting to R$ 35,448—US$ 15,144, as well aspart of the current account debit balance with the Company, amounting to R$ 35,398—US$ 15,123. The spun-off portion was legally merged into the Company, leading to an increasein its capital of R$ 50—US$ 22, with no issuance of new shares.

• On September 26, 2005, the investment in Produtores Energeticos de Manso S.A.—PROMAN(‘‘PROMAN’’), recorded in ‘‘Investments and properties for sale’’ under current assets was soldto third parties. The gain on this transaction amounted to R$ 764—US$ 326.

F-76




1 Operations (Continued)

• In order to eliminate the cross holding of OECI in the Company (see Note 12 (a)), onNovember 25, 2005, the parent company, Odebrecht S.A. (‘‘ODB’’), acquired the Company andCentaurus interest in OECI at the book value of R$ 228,707—US $97,709 (base dateOctober 31, 2005), through the current account among the parties. Due to this transfer, theCompany’s consolidated stockholders’ equity was increased by R$ 479,477—US$ 204,843 in 2005,which corresponds to the cross holding of OECI in the Company.

(iv) Equalization of the financial position

The improvement in the Brazilian economic scenario and consequent decrease in the risksassociated with Brazil allowed the Company to obtain long-term credits in the international financialmarket at interest rates significantly lower than those practiced to that date. Within this context, in2004 and 2005 the Company obtained various long-term loans, including the issue of Perpetual Bondsin 2005 (see Note 9 (ii) (e)), which permitted it to pay down or prepay short-term, higher costfinancings, as well as to create a substantial reserve of funds. With the addition of Funds arising fromsignificant receipts of advances from customers and invoices during the last quarter of the year, theserepresent the balance of cash and financial investments at the end of the year.

In this respect, the Medium-Term Notes issued in February and September 2004 and inNovember 2005 (Note 9 (ii) (a)), as well as the Perpetual Bonds issued in September 2005 (Note 9(ii) (e)), by the indirect subsidiary Odebrecht Overseas Ltd. (‘‘OOL’’), are designed to lengthen thedebt maturity profile, matching it with the cash generation.

In July 2004, Standard & Poor’s (‘‘S&P’’) improved the Company’s corporate credit rating in theBrazil National Scale, from ‘‘BrBBB+’’ to ‘‘BrA-’’. Shortly thereafter, following the upgrade of thesovereign Brazil rating, the Company’s rating in the Global Scale (foreign currency) changed from‘‘B+’’ to ‘‘BB-’’, and remained unaltered in 2005.

2 Significant Accounting Practices




Results are determined on the accrual basis of accounting.


Revenues from construction contracts are recognized taking into consideration the progress of eachcontract at the balance sheet date. The method used to determine progress considers the ratio betweencosts incurred to date and total budgeted costs per contract. If the revenue of certain contracts cannot

F-77




2 Significant Accounting Practices (Continued)

be measured reliably under this method, the Company and its subsidiaries take into consideration thephysical measurements of the work executed.

(c) Current assets and long-term receivables



Inventories of parts and materials to be used for construction work and for sale are stated ataverage purchase cost, lower than replacement cost or net realizable value.

Properties and equipment not used in operations, as well as investments for sale, are recorded incurrent assets and long-term receivables based on management’s expectations regarding the timing ofthe sale of these assets and the current stage of the negotiations.



Permanent assets are stated at cost plus restatements up to December 31, 1995, and take intoconsideration the following aspects:

• Investments in associated companies are recorded using the equity method. Provisions for losseson investments with negative equity, of which the Company intends to maintain its financialsupport, are recorded in long-term liabilities. Other investments are carried at cost.



(e) Current and long-term liabilities

These liabilities are stated at known or estimated amounts, including accrued charges andmonetary variations, when applicable.

(f) Taxes on income

Income tax and social contribution on net income are calculated at the rates established by theapplicable legislation. The expense for income tax and social contribution is recorded on the accrualbasis, including deferred taxes calculated on differences between the accounting and tax bases of assetsand liabilities, including the effects of deferrals of unrealized revenues from contracts with governmententities, as permitted by tax legislation, as well as on tax and social contribution losses.

F-78

Construtora Norberto Odebrecht S.A. and its Subsidaries





(i) The financial statements of the main subsidiary/associated companies included in the consolidationof the financial statements/equity method calculation as of December 31, 2005 and 2004 wereaudited or reviewed by our independent auditors, except for the investees shown in the tablebelow, which were or are being audited by other auditors:

Direct Adjusted stockholders’and indirect equity (net capitalholding (%) Results for the year deficiency) Total assets

2005 2004 2005 2004 2005 2004 2005 2004

US$ R$ US$ R$ US$ R$

Akal B y L, S. de R.L. deC.V.(d) . . . . . . . . . . . . . . 50.00% 50.00% 332 776 (148) (5,001) (11,705) (13,514) 3,706 8,675 9,458

BPC, CBPO, Somague,Profabril, Kaiser e Acer,ACE(a) . . . . . . . . . . . . . . 50.00% 50.00% 2,215 2,212 1,105 2,586 32,083

Hidropastaza S.A.(c) . . . . . . . 20.00% 20.00% 71,181 166,613 101,302 269,762 631,431 434,105Lusitania—Construtoras das

Auto-estradas das BeirasLitoral e Alta, ACE(a) . . . . 17.25% 17.25% 892 2,087 (818) 109,055 255,266 493,719

North Sea ProductionCompany (Note 2(g) (iv)) . . 49.95% 49.95% (1,856) (4,344) 1,752 4,986 11,671 20,338 53,921 126,213 226,388

Obras Civis, L.N.2.1.ACE(a) . . 40.00% 40.00% 1,509 3,531 127 1,509 3,531 127 4,413 10,329 37,172Odebrecht Oil & Gas Mexico,

S.R.L. de CV(b) . . . . . . . . 100.00% 100.00% (1,438) (3,365) (11,519) (8,559) (20,033) (17,978) 1,314 3,076 1,412Portuscale—Construtoras das

Auto-estradas do GrandePorto, ACE(a) . . . . . . . . . 17.25% 17.25% 782 1,830 2,434 143,722 336,411 415,874

Somague, BPC, Engil, SPIE-S.B.E.S.- Prolongamento daLinha Vermelha doMetropolitano, ACE(a) . . . . 26.32% 26.32% 3,555 8,322 4,510 3,554 8,318 4,510 23,462 54,918 65,968

Somague-Bento Pedroso-Nesco-Dragados, ACE(a) . . . . . . . 25.00% 25.00% 12,800 29,961 58 12,800 29,961 54 13,443 31,467 8,499

TACE—Construcao daTravessia Rodoviaria de Tejo,ACE(a) . . . . . . . . . . . . . . 16.67% 16.67% 2,498 5,848 2,497 5,845 40,798 95,497 11,400

Vianor—Construtoras dasAuto-estradas da Costa dePrata, ACE(a) . . . . . . . . . . 17.25% 17.25% (343) (803) 5,791 17,419 40,773 149,648

Norace—Construtoras dasAuto-estradas do Norte,ACE(a) . . . . . . . . . . . . . . 17.34% 17.34% 1,160 2,715 1,795 71,219 166,702 443,690

(a) Companies consolidated in 2005

(b) Companies consolidated in 2005 and 2004

(c) Investment not consolidated due the Company’s sale intention

(d) Investment not consolidated since this investee is in process of winding-up

F-79





(ii) The consolidated financial statements were prepared in conformity with accounting practicesadopted in Brazil and comprise the financial statements of the Company and the followingsubsidiaries in which direct and indirect holdings are maintained:

Direct andindirect

holding (%)

Country 2005 2004

Belgravia Empreendimentos Imobiliarios S.A. . . . . . . . . . . . . . . . . . Brazil 100.00 100.00Bento Pedroso Construcoes S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 100.00 100.00CBPO Engenharia Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100.00 100.00CBPO Overseas Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Islands 100.00 100.00Constructora Norberto Odebrecht de Colombia Ltda. . . . . . . . . . . . . Colombia 100.00 100.00Constructora Norberto Odebrecht del Ecuador S.A. . . . . . . . . . . . . . Ecuador 100.00 100.00Concessionaria Transvase Olmos S.A. . . . . . . . . . . . . . . . . . . . . . . . Peru 100.00 100.00CBPO Ingenierıa de Venezuela C.A. . . . . . . . . . . . . . . . . . . . . . . . . Venezuela 100.00 100.00Constructora Odebrecht Chile S.A. . . . . . . . . . . . . . . . . . . . . . . . . . Chile 100.00 100.00Constructora Odebrecht Uruguay S.A. . . . . . . . . . . . . . . . . . . . . . . Uruguay 100.00 100.00Lumina Engenharia Ambiental Ltda. . . . . . . . . . . . . . . . . . . . . . . . Brazil 100.00 100.00Energipar Captacao S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100.00 100.00Multitrade S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 99.99 99.99Odebrecht Angola Projectos e Servicos Ltda. . . . . . . . . . . . . . . . . . . Angola 100.00 100.00Odebrecht Construction International, Inc. . . . . . . . . . . . . . . . . . . . US 100.00 100.00Odebrecht Construction, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . US 100.00 100.00Odebrecht Djibouti SAZF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Djibouti 100.00 100.00Odebrecht Empreendimentos Imobiliarios Ltda. . . . . . . . . . . . . . . . . Brazil 100.00 100.00Odebrecht Engenharia e Construcao S.A. . . . . . . . . . . . . . . . . . . . . Brazil 100.00 100.00Odebrecht Mining Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Islands 100.00 100.00Odebrecht Oil Services Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cayman Islands 100.00 100.00Odebrecht Oil and Gas Services Ltd. . . . . . . . . . . . . . . . . . . . . . . . United Kingdom 100.00 100.00Odebrecht Oil and Gas Angola Ltd. . . . . . . . . . . . . . . . . . . . . . . . . Angola 100.00 100.00Odebrecht Oil and Gas Mexico, S.R.I. de CV . . . . . . . . . . . . . . . . . Mexico 100.00 100.00Odebrecht Overseas Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bahamas 100.00 100.00Odebrecht Peru Ingenierıa y Construccion S.A.C. . . . . . . . . . . . . . . . Peru 100.00 100.00OSEL—Odebrecht Servicos no Exterior Ltd. . . . . . . . . . . . . . . . . . . Cayman Islands 100.00 100.00Odebrecht Engenharia e Construcao Investimentos S.A.(*) . . . . . . . . Brazil 100.00Odebrecht Engenharia e Construcao Participacoes S.A.(**) . . . . . . . . Brazil 100.00Dominicana Ingenierıa y Construccion S.A. . . . . . . . . . . . . . . . . . . . Dominican Republic 100.00 100.00Concessionaria Interoceanica Sur-Tramo 2(***) . . . . . . . . . . . . . . . . Peru 70.00Concessionaria Interoceanica Sur-Tramo 3(***) . . . . . . . . . . . . . . . . Peru 70.00Centaurus Participacoes S.A.(****) . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 100.00Tenenge Overseas Corporation(****) . . . . . . . . . . . . . . . . . . . . . . . Cayman Islands 100.00Tenenge (UK) Ltd.(*****) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom 100.00

(*) Company sold to parent company ODB during 2005.

(**) Company merged in 2005.

(***) Companies formed in 2005.

(****) Companies acquired in 2005.

(*****) Company consolidated as from 2005.

F-80





Direct andindirect holding

(%)

Country 2005 2004

Proportionally consolidated companiesSociedade de Desenvolvimento Mineiro de Angola, S.A.R.L. . . . . . . . . . Angola 50.00 50.00Sociedade Mineira de Catoca Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . Angola 16.40 16.40Concessionaria IIRSA Norte S.A.(***) . . . . . . . . . . . . . . . . . . . . . . . . . Peru 49.80Proyectos Ebramex S. de R.L. de C.V.(***) . . . . . . . . . . . . . . . . . . . . . . Mexico 33.33Mina-Trico.S.de R.L. de C.V.(***) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico 33.33Participacoes Energeticas S.A.(*****) . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil 50.00 50.00Obras Civis, L.N.2.2. ACE(*****) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 63.90 63.90BPC, CBPO, Somague, Profabril, Kaiser e Acer, ACE(*****) . . . . . . . . . Portugal 49.75 49.75Obras Civis, L.N. 2.1. ACE(*****) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 40.00 40.00Lismercado Construcoes—Bento Pedroso, Somague, H.Hagen,

ACE(*****) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 40.00 40.00Somague, BPC, Engil, SPIE em ACE(*****) . . . . . . . . . . . . . . . . . . . . . Portugal 26.32 26.32Somague, BPC, Engil, SPIE-S.B.E.S.-Prolongamento da Linha Vermelha

do Metropolitano, ACE(*****) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 26.32 26.32Somague-Bento Pedroso-Necso-Dragados, ACE(*****) . . . . . . . . . . . . . Portugal 25.00 25.00Edifer, Soconstroi, BPC, Somague e Acciona, ACE(*****) . . . . . . . . . . . Portugal 20.00 20.00Norace—Construtoras das Auto-estradas do Norte, ACE(*****) . . . . . . . Portugal 17.34 17.34Vianor—Construtoras das Auto-estradas da Costa de Prata, ACE(*****) . Portugal 17.25 17.25Lusitania—Construtoras das Auto-estradas das Beiras Litoral e Alta,

ACE(*****) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 17.25 17.25Portuscale—Construtoras das Auto-estradas do Grande Porto,

ACE(*****) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 17.25 17.25TACE-Construcao da Travessia Rodoviaria de Tejo, ACE(*****) . . . . . . . Portugal 16.67 16.67Agrupamento para a Construcao da Segunda Travessia do Tejo,

ACE(*****) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portugal 14.34 14.34

(***) Companies formed in 2005.

(*****) Companies consolidated as from 2005.

F-81





(iii) Information on the main direct and indirect subsidiaries included in the consolidation:Number of shares or quotas Adjusted net income (loss)

directly or indirectly held Adjusted stockholders’ equity for the year

2005 2004 2005 2004 2005 2004

US$ R$ US$ R$

Bento Pedroso ConstrucoesS.A. . . . . . . . . . . . . . . . . . 7,399,859 7,399,859 74,846 175,193 212,071 8,440 19,756 21,760

CBPO Engenharia Ltda. . . . . 2,338,595 2,338,595 404,607 947,064 851,442 40,852 95,622 65,313Odebrecht Construction

International, Inc. . . . . . . . 100 100 55,011 128,764 153,261 (2,728) (6,384) 14,781Odebrecht Overseas Ltd. . . . . 165,213,212 165,213,212 131,753 308,395 456,129 (40,085) (93,828) 65,587Odebrecht Peru Ingenieria y

Construccion S.A.C. . . . . . . 4,357,442 9,005,557 22,017 51,535 7,667 9,744 22,808 (25,041)OSEL—Odebrecht Servicos

no Exterior Ltd. . . . . . . . . . 100,000,000 56,725,431 230,177 538,775 190,532 18,326 42,896 (2,109)Sociedade de

Desenvolvimento Mineirode Angola, S.A.R.L. . . . . . . 225,000 225,000 49,882 116,758 165,551 2,199 5,146 43,138

Sociedade Mineira de CatocaLtda. . . . . . . . . . . . . . . . . 1 1 136,770 320,138 283,716 83,395 195,203 177,235

(iv) Investments in subsidiaries and the balances of intercompany assets, liabilities, income and expenses areeliminated on consolidation. Minority interests in stockholders’ equity and net income for the period arepresented separately. The asset, liability, income and expense accounts of jointly-owned subsidiaries areconsolidated in proportion to the total ownership of their capital.

The financial statements of the foreign subsidiaries and branches were translated (i) from localcurrency into U.S. dollars, when applicable (highly inflationary countries without proper instruments foraccounting recognition of inflationary effects), based on the official exchange rates on the date of thefinancial statements or on the date of the transactions, depending on the nature of the accountingcomponent involved (monetary or not), and then converted into Brazilian Reais based on the officialrate of the U.S. dollar on the date of the financial statements, or (ii) from local currency into BrazilianReais based on the official exchange rate on the date of the financial statements, when the subsidiary isnot based in a highly inflationary country, or if it is the case, with proper instruments for accountingrecognition of inflationary effects according to Pronouncement XVIII—Foreign Corporate Investmentsof the Institute of Independent Auditors of Brazil (IBRACON).

Based on the Company’s intention to sell and the advanced stage of negotiations regarding the saleof jointly-controlled subsidiary North Sea Production Company (‘‘NSPC’’), the Company did notconsolidate the assets and liabilities of this investee. The amount of this investment—R$ 44,394—US$ 18,966—was reclassified from current to long-term receivables, based on management’s estimatesof the timing of the related sale. No losses are expected from this transaction. It should be pointed outthat, at December 31, 2004, the Company did not consolidate Tenenge (UK) Holdings Ltd. (‘‘TUK’’),the parent company of NSPC, subsequently included in the consolidation as a result of the changes inthe negotiations mentioned above. Also as of December 31, 2004, Participacoes Energeticas S.A.(‘‘PESA’’) and PROMAN, the latter sold in 2005, were not consolidated. The equity accountingadjustment for the year ended December 31, 2005 on the investments classified as long-termreceivables was a loss of R$ 2,300—US$ 983 (2004—loss of R$ 29,182).

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The accounting records are maintained in reais. The financial information in U.S. dollar ispresented solely for the convenience of the reader and has been translated from the amounts in theDecember 31, 2005 local currency financial statements, using the exchange rate prevailing on that dateof R$ 2.3407: US$ 1.00. Such translation should not be construed as representing that the amounts inreais represent, or have been, or could be, converted in U.S. dollars at that or at any other rate.

Had the Company’s transactions been measured directly in U.S. dollars at exchange rates ruling onthe dates that the transactions were carried out, significantly different results and trends would havebeen presented.

3 Trade Accounts Receivable

2005 2004

US$ R$

Public sectorFederal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,621 504,703 412,875State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298,461 698,607 456,086Municipal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,362 160,018 180,383

582,444 1,363,328 1,049,344Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,206 562,250 706,128

822,650 1,925,578 1,755,472Less: Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458,445 1,073,083 997,378

Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,205 852,495 758,094

As part of its policy to mitigate performance risks in developing countries, the Company requiresadvances from customers before starting a project (down payment). Such advances are usually deductedfrom each invoice through the end of the contract.

The balances of trade accounts receivable were restated taking into consideration the contractualterms, specific portfolio risks and negotiations in progress, including administrative and judicialcollection process, in order to recover amounts due for services rendered, including financial charges.Furthermore, taking into consideration the history of minimal losses that the Company and itssubsidiaries have incurred, management does not expect losses on realization of such receivables andbelieves that, as a result of these actions, the recognition of amounts in addition to those recorded mayoccur when sufficient evidence exists to support a reasonable expectation that the correspondingamounts will be received. Trade accounts receivable include R$ 710,861—US$ 303,619 (2004—R$ 562,363) of overdue receivables under judicial collection, where the major part has receivedfavorable judgments, and R$ 88,488—US$ 37,804 (2004—R$ 303,590) of overdue receivables which theCompany is attempting to collect through administrative actions with the debtors.

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4 Taxes Recoverable

2005 2004

US$ R$

Current assetsSocial contributions recoverable . . . . . . . . . . . . . . . . . . . . . . . . . 13,698 32,062 5,461Withholding income tax and social contribution on net income on

earnings from financial investments and invoicing . . . . . . . . . . . 19,220 44,989 45,944Prepaid income tax at foreign branches and subsidiaries . . . . . . . . 10,628 24,876 18,594Tax on added value at foreign branches . . . . . . . . . . . . . . . . . . . . 3,306 7,739 6,147Other taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,022 16,436 12,366

53,874 126,102 88,512

Long-term receivablesSocial contributions recoverable . . . . . . . . . . . . . . . . . . . . . . . . . 2,373 5,555 32,336Other taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,524 3,567 3,457

3,897 9,122 35,793

5 Inventories

2005 2004

US$ R$

Finished products(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,412 17,350 29,757Raw materials(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,958 23,308 33,467Materials to be used in construction works . . . . . . . . . . . . . . . . 58,767 137,556 114,118Marketable properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,123 28,377 31,857Inventories in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,914 41,932 28,042Advances to suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,431 57,185 23,146Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 971 2,271 5,962

131,576 307,979 266,349

(i) The balance of finished products and raw materials refers substantially to diamond inventories ofthe jointly-controlled subsidiaries SDM and Catoca.

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6 Odebrecht Organization Companies

FinancialLong-term Long-term incomereceivables liabilities (expenses), net

CBPO Malaysia SDN BHD . . . . . . . . . . . . . . . . . . . . . . 12,389Odebrecht S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449,701 19,689Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,193 566

Total—2005—R$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464,283 566 19,689

Total—2005—US$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,352 242 8,412

Total—2004—R$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,348 4,031 (4,750)

The main balances with Odebrecht Organization companies are covered by a ‘‘Current accountand single cash management agreement’’, entered into by all Odebrecht Organization companies, whichhas no defined expiration date and has the following characteristics:

Company Financial charges Nature of the transactions

Odebrecht S.A. Reference Unit—Long-term Interest Transfer of funds, credit assignments andRate (‘‘UR-TJLP’’) in the domestic debt assumptionsmarket and free of charges in theexternal market

7 Investments

The account ‘‘Other investments’’ is substantially represented by the interests held by the indirectsubsidiary Bento Pedroso Construcoes S.A., headquartered in Portugal, in highway concessionoperators, as well as by an investment acquired by its subsidiary, all recorded under on the costmethod.

8 Property and Equipment

2005 2004 %


Cost depreciation Net Net rate

R$ R$ US$ R$

Land . . . . . . . . . . . . . . . . . . . . . . . 10,061 4,298 10,061 11,567Buildings and installations . . . . . . . . 92,060 (30,415) 26,336 61,645 66,510 4Machinery and equipment . . . . . . . . 582,068 (349,670) 99,286 232,398 224,111 10 to 20Vehicles and ships . . . . . . . . . . . . . . 160,523 (94,265) 28,307 66,258 38,679 25Furniture and fixtures . . . . . . . . . . . 80,730 (45,379) 15,103 35,351 28,397 10Advances to suppliers and other . . . 56,655 (17,775) 16,610 38,880 55,538 0 to 10

982,097 (537,504) 189,940 444,593 424,802

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8 Property and Equipment (Continued)

(i) Leased vehicles/equipment

In 2004, the Company and its subsidiaries used vehicles, machinery and equipment leased throughirrevocable contracts, which had three to five years terms. During 2005, such contracts were fullysettled. The operating expenses and costs of services incurred with leasing contracts up to thesettlement date amounted to R$39,506—US$16,878 (2004—R$33,088). The commitments assumedunder these contracts amounted to R$36,242—US$15,483 at December 31, 2004.

9 Debts2005 2004

Financial institution/type of debt Currency Financial charges US$ R$

International Finance Corporation—Tranche B3(i) . . Real CDI + 2.50% 19,223International Finance Corporation—Tranches A, B1,

B2 and C(i) . . . . . . . . . . . . . . . . . . . . . . . . . U.S. dollar Libor + 2.75% to 5.00% + EV 223,431International Finance Corporation(i) . . . . . . . . . . . U.S. dollar Libor + 3.50% + EV 67,148Perpetual Bonds(ii)(e) . . . . . . . . . . . . . . . . . . . . U.S. dollar 9.63% + EV 200,428 469,141Medium-Term Note Programme(ii)(a)(1) . . . . . . . . . U.S. dollar 11.50% + EV 155,990 365,125 455,464Eurobond(ii)(b) . . . . . . . . . . . . . . . . . . . . . . . . U.S. dollar 12.00% + EV 273,403Medium-Term Note Programme EURO(ii)(a)(4) . . . . Euro 7.44% to 7.45% + EV 79,413 185,882 215,551BCP Investimento S.A. . . . . . . . . . . . . . . . . . . . . Euro 3.63% to 3.90% + EV 55,545 130,015 92,145Credit Suisse First Boston(ii)(c) . . . . . . . . . . . . . . U.S. dollar 8.50% to 9. 57% + EV 53,714IKB Deustche Bank . . . . . . . . . . . . . . . . . . . . . . U.S. dollar Libor + 0.95% + EV 16,561 38,765 50,773ABC Brasil e Bradesco Luxembourg(ii)(d) . . . . . . . U.S. dollar 7.50% + EV 53,221Banco ABN—Pichincha, Banco del Pacifico and

Banco Popular Internacional (Equador) . . . . . . . . U.S. dollar 8.00% + EV 36,335Banco Africano de Investimento . . . . . . . . . . . . . . U.S. dollar 9.50% + EV 4,306 10,080 6,415Caterpillar Financial . . . . . . . . . . . . . . . . . . . . . U.S. dollar Libor + 3.75% to 4.00% + EV 4,051Banco Fomento de Angola S.A.R.L. . . . . . . . . . . . U.S. dollar Libor + 4.00% to 7.00% 6,369 14,908BBVA Bancomer S.A. . . . . . . . . . . . . . . . . . . . . U.S. dollar Libor + 0.85% + EV 3,632 8,502Banco Santander S.A. . . . . . . . . . . . . . . . . . . . . . U.S. dollar Libor + 0.90% + EV 1,924 4,503Several financial institutions in Brazil . . . . . . . . . . . Real TJLP + 4.50% to 11.50% and fixed

interest of 11.00% to 14.00% 22,226 52,024Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,710

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546,394 1,278,945 1,574,584Less: long-term . . . . . . . 500,075 1,170,526 1,162,534

Current liabilities . . . . . . 46,319 108,419 412,050

Abbreviations used:CDI Interbank Deposit CertificateEV Exchange variationLibor London Interbank Offered RateTJLP Long-term Interest Rate

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9 Debts (Continued)

(i) International Finance Corporation

On June 21, 2002, the Company signed with the International Finance Corporation (‘‘IFC’’) anagreement to refinance certain of its existing obligations. The refinancing package, in the total amountof US$ 280,000, includes four tranches, two of which (A and C) were financed with IFC resources,totaling US$ 80,000. The third tranche (B1 and B2) was syndicated with other foreign financialinstitutions in the amount of US$ 165,000, and the fourth tranche (B3) was syndicated with Brazilianfinancial institutions, denominated in reais equivalent to US$ 35,000. These tranches have maturityperiods varying from four to ten years.

During the term of this operation, certain events resulted in prepayments of part of the loan:(a) the receipt of the net amount from the sale of Lusoponte—Concessionaria to Travessia do Rio TejoS.A., of US$ 32,648 (equivalent to R$ 115,355 at the time); (b) the receipt of dividends from theinvestee Catoca in July 2002, of US$ 2,224 (equivalent to R$ 7,858 at that date) and inNovember 2003, of US$ 6,564 (equivalent to R$ 18,838 at the time); (c) the receipt of certain overdueaccounts receivable in October 2003, in the amount of R$ 19,578, and (d) the receipt in June 2004 of aloan, for which the Company’s investment in the indirect subsidiary Catoca had been given as aguarantee, in the amount of US$ 60,000 (equivalent to R$ 188,658 at the time).

On June 15, 2004, the Company drew down a new tranche from the IFC in the amount ofUS$ 25,000, relating to the development of Brazilian small and mid-sized companies (‘‘SME’’).

Between September and October 2005, the Company prepaid tranches A and B and SME, whichhad half-yearly maturities up to 2007, 2009 and 2011. Such prepayment amounted to US$ 77,881(R$ 175,777).

In December 2005, tranche C, to be repaid in a single installment in 2012, was also settled. Theamount involved was US$ 27,541 (R$ 62,736), including interest of US$ 7,300 (R$ 16,628), chargedagainst income for the year.

(ii) Additional information

(a) On February 18, 2004, OOL placed the amount of US$ 250,000 in the international financialmarket through a Medium-Term Notes Program, falling due in up to five years from the issue date.Subsequently, on October 1, 2004, the total amount of this program was increased to US$ 500,000.Under the program, OOL carried out the following issues, all of which guaranteed by theCompany:

(1) On February 25, 2004, in the amount of US$ 150,000 (R$ 351,105), maturing inFebruary 2009. The outstanding balance amounted to US$ 155,989 (R$ 365,125) atDecember 31, 2005;

(2) On June 29, 2004, in the amount of US$ 60,000 (R$ 140,442), maturing in February 2009. Theissue was acquired and held in treasury by OSEL. The amount was eliminated in theconsolidated financial statements;

(3) On September 29, 2004, in the amount of US$ 15,000 (R$ 35,111), maturing in February 2009.The debt was subsequently assumed by Odb International Corporation (‘‘ODBIC’’), a

F-87




9 Debts (Continued)

subsidiary of ODB, pursuant to a Debt Assumption Agreement entered into by the parties,with the consent of the creditors;

(4) On October 4, 2004, in the amount of A 65,000 thousand (R$ 182,944), maturing inOctober 2007. The balance of this transaction, plus accrued interest, amounts toA 66,067 thousand (equal to R$ 182,944) at December 31, 2005 and, considering the impact ofa swap transaction from euros to U.S. dollars, amounts to R$ 185,882—US$ 79,413 atDecember 31, 2005; and

(5) On November 14, 2005, in the amount of US$ 15,000 (R$ 35,111), maturing in February 2010.This debt was subsequently assumed by ODBIC, a subsidiary of ODB, pursuant to a DebtAssumption Agreement entered into by the parties, with the consent of the creditors.

(b) On September 30, 2003, OOL raised US$ 100,000 in the international financial market inEurobonds, repaid on March 29, 2005, for the equivalent in reais of R$ 286,529—US$ 106,000.

(c) On June 30, 2004, OSEL granted to Credit Suisse First Boston the equivalent of US$ 20,225(R$ 47,341) of the notes issued by OOL on June 29, 2004 (see item (a) above), with a repurchaseoption on June 29, 2007. On December 29, 2005, ODBIC assumed this debt with OSEL, for therestated amount of US$ 20,230 (R$ 47,353), pursuant to a Debt Assumption Agreement. Thetransaction is guaranteed by the Company.

(d) In March and June 2004, OOL obtained loans from international financial market institutions inthe amounts of US$ 5,000 and US$ 15,000, fully settled during 2005.

(e) On September 24, 2005, OOL raised US$ 200,000 (R$ 469,141) in the European, Asian and U.S.markets in Perpetual Bonds. These bonds have no maturity date but grant the issuer a call option5 years after the issue, with annual interest charges equivalent to 9.625% paid on a quarterly basis.The issue costs, totaling US$ 4,135 (R$ 9,679), were accounted for as prepaid expenses, amortizedover the term of the call option (5 years). The transaction is guaranteed by the Company.

(iii) Composition of the long-term debt per year of maturity

Long-term debt is due as follows:

2005 2004

US$ R$

2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,0292007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,673 228,624 320,8412008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,308 19,447 30,6772009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,195 419,442 191,5472010 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,899 503,013 528,440

500,075 1,170,526 1,162,534

(iv) Restrictive Clauses

The Bonds issuances previously mentioned have certain restrictive clauses. The Company is incompliance with all restrictive clauses.

F-88




10 Provisions for Tax, Labor and Civil Claims

(i) The Company and its subsidiaries have provisions of R$ 55,469—US$ 23,698 (2004—R$ 33,834) incurrent liabilities and R$ 57,902—US$ 24,737 (2004—R$ 56,996) in long-term liabilities to cover(i) legal indemnity expenditures related to layoffs of employees, which is usual and inherent to itsline of activity; the provision is based on the history of similar monthly disbursements; and(ii) labor, tax and civil claims which in the opinion of management and its legal advisors have littlechance of a favorable outcome. In addition, the Company and its subsidiaries are defending labor,civil and tax claims of approximately R$ 88,898—US$ 37,979 (2004—R$ 100,337), for which noprovision for losses has been recorded because management and legal advisors believe that nosignificant losses therefrom are probable.

(ii) The Company and its subsidiary CBPO have an injunction which grants them the right not to paythe Social Contribution on Revenues (COFINS) on income other than billings and the right not topay the increase of 1% in the COFINS rate on billings, based on the provisions of Law 9,718/98.When Law 10,833/03 was enacted, the Company and CBPO started to regularly pay COFINS asfrom February 2004. In addition, the subsidiary CBPO was granted an injunction giving it the rightnot to pay the Social Integration Program Contribution (PIS) on other income, based on theprovisions of Law 9,718/98 (upon enactment of Law 10,637/02, this subsidiary started to pay PIS inJanuary 2003). The unpaid amounts are recorded monthly in this account and updated for therelated late charges until the Company and the subsidiary are awarded final rulings. AtDecember 31, 2005, the respective provision amounts to R$ 58,504—US$ 24,994 (2004—R$ 53,980).

(iii) During 2003 to 2005, the Company’s branch in Ecuador was inspected by the Internal RevenueService (local equivalent to the Brazilian Federal Revenue Secretariat) relating to income taxreturns filed from 1999 to 2002. As a result of these inspections, the Ecuadorian tax authoritiesassessed this branch for additional amounts in relation to income tax and tax on added value, ofapproximately US$ 4,039 (R$ 9,454) and US$ 320 (R$ 749), respectively (not including interest,arrears fines and other potential charges). Management, considering that there are sufficientgrounds for a favorable outcome, and based on the opinion of its external legal advisors, did notset up a provision to cover potential losses arising from this matter.

F-89





(a) Composition of the effects on income—reversal (expense)

2005 2004

US$ R$

Deferred social contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,779) (6,504) (13,377)Current social contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,275) (7,665) (6,601)Adjustment to prior year provision(i) . . . . . . . . . . . . . . . . . . . . . (5,331) (12,480) (8,860)

Total social contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,385) (26,649) (28,838)

Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,718) (18,066) (28,167)Current income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,430) (24,413) (14,685)Adjustment to prior year provision(i) . . . . . . . . . . . . . . . . . . . . . (5,228) (12,238)Foreign income tax (branches and subsidiaries) . . . . . . . . . . . . . . (29,538) (69,140) (102,785)Credits of income tax paid by foreign branches and subsidiaries . . 11,250 26,335 12,837

Total income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,664) (97,522) (132,800)

(i) Due to the Brazilian taxation of profits earned abroad in 2004, as a contra entry to the recognitionof credits arising from income tax paid by foreign branches and subsidiaries in 2004, recorded in2005; accordingly, there are no impacts on net income for the year.


The deferred tax asset balances relate to income tax and social contribution losses, and temporaryadditions, mainly in the Company and its indirect subsidiary CBPO. The liability balances relate toincome tax and social contribution on unrealized profits on sales to government entities and the effectsof exchange variations, mainly in the Company and its indirect subsidiary CBPO.

The composition of the deferred income tax and social contribution accounts at December 31,2005 is as follows:

(i) Income tax

2005 2004

On temporary Deferred Accumulateddifferences income tax losses Total Total

In R$Current assets . . . . . . . . . . . . . . . . . . . 62,808 29,540 92,348 48,557Long-term receivables . . . . . . . . . . . . . 53,560 53,560 100,684Long-term liabilities . . . . . . . . . . . . . . . (101,138) (101,138) (94,822)

In US$Current assets . . . . . . . . . . . . . . . . . . . 26,833 12,620 39,453Long-term receivables . . . . . . . . . . . . . 22,882 22,882Long-term liabilities . . . . . . . . . . . . . . . (43,208) (43,208)

F-90





(ii) Social contribution

2005 2004

On temporary Deferred Accumulateddifferences income tax losses Total Total

In R$Current assets . . . . . . . . . . . . . . . . . . . 15,438 23,495 38,933 17,480Long-term receivables . . . . . . . . . . . . . 13,250 13,250 39,968Long-term liabilities . . . . . . . . . . . . . . . (61,529) (61,529) (33,818)

In US$Current assets . . . . . . . . . . . . . . . . . . . 6,596 10,037 16,633Long-term receivables . . . . . . . . . . . . . 5,661 5,661Long-term liabilities . . . . . . . . . . . . . . . (26,287) (26,287)

(c) Recoverability of recorded deferred tax assets

The Company and its indirect subsidiary CBPO base the recoverability of the net asset balances ofdeferred income tax and social contribution on the profit forecasts for the next three years. Thisforecast includes, as basic assumptions, the continuing increase in the order backlog (portfolio ofrevenues already contracted by the Company and CBPO) in recent years; the gains to be earned fromthe disposal of assets not pertaining to the Engineering and Construction activity, the increasedinvestment in Brazil’s electric power and infrastructure sectors, and the increased participation of theCompany and CBPO in real estate ventures, as well as the recognition, for tax purposes, of theoperating results of foreign subsidiaries as from December 31, 2002. Additionally, the Company,together with its main subsidiary operating in Brazil, CBPO, have realized and cumulatively reducedtheir net balance of deferred income tax and social contribution assets in the past five years.

The forecast used to support the balances of the net deferred tax assets considers the realizationof R$ 131,281—US$ 56,086 in the 2006 tax year as a result of taxable income to be earned in that year.The Company estimates the realization of the deferred tax assets recorded in long-term receivablesover a maximum term of three years.


The income tax expense incurred abroad is represented primarily by the taxes generated by theCompany’s operations in Venezuela (R$ 25,103—US$ 10,725), Angola (R$ 22,098—US$ 9,441),Ecuador (R$ 2,859—US$ 1,221), Argentina (R$ 7,977—US$ 3,408), Peru (R$ 3,101—US$ 1,325),Colombia (R$ 1,452—US$ 620), and Portugal (R$ 6,404—US$ 2,736).

(e) Tax credits arising from income tax paid by foreign branches and subsidiaries

The statement of income for the year ended December 31, 2005 records R$ 19,505—US$ 8,333,R$ 6,598—US$ 2,819 and R$ 232—US$ 98 of credits relating to income tax amounts paid by theCompany branches in Venezuela, Ecuador and Argentina, respectively, and taxed in Brazil, pursuant tothe applicable income tax legislation (2004—R$ 12,568 and R$ 269, paid by subsidiary BPC, located inPortugal, and the Ecuador branch). These amounts were appropriately offset against income taxamounts payable relating to these foreign operations profits.

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(a) Capital

At December 31, 2005 and 2004, the Company’s capital subscribed and paid-up entirely byBrazilian individuals and corporations, was comprised of 202,837,829 common and 147,382,173preferred shares, with no par value.

(b) Share rights


On December 31, 2005, the Company distributed special dividends, based on the reserve forinvestments as of December 31, 2005, in the amount of R$ 143,052—US$ 61,115 (2004—R$ 114,030).Dividends proposed for the year ended December 31, 2005, in the amount of R$ 95,948—US$ 40,991,were paid in advance, pursuant to the executive board approval, to be ratified by the Ordinary GeneralMeeting.



(i) Legal reserve



This reserve is established through the appropriation of up to 70% of net income for the yearuntil, together with the legal reserve, it reaches 100% of total capital.

13 Non-Operating Results

2005 2004

US$ R$

Gain (loss) on fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,563) (22,383) 28,752Decrease in percentage holdings . . . . . . . . . . . . . . . . . . . . . . . . (546) (1,278)Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,427) (3,341) (8,998)

(11,536) (27,002) 19,754

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14 Insurance Coverage

The identification, mitigation, management of risks and contracting of insurance are handled in aconsistent manner by the Company and its subsidiaries, and comply with the policies of the OdebrechtOrganization. The Company is supported by OCS—Odebrecht Administradora e Corretora deSeguros Ltda., and its consultants, brokers and first line domestic and foreign partner insurancecompanies, to assure the contracting at adequate prices of the appropriate cover for each contract orventure, at amounts considered sufficient to cover possible losses. At December 31, 2005, the insurancecoverage of the Company and its subsidiaries amounts to US$ 5,978,650—R$ 13,994,225 (2004—US$ 6,167,503—R$ 16,371,020).

15 Private Pension Plan


In relation to the benefit payments established for the Optional Plan, the ODEPREV obligationsare limited to the total value of the participants’ quotas and, in conformity with the rules of the definedcontribution plan, no obligations or responsibilities can be required from the sponsoring companies toguarantee minimum levels of benefits to the retired participants. The contributions of the Companyand its subsidiaries for 2005 total R$ 11,971—US$ 5,114 (2004—R$ 9,398).

As the ODEPREV plan is a defined contribution plan, under which the risk of receiving benefits isthe full responsibility of the participants, the Company’s management has determined that theprovisions of Accounting Standard NPC 26 of the Institute of Independent Auditors of Brazil(IBRACON), ‘‘Accounting for Benefits to Employees’’ relating to defined benefit plans is not applicableto such plan.

16 Financial Instruments


The Company and its subsidiaries participate in transactions involving financial instruments for thepurpose of managing the cash resources of their operations, as well as meeting possible cash needs andhedging against the effects of foreign exchange fluctuations on the consolidated exposure in foreigncurrency and interest rate fluctuations. These risks are managed through financial market mechanismsthat minimize the exposure of the companies’ assets and liabilities, protecting their equity.

(b) Market value

The main financial instruments of the Company and its subsidiaries are trade accounts receivable,financial investments, marketable securities, suppliers, loans and long-term liabilities, mainly loan andcurrent accounts with other Odebrecht Organization companies (Note 6).

The market values of the financial instruments of the Company and its subsidiaries approximatetheir book values at December 31, 2005 and 2004. The market values of these financial instruments

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16 Financial Instruments (Continued)

were obtained by calculating their present values, taking into account current market interest rates forsimilar terms and risks. The most significant shareholding interests held by the Company and itssubsidiaries are not quoted in the market.

(c) Credit risk

At December 31, 2005, the Company and its subsidiaries had overdue accounts receivableamounting to R$ 799,349—US$ 341,500 (2004—R$ 865,953) for services rendered to governmententities. Historically, the Company and its subsidiaries have collected the amounts owed by theseentities, including those overdue for one year or more. The collection of these overdue amounts fromgovernment entities occurs through payment or the receipt of government bonds or other governmentassets. As a way of mitigating these risks, the Company and its subsidiaries have applied a greaterdegree of selectivity when accepting customers, and have increased the sales revenues from privatecustomers or public sector customers which the Company considers to have the capacity to generaterevenues independently and which do not rely on government budgets to pay their liabilities (mainlycompanies with both public and private shareholders). In order to reduce the volume of overduereceivables, the Company and its subsidiaries have adopted a policy of decentralizing the administrativecollection negotiations with customers, delegating this responsibility to the administrative levelsresponsible for the monitoring of each contract. If these administrative actions are not successful, thecollection of these amounts will occur through court actions.

At the same time, the Company adopts the policy of not restating the customers’ overdue credits,keeping them at historical value. Thus, whenever there is a final agreement with the customers, or afinal favorable judicial decision, referring to these credits, the value of the restatement is allocated tothe financial income for the year. In 2005, financial income includes approximately R$ 135,000—US$ 57,675 from restatement of credits relating primarily to Rio de Janeiro Subway, Urbanization ofLagoa do Oiteiro, Sisal Water Main, and MA-006 Highway works (2004—R$ 70,000 relating to Rio deJaneiro Subway and Indapolis Highway works).

(d) Price risk

A significant number of the contracts in which the Company and its subsidiaries are engaged arefixed-price contracts. The actual profit margins on these contracts may differ from the marginsestimated at the time the costs were budgeted and the contract price was proposed because of:significant unexpected increases in the costs of equipment, materials to be used or labor, relating toinflationary effects or other unexpected events; problems encountered by the customer to obtain thenecessary financing of the contract or to obtain Government authorizations or approvals; projectchanges resulting in unexpected costs; and delays caused by bad weather or the non-performance ofsubcontractors and/or contracted suppliers. To minimize the price risk, the fixed-price contractsperformed by the Company and its subsidiaries have their budgets periodically revised to reflectinconsistencies noted between actual and budgeted costs. The Company and its subsidiaries follow apolicy of negotiating claims to increase contract prices through contract amendments to recovervariations from the contracted price, recorded in the books when the contract amendment is signed.

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16 Financial Instruments (Continued)


The Company, through its branches, subsidiaries and associated companies, has operations asdescribed in Note 1, of which part is denominated in U.S. dollars, with little exposure to localcurrencies, restricted to certain specific countries. In addition, certain loans of the Company and itssubsidiaries obtained abroad are denominated in foreign currencies, as mentioned in Note 9, as well asliabilities to suppliers and other balances with related parties, as mentioned in Note 6.

(f) Interest rate and currency swap contracts

At December 31, 2005, the nominal value of outstanding swap contracts amounts to R$ 203,547—US$ 86,960, with an expense of R$ 18,335—US$ 7,833 (2004—R$ 251,141, income of R$ 22,450).



* * *

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APPENDIX A

SUMMARY OF PRINCIPAL DIFFERENCES BETWEEN BRAZILIAN GAAP AND U.S. GAAP

General Information

Our financial statements included elsewhere in this offering circular have been prepared inaccordance with Brazilian GAAP and are based on Brazilian Corporation Law (Law No. 6,404/76, asamended), the rules and regulations of the CVM and the accounting standards issued by the Institutodos Auditores Independentes do Brasil (the Brazilian Institute of Independent Auditors, or IBRACON).Certain differences exist between Brazilian GAAP and U.S. GAAP which might be material to thefinancial information herein. The matters described below summarize certain differences betweenBrazilian GAAP and U.S. GAAP that may be material. We are responsible for preparing the summarybelow. We have not prepared a complete reconciliation of our consolidated financial statements andrelated footnote disclosures between Brazilian GAAP and U.S. GAAP and have not quantified suchdifferences. Accordingly, no assurance is provided that the following summary is complete. In makingan investment decision, investors must rely upon their own examination of our company, the terms ofthe offering and the financial information. Potential investors should consult their own professionaladvisors for an understanding of the differences between Brazilian GAAP and U.S. GAAP, and howthose differences might affect the financial information herein.

Inflation Accounting

Highly inflationary conditions have prevailed in Brazil in the past. As a consequence, a form ofinflation accounting, referred to as monetary correction, was in use for many years to minimize theimpact of inflationary distortions in financial statements.

For periods through 1995, Brazilian GAAP required the monetary correction of certainnon-monetary balance sheet accounts (primarily fixed assets, deferred charges, long-term investmentsand shareholders’ equity), using a government-sanctioned index. The net monetary correction wasrecorded as a single line item in the income statement. Beginning in 1996, Brazilian GAAP no longerpermitted the recording of monetary correction.

Under U.S. GAAP, Statement of Financial Accounting Standard (‘‘SFAS’’) No. 52, ‘‘ForeignCurrency Translation’’ requires that companies operating in hyperinflationary economies, presentingprimary financial statements in U.S. GAAP, remeasure local currency transactions into U.S. dollars.Practice relating to the presentation of a reconciliation to U.S. GAAP require companies operating inhyper-inflationary environments in which inflation has exceeded 100% over the last three years andwhich report primary financial statements using a basis of accounting other than U.S. GAAP thatcomprehensively includes the effects of price level changes need not record adjustments for price levelchanges in the reconciliation. Companies presenting primary financial statements under BrazilianGAAP are required to include indexation effects on non-monetary assets during 1997 and 1996 in theU.S. GAAP reconciliation. Since 1998 the Brazilian economy has not met the 100% inflation test and isno longer deemed to be hyper-inflationary.

Construction Contract Accounting

Under Brazilian GAAP, a construction and engineering contractor is required to apply thepercentage-of-completion method, or POC method, when measuring the revenue and costs ofconstruction projects, regardless of the timing of billings to the customers. The stage of completion maybe measured by reference to physical measures or by the ratio of costs incurred to date to totalestimated costs. For short-term projects, Brazilian GAAP also allows the completed-contract method,which defers recognition of all revenue and related costs until the project is completed. We primarily

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use the POC method based on actual and budgeted costs to record construction contracts, and usephysical measurement for our remaining contracts.

Under U.S. GAAP, the POC method is generally used. The completed contract method is used incircumstances when estimates of costs to completion and the extent of progress towards completion arenot reasonably reliable. Under U.S. GAAP, the rules are generally more restrictive for revenuerecognition.

Equity Method of Accounting

Under Brazilian GAAP, parent companies in their consolidated financial statements are required toadjust the original investment in the equity of associated companies in order to recognize the parentcompany’s share in the earnings or losses relating to such investment, which is referred to as the equitymethod of accounting. Additionally, joint ventures are accounted for by proportional consolidation.

Associated companies are entities which the parent company does not control but for which theparent company:

• owns at least 10.0% of the issued share capital and exerts influence over its management; or

• owns 20.0% or more of the issued share capital and either (a) the aggregate book value of allsuch investments in other companies is equal to or greater than 15.0% of the investor’sshareholders’ equity or (b) the book value of an investment in any single company is equal to orgreater than 10.0% of the investor’s shareholders’ equity.

We have both associated companies and joint ventures that are accounted for as describedabove.

Under U.S. GAAP, companies use the equity method of accounting for investments:

• in other entities in which they have a 20.0% to 50.0% voting interest or can exert significantinfluence over the operations of the investee; and

• in joint ventures in which neither party has control.

Impairment of Investments

Under Brazilian GAAP, an investment in an equity investee is written down to market value whenevents and circumstances indicate permanent impairment. The quoted share price on the Sao PauloStock Exchange is generally not considered to be representative of market value if a small portion ofthe shares are traded or its traded volumes are low. We have not recorded write-downs for equityinvestees.

Under U.S. GAAP, APB Opinion No. 18, ‘‘The Equity Method of Accounting for Investment inCommon Stock,’’ requires an investment to be written down to fair value when an impairment isconsidered to be other than temporary. Evidence of a loss in value might include, but would notnecessarily be limited to, absence of an ability to recover the carrying amount of the investment orinability of the investee to sustain an earnings capacity that would justify the carrying amount of theinvestment. A current fair value of an investment that is less than its carrying amount may indicate aloss in value of the investment. However, a decline in the quoted market price below the carryingamount is not necessarily indicative of a loss in value that is other than temporary. All are factors to beevaluated.

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Provision for Dividends and interest on stockholders’ equity

Under Brazilian GAAP, at each balance sheet date, our executive officers are required to proposea dividend distribution from earnings and accrue the dividends in the financial statements. We normallyrecord provisions for dividends at year-end, provided sufficient profits are generated during the year.

Under U.S. GAAP, dividends and interest on stockholders’ equity up to the limit of the minimummandatory dividends.

Consolidation and Proportional Consolidation

Under Brazilian GAAP, as per CVM Instruction No. 247 of March 27, 1996, as amended by CVMInstructions Nos. 269/97 and 25/98, financial statements must consolidate the following entities:(a) entities in which the company has voting rights that provide it with the ability to have the majorityon social decisions and to elect the majority of the members of the Board; (b) overseas branches; and(c) companies under common control or controlled by stockholders’ agreements irrespective of theparticipation in voting stock. Joint ventures (including investees in which the company exerts significantinfluence through its participation in a stockholders’ agreement in which such group controls theinvestee) are to be accounted for under the proportional consolidation method. Additionally, CVMInstruction No. 408 of August 14, 2004 requires disclosure of information relating to special purposeentities, or SPEs, directly or indirectly controlled by the company, at December 31, 2004 withconsolidation of such entities as from January 1, 2005. There are no specific pronouncementsaddressing criteria for consolidation of variable interest entities. The financial statements includedherein are presented on a full consolidated basis for all majority-owned companies, and on aproportionately consolidated basis for jointly controlled companies.

Under U.S. GAAP, the usual condition for consolidation is the controlling interest (either througha majority voting interest or through the existence of other control factors). Therefore, as a generalrule, the condition for consolidation is the ownership by one company, directly or indirectly, of over50.0% of the outstanding voting shares of another company. Joint ventures are usually accounted forfollowing the equity method of accounting. Proportional consolidation generally is not allowed underU.S. GAAP.

In January 2003, the Financial Accounting Standards Board (‘‘FASB’’), issued FASB Interpretation(‘‘FIN’’), No. 46, ‘‘Consolidation of Variable Interest Entities—An Interpretation of APB No. 51.’’ FINNo. 46 requires consolidation of ‘‘variable interest entities’’, as from January 1, 2004 in the case of theCompany. Variable interest entities are entities with the following characteristics: (a) the equity at riskis not sufficient to permit the entity to finance its activities without additional subordinated financialsupport from other parties; and (b) the equity investors lack one or more of the following essentialcharacteristics of a controlling financial interest: (i) the direct or indirect ability to make decisionsabout the entity’s activities through voting rights or similar rights; (ii) the obligation to absorb theexpected losses of the entity if they occur, which makes it possible for the entity to finance its activities;or (iii) the right to receive the expected residual returns of the entity if they occur, which is thecompensation for the risk of absorbing the expected losses.

Business Combinations and Purchase Accounting and Goodwill

Under Brazilian GAAP, accounting standards do not specifically address business combinations andpurchase accounting. The purchase method is applied based on book values. Goodwill or negativegoodwill on the acquisition of a company is computed as the difference between the cost of acquisitionand its underlying book value. The excess of cost over the net book value of an acquired company isrecorded as goodwill attributable to one of the following reasons: step-up basis of the assets due to

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differences in the carrying values and fair values of the assets, future profitability and other reasons.Such goodwill should be amortized as follows depending on its nature:

• step-up basis of the assets: goodwill or negative goodwill should be amortized proportionallyover the remaining estimated useful lives of the corresponding assets of the acquiree;

• future profitability: goodwill or negative goodwill should be amortized during the time duringwhich expected results are achieved. In this case, the amortization period should not exceed tenyears; or

• non-justified goodwill by economic factors: goodwill should be expensed immediately. Negativegoodwill should not be amortized to income until the related investment is sold or written off.

For tax purposes, the amortization of goodwill or negative goodwill is generally not included in thedetermination of taxable income for the period. However, under certain tax strategies related tocorporate restructurings, the amortization of goodwill and negative goodwill are included in thedetermination of taxable income. The minimum amortization period accepted is five years, dependingon how the goodwill is classified, e.g., step-up basis of assets or future profitability.

We have been subject to business combinations and have recorded goodwill and negative goodwillas a result of purchase accounting.

Until July 2001, under U.S. GAAP and in accordance with APB Opinion No. 16 (APB No. 16),‘‘Business Combinations,’’ business combinations were accounted for as either purchases or poolings ofinterests. However, these two methods were not alternatives for the same transaction and distinctiveconditions had to be met in order for the pooling of interest method to be required. During June 2001,the Financial Accounting Standards Board issued SFAS No. 141, which amends APB No. 16 and whichrequires, among other things, that all business combinations, except those involving entities undercommon control, be accounted for by a single method—the purchase method. The combination ofentities under common control is accounted for in a manner similar to a pooling of interest. Under thismethod, the recorded assets and liabilities of the separate enterprises generally become the recordedassets and liabilities of the combined enterprise. Additionally, the combined enterprise records ascapital the capital stock and the capital in excess of par or stated value of outstanding stock of theseparate enterprises. Similarly, retained earnings or deficits of the separate enterprises are combinedand recognized as retained earnings or deficits of the combined enterprise. Any assets or liabilitiesexchanged to effect the transfer are accounted for as a capital dividend to, or capital contribution by,the transferor.

SFAS No. 141, contains more detailed guidance with regard to the recognition of intangible assets(as defined in the SFAS). Also, under SFAS No. 141 and SFAS No. 142 ‘‘Goodwill and OtherIntangible Assets,’’ goodwill and other intangible assets with indefinite lives are no longer amortized.Rather, goodwill and indefinite lives intangibles are evaluated for impairment annually, and if impairedtheir recorded value is adjusted accordingly. Under APB No. 16, the excess of fair value of net assetsacquired over the purchase price, referred to as negative goodwill, reduced noncurrent assets to zero,and any remaining balance was considered a deferred credit and amortized over the estimated periodof benefit, not to exceed 40 years. Under SFAS No. 141, any such remaining balance excess isimmediately recognized as an extraordinary gain in the statement of operations. Under the purchasemethod, the financial statements of the acquiring company for periods prior to the acquisition are notrestated. SFAS No. 141 requires the presentation of pro forma results of operations for the current andcomparative periods of business combinations.

Property, Plant and Equipment—Impairment Analysis

Under Brazilian GAAP, companies are required to determine if operating income is sufficient toabsorb the depreciation or amortization of long-lived assets, within the context of the balance sheet as

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a whole, in order to assess potential asset impairment. In the event that such operating income isinsufficient, within the context of the fixed asset group, to recover the depreciation due to permanentimpairment of assets, the assets, or groups of assets, are written down to recoverable values. We havenot recorded any significant long-lived asset impairments in recent years.

Under U.S. GAAP, SFAS No. 144, ‘‘Accounting for the Impairment or Disposal of Long-livedAssets,’’ requires companies to periodically evaluate the carrying value of long-lived assets to be heldand used and for long-lived assets to be disposed of, when events and circumstances require such areview. The carrying value of long-lived assets is considered impaired when the sum of its undiscountedcash flows expected to result from the use and eventual disposition of the asset exceeds its carryingvalue. In that event, a loss is recognized based on the amount by which the carrying value exceeds thefair market value of the assets or discounted cash flows generated by the assets.

Organizational and Pre-operating Costs

Under Brazilian GAAP, pre-operating expenses incurred in the construction or expansion of a newfacility may be deferred until the facility begins commercial operations. Subsequently all costs related tothe organization and start-up of a new business may be capitalized to the extent that they areconsidered recoverable. The deferred charges are amortized over a period of five to ten years. We haverecorded deferred charges.

Under U.S. GAAP, the rules are generally more restrictive as to the costs that can be capitalizedand the periods over which such costs are amortized. Under U.S. GAAP, these expenses are normallycharged to operations.

Employees Termination Costs in Restructuring Plan

Under Brazilian GAAP, a provision for estimated employee termination costs arising from thedecision to restructure operations is recorded when an obligation has been incurred and the relatedcosts can be estimated. The criteria for recognizing such a provision are more general and less definedthan under U.S. GAAP.

Under U.S. GAAP, until December 31, 2002, companies recorded this liability only when variousconditions were met, including:

• prior to the date of the financial statements, management having the appropriate level ofauthority to involuntarily terminate employees approved and committed the enterprise to theplan of termination and established the benefits that current employees would receive upontermination;

• prior to the date of the financial statements, the benefit arrangement was communicated toemployees. The communication of the benefit arrangement included sufficient detail to enableemployees to determine the type and amount of benefits they would receive if they wereterminated;

• the plan of termination specifically identified the number of employees to be terminated, theirjob classifications or functions, and their locations; and

• the period of time to complete the plan of termination indicated that significant changes to theplan of termination were not likely.

For employee termination benefits associated with exit or disposal activities initiated afterDecember 31, 2002, SFAS No. 146, ‘‘Accounting for Costs Associated with Exit or Disposal Activities’’applies. Under this new pronouncement, a liability for a cost associated with an exit or disposal activityshould be recognized and measured initially at its fair value in the period in which the liability isincurred, except for a liability for one-time termination benefits that is incurred over time. A liability

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for a cost associated with an exit or disposal activity is incurred when the definition of a liability is metin accordance with Paragraph 35 of FASB Concepts Statement No. 6 ‘‘Elements of FinancialStatements.’’ In the unusual circumstances in which fair value cannot be reasonably estimated, theliability should be recognized initially in the period in which fair value can be reasonably estimated.The timing of recognition and measurement of the liability for one-time termination benefits isdependent upon whether employees are required to render services until they are terminated in orderto receive the termination benefits and, if so, whether the employee will be retained to render servicebeyond a minimum retention period. Under FAS 146, an arrangement requires future services ifemployees: (i) are not entitled to receive the termination benefits until they are terminated; and(ii) they will be retained to render service beyond a minimum retention period, as defined in FAS 146.

If future service is required for employees to receive the one-time termination benefit, entitiesmust initially (at the communication date) measure the liability at its fair value as of the terminationdate. That liability must then be recognized ratably over the future service period. A change resultingfrom a revision to either the timing or the amount of estimated cash flows over the future serviceperiod shall be measured using the credit-adjusted risk free rate that was used to measure the liabilityinitially. The cumulative effect of the change shall be recognized as an adjustment to the liability in theperiod of change.

If employees are not required to render futures services (after the minimum retention period) inorder to receive the one-time termination benefits, then entities must recognize and measure theliability for such benefits at fair value at the communication date. The promise to provide one-timetermination benefits (absent a requirement to render future service) is the requisite past event forrecognition of a liability, without consideration as to when those benefits would be paid.

Statement of Cash Flows

Brazilian GAAP requires a company to present a statement of changes in its financial position,which depicts the source and application of funds in terms of movement in working capital.

U.S. GAAP requires presentation of a statement of cash flows describing the cash flows providedby or used in operating, investing and financing activities. SFAS No. 95 ‘‘Statement of Cash Flows’’establishes specific presentation requirements and requires additional disclosures, such as the amountof interest and income taxes paid and non-cash financing and investing transactions, such as acquisitionof property, plant and equipment through capital leases, utilization of escrow deposits in settlement ofliabilities and debt for equity conversions, among others.

Segment Information

Under Brazilian GAAP, there is no requirement for financial reporting of operating segments. Wedo not present segment information.

Under U.S. GAAP, publicly held companies should report both financial and descriptiveinformation about their reportable operating segments. Operating segments are defined as those aboutwhich separate financial information is available and is regularly evaluated by the chief operatingdecision maker. Segment information is generally reportable for any operating segment that accountsfor 10.0% or more of all segment revenue, results of operating activities, or total assets.

Generally, companies will report financial information on the basis used internally for evaluatingsegment performance. Financial information to be disclosed includes segment profit or loss, certainspecific revenue and expense items and segment assets as well as reconciliation of total segmentrevenues, profit or loss and assets to the corresponding amounts in the financial statements.

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Related Parties

Brazilian GAAP generally defines related parties in a more limited manner, and requires fewerdisclosures, than U.S. GAAP. As a result, many of the disclosures required in the United States are notrequired in Brazil.

Foreign Currency Translation

Under Brazilian GAAP, the financial statements of associates operating in strong currencyenvironments are translated using the current exchange rate. Financial statements presented in weakcurrencies are generally adjusted for the effects of inflation prior to translation. Translation gains andlosses are taken to the income statements.

SFAS 52, Foreign Currency Translation provides standards of financial accounting and reportingfor foreign currency financial statements that are included in the financial statements of an enterpriseby consolidation, combination, or the equity method of accounting. SFAS 52 requires the assets,liabilities and operations of a foreign entity to be measured using the functional currency of that entity.An entity’s functional currency is the currency of the primary economic environment in which the entityoperates; normally, that is the currency of the environment in which an entity primarily generates andexpends cash. When the functional currency of the subsidiary is the local currency, the translation offoreign currency financial statements into the reporting currency should be made using the currentexchange rate for all assets and liabilities. Revenue and expenses should be translated at the exchangerate of the dates when they were recognized. Translation gains and losses are reported as a separatecomponent of shareholders’ equity.

If an entity’s books of record are not maintained in its functional currency, remeasurement intothe functional currency is required. The remeasurement is required before translation into thereporting currency. If a foreign entity’s functional currency is the reporting currency, remeasurementinto the reporting currency obviates translation. The financial statements of a foreign entity in a highlyinflationary economy shall be remeasured as if its functional currency were the reporting currency. Allexchange gains and losses arising from remeasurement into the functional currency are recognizedcurrently in income.

Comprehensive Income

Brazilian GAAP does not embody the concept of comprehensive income, and we do not presentsuch information.

Under U.S. GAAP, SFAS No. 130 ‘‘Reporting Comprehensive Income’’ requires the disclosure ofcomprehensive income. Comprehensive income is comprised of net income and ‘‘other comprehensiveincome’’ that include charges or credits taken directly to equity that are not the result of transactionswith owners. Examples of other comprehensive income items are cumulative translation adjustmentsunder SFAS No. 52, unrealized gains and losses for available-for-sale securities under SFAS No. 115, aswell as the effects of cash flow hedge accounting under SFAS No. 133 and minimum pension liabilitiesunder SFAS No. 87

Financial Statement Note Disclosure

Brazilian GAAP in general require less information to be disclosed in financial statementsfootnotes than U.S. GAAP.

• general business, political and economic risks;

• details of guarantees provided to third parties;

• advertising expenses and assets;

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• research and development costs;

• analysis of sales by geographical area;

• financing facilities and terms;

• financial information by operating business and geographical areas; and

• footnote disclosure of summarized financial statements of affiliated companies that meet certaintests of significance.

Brazilian GAAP generally requires more disclosure than U.S. GAAP with respect to insurancecoverage, parent company financial statements and details of investments in affiliated and subsidiarycompanies.

Derivative Instruments

Brazilian GAAP does not address the accounting for derivatives, which are frequently maintainedas off-balance-sheet instruments or recorded at the lower of accrual basis or fair value. Embeddedderivatives are not identified under Brazilian GAAP. We have swap contracts that are recorded on theaccrual basis. Additionally, we have put and sale options in relation to sale of investments in jointventures and fixed assets.

SFAS No. 133, as amended, establishes accounting and reporting standards for derivativeinstruments, including certain derivative instruments embedded in other contracts (collectively referredto as derivatives), and for hedging activities.

SFAS No. 133, as amended, requires that a company recognize all derivatives as either assets orliabilities in the statement of financial position and measure those instruments at fair value. If certainconditions are met, a derivative may be specifically designated as:

• a hedge of the exposure to changes in the fair value of a recognized asset or liability or anunrecognized firm commitment;

• a hedge of the exposure to the variable cash flows of a forecasted transaction; or

• a hedge of the foreign currency exposure of a net investment in a foreign operation.

The accounting for changes in the fair value of a derivative (that is, gains and losses) depends onthe intended use of the derivative and the resulting designation. Derivatives that are not designated aspart of a hedging relationship must be adjusted to fair value through income. Certain stringentconditions must be met in order to designate a derivative as a hedge. If the derivative is a hedge,depending on the nature of the hedge, the effective portion of the hedge’s change in fair value is either(1) offset against the change in fair value of the hedged asset, liability or firm commitment throughincome or (2) held in equity until the hedged item is recognized in income. If the hedge criteria are nolonger met, the derivative instrument would then be accounted for as a trading instrument. If aderivative instrument designated as a hedge is terminated, the gain or loss is deferred and amortizedover the shorter of the remaining contractual life of the terminated risk management instrument or thematurity of the designated asset or liability.

Software for Internal Use

Under Brazilian GAAP, external computer development costs are capitalized at cost. We havecapitalized costs for internally developed software.

Under U.S. GAAP, Statement of Position, or SOP, 98-1, requires identified costs related to thedevelopment and installation of software for internal use to be capitalized as fixed assets, includingdesign of the chosen path, software configuration, software interfaces, coding, installation of hardware

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and testing. Costs incurred for conceptualization and formulation of alternatives, training andapplication maintenance should be expensed as incurred.

Leasing Transactions (Leases)

Under Brazilian GAAP, all leases normally are treated for accounting purposes as operating leasesand the expense is recognized at the time that each lease installment falls due. Disclosure regardingleases is more limited than under U.S. GAAP. We have leased vehicles/equipment that are accountedfor as operating leases.

Under U.S. GAAP, leases which transfer substantially all the benefits and risks of ownershiprelated to the leased property from lessor to the lessee are treated as capital leases and thecorresponding assets or liabilities are recognized, as appropriate, and the effects of depreciation andinterest expense are recognized in income. All other leases are classified as operating leases and thelease payments charged to income as they fall due.

Non-interest Bearing Debt Instruments

Under Brazilian GAAP, non-interest bearing debt instruments are not generally presented with animputed rate of interest in order to recognize the economic substance of the underlying transaction. Wehave non-interest bearing receivables with related parties.

Under U.S. GAAP, APB No. 21, ‘‘Interest on Receivables and Payables,’’ requires the imputationof a reasonable, market-based, rate of interest for non-interest bearing debt instruments over thematurity period of the note. In addition, the carrying value of the debt instrument is reported net ofany resulting discount or premium.

Transfer of Financial Assets

No specific pronouncement addresses the accounting for transfers of financial assets underBrazilian GAAP. We have entered into several agreements for credit assignments.

Under U.S. GAAP, SFAS No. 140, ‘‘Accounting for Transfers and Servicing of Financial Assets andExtinguishments of Liabilities,’’ provides a consistent application of a financial-components approachthat focuses on control to account for transfers of financial assets. Under that approach, after a transferof financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities ithas incurred, but does not recognize financial assets when control has been surrendered and does notrecognize liabilities when extinguished. SFAS No. 140 provides standards for distinguishing transfers offinancial assets that are sales from transfers that are secured borrowings from an accountingperspective.

A transfer of financial assets in which the transferor surrenders control over those assets isaccounted for as a sale to the extent that consideration is received in exchange. Under SFAS No. 140,it is considered that the transferor has surrendered control over transferred assets if and only if all ofthe following conditions are met:

• The transferred assets have been isolated from the transferor—put presumptively beyond thereach of the transferor and its creditors, even in bankruptcy or other receivership.

• Each transferee (or, if the transferee is a qualifying special-purpose entity, or SPE, each holderof its beneficial interests) has the right to pledge or exchange the assets (or beneficial interests)it received, and no condition both constrains the transferee (or holder) from taking advantage ofits right to pledge or exchange and provides more than a trivial benefit to the transferor.

• The transferor does not maintain effective control over the transferred assets through either(1) an agreement that both entitles and obligates the transferor to repurchase or redeem them

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before their maturity or (2) the ability to unilaterally cause the holder to return specific assets,other than through a clean-up call.

Under SFAS No. 140, liabilities and derivatives incurred or obtained by transferors as part of atransfer of financial assets are initially measured at fair value, if practicable. It also requires thatservicing assets and other retained interests in the transferred assets be measured by allocating theprevious carrying amount between the assets sold, if any, and retained interests, if any, based on theirrelative fair values at the date of the transfer.

Accounting for Guarantees by a Guarantor

Under Brazilian GAAP, guarantees granted to third parties are recorded in circular accounts.When fees are charged for issuing guarantees, the fee is recognized in income over the period of theguarantee. When the guaranteed party has not honored its commitments and the guarantor shouldassume a liability, a credit is recognized against the guaranteed party representing the right to seekreimbursement for such party with recognition of the related allowance for losses when consideredappropriate. We guarantee the debt of certain associated companies.

Under U.S. GAAP, FIN No. 45, ‘‘Guarantor’s Accounting and Disclosure Requirements forGuarantees, Including Indirect Guarantees of Indebtedness of Others,’’ is effective for guaranteesissued or modified after December 31, 2002. FIN No. 45 requires a guarantor to recognize, at theinception of a guarantee, a liability for the fair value of the obligation undertaken in issuing theguarantee. Specific disclosures of guarantees granted are also required under FIN No. 45.

Right of Offset

Brazilian GAAP permits offsetting amounts due or payable among parties, for purposes ofpresenting balances in the financial statements based on management’s expectation of being able tooffset the amounts. We offset advances from clients with amounts receivable and payable with certainbanks.

Under U.S. GAAP, for a right to setoff to exist certain conditions must be met including that suchright of setoff is enforceable at law.

Disclosures on Financial Instruments and Concentration of Credit Risk

Under Brazilian GAAP, there are less detailed requirements regarding the disclosure ofinformation on financial instruments not reflected on the balance sheet or on concentration of financialinstruments with credit risk.

U.S. GAAP requires disclosures prescribed by SFAS No. 105, ‘‘Disclosure of Information aboutFinancial Instruments with Off-Balance Sheet Risk and Concentration of Credit Risk,’’ SFAS No. 107,‘‘Disclosure about Fair Market Value of Financial Instruments’’ and SFAS No. 119, ‘‘Disclosure aboutDerivative Financial Instruments and Fair Value of Financial Instruments.’’ SFAS No. 105, with certainexceptions, requires disclosure of the following in regard to financial instruments with off-balance sheetrisk:

• face or contract or notional principal amount;

• nature and terms, including (i) credit and market risk, (ii) cash requirements and (iii) accountingpolicy followed;

• amount of loss, if any party to the financial instrument fails to perform; and

• policy as to requiring collateral.

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As to concentration of credit risk arising from all financial instruments, including accountsreceivable, SFAS No. 105 requires:

• information about the activity, region or other characteristic that identifies the concentration;

• amount of loss if parties to the concentrated risk fail to completely perform; and

• policy as to requiring collateral.

Income Taxes

Under Brazilian GAAP, income taxes are recorded pursuant to a method similar to U.S. GAAP,but its practical application may lead to different results under certain circumstances. The criteria forrecognition of the tax benefit of tax loss carryforwards under Brazilian GAAP and CVM rules limitsuch recognition to a maximum of 10 years. Also, under Brazilian GAAP, deferred tax effects are basedon statutory rates, including those established by provisional measures issued by the Brazilian Federalgovernment.

Under U.S. GAAP, companies use the liability method to calculate the income tax provision, asspecified in SFAS No. 109 ‘‘Accounting for Income Taxes.’’ Under the liability method, companiesrecognize deferred tax assets or liabilities with a corresponding charge or credit to income fordifferences between the financial and tax bases of assets and liabilities at each year/period-end. UnderU.S. GAAP, companies operating in highly inflationary environments do not record deferred taxes fordifferences relating to certain assets and liabilities that they remeasure into U.S. dollars at historicalexchange rates and that result from changes in exchange rates or indexing to inflation in local currencyfor tax purposes. Companies recognize net operating loss carryforwards arising from tax losses as assetsand establish valuation allowances to reflect the amount that more likely than not will be recovered.Deferred tax effects are based on the enacted tax rates that will be in effect when the temporarydifferences reverse. There may be differences in timing with respect to the recognition of the effects ofchanges in tax rates.

Investments in Debt and Equity Securities

Under Brazilian GAAP, marketable debt and equity securities are generally stated at the lower ofcost or market value and realized gains and both realized and unrealized losses were reflected inincome. We have investments in marketable securities.

Under U.S. GAAP, in accordance with SFAS No. 115 ‘‘Accounting for Certain Investments in Debtand Equity Securities,’’ the accounting and reporting for investments in equity securities that havereadily determinable fair values and for all investments in debt securities is as follows for companies inindustries not having specialized accounting practices:

• companies classify debt securities that the company has the positive intent and ability to hold tomaturity as ‘‘held-to-maturity’’ securities and report them at amortized cost;

• companies classify debt and equity securities they hold principally for the purpose of selling inthe short-term as ‘‘trading securities’’ and report them at fair market value, including unrealizedgains and losses in income; and

• companies classify debt and equity securities that they have not classified either as‘‘held-to-maturity’’ or ‘‘trading securities’’ as securities available-for-sale and report them at fairvalue, excluding unrealized gains and losses from earnings and reporting them in a separatecomponent of shareholders’ equity until realized.

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Employee Pension Costs and Other Post-Employment Benefits

Under Brazilian GAAP, employee pension costs and other benefits were expensed as they fell due.As for fiscal years commencing on or after December 31, 2002, with prior application encouraged, anew statement of the IBRACON (NPC 26) approved by the CVM should be applied by sponsor ofplans that are public companies to account for employee benefits including pension costs andother-post-employment benefits. Under this new standard, an actuarial method is used for determiningdefined benefit pension costs and other post-employment benefits and provides for the deferral ofactuarial gains and losses (in excess of a specific corridor). Defined contribution pension plans andother post-employment benefits require the recognition as an expense of contributions when fall due. Ifthe new standard was implemented up to December 31, 2001 the impact on adoption should berecognized against retained earnings; if the standard was implemented after December 31, 2001 suchimpact should be recognized in net income over five years or over the estimated remaining life if it isshorter. At a minimum, specific disclosures are required in financial statements for the year endedDecember 31, 2001, including the funded/unfunded status of the plan.

Under U.S. GAAP, employee pension costs are recognized in accordance with SFAS No. 87‘‘Employers’ Accounting for Pensions.’’ In addition to the differences in cost recognition, thedisclosures required with respect to employee pensions are more detailed under U.S. GAAP thancurrent requirements under the Brazilian GAAP.

SFAS 87 requires the use of an actuarial method for determining defined benefit pension costs andprovides for the deferral of actuarial gains and losses (in excess of a specific corridor) that result fromchanges in assumptions or actual experience differing from that assumed. SFAS No. 87 also providesfor the prospective amortization of costs related to changes in the benefit plan, as well as the obligationresulting from transition and requires disclosure of the components of periodic pension costs and thefunded status of pension plans. SFAS No. 132, ‘‘Employers’ Disclosures About Pensions and OtherPostretirement Benefits,’’ which became effective for all entities for fiscal years beginning afterDecember 15, 1997 modified the disclosure requirements under SFAS 87.

Under U.S. GAAP, SFAS No. 106 ‘‘Employers’ Accounting for Post-retirement Benefits other thanPensions’’ applies to all post-retirement benefits related to life insurance provided outside a pensionplan or to other post-retirement benefits, including health care and welfare benefits, expected to beprovided by an employer to current and former employees. SFAS No. 106 is similar to SFAS No. 87 inthat the cost of a post-retirement benefits plan should be recognized over the employees’ serviceperiods and that actuarial assumptions are used to project the cost of health care benefits and thepresent value thereof. Under SFAS No. 106, a company is required to describe the plan, employeegroups covered, type of benefits provided, funding policy, periodic plan costs, types of assets held, andany matter affecting comparability, among other disclosures.

Under SFAS no. 158 ‘‘Employers’ Accounting for Defined Benefit Pension and OtherPostretirement Plans—an Amendment of FASB Statements No. 87, 88, 106, and 132(R)’’ an employeris required to recognize the overfunded or underfunded status of a defined benefit pension andpost-retirement plan (other than a multiemployer plan) as an asset or liability in its statement offinancial position and to recognize changes in that funded status in the year in which the changes occurthrough comprehensive income of a business entity or changes in unrestricted net assets of anot-for-profit organization. SFAS 158 also requires an employer to measure the funded status of a planas of the date of its year-end statement of financial position, with limited exceptions. A company isrequired to initially recognize the funded status of a defined benefit pension and post-retirement plansand to provide the required disclosures as of December 31, 2006. The requirement to measure planassets and benefit obligations as of the date of the employer’s fiscal year end statement of financialposition is effective for the fiscal year ending December 31, 2008.

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PRINCIPAL EXECUTIVE OFFICES

CONSTRUTORA NORBERTO ODEBRECHT FINANCE LTD.ODEBRECHT S.A. M&C Corporate Services Limited,Avenida das Nacoes P.O. Box 309 GT

Unidas, 4777, 6th and 7th Floors Ugland House, South Church Street05477-000 Sao Paulo—SP George Town, Grand Cayman

Brazil Cayman Islands

TRUSTEE, PAYING AGENT AND TRANSFER AGENTThe Bank of New York

Global Trust Services—America101 Barclay Street

New York, New York 10286USA

PRINCIPAL PAYING AGENTThe Bank of Tokyo-Mitsubishi UFJ, Ltd.

12-15 Finsbury CircusLondon EC2M 7BT

England

LEGAL ADVISORS

To Odebrecht Finance Ltd. and To Odebrecht Finance Ltd. andConstrutora Norberto Odebrecht S.A. Construtora Norberto Odebrecht S.A.

as to United States Law as to Cayman Islands LawWhite & Case LLP Maples and Calder

Alameda Santos, 1940-3o andar P.O. Box 309GT, Ugland House01418-200 Sao Paulo—SP South Church Street

Brazil George Town, Grand CaymanCayman Islands

To the Initial Purchasers To the Initial Purchasersas to United States Law as to Brazilian Law

Clifford Chance US LLP Souza, Cescon Avedissian, Barrieu e31 West 52nd Street Flesch Advogados

New York, New York 10019 R. Funchal, 263, 11o andarUSA 04551-060 Sao Paulo—SP

Brazil

INDEPENDENT ACCOUNTANTSPricewaterhouseCoopers Auditores Independentes

Rua Miguel Calmon, 55540015-010 Salvador, Bahia, Brazil

LUXEMBOURG LISTING AGENT AND PAYING AGENTThe Bank of New York (Luxembourg) S.A.

Areogolf Center1A Hoehenhof

L-1736 SenningerbergLuxembourg

Construtora Norberto Odebrecht S.A. - Cbonds

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