July 7, 2010

ECONOMICS
Economics Research
Ernest W. (Chip) Brown, Head
212-583-4663 ebrown@santander.us

BRAZIL
Who Wants to Be a Millionaire?
Alexandre Schwartsman
5511-3012-5726
aschwartsman@santander.com.br
• Those who follow the evolution of fiscal accounts in Brazil closely surely have noticed something about the interest
payments on the public sector debt. After a significant (and more or less steady) decline from about 9.5% of GDP in
3Q03 to little less than 5% of GDP in 3Q09, interest payments have started to increase again, standing at 5.4% of
GDP during the 12-month period ended in May 2010.
• The implicit cost of net domestic federal debt used to follow quite closely the movements of the Selic rate, but the
correlation broke down in the past two years: while the policy rate declined, the implicit debt cost has gone up. This
development, however, has occurred against a backdrop of lower interest rates and a reduced net debt, which is
something of a puzzle.
• In order to solve this puzzle we put forward the following hypothesis: the rise in interest payments results from the
negative spread between the interest rates received by the government and the interest rate it pays on its debt. This
spread was less important until 2008, when government assets were smaller, but has become more relevant in the
last two years, as government lending to BNDES jumped from 0.5% to more than 6% of GDP.
• An alternative explanation could be the change in the debt profile, resulting from a higher share of fixed interest
rate and inflation linked securities at the expense of Selic-linked notes. Yet, once we include the Central Bank repos
in the picture we cannot find a significant difference between the debt profile in 2004-2007 (when the correlation
between the debt cost and the Selic rate was positive and high) and during the 2008-2010 period, when the
correlation broke down.
• With the help of a simple example we find that the implicit debt cost would be close to the Selic rate if one of the two
conditions is valid: (1) the spread between the Selic rate and the return on government is small; or (2) the ratio
between government assets and the net debt is small. The first condition is typically not true, but it was the second
one that ceased to be valid in 2008-2010 on the back of the fast expansion of National Treasury credits to BNDES,
which rose from about 1% of the net debt to 12% of the net debt in that period.
• The negative correlation between the Selic rate and the implicit debt cost observed in the past two years is not,
however, a structural feature. As the spread between the Selic rate and the rate at which the government lends to
BNDES rises, the implicit cost should go up as well, an effect now likely to be magnified by a higher share of BNDES
credits relative to net debt.
• Our calculations do not take into consideration an additional channel. Given that increased funding leads to BNDES
leads to higher lending, it should expand domestic demand, requiring an additional effort in terms of the Selic rate
than it would be necessary in the absence of such policy. Hence, the spread between the Selic rate and the rate at
which the government lends to BNDES is likely to rise even more, leading to a further increase in the interest bill.
Those who follow closely the evolution of fiscal accounts in Brazil surely have noticed something about the interest payments
on the public sector debt. After a significant (and more or less steady) decline from about 9.5% of GDP in 3Q03 to little less
than 5% of GDP in 3Q09, interest payments have started to increase again, standing at 5.4% of GDP during the 12-month
period ended in May 2010. This development is hard to square with the slight decline of the net debt relative to the levels

U.S. investors’ inquiries should be directed to Santander Investment at (212) 350-0707.

observed in 3Q09 and the stability of the Selic from 3Q09 until the beginning of 2Q10. 1 There must be something odd going on
when interest payments rise while the debt has declined and interest rates barely budged.

Interest on debt - % GDP Interest rates & net debt

9.5% 33% 60%
Selic (left)
360-day swap (left)
28% 55%

Interest rate - % per annum

8.5% Net debt (right)

Net debt - % GDP

7.5% 23% 50%

6.5% 18% 45%

5.5% 13% 40%

4.5% 8% 35%
Se -00

S e -01

Se -02

Se -03

S e -04

Se -05

S e -06

Se -07

Se -08

S e -09

0
M -00

M -01

M -02

M -03

M -04

M -05

M -06

M -07

M -08

M -09

M -10
Ja -00

Ja -01

Ja -02

Ja -03

Ja -04

Ja -05

Ja -06

Ja -07

Ja -08

Ja -09

0
p 8

p 9
p 5

p 6

p 7
p 2

p 3

p 4
p 0

p 1
-1

Ja -08
ay 9

Ja -09
ay 0
ay 6

Ja -06
ay 7

Ja -07
ay 8
Ja -03
ay 4

Ja -04
ay 5

Ja -05
a 0

Ja -00
ay 1

Ja -01
ay 2

Ja -02
ay 3

Se -0

Se -0

-1
Se -0

Se -0
Se -0
Se -0

Se -0

Se -0
Se y-0

Se -0

M n-1
M n-0

M n-0
M n-0

M n-0
M n-0

M n-0
M n-0

M n-0

M n-0

M n-0
ay

ay

ay

ay

ay

ay

ay

ay

ay

ay

ay
n

p
n

p
n

p
n

p
n

p
n

p
n

p
n

p
n

p
n

p
n
Ja

Ja
Source: Central Bank.

The implicit cost 2 of net domestic federal debt used to follow quite closely the movements of the Selic rate; even though there
have always been differences between the level of the debt cost and the Selic rate, they tended to move in line, in particular
when we concentrate on the net domestic federal debt cost. As shown below, the observed correlation between the 12-month
average of the net domestic federal debt cost and the 12-month average of the Selic rate approached 0.9 between 2004 and
2007, becoming, however, significantly negative at -0.6 between 2008 and 2010 (actually the 12-month period ended in May
2010). That is, the decline of domestic interest rates since late 2008 did not result in a correspondent reduction in the debt cost
estimates for most of the period after 2007.

Federal debt cost vs Selic (12-month)

33
Net federal debt
Net domestic federal debt
28 Selic

23

18

13

8
Se 4

Se 5

Se 6

Se 7

Se 8

Se 9

0
04

M 5

M 6

M 7

M 8

M 9

M 0
04

05

06

07

08

09
-0

-0

-0

-0

-0

-0

-1
0

1
n-

n-

n-

n-

n-

n-

n-
p-

p-

p-

p-

p-

p-
ay

ay

ay

ay

ay

ay

ay
Ja

Ja

Ja

Ja

Ja

Ja

Ja
M

1
It is true that the 360-day swap rate did increase from 9% per annum to about 12% per annum in the period, but note that this would have had an impact only in the new prefixed debt issued
between 3Q09 and 2Q10, which would hardly explain the rise in interest payments.
2
The implicit cost of government debt is estimated by the Central Bank. Using the detailed information currently available only to the Central Bank, it estimates the implicit debt cost as the
ratio of interest payments and the debt. Specifically, in the case at hand, the Central Bank calculates the cost of the net domestic federal debt as the ratio between net interest (interest accrued
on the debt deducted interest accrued on the federal government assets) and the net domestic federal debt.

July 7, 2010 2
 Domestic federal debt cost x Selic (2004-07) Domestic federal debt cost x Selic (2008-10)
30 15

28
14
Domestic federal debt cost

Domestic federal debt cost

26
13
24

22 12
20
11
18

16 10

14 9
11 13 15 17 19 21 23 8 9 10 11 12 13
Selic Selic

Sources: Central Bank and Santander estimates from Central Bank data.

In order to solve this puzzle we put forward the following hypothesis: the rise in interest payments results from the negative
spread between the interest rates received by the government and the interest rate it pays on its debt. This spread was less
important until 2008, when government assets were smaller, but has become more relevant in the last two years, as government
lending to BNDES jumped from 0.5% to more than 6% of GDP.
Of course, this pattern could have originated from the change in the government debt structure, namely the increase in the share
of government securities whose yield is not directly linked to the Selic rate – the prefixed debt (LTNs and NTN-Fs) and
inflation linked debt (NTN-Bs and NTN-Cs) at the expense of Selic linked debt (LFTs). As more debt had been contracted at
fixed rates, it would be only natural to observe a lower correlation between the overnight rate and the debt cost. A closer look,
however, suggests that this is unlikely to have led to the dramatic change in the correlation observed above.
Whereas it is true that the National Treasury has made a substantial effort to reduce the share of Selic-linked securities, a
somewhat wider definition of the federal domestic debt, which also includes the repo operations through which the Central
Bank regulates the money supply, reveals that the change in the debt structure becomes less impressive once we include the
repos in the picture. The share of Selic-linked notes indeed reduced from nearly 50% to 29% of the federal debt in between
December 2004 and May 2010, but, during the same period, repos jumped from 5.5% to 18% of the debt. Taken jointly, we still
observe a reduction in overnight-linked debt, from 55% to 47%, but not that remarkable. Moreover, looking at the 2004-2007
average versus the 2008-20100 average, which would be the relevant comparison to understand the different performance in
these periods, we find a very modest reduction in overnight-linked debt (LFTs and repos), from 49% to 48%, while the share of
prefixed and inflation-linked securities rose from 47% to 50%.

Federal debt duration (excluding repos)

30

25
Dec-07

20
Months

15

Dec-03
10

0
Ju 8
Ju 7
Ja 07

Ja 08

Ju 9
Ja 09
10
Ja 04

Ju 5
Ja 05

Ju 6
Ja 06
Ju 8
Ja 98

Ju 9
Ja 99

Ju 0
Ja 00

Ju 1
Ja 01

Ju 2
Ja 02

Ju 3
Ja 03

Ju 4

0
0
0

0
9

l-
n-

l-
n-

l-
n-
l-
n-
n-

l-
n-
n-

l-
n-

l-
n-

l-
n-

l-
n-

l-
n-

l-
n-

l-
Ja

Sources: Central Bank and Santander estimates from Central Bank data.

In other words, the federal debt duration figures above overstate, to some extent, the actual increase in duration, since they do
not take into consideration the large share of debt currently under the form of Central Bank repos.

July 7, 2010 3
Those figures indicate that we have to look somewhere else to understand the correlation change. In the next section we
illustrate through a simple example, how the negative spread between interest received in domestic government assets and
interest paid on the domestic debt produces an increase in the implicit debt cost.

A simple example
Let “i” denote the interest rate paid on (gross) domestic debt (D), and “i+” be the interest received from government assets (A).
The total interest bill, “I,” would therefore be given by the difference between interest accrued on the debt and interest accrued
on assets:

I = iD − i + A (1)
We define the net debt (N) simply as the difference between the gross debt, D, and assets, A:
N = D− A (2)
Now adding and subtracting iA in equation (1) and using definition (2) we can find:
I = iN + (i − i + ) A (3)

Dividing both sides of (3) by the net debt (N) we find the following expression for the implicit domestic debt cost iˆ ≡ I / N :
iˆ = i + (i − i + )( A / N ) (4)
The expression above suggests that the implicit debt cost should fluctuate in line with the gross debt cost provided one of the
two following conditions prevails: (a) the interest rate differential (i-i+) is small 3 ; or (b) the ratio between government assets and
the net debt is small. The first condition has not been observed for most of the time as the 12-month spread between the Selic
rate and the Long-Term Interest Rate (TJLP, the interest rate that accrues on government lending to BNDES) has usually been
high, with the possible exception of the most recent period, when it dropped to the neighborhood of 2% per annum.

Selic (-) TJLP (12-month) BNDES credit/Net Debt - %

12 14

10 12

10
8
8
6
6
4
4
2
2

0 0
Se -00

S e -01

Se -02

Se -03

S e -04

Se -05

Se -06
ay 0

ay 1

S e -07

Se -08
ay 2

ay 3

S e -09
ay 4

0
ay 5

ay 6

ay 7
Ja -00

ay 8
Ja -01

Ja -02

ay 9

ay 0
Ja -03

Ja -04

Ja -05

Ja -06

Ja -07

Ja -08

Ja -09

Se -07

Se -08

Se -09

0
Se -06
Se -01

Se -02

Se -03

Se -04

Se -05

M -10
Ja -06
M -07

Ja -07
M -08

Ja -08
M -09

Ja -09
Ja -02

Ja -04
M -05

Ja -05
M -06
-1

M -01

Ja -01
M -02

M -03

Ja -03
M -04
M -0

M -0

M n-0

M -0

M -0

M n-0

M -0

M -0

M n-0

M -0

M -1

-1
n

p
n

p
n

p
n

p
n

p
n

p
n

p
n

ay

ay

ay

ay
ay
ay

ay

ay

ay

ay
Ja

p
n
p
n

p
n

p
n

p
n

p
n

p
n

p
n

p
n
Ja

Sources: Central Bank and Santander estimates from Central Bank data.

However, this did not matter much for the net domestic federal implicit debt cost most of the time, because Treasury lending to
BNDES represented a very small proportion of the net debt, typically hovering between 0% and 2% until late in 2008, as the
chart above at the right reveals. Since then, however, this share jumped to more than 12% of the net debt (measured relative to
GDP it jumped from 0.5% to 6%). Thus, as the second condition failed, the close correlation between the Selic rate and the
implicit net domestic federal cost broke down.
To put it differently, the National Treasury had to finance additional lending to BNDES through the issuance of domestic debt,
so at the end of the day the impact on the net debt was zero. 4 However, the National Treasury lends to BNDES at a much lower
rate (typically the TJLP) than its borrowing cost, paying, therefore, a negative spread, which, as expressed by equation (4), adds
to cost of (gross) domestic debt. Moreover, the larger are the loans to BNDES, the higher is the impact of negative impact on
the implicit net domestic federal debt.

3
Alternatively, the negative spread (i+-i) is small
4
On this issue, please refer to our earlier report “Bond, Federal Bond,” January 7, 2010.

July 7, 2010 4
Notice further that the impact is bound to increase. As we know, the Selic is scheduled to increase in the coming months, which
means that the spread between the Selic and TJLP is going up as well. Even if the Selic and TJLP were to stay at their current
levels (10.25% and 6% respectively), the 12-month spread would increase from 2.6% observed in May 2010 to 4%. If we are
correct in our forecasts, the Selic rate should reach 13% per annum at the end of the tightening cycle, which would push the
spread further to 6.6% per annum, about 2.5 times higher than the May observation. Hence, regardless of any further increase in
credits to BNDES, one should expect the implicit domestic federal debt cost to go up.

Conclusion
The observed negative correlation may have led to some hope that the impending rise of the Selic rate would not translate into a
similar hike of the debt cost, but this is definitely not the case. The positive correlation broke down because credits to BNDES
increased at the same time interest rates came down, preventing their decline from translating into lower debt costs. Now the
interest rate hike should affect debt costs through two channels, as suggested by equation (4): the direct impact on debt costs
and the increased spread weighed by a higher proportion of government assets relative to the net debt. In other words, the
negative correlation was not a structural feature of the economy.
If one had any hope that the negative correlation implied that BNDES credits would mean a hedge against interest rates hikes,
our advice would be to go over the issue again. As argued above, debt costs are about to rise significantly due to the
combination of a higher share of government assets relative to the net debt and the increase in the spread between the gross debt
cost and the return on government assets.

BNDES impact on implicit debt cost (basis points) BNDES impact on debt cost/GDP (basis points)
50 18
45 16
40 14
35
12
30
10
25
8
20
15 6

10 4
5 2
0 0
Se -01

S e -02

S e -03

Se -04

S e -05

S e -06

Se -07

S e -08
M -01

Se -09
M -02

0
M -03

M -04

M -05

M -06

M -07

M -08

M -09

M -10
Ja -01

Ja -02

Ja -03

Ja -04

Ja -05

Ja -06

Ja -07

Ja -08

Ja -09

Se -07

Se -08

Se -09

0
Se -01

Se -02

Se -03

Se -04

Se -05

Se -06

Ja -09
Ja -07
M -08

Ja -08
M -09

M -10
-1

Ja -05
M -06

Ja -06
M -07
M -01

Ja -01
M -02

Ja -02
M -03

Ja -03
M -04

Ja -04
M -05

-1
ay

ay

ay

ay

ay

ay

ay

ay

ay

ay
n

p
n

p
n

p
n

p
n

p
n

p
n

p
n

p
n

p
n

ay

ay

ay

ay
ay
ay

ay

ay

ay

ay
Ja

p
n
n

p
n

p
n

n
p
n

p
n

p
n

p
n

p
n

p
Ja

Source: Santander estimates from Central Bank data.

There are, of course, other important government assets, in particular international reserves, that also have impacts on the
implicit cost of the net debt (not only the net federal domestic debt), but, as we have argued in previous research, international
reserves display two important differences relative to credits to BNDES. First, international reserves are liquid assets, which
can, presumably, help finance the debt rollover in a stress scenario. Second, the local valuation of reserves (that is, reserves
translated into domestic currency) should typically increase under bad conditions (a decline in commodity prices, or a sudden
stop in capital flows), and decrease in favorable conditions; that is, they play a role of a hedge, whereas BNDES credits,
denominated in local currency, do not.
That said, there is another issue that deserves further exploration, which we intend to go over in future research. In our simple
example above we took the gross debt cost (i.e., the Selic rate) as a given, or, better said, as a variable unaffected by increase or
reduction of government assets, but in a more realistic setting this is unlikely to be the case. We can imagine at least two
channels through which an increase in government funding for BNDES can lead to higher domestic interest rates.
The least important one is a direct result of the previous discussion. If higher funding to BNDES leads to a higher debt cost, and
hence to a higher debt path, everything else constant, there might be some impact on sovereign spreads, which could affect
domestic rates. But this channel would hardly be a relevant one. At the current debt levels and given primary performance, we
are really discussing the speed at which the debt would decline, rather than a process that could lead to much higher rates due to
increasing risk premium on government debt.
We deem as possibly more important the likely effect that additional funding for BNDES would have on lending ability and
hence on domestic demand. Notice, first, how increased National Treasury funding to BNDES from late 2008 onwards (from
BRL20 billion to BRL130 billion) led to a correspondent increase in the bank’s leading, which came from about BRL190
billion in 3Q08 to BRL300 billion in 2Q10. The second leg of increased funding (additional BRL80 billion, from BRL130
July 7, 2010 5
billion to BRL210 billion) that took place in late April has yet to translate into additional lending, but this is only a matter of
time.

BNDES funding - constant R$ million BNDES lending - constant R$ million

250,000 300,000
280,000
200,000 260,000
240,000
150,000 220,000
200,000
100,000 180,000
160,000
50,000 140,000
120,000
0 100,000
01

1
02

2
03

3
04

4
05

5
06

6
07

7
08

8
09

9
10

04

05

06

07

08

09

10
01

02

03

9
1

2
l-0

l-0

l-0

l-0

l-0

l-0

l-0

l-0

l-0
n-

n-

n-

n-

l-0

l-0

l-0

l-0

l-0
n-

n-

n-

n-

n-

n-

l-0

l-0

l-0

l-0

n-

n-

n-

n-

n-

n-
Ju

Ju

n-

n-

n-

n-
Ju

Ju

Ju

Ju

Ju

Ju

Ju
Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ju

Ju

Ju

Ju

Ju
Ju

Ju

Ju

Ju

Ja

Ja

Ja

Ja

Ja

Ja
Ja

Ja

Ja

Ja
Sources: Central Bank.

At the same time, there is little doubt that the significant increase of BNDES balance sheet (BRL110 billion so far, and possibly
BRL80 billion more to come) should have had a substantial impact on domestic demand. We have argued 5 that this policy
shares more than a passing resemblance to fiscal policy and, indeed, many have classified BNDES credit expansion as quasi-
fiscal policy. But then, as is usually the case, everything else constant, a more expansionary fiscal policy requires a more
contractionary monetary policy (higher interest rates) to deliver the same level of inflation.
Extending the reasoning to the increase of BNDES funding (therefore its lending), it is straightforward to conclude that the
increase in government assets also implies higher interest rates than the ones that would prevail in the absence of such policy.
Thus, the impact of higher government assets is not limited to being a channel through which the negative spread between
returns on assets and interest on debt increases the implicit debt cost; it also implies an additional increase of the negative
spread through the required rise in the Selic rate to offset the expansionary impact of BNDES lending on demand, magnifying
the effect described in the preceding section.
It is true that BNDES financing should have some impact on investment, hence on potential GDP growth. But this would hardly
be strong enough to offset the impact on demand. For a start, investment is first demand, becoming additional supply only after
a while. In a recent paper 6 we estimated that investment becomes new industrial capacity after some six quarters, being of little
use to help with current inflationary pressures.
Second, we also estimate that, in order to boost potential GDP growth by 1% per annum, investment needs to increase between
4% and 5% of GDP. Given that investment is currently 18% of GDP, it would have to reach, conservatively, 22% of GDP to
accelerate potential growth from, say, 4.5% to 5.5% per annum, an expansion of 22%. In order to reach this 22% increase in the
investment rate in one year, assuming that the economy would grow at potential 7 (4.5%), gross capital formation would have to
increase a little less than 28% in a single year. To reach this target over two years, investment would have to increase about
16% per annum during those years. In any case, domestic demand would have to accelerate drastically due to investment
growth before any additional supply would appear.
Note, moreover, that the economy is growing much faster than potential (about 9-10% per annum at the margin), so, for
investment to accommodate current growth, it would not be enough to increase investment only by 4% of GDP, but a larger
figure instead, a consideration that only makes the problem much harder to solve.
In short, the notion that one can offset inflationary pressures through the increase in supply resulting from higher investment
does not really stand on solid ground. For investment to have a meaningful impact on supply, it would have to increase
massively, propping up current demand. Second, it would not become additional supply immediately, but after about a year and
half. In the meantime, the inflationary problem would only get worse, requiring further monetary policy tightening.
Thus, going back to the original issue, it seems reasonable to conclude that the increase in the availability of credit at below-
market interest rates results in further inflationary pressures, and thus higher policy rates. This would feed back into the spread
between the gross debt cost and the return on government assets, amplifying the effect described earlier.

5
“Bond, Federal Bond,” January 7, 2010, page 6.
6
“576 Regressions on Capacity Utilization,” April 26, 2010.
7
If growth is higher than potential, the increase in investment would have to be even higher, so our conclusions do not really depend on this assumption.

July 7, 2010 6
We still do not think that such developments would lead to a deterioration of the debt dynamics large enough to cause a debt
crisis. However, we had better get used to a considerably higher implicit debt cost, and, therefore, an interest bill permanently
higher than the one that would have prevailed in the absence of the expansion of government assets. Summing up, the
expansion of BNDES credits implies a higher government transfer for those who have access to cheap financing and can
appropriate the negative spread between the TJLP and the Selic rate – a riskless path to becoming a millionaire.

July 7, 2010 7
CONTACTS
Economics Research
Ernest (Chip) Brown Head of Economics Research ebrown@santander.us 212-583-4663
Sergio Galván Economist – Argentina sgalvan@santanderrio.com.ar 54-11-4341-1728
Alexandre Schwartsman Economist – Brazil aschwartsman@santander.com.br 5511-3012-5726
Juan Pablo Castro Economist – Chile jcastro@santander.cl 562-336-3389
Felipe Hernandez Calle Economist – Colombia fhernandezcalle@santander.com.co 571-644-8006
Delia Paredes Economist – Mexico dparedes@santander.com.mx 5255-5269-1932

Fixed Income Research

Fernando Marin Head of Global Research femarin@gruposantander.com 3491-257-2100
Juan Pablo Cabrera Senior Economist – Local Markets jupcabrera@gruposantander.com 3491-257-2172
Alejandro Estevez-Breton Local Markets Strategy aestevez@santander.us 212-350-3917

Equity Research
Cristián Moreno Head, Equity Research cmoreno@santander.us 212-350-3992
Walter Chiarvesio Head, Argentina wchiarvesio@santanderrio.com.ar 5411-4341-1564
Marcelo Audi Head, Brazil maudi@santander.com.br 5511-3012-5749
Francisco Errandonea Head, Chile ferrando@santander.cl 562-336-3357
Gonzalo Fernandez Head, Mexico gofernandez@santander.com.mx 5255-5269-1931

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in any such securities). Any decision by the recipient to buy or to sell should be based on publicly available information on the related
security and, where appropriate, should take into account the content of the related prospectus filed with and available from the entity
governing the related market and the company issuing the security. This report is issued in Spain by Santander Investment Bolsa,
Sociedad de Valores, S.A. (“Santander Investment Bolsa”), and in the United Kingdom by Banco Santander, S.A., London Branch.
Santander London is authorized by the Bank of Spain. This report is not being issued to private customers. SIS, Santander London and
Santander Investment Bolsa are members of Grupo Santander.
ANALYST CERTIFICATION: The following analysts hereby certify that their views about the companies and their securities discussed
in this report are accurately expressed, that their recommendations reflect solely and exclusively their personal opinions, and that such
opinions were prepared in an independent and autonomous manner, including as regards the institution to which they are linked, and
that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or
views in this report, since their compensation and the compensation system applying to Grupo Santander and any of its affiliates is not
pegged to the pricing of any of the securities issued by the companies evaluated in the report, or to the income arising from the
businesses and financial transactions carried out by Grupo Santander and any of its affiliates: Ernest W. (Chip) Brown, Alexandre
Schwartsman.
The information contained herein has been compiled from sources believed to be reliable, but, although all reasonable care has been
taken to ensure that the information contained herein is not untrue or misleading, we make no representation that it is accurate or
complete and it should not be relied upon as such. All opinions and estimates included herein constitute our judgment as at the date of
this report and are subject to change without notice.
Any U.S. recipient of this report (other than a registered broker-dealer or a bank acting in a broker-dealer capacity) that would like to
effect any transaction in any security discussed herein should contact and place orders in the United States with SIS, which, without in
any way limiting the foregoing, accepts responsibility (solely for purposes of and within the meaning of Rule 15a-6 under the U.S.
Securities Exchange Act of 1934) for this report and its dissemination in the United States.
© 2010 by Santander Investment Securities Inc. All Rights Reserved.

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