BRAZIL : OPPORTUNITIES IN TROUBLED MARKETS LUIZ FERNANDO FIGUEIREDO

2 FX: Are we in the 2002 path? FX depreciation has been even more agressive this time than it was in But there are crucial differences: a)Today, Public Debt as % of GDP goes down with FX depreciation (2002 was the opposite); Net Public Debt as % of GDP Months forecast

3 FX: Are we in the 2002 path? b) Less deflacionary this time, since Commodity Prices are falling; c) External Accounts are considerably more balanced External indebtedness indicators Total external debt / GDP (%) Net total external debt / GDP (%) Debt service / exports (%) Reserves / short-term external debt Total external debt/exports (ratio) Current account/GDP (%) FDI/GDP (%)

Real Interest Rates Quite high by any standard

The Brazilian stock market underperformed, despite solid macroeconomic fundamentals Even though companies did take advantage of the bull market’s abundant liquidity, they are being penalized on a relative basis. Foreign outflow is contributing to exaggerated movements. Brazil once again is being traded at a discount when compared to Latam, EM and World P/Es. Source: Bloomberg, Economática, Bovespa

Brazilian banks are less exposed to the crisis because : (1) They are not exposed to the subprime market (2) There is not the issue of being “too big to be saved” (3) Housing credit still low as % of GDP. Sectors, such as financial, are being excessively penalized due to the global credit crisis Source: Financial Times, Company Data, Banco Central do Brasil, Mauá Consultoria

Seeking comfort in valuation: even stress testing our base case scenario, upside is attractive Source: Bloomberg, Company Data, Mauá Consultoria Average historical multiple: 10.9 Stressing the scenario for one of the banks under our coverage shows that worst case equals banks trading at average historical P/E, considering maintenance of spreads.