US$75000000 Lupatech Finance Limited - Banco Best

educing economic growth. As a result, interest rates have fluctuated significantly. For example, the official interest
rates in Brazil at the end of 2005, 2006, 2007 and at March 31, 2008 were 17.75%, 18.0%, 13.25% and 11.25%,
respectively, as set by the Brazilian Committee on Monetary Policy (Comitê de Política Monetária), or the COPOM.
Future Brazilian government actions, such as interest rate decreases, intervention in the foreign exchange
market and actions to adjust or fix the value of the real, may trigger increases in inflation. If Brazil experiences high
inflation in the future, we may not be able to adjust the prices we charge our customers to offset the effects of
inflation on our cost structure, which may have a material adverse effect on us.
Exchange rate instability may adversely affect the Brazilian economy and the trading price of our bonds.
As a result of several pressures, the Brazilian currency has been devalued periodically in relation to the
U.S. dollar and other foreign currencies during the last four decades. Throughout this period, the Brazilian
government has implemented various economic plans and utilized a number of exchange rate policies, including
sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from daily to
monthly, floating exchange rate systems, exchange controls and dual exchange rate markets. From time to time,
there have been significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and
other currencies. For example, the real depreciated against the U.S. dollar 18.7% in 2001 and 52.3% in 2002.
Although the real appreciated 11.6%, 8.7% and 17.2% against the U.S. dollar in 2005, 2006, and 2007 respectively,
there can be no assurance that the real will not depreciate or be devalued against the U.S. dollar again. On
March 31, 2008, the U.S. dollar-real exchange rate was R$1.749 per US$1.00.
Depreciations of the real relative to the U.S. dollar could create additional inflationary pressures in Brazil
and lead to increases in interest rates, which may negatively affect the Brazilian economy as a whole, as well as the
trading price of our bonds.
Developments and the conditions prevailing in other emerging market countries have in the past significantly
affected the availability of credit and resulted in considerable decreases in investor demand and volume of
foreign investments in Brazil.
There can be no assurance that future developments in emerging market countries and government
measures in these countries would not adversely affect the availability of credit in the local and international
markets, thereby negatively affecting the Brazilian economy, our business and results of operations. If our access to
the capital and finance markets is restricted, we could have difficulties in implementing our capital expenditure plan
and maintaining our market share, which may adversely affect our financial condition and results of operations and
the market value of the bonds.
Risks Relating to Argentina
Political, economic and social instability in Argentina may adversely impact our business operations in
Argentina.
During 2001 and 2002, Argentina went through a period of severe political, social and economic crisis.
Although general economic conditions have shown improvement and political protests and social disturbances have
considerably diminished since the economic crisis of 2001 and 2002, the rapid and radical nature of the changes in
the Argentine social, political, economic and legal environment over the past five years and the absence of a clear
political consensus in favor of any particular set of economic or political policies have given rise to significant
uncertainties about the country’s economic and political future. It is unclear whether the economic and political
instability experienced over the past years will continue and it is possible that, despite recent economic growth,
Argentina may experience another recession, higher inflation, unemployment and greater social unrest. As a result,
these factors may result in a material adverse effect on our results of operations and financial condition.
During its crisis in 2001 and 2002, Argentina experienced social and political turmoil, including civil
unrest, riots, looting, nationwide protests, strikes and street demonstrations. Despite Argentina’s ongoing economic
recovery and relative stabilization, the social and political tensions and high levels of poverty and unemployment
continue. These conditions could adversely affect our relations with our employees, which could affect our
operations. Future government policies to preempt or respond to social unrest may include expropriation,
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