Brazilian Infrastructure July 2010

Macroeconomic Scenario SECTION 2

2

4.0

6.15.1

-0.2

6.0

4.0 4.0 4.0 4.0 4.04.5 4.5 4.5

2006 2008 2010E 2012E 2014E 2016E 2018E

Unique Momentum of the Local Economy

Brazil grows more than developed countries (GDP %)…

… but still below emerging economies (GDP %) …

… with strong growth forecast (GDP %)

0%

2%

4%

6%

2004 2005 2006 2007 2008

Brazil Developed Countries

0%

2%

4% 6%

8%

10%

2004 2005 2006 2007 2008

Brazil Emerging Economies

Among the fastest growing economies…

… with solid fundamentals for long term growth

Inflation stability (IPCA %)… …historically low real interest rates… …political stability with lowest country risk in history

0

500

1000

1500

31-d

ec-0

2

14-n

ov-0

3

30-se

p-04

16-a

ug-0

5

30-ju

n-06

17-m

ay-0

7

4-ap

r-08

19-fe

b-09

11.6 7.2 6.3 5.4 4.9

6.9 7.2 6.5 5.5 5.0 4.8 4.8 4.8

2006 2008 2010E 2012E 2014E 2016E 2018E

3.1 4.5

5.9 4.3 5.0

4.5 4.5 4.3 4.3 4.0 4.0 4.0 4.0

2006 2008 2010E 2012E 2014E 2016E 2018E

And 2010 elections should not impact long term stability

Source: Banco Central do Brazil, IBGE, FGV, Bloomberg and BTG Pactual estimates.

Brazil’s Infrastructure Landscape SECTION 3

4

Debottlenecking, efficiency enhancement

and sector competitiveness

Why Invest in Infrastructure in Brazil? Need of huge investments to support growth...

… creating significant investment opportunities and strong growth potential for the infrastructure sector

"

Private Sector Encouraged to Invest   Lack of public investment   Availability of several lines of long term governmental funding

with low cost

  Low impact of global crisis on local industry   GDP growth forecast over 5% in 2010

Strong Economic Growth

"

Strong Need of Investments in Various Sectors   Airports modernization and expansion   Roadways improvement and recovery   Ports modernization and expansion   Increase energy supply   Expansion of natural gas structure of production, transportation

and distribution   Sanitation coverage expansion   Infrastructure support for recently discovered oil reserves

exploration

"

5

Government’s Growth Acceleration Program (PAC)

•  In the first phase – from 2007 until 2010 – the total investments are expected to achieve R$504 billion •  The second phase – PAC 2 – was recently announced

and calls for public and private investments of R$959 billion between 2011 and 2014 and R$ 632 billion after 2014 •  The investments are distributed between federal

government and private sector/government controlled companies •  PAC investments are divided as follows: ￚ  Logistics

  highways, railways, ports, airports and waterways ￚ  Energy

  Generation and transmission of electric power, petroleum, natural gas and renewable fuels

ￚ  Social and urban infrastructure   Sanitation, housing, urban transportation, lighting

and water resources

The Growth Acceleration Program (Programa de Aceleração do Crescimento – PAC) was created by the Federal Government in early 2007 to promote a sustainable economic growth in Brazil via an increase in infrastructure investment

Roads 33.4 27.7 83% Shipping 10.6 11.2 106% Railways 7.9 1.14 14% Airports 3 0.25 8% Ports 2.7 0.12 5% Waterways 0.7 0.01 1% Total 58.3 40.4 69%

PAC 1 2006-2010 Sector Investments until Concluded until

Concluded 2010 (R$bn) Dez 09 (R$bn) (%)

Roads Shipping Railways Airports Ports Waterways Total

PAC 2 2011-2014

Sector Investments until After 2014 (R$bn) 2014

50.2 36.7 43.9

3 4.8 2.6

141.2

2 -

2.1 -

0.3 0.1 4.5

Tranportation and Logistics investments under PAC

6

2014 World Cup & 2016 Olympic Games

Investment breakdown by sector Estimated investments related to the 2014 World Cup (R$ bn)

2016 Olympic Games in Rio: Preliminary estimates indicate potential investment requirements of approx. US$16 billion

Cuiabá: 2

Manaus: 1

DF: 3

Porto Alegre: 4

Curitiba: 4

São Paulo: 28 Rio de Janeiro: 9

BH: 2

Salvador: 4 Recife: 4

Natal: 3

Fortaleza: 7

Source: Federal Govenment, States Governments BTG Pactual estimates

Transportation and Logistics R$15bn Structures R$5bn Energy R$2bn Secudity & Others R$9bn Total R$31bn

Estimated Olympic Games Investments

Urban Mobility R$50bn Airports R$4bn Energy R$8bn Sanitation R$9bn Total R$71bn

Estimated World Cup Investments

Significant infrastructure investment requirements fostered by huge sports events

SECTION 3.1

Ports

8

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

1400.0

1600.0

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2007 2008 2009

(1980 = 100)

PIB global

Comércio global

Transporte global de contêineres

Containerization trend marching forward

≈ 2,2x

≈ 12,4x

≈ 5,6x

≈ 10,1x

Source: WTO, IMF, Drewry Shipping Consultants, Baltic Maritime Advisers

Lei d

e M

oder

niza

ção

dos

Port

os

Nov

a C

onst

ituiç

ão F

eder

al

Arr

enda

men

to d

os p

rinci

pais

te

rmin

ais

de u

so p

úblic

o

Global GDP

Global Commerce

Global Container Transportation

Global Container Movements

9

Economies of scale driving container vessels larger and larger

8.600 TEU 5a Geração (2000 - 2005)

Super Post-Panamax

4a Geração (1986 - 2000)

Post-Panamax 4.848 TEU

3a Geração (1985) Panamax 3.220 TEU

2a Geração (1970 - 1980) 2.305 TEU

1a Geração (Pré 1960 - 1970) Ideal X 1.700 TEU

Full Cellular

15.000 TEU 6a Geração (2006 - ?)

Super-size Maersk

10

“Super vessels” demanding “super ports”

N/M Emma Maersk

Length 397m • Draft 15,5m Capacity 15.000 TEU • Crew 13

Constuction Cost US$ 145 mn • Speed 31 knots

11

Brazilian ports adequate to handle 5th generation vessels

N/M Monte Rosa

Length 272m • Draft 12.5m Capacity 6.290 TEU • Speed 24 knots

12

World’s 100 largest ports (2008)

13

Privatization has helped drive Brazil’s commerce with rest of the world

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Fonte: Banco Central / IBGE

International Trade GDP

≈ 1,88x

≈ 2,77x

1996 2008 2009

PIB (US$ bn) 840 1,573 1,577

International Trade (US$ bn) 101 371 281

≈ 3,67x

14

Private investments drove growth at public ports

0 50

100 150 200 250 300 350 400 450 500

1999 2001 2004 2009

Granéis Sólidos

Portos Públicos

Terminais Privativos

0

50

100

150

200

250

1999 2001 2004 2009

Granéis Líqüidos

Portos Públicos

Terminais Privativos

0

20

40

60

80

100

120

1999 2001 2004 2009

Carga Geral

Portos Públicos

Terminais Privativos

0

100

200

300

400

500

600

700

800

1999 2001 2004 2009

Total

Portos Públicos

Terminais Privativos

Mn tons

Fonte: ANTAq e Ministério dos Transportes

Brazilian Ports (mn tons)

General Cargo Solid Bulk Liquid Bulk Total

1999 2009 Growth 1999 2009 Growth 1999 2009 Growth 1999 2009 Growth Portos públicos

35 72 107% 66 148 123% 31 40 29% 132 260 97% Terminais privativos

13 30 125% 176 285 62% 114 158 38% 304 473 56% Total

48 85 113% 243 433 78% 145 197 36% 436 733 68%

Mn tons Mn tons Mn tons

15

Over US$2 bn were invested by 14 container terminal concessionaires

1998 2007

Extensão de cais (m) 3.313 7.049

Retroárea (m2) 940.141 2.538.966

Produtividade (mph*) 22,70 40,00

Empregos diretos 1.602 8.100

Guindastes / empilhadeiras 45 299

* A produtividade refere-se à movimentação de contêineres por hora, por navio

16

Investments have driven capacity and productivity

Fonte: Santos Brasil

11

43

53

82

104

1998 2005 2008 2011 2015

Mph per vessel

208,531

689,174839,392

1,400,000

2,000,000

1998 2005 2008 2011 2015

* Previsões de produtividade e capacidade de movimentação

Container Movements

* * * *

*

* *

*

Santos Brasil

17

Another US$4bn will be invested until 2015

Realizado A realizar

1998 2007 2015

Extensão de cais (m) 3.313 7.049 11.965

Retroárea (m2) 940.141 2.538.966 3.446.068

Produtividade (mph*) 22,70 40,00 73,00

Empregos diretos 1.602 8.100 11.457

Guindastes / empilhadeiras 45 299 558

Fonte: ABRATEC * MPH é a movimentação média de contêineres por hora, por navio

18

Ports held by Cia. Docas Controladas da União

Ports held by States & municipalities

Private ports

Brazilian Port Industry

Top 8 container ports in Brazil (volume handled in thousands TEU) Main Brazilian Ports

Source: Confederação Nacional dos Transportes.

•  There are 54 ports in Brazil, 46 located on Brazil's 8,500 km of coast and 8 on rivers, all of which are responsible for 81% of Brazilian exports

44.4%

1,743

396 373 357 289 213 198 175

38.6%

8.8% 8.3% 7.9% 6.4%

4.7% 4.4% 3.9% Sa

ntos

Itajaí

Rio

Gran

de

Para

nagu

á

Rio d

e Jan

eiro

Sepe

tiba

Vitór

ia

S. F

co do

Sul

Source: ABRATEC - 2008

The 8 largest container ports account for more than 80% of total volume handled

19

Ports: Regulatory Framework

•  Mandatory public bidding process •  Authorization granted by the Government (no public bidding)

•  Determined term (up to 50 years, including renewal)

•  Undetermined term (for specific economic activity)

•  Assets are returned on the maturity date of the concession agreement

•  No return of assets

•  Public services subject to price supervision •  Private services – free to select users and determine prices

•  Restricted to specific regulation (OGMO)¹ •  Employed according to the national labor laws

•  ANTAQ Res. 55/2002: regulates the lease of the area and its facilities

•  ANTAQ Res. 517/2005: regulates the operation of private terminals (own cargo handling has to be economically feasible on a standalone basis)

Note: 1  Agency of Port Labor Management Source: ANTAQ

Implementation

Term

Assets

Services

Labor

Regulation

Main Aspects Public/Common Use Terminal Private Use Terminal

20

Main Players in the Brazilian Container Terminal Industry

Player Container terminal LocationStart of

operations Area (m2) # berths Extension (m)Access Channel

draft (m)Volume 2007

(TEU '000)

Santos Brasil Santos Jan-97 596 4 980 13.0 1,235

Imbituba Santa Catarina Mar-08 233 3 380 10.8 570

Convicon Cont. Vila de Conde Sep-03 103 6 254 12.2 29

Libra Term. Santos Apr-95 371 6 1,100 13.5 736

Libra Term. Rio de Janeiro May-98 140 2 545 13.0 202

Tecon Salvador Salvador Mar-00 74 2 454 12.0 253

Tecon Rio Grande Rio Grande Mar-97 735 3 850 12.5 622

Teconvi Itajaí Jan-02 48 4 740 9.9 n.a.

TCP Paranaguá Oct-98 320 3 665 12.7 590

Sepetiba Tecon Sepetiba Jan-02 400 3 810 18.5 154

Tecondi Santos Jan-00 100 2 410 n.a. n.a.

TVV Vitória Sep-98 108 2 464 10.7 275

Rodrimar Santos n.a. 70 2 400 11.5 n.a.

Multiterminais Rio de Janeiro Feb-98 318 3 713 12.6 146

21

Bottlenecks have turned into oversupply TECON Santos: 980m quay, 1.047.264 TEUs in 2009

Capacity >2.000.000 TEUs

Fonte: Santos-Brasil

22

Bottlenecks have turned into oversupply TECON Rio Grande: 850m quay, 656.358 TEUs em 2009

Fonte: TECON Rio Grande

Capacity >1.500.000 TEUs

SECTION 3.1

Airports

24

Strong demand pointing to major challenges ahead

98129

172

273

13

17

23

39

111

146

195

312

2009E 2014E 2020E 2030EDomestic International

127

36

27 107

47

Total SP RJ Brasilia BH Others

5.1% a.a.

VCP: 3.5 mnCGH: 12.0 mnGRU: 20.5 mn

SDU: 8.5 mnGIC: 18.0 mn

•  Assuming a base case scenario (5% annual growth), demand measured by enplanements will expand by 2.5x by 2030

•  The equivalent of another 9 Gruarulhos Airports are needed to meet this expected expansion

mn enplanements

Demand expansion of 10% p.a.

GDP Growth Yields

Demand Capacity

25

Several airports already operating above capacity

Airport Capacity (2009, mn enplanements) Capacity Gap

2009 2010 2011 2012

26

Sao Paulo terminal represents most relevant problem

Domestic Enplanements (mn) International Movements (mn) Cargo (mn tons)

27

Brazil’s main airports run by Infraero

Source: Infraero

Airport Administrators PAX (%) Cargo (%)

More than 8mn PAX More than 8mn PAX More than 1-3mn PAX Less than 1 mn PAX

28

Infraero is an inefficient entity vs. international benchmarks

10394

63 6055

33

100

Congonhas Guarulhos Brasilia Galeao Confins S. Dumont NorthAmerica

Movements per Runway (mn)

Movements per Runway (mn)

635

352

256201

111 93

741

Congonhas Guarulhos Brasilia Galeao Confins S. Dumont NorthAmerica

Infraero Revenues Breakdown – 2009

Boarding 28%

Storage 19% Landing &

Parking 10%

Commercial 30%

Communication & Navigation Services

11%

Others 2%

•  Commercial revenues represent 30% of total versus as much as 55% at benchmark airports

•  EBITDA margin below 15%, versus 60% for Asur

29

Investment requirements

29.05

6.0 - 8.4

7.8 - 11.0

10.7 - 14.2

24.5 - 33.6

2010-2014 2015-2020 2021-2030 2030

bn R$

SECTION 3.3

Rails

31

Brazilian Railway Industry Dynamics

Ratio of Railway Km per Million Inhabitants Evolution of Rail Freight in Brazil (NTK billion)

Low investment levels along the last decades have led the Brazilian rail system to poor conditions

Inefficient Rail System (ton/km/year) Rail Density (km of rail / 1,000 km2)

155 57

788

Brazil China United States

182.7 205.8

221.6 238.3

257.1 267.0

2003 2004 2005 2006 2007 2008

2.7 2.2

1.8

0.4 0.2

U.S. China Russia India Brazil

Source: ANTT, CNT., ANTP, CIA World Factbook and Banco Mundial.

130.3

69.9 61.8 59.5

21.4 21.3 18.3 7.0 7.0 5.5 5.1 3.4

GermanyEngland Japan France India US South Africa

Canada China Australia Russia Brazil

32

Concessionaire ProjectInvestment (R$ million)

Extension (Km)

ALL / Ferronorte Section from Alto Araguaia to Rondonópolis 750 260

ALL / Ferronorte Section from Inocência to Água Clara 350 278

Transnordestina Nova Transnordestina 5,400 1,728

FCA Ferrovia Oeste-Leste 5,993 1,490

FCA Litorânea Sul branch-line 2,030 165

FTC Expansion of Santa Catarina Railways 1,680 843

Vale Section from Araguaína to Palmas 1,630 504

TOTAL 17,833 5,268

Regional rail network

Bidding date

ConcessionaireOperating

sinceExtension

(Km)

West Mar-96 Ferrovia Nordeste Jul-96 1,621

Mid-east Jun-96 Ferrovia Centro-Atlântica Sep-96 7,080

Southeast Sep-96 MRS Logística Dec-96 1,674

Tereza Cristina Nov-96 Ferrovia Tereza Cristina Feb-97 164

South Dec-96 All - América Latina Logística do Brasil Mar-97 6,586

Northeast Jul-97 Companhia Ferroviária do Nordeste Jan-98 4,238

Paulista Nov-98 Ferrovia Bandeirantes Jan-99 4,236

TOTAL 25,599

Brazilian Railway System The regulatory framework established in the 90s is currently under review to address better market dynamics

Source: ANTT and Valor Econômico

•  In 1957, the Rede Ferroviária Federal S.A. (RFSSA) was created by the merge of 18 railways owned by the federal government to unify the national railway system

•  Following the National Privatization Program (Plano Nacional de Desestatização) in the 90s, RFSSA was privatized in several parts to enhance efficiency and improve system quality

―  Concessions period: 30+ 30 years ― Only 38% of granted railways are being explored

•  The current concession model is under review to promote system development through private investment

412 386 538 617 766 668 1,089 1,958 3,114

2,222 2,597 4,385

162 113 45 56 58 56 35 8

44 72 14

225

574 499 583 673 824 724 1,124 1,966

3,158 2,294 2,611

4,610

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Federal Government Concessionaires

Overview Investments in the Railway System

Privatization Program - RFSSA Main expansion projects

SECTION 3.4

Toll Roads

• 34

Brazilian Highway Industry Overview There is a significant growth potential in the Brazilian highway industry, as a considerable portion of the Brazilian highway network is not under concession

Highway Network (km) Paved Non Paved Federal 74,940 61,304 82% 13,636 18% State 243,420 123,604 51% 119,816 49% Municipal 1,315,711 26,770 2% 1,288,941 98% Total 1,634,071 211,678 13% 1,422,393 87% Under Concession 13,810 13,810 7%1

State-Owned Under Concession

Length Density Paved ('000 km) (km/sqm km) (%)

Brazil 1,634 188 13% United States 6,427 686 65% Argentina 634 169 na Chile 81 107 21% Peru 79 61 14% Uruguay 9 49 na

Quality of Highways

Good Regular Source: CNT survey 2009

Highways under concession are well perceived by users compared to state-owned highways

Very Good Bad Very Bad

42.5%

33.9%

21.7%

1.9% 8.0%

14.4%

8.4%

19.8%

49.4%

Note: 1  Highway under concession / Paved highways

• 35

Brazilian Car Industry The Brazilian car industry has been showing strong growth, underpinned by improved income and economic growth, as well as by the greater availability of credit to purchase vehicles at attractive prices…

Brazilian car fleet (mm)(1) Vehicle sales and production (mm)(1)

Credit for car purchase (R$mm) and spread (% per year)(2) Vehicle Density vs. nominal GDP per capita (3)

20.8 21.4 22.2 23.0 24.125.6

27.5

2002 2003 2004 2005 2006 2007 2008

1,792 1,828

2,3172,531 2,611

2,9713,227

1,383 1,3151,564 1,631

1,786

2,2202,483

2002 2003 2004 2005 2006 2007 2008

CAGR 10.3% CAGR 10.2%

CAGR 4.8%

0

300

600

900

10,000 20,000 30,000 40,000 50,000 60,000

China

Mexico

Brazil Chile

Poland

Czech Rep. Spain

Japan Belgium

Holand

France Italy

USA

Nominal GDP Per Capita (US$)

Vehi

cle d

ensit

y per

1,00

0 in

habi

tant

s

(1) Source: Relatório Anual Anfavea, 2008. (2) Fonte: Febraban em Agosto de 2009. (3) Fonte: Euromonitor, Eurostat, IMF, JPMorgan.

27 30 38 51 63 81 82 85

2 2 4 8 14 30

57 66

26% 37% 29% 32% 35% 36% 37% 56%

2002 2003 2004 2005 2006 2007 2008 Aug-09 Car financing (R$mm) Leasing (R$mm) Rate (% per year)

… and Brazil still have a relative low vehicle density

• 36

Highways’ Regulatory Framework Solid and tested regulatory framework with a regulatory agency responsible for the industry and enough jurisprudence to provide required comfort for private investors

Note: Insert Footnote Here Insert Footnote Here

1994 2007

Legislation

Regulatory Body

Concession Agreement

Jurisprudence

----

Federal Concession Law 8987 of 1995 Federal PPP Law 11079 of 2004

Regulatory Agency – ANTT – June 2001

First legal decisions governing annual tariff adjustments in 1997. First Supreme Court decisions as of 2003, related to the dispute in Paraná, with consolidation of the legal precedent of annual tariff adjustments, risk of the appropriation of voting capital and expropriation

Federal Public Tender Law 8666 of 1993

DNER – responsible for managing the Concession Agreements. Inspections handled by state DNER branches

No legal precedent

1st Federal Concession Agreement signed in 1994

• 37

Toll Roads’ Main Brazilian Players Financial Figures (R$ million)

Players # of concessions Network size

(Km) vehicle equivalent

(thousands) 1 Market

Capitalization 2 Net revenues 3 Net debt / EBITDA 4

CCR 8 1,923 700,651 17,016 3,089 1,961 1.5x

Ecorodovias 5 1,459 118,100 5,431 1,003 691 1.9x

OHL 9 3,226 446,453 2,674 1,190 677 2.0x

Triunfo 3 641 64,085 743 388 240 1.9x

Invepar 3 680 NA NA 156 98 NA

Odebrecht 3 514 NA NA NA NA NA

Notes: 1 Vehicle equivalent is a measure generally calculated by adding heavy vehicles (commercial vehicles such as trucks and buses), multiplied by the number of axles charged. One light vehicle is counted as one axle of a heavy vehicle) 2 Market cap as of May 6, 2010 3 Net revenues and EBITDA in 2009 for all companies, but Invepar 4 Net debt as of December 2009

EBITDA 3

• 38

•  Government supported initiative to reduce traffic in the metropolitan area of São Paulo

•  Remaining sections expected to be auctioned in 2010

•  Main players are concerned with the expected expropriation costs to build the East section

The auction for the remaining Rodoanel sections is expected for the 1H2010

Rodoanel

Project Total Investment (R$ million)

Concession Fees (R$ million) Concession Term Bidding

Documentation

Rodoanel South 752 800 35 years 2009/2010

Rodoanel East 903 (1) 1,000 35 years 2010/2011

Total 1,655 1,800 (1) Assuming the State government will be responsible for the civil works

S. B. CAMPO

Anchieta

Dutra

Raposo Tavares

Castello Branco

Anhangüera / Bandeirantes Fernão Dias

Ayrton Senna / Carvalho Pinto

Imigrantes

Régis Bittencourt

West Stretch South Stretch North + East Stretch

Expected Auctions Rodoanel: Landmark Highway Hub in Brazil

• 39

Attractive investment opportunity to benefit from heavy traffic from both passenger and commercial vehicles

State of São Paulo Concession Program

•  Brazil’s most important State

•  Two coastal highways totaling R$5.1 billion in investments

•  Bidding documentation is expected for 2011

BR116

Miracatu Pedro de Toledo

Itariri

Peruibe

SP055

Itanhaém Mongaguá

Santos

Bertioga

Guarujá

Sâo Sebastiâo

Illhabela

Caraguatatuba

Sâo Luis do Paraitinga

Ubatuba

Dutra

To be auctioned

Expected Auctions SP Concession Program: De-bottlenecking an Important Export Corridor

• 40

Possibility to capture the expected economic growth of Minas Gerais and neighboring States

State of Minas Gerais Concession Program

•  Minas Gerais has a program of 17 roads totaling 5,777 km expected to be auctioned in 2011 •  Investments expected to amount to R$8.9 billion plus R$1.2 billion in concession fees

Federal Concession Program

•  Federal Government to resume its Road Concession Program –  1st round: late 90’s –  2nd round: 2007

•  3rd and 4th round expected to be auctioned in 2011

Federal Roads Federal Highways Revenues (R$ million) (1)

Investments (R$ million) Concession Term Bidding

Documentation

1 BR 116 / MG 8,813 3,933 25 years 2010/2011 2 BR 040 / MG 9,582 3,067 25 years 2010/2011 3 BR 381 / MG 6,147 2,208 25 years 2010/2011

Total 24,541 9,208 (1) Estimated revenues for the whole concession period in real terms

Expected Auctions MG and Federal Auctions: Opportunity to Have a National Footprint in Brazil