SECURITIES AND EXCHANGE COMMISSION

                                   FORM 20-F/A

                                 Amendment No. 1

[ ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                                       OR

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                         Commission file number 1-15018

                        Votorantim Celulose e Papel S.A.
             (Exact name of Registrant as specified in its charter)


                         Votorantim Pulp and Paper Inc.
                 (Translation of Registrant's name into English)


                          Federative Republic of Brazil
                 (Jurisdiction of incorporation or organization)


                         Alameda Santos, 1357- 6th floor
                        01419-908, Sao Paulo, SP, Brazil
                    (Address of principal executive offices)
                             ----------------------

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class:                             Name of each exchange
Preferred Shares, without par value              on which registered:
American Depositary Shares (as evidenced         New York Stock Exchange*
   by American Depositary Receipts), each        New York Stock Exchange
   representing 500 shares of Preferred Stock
-------------------

*    Not for trading purposes, but only in connection with the registration on
     the New York Stock Exchange of American Depositary Shares representing
     those Preferred Shares.

                             ----------------------

Securities registered or to be registered pursuant to Section 12(g) of the Act:
                                      None
                             ----------------------

        Securities for which there is a reporting obligation pursuant to
                            Section 15(d) of the Act:
                                      None
                             ----------------------

           The number of outstanding shares of each class of stock of
            Votorantim Celulose e Papel S.A. as of December 31, 2001.

                      21,140,490,321 Shares of Common Stock
                    16,946,809,232 Shares of Preferred Stock

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes [X] No [ ]

     Indicate by check mark which financial statement item the registrant has
elected to follow.

                             Item 17 [ ] Item 18 [X]

     Please send copies of notices and communications from the Securities and
Exchange Commission to:

                             Richard S. Aldrich, Jr.
                             Shearman & Sterling 599

<PAGE>

                                Lexington Avenue
                               New York, NY 10022


<PAGE>


                                TABLE OF CONTENTS

                                                                           Page


                                  INTRODUCTION



                           FORWARD-LOOKING STATEMENTS



                                     PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.................2
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE...............................2
ITEM 3. KEY INFORMATION.......................................................2
ITEM 4. INFORMATION ON VCP...................................................13
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.........................38
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES...........................58
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS....................62
ITEM 8. FINANCIAL INFORMATION................................................64
ITEM 9. THE OFFER AND LISTING................................................69
ITEM 10. ADDITIONAL INFORMATION..............................................72
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........85
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES..............89


                                     PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.....................89
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
         OF PROCEEDS.........................................................89
ITEM 15. [Reserved]..........................................................89
ITEM 16. [Reserved]..........................................................89


                                    PART III

ITEM 17. FINANCIAL STATEMENTS................................................89
ITEM 18. FINANCIAL STATEMENTS................................................89
ITEM 19. EXHIBITS............................................................90





                                       i
<PAGE>



                                  INTRODUCTION

     All references in this annual report to:

     o    "VCP," "we," "our" and "us" are to Votorantim Celulose e Papel
          S.A. and its consolidated subsidiaries (unless the context otherwise
          requires);

     o    "Votorantim group" are to the group of companies, including VCP,
          controlled by the Ermirio de Moraes family;

     o    "Brazilian government" are to the federal government of the Federative
          Republic of Brazil;

     o    "real," "reais" or "R$" are to Brazilian reais, the official currency
          of Brazil;

     o    "U.S.$," "dollars" or "U.S. dollars" are to United States dollars;

     o    "ton" are to one metric ton (1,000 kilograms). One kilogram equals
          approximately 2.2 pounds;

     o    "ADSs" are to our American Depositary Shares, each representing 500
          shares of our non-voting preferred stock; and

     o    "CVM" are to the Comissao de Valores Mobiliarios, the Brazilian
          securities commission.

     As used in this annual report, one hectare equals approximately 2.471 acres
and one kilometer equals approximately 0.621 miles. References in this annual
report to nominal production capacity or production capacity mean annual
projected capacity for which the facility was designed, with the facility
operating under optimal conditions, 24 hours a day for 365 days a year and
subject to reductions in rates of production for scheduled maintenance only.
Actual production capacity will vary depending on operating conditions, the
grades of pulp or paper produced and other factors.

     At July 10, 2002, the commercial market rate for purchasing U.S. dollars
was R$2.8541 to U.S.$1.00. The commercial selling rate is used in this annual
report rather than the noon buying rate in New York City as reported by the
Federal Reserve Bank of New York because the noon buying rate was not
consistently reported for reais during the periods shown in this annual report.
See "Item 3A -- Key Information -- Selected Financial Data -- Exchange Rates"
for information regarding exchange rates applicable to the Brazilian currency
since 1997.

     We have prepared our consolidated financial statements included in this
annual report in conformity with generally accepted accounting principles in the
United States, or U.S. GAAP.

     We make statements in this annual report about our competitive position and
market share in, and the market size of, the pulp and paper industry. We have
made these statements on the basis of statistics and other information from
third-party sources that we believe are reliable. We derive this third-party
information principally from reports published by BRACELPA -- Associacao
Brasileira de Celulose e Papel (the Brazilian Association of Pulp and Paper), or
Bracelpa. Although we have no reason to believe that any of this information or
these reports are inaccurate in any material respect, we have not independently
verified the competitive position, market share, market size or market growth
data provided by third parties or by industry or general publications.

                           FORWARD-LOOKING STATEMENTS

     This annual report includes forward-looking statements, principally in
"Item 3D -- Key Information -- Risk Factors," "Item 4B -- Information on VCP --
Business Overview" and "Item 5 -- Operating and Financial Review and Prospects."
We have based these forward-looking statements largely on our current
expectations and projections about future events and financial trends affecting
our business. These forward-looking statements are subject to risks,
uncertainties and assumptions including, among other things:


                                       1
<PAGE>

     o    general economic, political and business conditions, both in Brazil
          and in our principal export markets;

     o    changes in market prices, customer preferences and competitive
          conditions;

     o    management's expectations and estimates concerning future financial
          performance, financing plans and the effects of competition;

     o    our level of debt;

     o    anticipated trends in the pulp and paper industry, including changes
          in capacity and industry price movements;

     o    capital expenditure plans;

     o    changes in currency exchange rates;

     o    ability to produce and deliver our products on a timely basis;

     o    existing and future governmental regulation, including import tax
          policies; and

     o    other risk factors as set forth under "Item 3D -- Key Information --
          Risk Factors."

     The forward-looking statements referred to above also include information
with respect to our expansion project at the Jacarei plant, known as the Jacarei
expansion. In addition to the above risks and uncertainties, the Jacarei
expansion involves engineering, construction, regulatory and other significant
risks that may:

     o    delay or prevent successful completion of this project;

     o    increase its costs; or

     o    result in the facilities not operating in accordance with our
          expectations.

     The words "believe," "may," "will," "estimate," "continue," "anticipate,"
"intend," "expect" and similar words are intended to identify forward-looking
statements. We undertake no obligation to update publicly or revise any
forward-looking statements because of new information, future events or
otherwise. In light of these risks and uncertainties, the forward-looking
information, events and circumstances discussed in this annual report might not
occur. Our actual results and performance could differ substantially from those
anticipated in our forward-looking statements.

                                     PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

         Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not applicable.

ITEM 3.  KEY INFORMATION


                                       2
<PAGE>
A.   Selected Financial Data

     We maintain our books and records in reais and prepare our financial
statements in accordance with accounting principles prescribed by Law No. 6,404
of December 15, 1976, as amended, or the Brazilian corporate law. We also
prepared consolidated balance sheets at December 31, 2001 and 2000 and the
related consolidated statements of income, cash flows and changes in
shareholders' equity for the years ended December 31, 2001, 2000 and 1999, all
stated in U.S. dollars in accordance with U.S. GAAP. Our U.S. GAAP financial
statements are included in this annual report. The selected financial
information at and for the years ended December 31, 2001, 2000 and 1999 is
derived from our U.S. GAAP financial statements audited by Ernst &Young
Auditores Independentes S.C. The selected financial information at and for the
years ended December 31, 1998 and 1997 is derived from our U.S. GAAP financial
statements.

     Our reporting currency for all periods is the U.S. dollar. Our functional
currency prior to 1998 was required to be the U.S. dollar under Statement of
Financial Accounting Standards No. 52 -- "Foreign Currency Translation," but,
beginning in 1998, we changed our functional currency to the real. We made this
change because, in accordance with SFAS No. 52, a company operating in an
environment that is not highly inflationary must determine its functional
currency based on a number of factors. Beginning in 1998, the Brazilian economy
was no longer highly inflationary because the increase in the general price
index was measured at less than 100% over the previous three years. Therefore,
under SFAS No. 52, we determined our functional currency, typically the currency
in which a company generates and expends cash, based upon factors including cash
flow, sales price, sales market, expenses, financing, inter-company transactions
and management focus, to be the real.

     The following table presents a summary of our selected financial data at
the dates and for each of the periods indicated. You should read the following
information together with our financial statements, including the notes thereto,
included elsewhere in this annual report.


                                       3

<PAGE>

<TABLE>

                                                                        Selected Financial Data
                                                                    For the Years Ended December 31,

<S>                                             <C>            <C>              <C>             <C>           <C>
                                                  2001          2000            1999           1998          1997
                                                                      (U.S. dollar in millions)
STATEMENT OF INCOME DATA
Net operating revenue:
Domestic sales..............................U.S.$   443     U.S.$   537      U.S.$   392     U.S.$  393    U.S.$391
Export sales................................        211             237              196            207         205
                                            -----------     -----------    -------------   ------------  ----------
Total net sales.............................        654             774              588            600         596
Operating costs and expenses:...............
Cost of sales...............................        344             371              322            435         451
Selling, marketing, general and
administrative..............................         88              91               89            105         102
Other operating expenses (income), net......          5              (2)               1              3          (4)
                                            -----------     -----------    -------------   ------------  ----------
Total.......................................        437             460              412            543         549
                                            -----------     -----------    -------------   ------------  ----------
Operating profit............................        217             314              176             57          47
                                            -----------     -----------    -------------   ------------  ----------
Non-operating income (expenses):............
Financial income, net.......................         32              29               13             27          40

Translation (losses) gains..................        ---             ---              ---            ---         (36)

Foreign exchange losses, net................         (8)            (14)             (69)          (54)         ---

Gain on sale of investee....................        ---             ---               13            ---         ---
                                            -----------     -----------    -------------   ------------  ----------
Total.......................................         24              15              (43)          (27)           4
                                            -----------     -----------    -------------   ------------  ----------

Income before income tax, equity income
     (loss) of investees and cumulative
     effect of accounting change............        241             329              133            30           51
Income tax expense..........................        (59)            (80)             (35)          (14)         (10)
                                            -----------     -----------   --------------  -------------   ----------

Income before equity income (loss) of
     investees  and cumulative effect of
     accounting change.....................         182             249               98            16           41
Equity income (loss) of investees..........         ---             ---                1            (1)           1
                                            -----------     -----------   --------------  -------------   ----------

Income before cumulative effect of
accounting change..........................         182             249               99             15          42

Cumulative effect of accounting change,
net of tax.................................          10             ---              ---            ---         ---
                                            -----------     -----------    -------------   ------------  ----------

Net income................................. U.S.$   192     U.S.$   249    U.S.$      99   U.S.$     15  U.S.$   42
                                            ===========     ===========    =============   ============  ==========

Net income applicable to preferred stock... U.S.$    90     U.S.$   116    U.S.$      45   U.S.$      7  U.S.$   19
Net income applicable to common stock......         102             133               54              8          23
                                            -----------     -----------    -------------   ------------  ----------

Net income................................. U.S.$   192     U.S.$   249    U.S.$      99   U.S.$     15  U.S.$   42
                                            ===========     ===========    =============   ============  ==========

Basic earnings per 500 shares (in
U.S.$):(1)
Preferred.................................. U.S.$  2.65     U.S.$  3.45    U.S.$    1.41   U.S.$   0.21  U.S.$ 0.58
Common.....................................        2.41            3.13             1.28           0.19        0.52

Basic earnings per 1,000 shares (in
    U.S.$):(1)
Preferred..................................        5.31            6.89             2.81           0.42        1.15
Common.....................................        4.83            6.27             2.56           0.38        1.04

Weighted average number of shares
   outstanding (in thousands):
Preferred..................................  16,946,809      16,867,058       15,973,367     16,607,199  17,182,207
Common.....................................  21,140,490      21,140,490       21,140,490     21,140,490  21,140,490

Dividends per 1,000 shares (in U.S.$):(2)
Preferred.................................. U.S.$  1.02     U.S.$ 0.65      U.S.$   0.16   U.S.$   0.24  U.S.$ 0.49
Common.....................................        0.93           0.59              0.15           0.22        0.49

</TABLE>

                                       4

<PAGE>

<TABLE>
<CAPTION>

                                                                        Selected Financial Data
                                                                    For the Years Ended December 31,

<S>                                             <C>            <C>              <C>             <C>         <C>
                                                 2001           2000            1999           1998         1997
                                                                      (U.S. dollar in millions)
BALANCE SHEET DATA
Cash and cash equivalents.................  U.S.$ 172       U.S.$ 489        U.S.$176     U.S.$279     U.S.$ 435
Held-to-maturity investments(3)...........        364              17            174           269            45
Property, plant and equipment, net........      1,100             997          1,032         1,496         1,580
Equity Investees..........................        371              --             --            --            --
Total assets..............................      2,321           1,790          1,806         2,416         2,401
Short-term debt(4)........................         69              74             82            76            78
Long-term debt, including current portion.        973             455            601           843           791
Shareholders' equity......................      1,107           1,134          1,019         1,373         1,434

                                                                   For the Years Ended December 31,
                                                2001            2000            1999           1998         1997
                                                           (U.S. dollar in millions, except for percentages)
OTHER FINANCIAL DATA
Gross margin...............................    47.4%           52.1%          45.2%          27.5%         24.3%
Operating margin...........................    33.2%           40.6%          29.9%           9.5%          7.9%
EBITDA(5).................................. U.S.$ 269       U.S.$ 377      U.S.$239       U.S.$133     U.S.$ 120
Capital expenditures(6)....................       309             125            84            120           150
Investment in equity investee(7)...........       371              --            --             --            --
Depreciation and depletion.................        52              63            63             76            73
Cash flow provided by (used in):
    Operating activities...................       234             381           205            150           117
    Investing activities...................    (1,002)            101           (45)          (349)         (166)
    Financing activities...................       525            (143)         (180)            51           155

                                                                   For the Years Ended December 31,
                                                2001           2000             1999           1998         1997
OPERATIONAL DATA
Number of employees (at period end)........     3,767           3,658         3,682          3,840         4,312
Nominal production capacity (thousand
metric tons):
    Pulp...................................       800             800           800            800           680
    Paper..................................       655             655           635            635           580
Sales volumes (thousand metric tons):
Domestic market:
    Market pulp............................        85             100            84             90           103
    Paper..................................       437             424           369            306           284
        Printing and writing...............       357             337           299            239           223
        Thermal and carbonless.............        52              49            43             37            30
        Other specialty papers(8)..........        28              38            27             30            31
International market:
    Market pulp............................       258             240           232            177            75
    Printing and writing paper.............       133             105           137            172           215
</TABLE>

--------------------
(1) Based on the weighted average number of shares outstanding for each period.
For additional information on earnings per share, see note 2(j) to our
consolidated financial statements and "Item 5A--Operating Results."
(2) Based on declared cash dividends, which are declared in reais, translated to
U.S. dollars on the date of payment and divided by the number of shares
outstanding on the date declared.
(3) Includes current and non-current portions.
(4) Excludes current portion of long-term debt.
(5) EBITDA means earnings before financial income, financial expenses,
translation (losses) gains, foreign exchange (losses) gains, gain on sale of
investee, income taxes, equity income (loss) of investees, cumulative effect of
accounting change, net of tax, depreciation, amortization and depletion. EBITDA
is a non-U.S. GAAP measurement. This measure does not represent cash flow for
the periods presented and should not be considered as an alternative to net
income, as an indicator of our operating performance or as an alternative to
cash flows as a source of liquidity. Our EBITDA (as defined above) may not be
comparable with EBITDA as defined by other companies. Although EBITDA (as
defined above) does not provide a U.S. GAAP measurement of operating cash flows
due to its accrual accounting basis, it is commonly used by financial analysts
and others in the pulp and paper industry.
(6) Represents cash expenditures for acquisition of property, plant and
equipment, excluding the investment in Aracruz Celulose S.A.
(7) Includes the excess of the cost of investment in Aracruz Celulose S.A. over
the underlying fair value of net assets (excluding any possible adjustments for
fair value of property, plant and intangible assets), which amounted to U.S.$155
million determined on the acquisition of a 12.35% interest in the total capital
of Aracruz Celulose S.A. The excess of the cost of the investment over the
portion of the underlying fair value of the net assets is tentative pending
completion of the appraisal of property, plant and equipment and intangible
assets. The allocation may change with the completion of the pending procedures.
Consistent with the SFAS No. 142 "Goodwill and Other Intangible Assets," this
excess has not been amortized.
(8) Includes sales of third-party products by KSR and sales of specialty papers
produced at the Mogi das Cruzes mill.

                                       5

<PAGE>


Exchange Rates

     There are two principal foreign exchange markets in Brazil:

     o    the commercial rate exchange market, or commercial market, and

     o    the floating rate exchange market.

     Most trade and financial foreign-exchange transactions, including
transactions relating to the purchase or sale of preferred shares or the payment
of dividends with respect to preferred shares or ADSs, are carried out on the
commercial market at the applicable commercial market rate. Purchase of foreign
currencies in the commercial market may be carried out only through a Brazilian
bank authorized to buy and sell currency in that market. In both markets, rates
are freely negotiated but may be strongly influenced by intervention by the
Brazilian Central Bank, or the Central Bank.

     Between March 1995 and January 1999, the Central Bank permitted the gradual
devaluation of the real against the U.S. dollar pursuant to an exchange rate
policy that established a band within which the real/U.S. dollar exchange rate
could fluctuate.

     Responding to pressure on the real, on January 13, 1999, the Central Bank
widened the foreign exchange band. Because the pressure did not ease, on January
15, 1999, the Central Bank allowed the real to float. Since January 1, 1999 and
through December 31, 2000, the real depreciated by 61.8% against the U.S.
dollar, and, as of December 31, 2000, the commercial market rate for purchasing
U.S. dollars was R$1.9554 to US$1.00. In the year ended December 31, 2001, the
real depreciated by 18.7% against the U.S. dollar. As of July 10, 2002, the
commercial market rate for purchasing U.S. dollars was R$2.8541 to US$1.00. We
cannot assure you that the real will not appreciate or devalue substantially in
the near future. See "Item 5A -- Operating and Financial Review and Prospects --
Operating Results -- Overview -- Brazilian Economic Environment."

     The following table shows the commercial selling rate for U.S. dollars for
the periods and dates indicated.

                                 Exchange Rate of Reais per U.S.$1.00

Year Ended December 31,      Low         High     Average(1)  Period-end

1997.....................   1.0390      1.1164      1.0808      1.1164
1998.....................   1.1165      1.2087      1.1611      1.2087
1999.....................   1.2078      2.1647      1.8158      1.7890
2000.....................   1.7234      1.9847      1.8295      1.9554
2001.....................   1.9357      2.8007      2.3523      2.3204

                                 Exchange Rate of Reais per U.S.$1.00

Month Ended                                         Low             High

January 31, 2002...........................        2.2932          2.4384
February 28, 2002..........................        2.3482          2.4691
March 31, 2002.............................        2.3236          2.3663
April 30, 2002.............................        2.2709          2.3689
May 31, 2002...............................        2.3625          2.5269
June 30, 2002..............................        2.5220          2.8593
July (through July 10), 2002...............        2.8481          2.9141

----------------------------
Source:  Central Bank.
(1) Represents the daily average exchange rate during each of the relevant
periods.

                                       6
<PAGE>


B.  Capitalization and Indebtedness

     The following table sets forth our total short-term loans and financings
and capitalization unaudited at March 31, 2002 derived from our unaudited
interim financial information prepared in accordance with U.S. GAAP. You should
read this table in conjunction with "Item 3A -- Key Information -- Selected
Financial Data," "Item 5 -- Operating and Financial Review and Prospects" and
our audited financial statements included elsewhere in this annual report.


                                                              At March 31, 2002
                                                     --------------------------
                                                     (U.S. dollars in millions)
Short-term debt:(1)(2)
      Foreign currency-denominated                    U.S.$                  74
          Total short-term debt                       U.S.$                  74
                                                     --------------------------
Long-term debt:(2)
      Current portion:
      Real-denominated                                U.S.$                  20
      Foreign currency-denominated                                          368
                                                     --------------------------
                                                                            388

Non-current portion:
      Real-denominated                                                       89
      Foreign currency-denominated                                          527
                                                     --------------------------

        Total long-term debt                                              1,004
        Less current portion                                               (388)
           Total long-term debt less
           current portion                           U.S.$                  616
                                                     --------------------------

Shareholders' equity:
      Paid-in capital                                U.S.$                1,320
      Additional paid-in capital                                             24
      Treasury shares, at cost                                               (4)
      Appropriated retained earnings                                         27
      Unappropriated retained earnings                                      562
      Cumulative translation adjustment                                    (775)
            Total shareholders' equity               U.S.$                1,154
                                                     --------------------------
Total capitalization (long-term debt, less
current portion, plus shareholders' equity)          U.S.$                1,770
-----------------
(1)  Excludes current portion of long-term debt.
(2) All of our short-term and long-term debt is secured by either property,
plant and equipment, promissory notes or export notes.

C.   Reasons for the Offer and Use of Proceeds

         Not applicable.

D.   Risk Factors

     We are subject to various changing competitive, economic, political and
social conditions. These conditions are described below.

         Risks Relating to VCP and the Pulp and Paper Industry

         The market prices for our products are cyclical.


                                       7

<PAGE>

     The prices we are able to obtain for our products depend on prevailing
world prices for market pulp and paper. World prices have historically been
cyclical, subject to significant fluctuations over short periods of time
depending on a number of factors, including:

     o    worldwide demand for pulp and paper products;

     o    worldwide production capacity and inventories;

     o    the strategies adopted by major pulp and paper producers; and

     o    the availability of substitutes for our products.

     All of these factors are beyond our control. After reaching a peak of
approximately U.S.$700 per ton in the second half of 2000, market pulp prices
began to fall in 2001 due primarily to a significant drop in demand and a
slowdown of the U.S. economy. During the second half of 2001, market pulp prices
declined to approximately U.S.$400 per ton. In the fourth quarter of 2001,
market pulp prices began to increase as a result of the industry-wide decline in
inventory. In the first quarter of 2002, pulp prices remained stable due to an
increase in inventory to 1.9 million tons in North America and Scandinavia at
the end of January. In the second quarter of 2002, due to increased demand and
relatively lower inventory, pulp prices began to increase and reached U.S.$450
per ton in the beginning of May. The price of paper products, although less
volatile than the price of pulp, experiences fluctuations in response to
fluctuations in pulp prices.

     It is possible that market prices for pulp and paper will decline further
in the future, or that there will not be sufficient demand for our products to
enable us to operate our production facilities in an economical manner.

     We face significant competition in some of our lines of business, which may
adversely affect our market share and profitability.

     The pulp and paper industry is highly competitive. Competitive features
within the industry include the following:

     o    in coated paper, we face competition from larger international
          companies that have greater ability to support possible strategic
          expenditures directed to increase market share; and

     o    in the international pulp and paper markets, we compete with larger
          competitors that have greater financial strength and higher production
          capacities.

     Traditionally, imports of pulp and paper have not provided substantial
competition for us in Brazil due to, among other factors, tariff rates on those
products. If the Brazilian government decreases import tariffs, we may face a
sudden increase in competition in the domestic market by foreign producers.

     In addition, most markets are served by several suppliers, often from
different countries. Many factors influence our competitive position, including
mill efficiency and operating rates, and the availability, quality and cost of
wood, energy, chemicals and labor. Some of our competitors have greater
financial, marketing and other resources, larger customer bases and greater
breadth of product offerings than we do. If we are unable to remain competitive
with these producers in the future, our market share may be adversely affected.
In addition, downward pressure on the prices of pulp and paper by our
competitors may affect our profitability.

     Delays in the expansion of our facilities may affect our costs.

     As part of our strategy to increase our international market share and
improve our competitiveness through greater economies of scale, we are expanding
our pulp production capacity at the Jacarei mill by 530,000 tons, raising our
total current annual installed capacity from 850,000 to 1.4 million tons per
year by January 2003. The project is currently on schedule and we expect to
begin our operations in January 2003. The Jacarei expansion involves various
risks. These risks include engineering, construction, regulatory and other
significant risks that may delay or prevent the successful completion or
operation of the project or significantly increase our costs. Our ability to
successfully complete any expansion project on time is also subject to financing
and other risks.

     We may be adversely affected because:

                                       8
<PAGE>


     o    we may not be able to complete our expansion project on time or within
          a determined budget;

     o    our new or modified facilities may not operate at designed capacity or
          may cost more to operate than we expect; and

     o    we may not be able to sell our additional production at attractive
          prices.

     We may be adversely affected by the imposition and enforcement of more
stringent environmental regulations that would require us to spend additional
funds.

     We are subject to stringent environmental laws and regulations in Brazil
governing air emissions, effluents discharges, solid wastes, odor and
reforestation, and certain of our operations are required to be permitted by
governmental agencies implementing these laws and regulations and pollution
control policies. Changes in these laws and regulations could adversely affect
us. If we violate or fail to comply with these laws, regulations and permits, we
could be fined or otherwise sanctioned by regulators, or our permits could be
revoked and our ability to operate could be suspended or otherwise adversely
affected. In addition, noncompliance with these laws, regulations and permits
could result in criminal sanctions for us and for our employees. We could also
be responsible for related environmental remediation costs, which costs could be
substantial.

     It is possible that the relevant legislatures and/or governmental agencies
will pass new laws or impose additional laws and regulations even more stringent
than the ones currently in force, or will seek a more stringent interpretation
of existing laws and regulations that would require us to spend additional funds
on environmental matters or limit our ability to operate as we currently do. In
addition, these actions could increase the costs associated with renewing
existing permits or applying for new ones. There can be no assurance that these
additional funds or costs will not be material.

     Our insurance coverage may be insufficient to cover our losses in cases of
damage to our forests.

     Our insurance may be insufficient to cover losses that we might incur. We
have comprehensive insurance with leading insurers to cover damages to our mills
caused by fire, general third-party liability for accidents and operational
risks, as well as international and domestic transportation. However, we do not
maintain insurance coverage against fire, disease and other risks to our
forests. In each of the past three years, forest fires have resulted in damage
to less than 0.1% of our total planted area. The occurrence of losses or other
liabilities that are not covered by insurance or that exceed our insurance
limits could result in significant unexpected additional costs.

     If we are unable to manage potential problems and risks related to
acquisitions and alliances, our business and growth prospects may suffer.

     We may, as part of our business strategy, acquire other businesses in
Brazil or elsewhere or enter into alliances. Our management is unable to predict
whether or when any prospective acquisitions or alliances will occur, or the
likelihood of a material transaction being completed on favorable terms and
conditions. Our ability to continue to expand successfully through acquisitions
or alliances depends on many factors, including our ability to identify
acquisitions and negotiate and close transactions. Even if we complete future
acquisitions:

     o    we could fail to successfully integrate the operations, services and
          products of any acquired company;

     o    we could fail to select the best partners or fail to effectively plan
          and manage any alliance strategy;

     o    the acquisitions could increase our costs;

     o    our management's attention could be diverted from other business
          concerns; and

     o    we could lose key employees of the acquired company.

     The world pulp and paper industry is undergoing consolidation, and many
companies compete for acquisition and alliance opportunities in our industry.
Some of our competitors have greater financial and other resources than we do.
This may reduce the likelihood that we will be successful in completing
acquisitions and alliances necessary for the expansion of our business. In
addition, any major acquisition we consider may be subject

                                       9

<PAGE>


to regulatory approval. We may not be successful in obtaining required
regulatory approvals on a timely basis or at all.

     We are controlled by a defined group of individuals who have the power to
control all our subsidiaries and us.

     We are controlled by the Ermirio de Moraes family, which indirectly
controls all of our outstanding common voting shares. Consequently, our
controlling shareholders have the power to control us and all of our
subsidiaries, including the power to:

     o    elect our directors; and

     o    determine the outcome of any action requiring shareholder approval,
          including transactions with related parties, corporate reorganizations
          and dispositions and the timing and payment of any future dividends.

     We engage in, and expect from time to time in the future to engage in,
commercial and financial transactions with our controlling shareholders or their
affiliates. Commercial and financial transactions between us and our affiliates
create the potential for, or could result in, conflicting interests. For a
discussion of certain related party transactions, see "Item 7B -- Related Party
Transactions."

     Various other risks could have a material adverse effect on our financial
results.

     Our operations are subject to various other risks affecting our forests and
manufacturing processes, including fire, drought, disease, climate changes,
electrical failures and factory explosions, which could have a material adverse
effect on our financial results.

     We rely on third parties for some of our technology.

     We rely on third parties for the technology we use to make some of our
value-added paper products. For example, Oji Paper of Japan has granted us the
right to use its technology to manufacture and sell certain carbonless and
thermal papers in Brazil and to sell these products in some other territories.
This agreement is scheduled to expire in 2004. Although we have no reason to
believe that Oji Paper will not allow us to renew this agreement on commercially
reasonable terms, Oji Paper is not obligated to do so. If a third-party licensor
of technology that we use refused to continue licensing its technology to us,
our results of operations could be adversely affected.

     Risks Relating to Brazil

     Brazilian economic and political conditions have a direct impact on our
business and the market price of our preferred shares and ADSs.

     Our operations are conducted in Brazil, and, in 2001, we sold approximately
57% of our products in terms of volume to Brazilian customers. Accordingly, our
financial conditions and results of operations are substantially dependent on
economic conditions in Brazil. Brazil's gross domestic product grew by 3.0% in
1997, 0.2% in 1998, 0.8% in 1999, 4.4% in 2000 and 1.5% in 2001. However, we
cannot assure you that gross domestic product will increase or remain stable in
the future. Future developments in the Brazilian economy may affect the
country's growth rates and, consequently, the consumption of pulp and paper. As
a result, these developments could impair our ability to proceed with our
business strategies, our financial condition or our results of operations.

     The Brazilian economy has been characterized by frequent and occasionally
drastic intervention by the Brazilian government and by volatile economic
cycles. The Brazilian government has often changed monetary, taxation, credit,
tariff and other policies to influence the course of Brazil's economy. Changes
in policy, including tariffs, exchange controls or other factors, could
adversely affect our business and financial results, as could inflation, further
currency devaluation and other developments, and the Brazilian government's
response to them. See "Item 5A -- Operating and Financial Review and Prospects
-- Operating Results -- Overview -- Brazilian Economic Environment" for more
information regarding how government policies may affect our operations.

     Our business could be significantly affected by political instability in
Brazil. The next presidential elections are to occur in October 2002, and
Brazilian law does not allow President Fernando Henrique Cardoso, now serving a
second term, to serve a third term. Changes in the composition of the governing
coalition, in the identity of ruling

                                       10

<PAGE>


local parties, in the cabinet or in the presidency may potentially undermine
investor confidence or produce policy changes that may adversely affect our
operations and/or the price of our preferred shares and ADSs.

     Inflation, and certain governmental measures to combat inflation, may
contribute significantly to economic uncertainty in Brazil and to heightened
volatility in the Brazilian securities markets.

     Brazil has historically experienced extremely high rates of inflation.
Inflation itself and certain governmental measures to combat inflation in the
past have had significant negative effects on the Brazilian economy. Our cash
costs and operating expenses are substantially all in reais and tend to increase
with Brazilian inflation because our suppliers and providers generally increase
prices to reflect the depreciation of the value of the currency. As expressed in
U.S. dollars, however, these increases are typically offset at least in part by
the effect of the appreciation of the U.S. dollar against the real. If the rate
of Brazilian inflation increases more rapidly than the rate of appreciation of
the U.S. dollar, then, as expressed in U.S. dollars, our operating expenses may
increase and (assuming constant U.S. dollar sales prices) our profit margins
decrease. In addition, high inflation generally leads to higher domestic
interest rates, and, as a result, our costs of real-denominated debt may
increase. See "Item 5A -- Operating and Financial Review and Prospects --
Operating Results -- Overview -- Brazilian Economic Environment."

     Exchange rate instability may adversely affect our financial condition and
results of operations and the market price of the preferred shares and ADSs.

     Because a significant portion of our revenues and assets is denominated in
reais and we have U.S. dollar-denominated debt and other liabilities, we may be
adversely affected by any future devaluations of the real against the U.S.
dollar. The Brazilian currency has been devalued periodically during the last
four decades. See "Item 3A -- Selected Financial Data -- Exchange Rates."

     Our cash costs and operating expenses are substantially all in reais and
will generally decrease, as expressed in U.S. dollars, as a result of any
devaluation of the real. If the rate of Brazilian inflation increases more
rapidly than the rate of appreciation of the U.S. dollar against the real, then,
as expressed in U.S. dollars, our operating expenses may increase and (assuming
constant U.S. dollar sales prices) our profit margins decrease. In addition, any
significant devaluation of the real may produce exchange losses on unhedged debt
denominated in foreign currency.

     The real devalued against the U.S. dollar by 48.0% in 1999 and by 9.3% in
2000. During 2001, the real experienced a period of significant devaluation, due
in part to the economic and political uncertainties in Argentina, the global
economic slowdown and the energy crisis in Brazil. In 2001, the depreciation of
the real relative to the U.S. dollar totaled 18.7%. In the first three months of
2002, the real depreciated against the U.S. dollar by 0.1%.

     The Brazilian Central Bank, or the Central Bank, has intervened
occasionally to control unstable movements in the foreign exchange rate. At the
present time, it is not yet possible to predict whether the Central Bank will
continue to let the real float freely. Accordingly, it is not possible to
predict what impact the Brazilian government's exchange rate policies may have
on us. We cannot assure you that the Brazilian government will not impose a band
within which the real/U.S. dollar exchange rate could fluctuate in the future.

     Devaluations of the real relative to the U.S. dollar also create additional
inflationary pressures in Brazil that may negatively affect us. They generally
curtail access to foreign financial markets and may require government
intervention, including recessionary governmental policies. See "--Inflation and
certain governmental measures to combat inflation may contribute significantly
to economic uncertainty in Brazil and to heightened volatility in the Brazilian
securities markets." Devaluations also reduce the U.S. dollar value of
distributions and dividends on the ADSs and the market price of the preferred
shares and ADSs.

     In addition, political and economic uncertainty over the outcome of the
2002 elections may have an adverse effect on the financial and capital markets,
including the foreign exchange market. See "--Brazilian economic and political
conditions have a direct impact on our business and the market price of our
preferred shares and ADSs."


                                       11

<PAGE>


     Developments in other emerging markets, including Argentina, may adversely
affect the market price of the preferred shares and ADSs.

     Economic and market conditions in other emerging market countries,
especially those in Latin America, influence the market for securities issued by
Brazilian companies and investors' perception of economic conditions in Brazil.
In 2001, after prolonged periods of recession, followed by political
instability, Argentina announced it would not service its public debt. In order
to address the worsening economic and social crisis, the Argentine government
abandoned its decade-old fixed dollar-peso exchange rate, allowing the currency
to float. The Argentine peso experienced a 260% devaluation against the U.S.
dollar from January 1 to May 31, 2002.

     The Argentine crisis may also affect the perception of risk in Brazil by
foreign investors. Although the expectation of many that a similar problem would
follow in Brazil has not materialized, the volatility in market prices for
Brazilian securities increased in early 2001. Nonetheless, if events in
Argentina continue to deteriorate, they may adversely affect our ability to
borrow funds at an acceptable interest rate or to raise equity capital when and
if there should be a need. Accordingly, adverse developments in Argentina or in
other emerging market countries could lead to a reduction in the demand for, and
market price of, the preferred shares and the ADSs. In addition, the
continuation of the Argentine recession and the recent devaluation of the
Argentine peso could adversely affect the Brazilian economy, as Argentina is one
of Brazil's principal trading partners, accounting for 8.6% of Brazil's exports
in 2001.

     Risks Relating to the Preferred Shares and ADSs

     Exchange controls and restrictions on remittances abroad may adversely
affect holders of our ADSs.

     You may be adversely affected if the government imposes restrictions on the
remittance to foreign investors of the proceeds of their investments in Brazil
and the conversion of Brazilian currency into foreign currencies. The government
imposed remittance restrictions for approximately three months in 1989 and early
1990. These restrictions would hinder or prevent the conversion of dividends,
distributions or the proceeds from any sale of preferred shares, as the case may
be, into U.S. dollars and remitting the U.S. dollars abroad. We cannot assure
you that the government will not take similar measures in the future. Holders of
the ADSs could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for conversion of real payments and remittances
abroad in respect of the preferred shares underlying the ADSs. In such case, our
ADSs depositary will distribute reais or hold the reais it cannot convert for
the account of the ADS holders who have not been paid.

     Exchanging ADSs for the underlying preferred shares may have unfavorable
consequences.

     The Brazilian custodian for the preferred shares must obtain an electronic
certificate of registration from the Central Bank to remit U.S. dollars abroad
for payments of dividends, any other cash distributions, or upon the disposition
of the shares and sales proceeds related thereto. If you decide to exchange your
ADSs for the underlying preferred shares, you will be entitled to continue to
rely, for five business days from the date of exchange, on the ADS depositary's
electronic certificate of registration. Thereafter, you may not be able to
obtain and remit U.S. dollars abroad upon the disposition of the preferred
shares, or distributions relating to the preferred shares, unless you obtain
your own electronic certificate of registration with the Central Bank, under
Resolution No. 2,689 of January 26, 2000 of the National Monetary Council, known
as Resolution No. 2,689, which entitles foreign investors to buy and sell on the
Brazilian stock exchanges. If you do not obtain a certificate of registration
under Resolution No. 2,689, you may not be able to obtain and remit abroad U.S.
dollars or other hard currencies upon the disposition of preferred shares or
distributions with respect thereto, and you will generally be subject to less
favorable tax treatment on gains with respect to the preferred shares. If you
attempt to obtain your own electronic certificate of registration, you may incur
expenses or suffer significant delays in the application process. Obtaining an
electronic certificate of registration involves generating significant
documentation, including completing and filing various electronic forms with the
Central Bank and the CVM. In order to complete this process, the investor will
usually need to have a consultant or an attorney who has expertise in Central
Bank and CVM regulations. These expenses or delays could adversely impact your
ability to receive dividends or distributions relating to the preferred shares
or the return of your capital in a timely manner. If you decide to exchange your
preferred shares back into ADSs once you have registered your investment in the
preferred shares, you may deposit your preferred shares with the custodian and
rely on the ADS depositary's electronic certificate of registration, subject to
certain conditions. We cannot assure you that the ADS depositary's electronic
certificate of registration or any certificate of foreign

                                       12

<PAGE>


capital registration obtained by you may not be affected by future legislative
or other regulatory changes, or that additional restrictions applicable to you,
the disposition of the underlying preferred shares or the repatriation of the
proceeds from disposition could not be imposed in the future. See "Item 8A --
Financial Information -- Consolidated Financial Statements and Other Financial
Information -- Dividend Policy and Dividends -- Payment of Dividends."

     Because we are subject to specific rules and regulations as a Brazilian
company, holders of our ADSs have fewer and less well defined shareholders'
rights.

     Our corporate affairs are governed by our by-laws and the Brazilian
corporate law, which may differ from the legal principles that would apply if we
were incorporated in a jurisdiction in the United States, such as Delaware or
New York, or in certain other jurisdictions outside Brazil. In addition, your
rights or the rights of holders of the preferred shares under the Brazilian
corporate law to protect your interests relative to actions taken by our board
of directors or the holders of common shares may be fewer and less well defined
than under the laws of those other jurisdictions outside Brazil.

     Although Brazilian law imposes restrictions on insider trading and price
manipulation, the Brazilian securities markets are not as highly regulated and
supervised as the U.S. securities markets or markets in certain other
jurisdictions. In addition, rules and policies against self-dealing and
regarding the preservation of shareholder interests may be less well developed
and enforced in Brazil than in the United States, potentially disadvantaging
holders of the preferred shares and ADSs. Specifically, among other differences
when compared to, for example, Delaware general corporation law, the Brazilian
corporate law and practice have less detailed and well established rules and
judicial precedents relating to the review of management decisions against duty
of care and duty of loyalty standards in the context of corporate
restructurings, transactions with related parties, and sale-of-business
transactions. In addition, shareholders must hold 5% of the outstanding share
capital of a corporation to have standing to bring shareholders' derivative
suits, and shareholders ordinarily do not have standing to bring a class action.

     You may not be able to exercise preemptive rights with respect to our
preferred shares.

     You may not be able to exercise the preemptive rights relating to the
preferred shares underlying your ADSs unless a registration statement under the
Securities Act of 1933, as amended, or the Securities Act, is effective with
respect to those rights or an exemption from the registration requirements of
the Securities Act is available and the ADS depositary determines to make the
rights available to you. We are not obligated to file a registration statement
with respect to the shares relating to these preemptive rights, and we cannot
assure you that we will file any such registration statement. Unless we file a
registration statement or an exemption from registration applies, you may
receive only the net proceeds from the sale of your preemptive rights by the ADS
depositary or, if the preemptive rights cannot be sold, they will be allowed to
lapse. See "Item 10D -- Additional Information -- Exchange Controls --
Preemptive Rights."

ITEM 4.  INFORMATION ON VCP

A.   History and Development of VCP

     We are incorporated under the laws of the Federative Republic of Brazil
under the name Votorantim Celulose e Papel S.A. as a corporation with unlimited
duration. We have the legal status of a sociedade por acoes, or a stock
corporation, operating under the Brazilian corporate law, as amended. Our
principal executive offices are located at Alameda Santos, 1357, 6th floor,
01419-908 Sao Paulo, SP Brazil (telephone: 55-11-3269-4168/4169). Our agent for
service of process in the United States is CT Corporation, 111 Eighth Avenue,
New York, New York 10011.

     Currently, our industrial facilities consist of two integrated pulp and
paper mills, Jacarei and Luiz Antonio, and two facilities exclusively dedicated
to paper production, Piracicaba and Mogi das Cruzes, all located in the state of
Sao Paulo. At March 31, 2002, our installed capacity was 850,000 tons per year
of pulp and 655,000 tons per year of coated, uncoated and specialty papers.
Approximately 80% of our paper sales volume and 25% of our pulp sales volume are
sold to the domestic market.

                                       13

<PAGE>


     We also have a paper distribution division, KSR, with an extensive product
line, including graphic papers and products. We have an automated, modern
warehouse system that permits efficient distribution, supported by a specialized
transportation fleet for deliveries throughout Brazil.

     Our activities began in 1988 when the Votorantim group purchased Celpav
Celulose e Papel Ltda., or Celpav, a pulp and paper producer based in the state
of Sao Paulo. We began production in 1991 after expanding and modernizing our
facilities. In September 1992, the Votorantim group purchased Industrias de
Papel Simao S.A, or Papel Simao. In 1995, Celpav became a subsidiary of Papel
Simao, and Papel Simao changed its name to Votorantim Celulose e Papel S.A. We
later transferred our operating assets to Celpav and, in July 1999, Celpav was
merged into VCP.

     In 1991, our annual capacity was 350,000 tons per year of pulp and 280,000
tons per year of paper. With the acquisition of Papel Simao, the Votorantim
group added 220,000 tons of pulp and 250,000 tons of paper to the annual pulp
and paper production capacity, respectively. Following the acquisition of Papel
Simao, the Votorantim group's combined pulp and paper operations constituted the
third largest in Brazil in terms of sales. We further increased our pulp
production capacity by 230,000 tons in 1996 with the addition of a new pulp
production line at the Jacarei mill. We also added a new coater in 1996 at the
Piracicaba mill, which increased our annual production capacity of thermal and
carbonless paper to 40,000 tons per year and further production optimizations in
2001 raised the production capacity by 50,000 tons of pulp per year. Our annual
production capacity of coated paper increased to 175,000 tons per year with the
addition of a new coater at the Jacarei mill in 1997 and the addition of a new
on-line coater at the Piracicaba mill in 1998. As a result of these additions,
our paper production capacity reached 655,000 tons per year in 2001.

     On December 29, 1999, we sold our 51% stake in Industria de Papel de Salto
Ltda., or Salto, to Arjo Wiggins Participacoes e Comercio Ltda., a subsidiary of
Arjo Wiggins S.A., a French company, for a cash payment of U.S.$23 million.
Salto produced security, industrial and other specialty papers, including paper
used for bank notes, checks, identification cards, vouchers and bibles. Under
the terms of the sale agreement, we have to indemnify Arjo Wiggins against
certain losses in excess of amounts recorded. Our obligation, however, is
limited to R$22 million (U.S.$10 million at the exchange rate prevailing on
December 31, 2001) until 2005. To date, we have not paid any amounts under this
indemnification provision, and we believe any amount paid will not be
significant. We realized a gain of U.S.$13 million on this sale.

     On April 19, 2000, we completed a registered offering of 7,920,000 ADSs.
Each ADS represented 500 preferred shares, and the ADSs were listed on the New
York Stock Exchange under the symbol "VCP." Of the 7,920,000 ADSs being offered
at that time, we sold 2,047,648 ADSs and certain of our shareholders sold the
remaining 5,872,352 ADSs. Concurrently, 440,000,000 preferred shares were sold
in Brazil.

     On August 14, 2000, our board of directors approved the Jacarei expansion,
which will expand the pulp production capacity at our Jacarei mill by
approximately 530,000 metric tons, raising our total current annual installed
capacity from 850,000 to 1.4 million metric tons per year by January 2003. The
Jacarei expansion project includes reforestation projects, which should be
completed at the same time as the Jacarei expansion. For the year ended December
31, 2001, we had invested U.S.$206 million in the Jacarei expansion and we
expect to invest approximately U.S.$344 million until the completion of this
project. The government-owned development bank, Banco Nacional de
Desenvolvimento Economico e Social, or BNDES, disbursed U.S.$56 million (or
R$141 million) to finance part of our investment in the Jacarei expansion. See
"Item 4D -- Property, Plant and Equipment -- Jacarei Expansion."

     On November 1, 2001, we purchased 28.0% of the voting shares (representing
12.35% of the total capital) of Aracruz Celulose S.A. from the Mondi Group, for
approximately U.S.$370 million. Aracruz is a Brazilian pulp exporter whose ADSs
trade on the New York Stock Exchange. We acquired our interest in Aracruz in
order to increase our exposure to the international pulp market, and we account
for this investment under the equity method. We financed this acquisition with a
bridge loan in the amount of U.S.$370 million. This transaction is subject to
approval the Conselho Administrativo de Defesa Economica, known as CADE, the
Brazilian antitrust regulator. CADE could impose conditions on the acquisition
or on our involvement with Aracruz, or could require us to divest the
acquisition, although we do not believe a divestiture order or any imposition of
conditions is likely. As long as Aracruz continues to export 95% or more of its
products, we believe that the CADE approval will be forthcoming.

                                       14

<PAGE>


     We do not expect to have significant operational involvement at Aracruz at
this time. A subsidiary of ours became a party to the Aracruz shareholders'
agreement, along with BNDESPAR, the Lorentzen Group and the Safra Group. Under
the shareholders' agreement, our subsidiary will be entitled to appoint three
directors to the Aracruz's board, which currently consists of ten directors. The
shareholders' agreement, which expires in 2008, provides that the maximum number
of shares of voting stock of Aracruz to be held by any party to the
shareholders' agreement may not exceed 28% of the total outstanding shares of
voting stock. In addition, the shareholders' agreement requires that each person
or entity who acquires shares of voting stock of Aracruz from any of the parties
to the shareholders' agreement become a party to such agreement.

     On January 2, 2002, we created VCP Florestal S.A., a wholly owned
subsidiary of VCP, which assumed all of our assets and liabilities relating to
our forestry activities.

Capital Expenditures

     Our capital expenditures totaled U.S.$679 million in 2001, U.S.$125 million
in 2000, and U.S.$84 million in 1999. We have invested principally in capacity
expansion projects and in modernizing existing facilities.

     We have not made specific capital expenditure plans for future expansion
projects, other than the Jacarei expansion. The table below sets forth a
breakdown of our most significant capital expenditures for the periods
indicated:

                                             2001      2000      1999
                                               (in U.S.$ millions)
   Jacarei expansion..................    $  206         --       --
   Other increase in pulp
     production.......................        --    $    40  $    25
   Increase in coated paper
     production.......................        --         20        5
   Increase in thermal and
     carbonless paper production......        --          1       --
   Forests (includes land purchase)...        37         29       29
   Improvements / modernization.......        24         --        8
   Acquisition of equity
     participation in Aracruz.........       370         --       --
   Other (includes maintenance
     and information technology)......        42         35       17
                                          ------    -------  -------
        Total.........................    $  679    $   125  $    84
                                          ======    =======  =======

     As part of our capital investment program for 2002, we intend to invest
U.S.$435 million for several projects, including the Jacarei expansion. The
following table shows the estimated breakdown of planned capital expenditures
during 2002, which is expected to be financed by cash generated from operations,
by existing cash and/or by special lines of credit denominated in reais from
BNDES:

                                       15
<PAGE>


                                                     U.S.$ in millions
     Jacarei expansion....................              $   295
     Forests (includes land purchase).....                   39
     Improvements / modernization.........                   39
     Other (includes maintenance and
       information technology)............                   62
                                                        -------
          Total...........................              $   435
                                                        =======

     As part of our strategy to increase our international pulp market share and
improve our competitiveness through greater economies of scale, we are expanding
our pulp production capacity at the Jacarei mill by approximately 530,000 tons,
raising our total current annual installed capacity from the current 850,000
metric tons to 1.4 million metric tons per year by January 2003, for an
estimated cost of approximately U.S.$550 million. Approximately U.S.$350 million
will be funded with internal cash flows and U.S.$200 million will be funded by
lines of credit from BNDES. The project is on schedule and we expect to begin
our operations in January 2003. The Jacarei expansion project includes
reforestation projects, which should be completed at the same time as the
Jacarei expansion. At December 31, 2001, we had invested U.S.$206 million in the
Jacarei expansion. BNDES has disbursed U.S.$56 million of its $200 million
commitment.


B.   Business Overview

     We are one of the largest pulp and paper products companies in Brazil and
the leading Brazilian producer of wood-free printing and writing papers and
specialty papers in terms of net sales and total assets, according to Bracelpa.
We produce eucalyptus pulp, which is a high quality variety of hardwood pulp. We
sell approximately 40% of our pulp production to third parties, and we use the
remainder internally to manufacture a wide range of printing and writing paper
products, including coated and uncoated printing and writing papers, thermal,
carbonless papers and other specialty papers. Exports account for a significant
portion of our revenues. In 2001, we sold 43% of our pulp and paper tonnage
outside of Brazil.

Operations

     In 2001, we produced 807,761 tons of eucalyptus pulp, compared to 798,517
tons in 2000 and 735,936 tons in 1999. In 2001, we sold 342,566 tons of this
production as market pulp to third-party producers and we used the remainder to
manufacture paper products. Our production and related U.S. dollar-based exports
of pulp have also increased during 2001. In 2001, our sales volume of market
pulp totaled 75% of our market pulp tonnage outside of Brazil, compared to 71%
in 2000 and 73% in 1999. In 2001, we sold approximately U.S.$143 million of
market pulp compared to U.S.$207 million in 2000, and U.S.$140 million in 1999.
Our pulp export revenues decreased in 2001 as compared to 2000 due to the
significant reduction in the international average price of pulp.

     In 2001, our sales volume of paper products increased to 569,398 tons from
529,523 tons in 2000 and 506,701 tons in 1999. Due to the reduction of pulp
prices, however, our revenues from paper products decreased to U.S.$511 million
in 2001 from U.S.$567 million in 2000 but increased relative to 1999 revenues of
U.S.$448 million. Uncoated and coated printing and writing paper sales accounted
for 76% of our total paper products revenues in 2001. The remainder of our
revenues from paper products in 2001 was made up of sales of thermal and
carbonless paper, accounting for 17% of paper sales, and sales of other
specialty paper accounting for 7% of paper sales. Our printing and writing
papers are used for a variety of business supplies, including notebooks, books,
continuous forms, labels, brochures and magazines. Our estimated market share in
Brazil in 2001 was 40% for coated papers and 22% for uncoated papers. We sold
23% of our printing and writing paper volume outside of Brazil in 2001. Since
1995, our production and sales of higher-margin chemical papers has been
increasing both in real terms and as a proportion of our total paper production
and sales.

     Our total sales volume totaled 911,964 tons in 2001, representing a 4.8%
increase from 2000. Net revenues decreased 15.5% to U.S.$654 million as a result
of the price decrease in U.S. dollars due to the devaluation of the real and the
lower international prices of pulp. The reduction in our average price of pulp
and paper more than offset the increase in volumes and the better mix of
products sold in 2001 as compared to 2000.

                                       16

<PAGE>


     There was a decrease in domestic market paper consumption in 2001 for the
first time in the last seven years, due to the Brazilian economic slowdown
resulting from domestic factors, such as the energy rationing program and
external factors such as the Argentine crisis, high exchange rate volatility,
the general global economic slowdown and the terrorist attacks in the second
half of the year.

     In 2001, 57% of the volume and 68% of the revenues of our total sales came
from the domestic market compared to 60% and 69%, respectively, in 2000. In the
pulp market, the export market was responsible for 75% of both the sales volume
and revenues. In the paper market, the export market was responsible for 23% of
both the sales volumes and revenues.

     The charts below set forth the percentage of our net revenues in 2001 that
correspond to the domestic and export markets and the breakdown by product of
our net revenues:


[OBJECT OMITTED]                                [OBJECT OMITTED]


Our Ownership Structure

     We are part of the Votorantim group, one of the largest privately held
Brazilian groups of companies. The Votorantim group was founded in 1918 by
Senator Jose Ermirio de Moraes and is controlled by the Ermirio de Moraes
family. The three core businesses of the Votorantim group are cement, aluminum
and pulp and paper. In 2001, pulp and paper accounted for approximately 20% of
the Votorantim group's net operating revenues as measured under the Brazilian
corporate law accounting principles. The Votorantim group is also involved in
other industries, including financial services, chemicals and agribusiness.

     The following chart shows our ownership structure as of March 31, 2002:

[OBJECT OMITTED]

--------------

1 Our immediate parent company is Votocel Filmes Flexiveis Ltda., or Votocel,
which is directly controlled by S.A. Industrias Votorantim, and which in turn
is ultimately controlled by Hejoassu Administracao Ltda, or Hejoassu is
controlled by the Ermirio de Moraes Family.

                                       17

<PAGE>

Our Business Strategy

     We intend to focus on steady and sustained growth, building on our
competitive strengths in order to become a leader in the international pulp
market and to maintain our leadership in the Brazilian coated paper market. The
principal components of our strategy are to:

     o    expand our presence in the international pulp market;

     o    maintain our leadership position in the growing Brazilian market for
          wood-free printing, writing, copying and specialty papers;

     o    shift our sales mix toward higher margin paper products;

     o    increase operating efficiencies; and

     o    expand our production capacity through both mill expansion and
          strategic acquisitions to meet increased demand in both the domestic
          and export markets.

     Expand our presence in the international pulp market

     We intend to take advantage of our competitive strengths to increase our
market share in the international pulp market. In 2001, we sold approximately
75% of our market pulp tonnage outside of Brazil, compared to 2% in 1996 when we
began exporting. The high forest yields due to climate and soil conditions in
Brazil, the short harvest cycle, the high productivity and sustainability of our
forest operations and our use of cloning methods are important competitive
advantages over producers in many other countries, and allow us to play an
active and competitive role in the global pulp market. Our investment in Aracruz
reinforces our presence in the international pulp market.

     Maintain our leadership position in the growing regional market for
     wood-free printing, writing, copying and specialty papers

     We are currently a market leader for coated wood-free printing, writing and
specialty papers, with a 40% market share in Brazil. We are also a market leader
for uncoated printing and writing paper, with a 22% market share in Brazil. We
expect domestic demand to grow significantly over the next few years. We are
also increasing sales in our new line of coated cut-size papers launched in
2000, which allows for high quality and resolution printing and is targeted at
small and home offices. In order to consolidate our market position, we focus on
long-term relationships with our customers by seeking to increase our
understanding of our customers and their industries and to tailor our products
to their specific needs. We increased our cut-size capacity in the Luiz Antonio
mill to be able to meet the demand for both domestic and international markets.

     Shift our sales mix toward higher margin paper products

     We believe that an improved product mix with more value-added products can
increase operating margins even if average paper prices do not improve
significantly. In addition, these products are less subject to cyclical price
variations. Therefore, we seek to increase our production of value-added paper
products, such as coated, thermal, carbonless and other specialty papers; our
sales of these papers increased to approximately 47% of our net paper sales in
2001, from approximately 33% in 1997. We are producing higher margin products to
replace products that Brazilian consumers previously had to import, such as beer
and soft drink beverage labels.

     We have developed our production facilities for thermal and carbonless
papers through an alliance with a leading producer in the area, Oji Paper Co.,
Ltd. of Japan, which allows us to benefit from Oji Paper's technology. We expect
to continue to benefit from an increase in domestic demand, as well as to gain
market share from imports of coated and specialty papers, which have become less
competitive due principally to the continuous devaluation of the real since
January 1999. We also will continue to work closely with our customers to
develop new products.

     Increase operating efficiencies

     We intend to remain a low-cost producer of pulp and paper by continuing our
ongoing program to increase operating efficiencies and reduce operating costs
per unit. We intend to continue to:

                                       18

<PAGE>


     o    focus on reducing wood costs through increased eucalyptus yields and
          reduced harvesting costs;

     o    focus on improving the efficiency of our operations through investment
          in harvesting equipment, production facilities and advanced
          information technology; and

     o    improve information flow to facilitate decision-making.

     Expand our production capacity through both mill expansion and strategic
     acquisitions to meet increased demand in both the domestic and export
     markets

     We intend to further increase our production capacity, through both
expansion of existing facilities, including the Jacarei expansion and strategic
acquisitions.

     The Jacarei expansion will increase the annual pulp production capacity at
the Jacarei mill by approximately 530,000 tons. For a more complete description
of the Jacarei expansion, see "Item 4D--Property, Plant and Equipment--Jacarei
expansion."

     Between 1994 and 2001, the average annual rate of paper consumption
increased by 5.7% per year. In recent years, there has been a marked increase in
paper consumption in Brazil. We believe that demand for pulp and paper in the
domestic and export markets will continue to grow over time. We are therefore
increasing our pulp production capacity through our U.S.$550 million expansion
project at our Jacarei mill, which will boost our pulp production capacity to
1.4 million tons annually. At March 31, 2002, we had invested U.S.$282 million
in this project, which we expect will become operational in January 2003. We
also closely monitor the evolution of the Brazilian and global pulp and paper
industry. We continue to pursue growth opportunities to create value for our
shareholders through strategic acquisitions, and we intend to be a participant
in the continuing consolidation among pulp and paper producers, both
domestically and internationally.

Our Products

     We produce a variety of pulp and paper products. We produce pulp both for
sale (market pulp) and for use in our paper production. We sell hardwood
bleached market pulp, both to the Brazilian domestic market and to the export
market outside Brazil. We produce coated and uncoated printing and writing
paper, carbonless, thermal and other specialty papers. Within the printing and
writing paper category, we produce cut-size, folio-size, and rolled products.
The following table sets forth the breakdown of our sales revenues by year:

                                                    2001       2000      1999
                                                    ----       ----      ----
    Pulp ...................................         22%        27%       24%
    Paper:
         Printing and writing...............         59%        54%       56%
         Thermal and carbonless.............         13%        12%       13%
         Other specialty papers.............          6%         7%        7%

     Pulp

     Production

     We produced 807,761 tons of eucalyptus pulp in 2001, compared with 798,917
tons in 2000. The following table sets forth our total hardwood pulp production,
total Brazilian hardwood pulp production, and our hardwood pulp production as a
percentage of total Brazilian pulp production for the years ended December 31,
2001, 2000 and 1999:


                                       19

<PAGE>


                                                     2001      2000      1999
                                                     ----      ----      ----

   VCP's production (in tons)..................    807,761    798,917   735,936
   Total Brazilian production (in tons)........  5,500,118  5,539,258 5,363,533
   VCP's production as percentage of
     total Brazilian production................      14.7%      14.4%     13.7%

----------------------
Sources:  Bracelpa and VCP.


     The pulp production process traditionally involved the use of elementary
chlorine. In recent years, demand for pulp that is bleached with little or no
chlorine has grown significantly because of concerns over possible carcinogenic
effects of chlorinated organic compounds released in water. As a result, we have
increasingly used the elementary chlorine-free method, or ECF, which uses a
reduced amount of chlorine, and the total chlorine-free method, or TCF, in our
production of pulp. ECF and TCF are bleaching processes which do not utilize
elementary chlorine and chlorine chemical compounds, respectively. The ECF
process involves the use of oxygen, chlorine dioxide, caustic soda, hydrogen
peroxide, ozone, talc, magnesium sulfate and sulfuric acid, while the TCF
process involves the use of oxygen, ozone, caustic soda, hydrogen peroxide,
magnesium sulfate and sulfuric acid. In addition, we have developed a bleaching
process referred to as Votorantim chlorine-free, or VCF, which utilizes a
smaller amount of chlorine chemical compound than the ECF process, but is not as
costly as the TCF process. In 2001, approximately 81% of our pulp was produced
without the use of elementary chlorine.

     Sales

     In 2001, we sold 342,566 tons of bleached pulp as market pulp to third
parties, both in the domestic market and outside of Brazil. We had a 20% share
of the Brazilian domestic market for bleached hardwood pulp in 2001. In recent
years, however, we have sought to increase significantly our sales of market
pulp outside of Brazil. In 2001, approximately 75% of our market pulp sales
volume was to customers located outside Brazil. The following table sets forth
our net sales of pulp to the export market by geographic region for the years
ended December 31, 2001, 2000 and 1999:

                               2001                2000               1999
                         Tons   % of Total   Tons  % of Total   Tons % of Total

North America........   98,590     38.3%     88,903     37.0%   89,773    38.7%
Latin America (1)....       --       --          --       --       815     0.4
Europe...............   97,263     37.8     115,333     48.0    98,683    42.6
Asia.................   61,655     23.9      36,042     15.0    42,422    18.3
Africa...............       --       --          --       --        --      --
Total Exports........  257,508    100.0%    240,278    100.0%  231,693   100.0%
-------------------------
(1)Excluding Brazil.

     In 2001, Fabrica de Papel Santa Therezinha S.A. and Industrias de Papel de
Salto Ltda. were our largest domestic customers of pulp and Kimberly-Clark
Corporation was our largest customer of pulp outside of Brazil. Demand for our
pulp has generally exceeded our production capacity even during cyclical
downturns of the pulp industry, and, according to an independent study conducted
in March 2002 by Hawkins Wright, an independent international consulting firm,
the projected average demand growth in the world for bleached eucalyptus kraft
pulp, or BEKP, is 6.3% per year from 2001 to 2005, while the total pulp
(including BEKP) projected average growth is 2.4% per year in the same period.
Also, because pulp is a commodity, we have the ability to switch our pulp sales
from the domestic market to the export market and from the export market to the
domestic market. Accordingly, we believe that the loss of any one customer would
probably be replaced by other customers. However, we cannot assure you that the
loss of a major customer would not have a material adverse effect on our results
of operations.

     We have long-term sales contracts with some of our customers, including
several of our largest customers. These contracts generally provide for sales of
specified amounts of pulp at prices we announce each month. These prices vary
among the different geographic areas where our customers are located. In a few
instances, prices are set in part by reference to publicly announced prices for
pulp or paper products. Generally, the price arrangements under our long-term
contracts are consistent with prices for our other sales within the same region.
Early termination

                                       20

<PAGE>

is provided for in the contracts in the event of a material breach, the
insolvency of one of the parties or force majeure events of extended duration.
Some sales contracts include provisions that permit us to terminate the contract
or reduce the quantities shipped if sales to the purchaser and its affiliates
would exceed a specified percentage of our annual production capacity.

     Paper

     Our paper products can be divided into three major categories:

     o    coated and uncoated printing and writing papers;

     o    carbonless and thermal papers; and

     o    other specialty papers.

     The production and sale of printing and writing papers was our major line
of business in 2001, accounting for approximately 59% of our total net sales and
99% of our paper exports during that year. The following table provides a brief
description of our principal paper products and lists the facilities where they
are produced:

Product                          Description                           Facility

Coated printing and
writing paper.........    Coated free sheet paper used               Jacarei
                          for labels, self-adhesive, flexible        Piracicaba
                          packaging markets and publishing
                          sector (magazine, book and catalogue)
                          inserts, brochures and other
                          publications; pioneer line of coated
                          cut-size paper for small/home office
                          market designed for printing of high
                          resolution and quality images; coated
                          paper to be used on labels for plastic
                          PET soft drink packaging.

Uncoated printing and
writing paper.........    Uncoated free sheet paper in reels,      Luiz Antonio
                          sheets and cut-size designed for         Jacarei
                          maximum performance in photocopying
                          machines and laser and inkjet
                          printers, and alkaline offset paper.

Carbonless paper......    Used to produce multi-copy forms for       Piracicaba
                          credit card receipts, invoices and
                          other applications in place of
                          traditional carbon paper.

Thermal paper.........    Traditionally used in fax machines;        Piracicaba
                          new applications include supermarket
                          receipts, bar code labels, toll
                          tickets, water and gas bills and
                          receipts for ATMs and credit card
                          machines.

Other specialty
papers................    Our specialty papers include art      Mogi das Cruzes
                          paper for catalogues, folders,
                          letters, envelopes, etc.

     Production

     We produced 551,400 tons of paper in 2001, compared to 535,340 tons in
2000. See "Item 4D -- Property, Plant and Equipment -- Operations." The
following table sets forth our paper production, total Brazilian paper
production, and our total paper production as a percentage of total Brazilian
production for the years ended December 31, 2001, 2000 and 1999:

                                        2001             2000             1999

VCP's Production (in tons).....       551,400          535,340          501,764
Total Brazilian Production
 (in tons).....................     7,353,700        7,115,513        6,888,613

                                       21
<PAGE>


VCP's Production as Percentage
 of Total Brazilian
 Production....................          7.5%             7.5%             7.3%
--------------------
Sources:  Bracelpa and VCP.

     Printing and Writing Paper. According to Bracelpa, we are Brazil's largest
producer of wood-free printing and writing paper, and ranked first in uncoated
and coated paper production in 2001. During 2001, we produced 488,400 tons of
printing and writing paper, consisting of approximately 358,200 tons of uncoated
and 130,200 tons of coated paper. Our coated paper is used for a variety of
purposes, including labels, inserts, brochures and magazine covers. Uses for our
uncoated paper include notebooks, books and continuous forms. We produce coated
and uncoated paper in reels and sheets and paper in cut-size. We have estimated
domestic market shares of 40% and 22% in the coated and uncoated printing and
writing markets, respectively.

     The following table sets forth our printing and writing paper production,
total Brazilian printing and writing paper production, and our production as a
percentage of Brazilian production of such products for the years ended December
31, 2001, 2000 and 1999:


                                     2001              2000             1999

VCP's Production
  (in tons)..............          488,400           474,455          442,621
    Uncoated Paper
    (in tons)............          358,200           363,835          361,971
    Coated Paper
    (in tons)............          130,200           110,620           80,650
Total Brazilian
  Production (in tons)...        2,150,364         2,099,593        2,070,339
VCP's Percentage of
  Brazilian Production...            22.7%             22.6%            21.4%
--------------------
Sources:  Bracelpa and VCP.

     Carbonless and Thermal Papers. During 2001, we manufactured 51,420 tons of
carbonless and thermal paper at our Piracicaba production facility. We produce
carbonless and thermal paper in reels and sheets for use as facsimile and
medical paper, as well as supermarket receipts, banking and commercial
automation paper, bar code paper, toll tickets and commercial invoices.

     We developed our thermal and carbonless paper products through
technological agreements with Oji Paper, a market leader for carbonless and
thermal papers. We entered into a technical assistance agreement with Oji Paper
in 1994, pursuant to which Oji Paper provided assistance in the design,
engineering and construction of the coater used in the manufacture of our
carbonless and thermal paper at the Piracicaba mill.

     In addition, we entered into a technology transfer agreement with Oji
Paper, pursuant to which Oji Paper agreed to share secret formulae, processes,
technical information and know-how developed by it for thermal and carbonless
paper. The agreement also grants us an exclusive, non-assignable license to
manufacture and sell certain carbonless and thermal papers in Brazil and a
non-exclusive, non-assignable license to sell such products in Latin America,
Africa and the Middle East. Oji Paper receives quarterly royalties based on net
sales. The sum of the quarterly royalties in each of the years ended December
31, 2001, 2000, and 1999 was approximately U.S.$1.3 million. The technology
transfer agreement will expire in October 2004 and we intend to renew it.
Although we have no reason to believe that Oji Paper will not allow us to renew
this agreement on commercially reasonable terms, Oji Paper is not obligated to
do so.

     Other Specialty Papers. We are one of the largest producers of specialty
papers in Latin America. In 2001, we produced 11,550 tons of other specialty
papers from our Mogi das Cruzes facility, including art papers for catalogues,
folders, letters and envelopes and finish foil for the furniture industry.

     The following table sets forth our carbonless, thermal and other specialty
paper production, Brazilian carbonless, thermal and other specialty paper
production as a total, and our total production as a percentage of the total
Brazilian production of such products, for the years ended December 31, 2001,
2000 and 1999:

                                       22

<PAGE>


                                      2001        2000          1999

VCP's Carbonless Paper
 Production (in tons)..............  40,281      37,132        36,132
VCP's Thermal Paper
 Production (in tons)..............  11,139      10,346         7,537
VCP's Other Specialty
 Paper Production (in tons)........  11,550      13,405        15,474
                                     ------      ------        ------
Total (in tons)....................  62,970      60,883        59,143
                                    =======     =======       =======
Brazilian Production (in tons)..... 169,460     171,531       162,103
VCP's Percentage of Brazilian
 Production........................   37.2%       35.5%         36.5%
-------------------
Sources:  Bracelpa and VCP.

     Sales

     We sell our paper products around the world. The following table sets forth
our net sales of paper to the export market by geographic region at December 31,
2001, 2000, and 1999:

                              2001               2000               1999
                         Tons  % of Total   Tons  % of Total   Tons  % of Total
North America.........  49,802   37.6%     14,706    14.0%    23,960     17.5%
Latin America(1)......  40,302   30.4      43,069    41.0     37,703     27.5
Europe................  34,599   26.1      35,716    34.0     62,990     45.9
Middle East/Asia/
 Africa/Other.........   7,801    5.9      11,555    11.0     12,561      9.1
Total Exports......... 132,504  100.0%    105,046   100.0%   137,214    100.0%
                       =======  ======    =======   ======   =======    ======
-------------------------
(1)  Excluding Brazil.

     The following table sets forth our domestic sales of specialty, carbonless
and thermal paper, Brazilian specialty, carbonless and thermal paper sales, and
VCP's sales as a percentage of Brazilian sales for such products for the years
ended December 31, 2001, 2000 and 1999:

                                           2001        2000          1999
VCP's Carbonless and
 Thermal Paper Sales (in tons).......     52,446      49,061        43,403
VCP's Other Specialty
 Paper Sales(1) (in tons)............     28,388      37,381        27,502
                                          ------      ------        ------
Total (in tons)......................     80,834      86,442        70,905
                                          ======      ======        ======
Brazilian Market
 (in tons)...........................    152,185     154,812       149,464
VCP's Percentage of
 Brazilian Market....................      53.1%       55.8%         47.4%
-------------------------
(1) Includes sales of third-party products by KSR and sales of specialty papers
produced at the Mogi das Cruzes mill.

Sources:  Bracelpa and VCP.

     Printing and writing paper represents the largest category of paper exports
from Brazil. In 2001, we exported 131,749 tons of printing and writing paper,
which primarily consisted of uncoated paper.

     The following table sets forth our exports and domestic sales of printing
and writing paper for the years ended December 31, 2001, 2000 and 1999:


                                       23

<PAGE>




                                                 2001         2000         1999
                                                 ----         ----         ----
VCP's Exports (in tons) .................     131,749      105,046      137,214
Brazilian Exports (in tons) .............     637,577      589,740      750,383
VCP's Percentage of Brazilian Exports ...        20.7%        17.8%        18.3%
VCP's Domestic Sales (in tons) ..........     356,059      337,340      298,582
Brazilian Market (in tons) ..............   1,487,751    1,457,190    1,296,312
VCP's Percentage of Brazilian Market ....        23.9%        23.2%        23.0%

__________________
Sources:  Bracelpa and VCP.

     We believe that we can gain additional market share in the domestic market
because approximately 16% of all coated paper consumed in Brazil in 2001 was
imported, and imports have been less competitive because of the devaluation of
the real since January 1999.

     The customer base for our paper products is very diversified. None of our
customers accounted for more than 10% of our domestic or international sales of
paper products in 2001.

Raw Materials

     Wood

     Our pulp production is 100% based on bleached eucalyptus hardwood grown in
sustainable forest plantations. We use modern technologies that enable us to
obtain high product quality when producing the ECF pulp and a differentiated
product known as Votorantim chlorine-free, or VCF pulp.

     We rely exclusively on eucalyptus trees to meet our pulpwood requirements.
Eucalyptus trees are among the fastest growing in the world. Climate and soil
conditions in Brazil allow for eucalyptus tree harvest rotations of
approximately seven years, as compared to harvest rotations of approximately 12
years in Spain, Portugal and Chile and up to 20 years in the southern United
States. The optimal time to harvest our trees is approximately seven years from
the time of planting.

     We have sufficient forests to supply our current wood requirements for pulp
production and to support the Jacarei expansion.

     Energy and Chemicals

     We use several sources to generate thermal and electrical energy, including
biomass derived from wood debarking, bark and scraps, fuel, oil and black
liquor. By producing electricity internally, we realize substantial savings
compared to purchasing power in the open market. We generate approximately 83%
of our power requirements for the pulp and paper production process from
renewable fuels, such as biomass and black liquor and 12% of our power
requirements from non-renewable fuels, such as fossil fuels (oil, coal and gas).
We only purchase 5% of our power requirements in the open market and, therefore,
we realize substantial savings. Recovery boilers recycle substantially all of
the chemicals used in the pulp production process. We believe that our sources
of supply will allow us to maintain a cost advantage in these areas for the
foreseeable future.

     We purchase approximately 33% of our external energy needs from
concessionaires, including CPFL--Companhia Paulista de Forca e Luz (for the Luiz
Antonio and Piracicaba facilities), Bandeirantes (for the Jacarei and Mogi das
Cruzes facilities) and Eletropaulo (for our headquarters), as well as from fuel
oil and natural gas suppliers. We believe our low dependence on external
supplies of energy represents a strategic business advantage.

     In addition, in 2001, the auxiliary boilers at the mills in Jacarei,
Piracicaba and Mogi das Cruzes, which previously burned fuel oil, began to burn
natural gas. We believe our secure sources of supply will allow us to maintain a
cost advantage in these areas for the foreseeable future.

     The chemicals used in the pulp production process include white liquors,
which are made of sodium hydroxide and sodium sulfite and are recycled in the
chemical recovery system. Any shortage of these chemicals can be replaced by
additional amounts of caustic soda and limestone. In addition, the pulp
production process traditionally



                                       24
<PAGE>


involved the use of elementary chlorine. In recent years, demand for pulp that
is bleached with little or no chlorine has grown significantly because of
concerns over possible carcinogenic effects of chlorinated organic compounds
released in water. As a result, we have increasingly used the elementary
chlorine-free method, or ECF, which uses a reduced amount of chlorine, and the
total chlorine-free method, or TCF, in our production of pulp. ECF and TCF are
bleaching processes which do not utilize elementary chlorine and chlorine
chemical compounds, respectively. The ECF process involves the use of oxygen,
chlorine dioxide, caustic soda, hydrogen peroxide, ozone, talc, magnesium
sulfate and sulfuric acid, while the TCF process involves the use of oxygen,
ozone, caustic soda, hydrogen peroxide, magnesium sulfate and sulfuric acid. In
addition, we have developed a bleaching process referred to as Votorantim
chlorine-free, or VCF, which utilizes a smaller amount of chlorine chemical
compound than the ECF process, but is not as costly as the TCF process.

     In 2001, Brazil experienced a severe shortage of capacity to generate
electrical energy due to a severe shortage in hydroelectric power resulting from
drought conditions throughout the country. In order to avoid the possibility of
rolling blackouts, in May 2001, the Brazilian government announced measures
aimed at reducing electricity consumption and creating alternative sources of
energy in the southeastern, central-western and northeastern regions of Brazil.

     During the energy shortage in Brazil, we bought and rented generators, and
increased our reliance on alternate sources of energy, such as fuel, oil and
natural gas. As a result, we avoided reductions in our production and any
postponement of the Jacarei expansion. The governmental emergency measures
resulted in an approximate U.S.$3.5 million increase in our cost of sales for
2001, which is less than 2% of our total cost of sales for June through December
of 2001, and approximately 1% of our total cost of sales for 2001. On March 1,
2002, the Brazilian government terminated the rationing of energy in Brazil due
to the recovery of water levels.

     Water

     We require 40 to 60 cubic meters of water per metric ton of product to
produce pulp and paper. We get our water from rivers in Brazil, including Rio
Paraiba do Sul, Rio Piracicaba and Rio Mogi Guacu. We believe our water supplies
are currently adequate and that, while the Jacarei expansion will increase our
water needs, our water consumption per ton will be lower because our new
effluent treatment facility will consume less water.


Transportation

     We use trucks owned and operated by independent contractors to transport
wood from our forests to our production facilities. Our forests are located an
average distance of 210 kilometers from our pulp mills. We also use trucks owned
and operated by third parties to ship finished pulp and paper products from our
facilities to our customers in Brazil and other regions in Latin America or to
the port of Santos. Santos is located on the coast of the state of Sao Paulo, at
approximately 380 kilometers from the Luiz Antonio mill and 150 kilometers from
the Jacarei mill.

     In 1998, we obtained a concession from the state government of Sao Paulo to
operate a terminal and a warehouse in Santos, under a renewable ten-year
operational lease agreement with CODESP, the government-owned corporation that
owns and operates the port. This lease is noncancellable during the initial
period and, if not renewed, will expire in September 2007. This has facilitated
our exports, as we currently load vessels with pulp directly from our terminal,
thereby significantly reducing freight and handling costs. Our expense in each
of 2001, 2000, and 1999 was approximately U.S.$0.1 million, and future annual
lease payments under the CODESP lease will also be of approximately U.S.$0.1
million per year. This amount was capitalized and is being amortized over the
term of the lease in equal installments. There is no contingent rent under the
contract. In addition, in 2001, we rented another warehouse at the terminal in
Santos in anticipation of future increases of our pulp exports as a result of
the Jacarei expansion. This expanded our total warehouse area to 12,520 square
meters from 9,550 square meters and our total warehouse volume capacity to
38,000 tons from 28,000 tons.

Marketing and Distribution

     We sell our pulp and paper products in both the domestic and export
markets. In 2001, approximately 75% of our sales volume of market pulp and 23%
of our sales volume of paper products were made outside of Brazil. Our


                                       25
<PAGE>

internal sales staff consists of 86 employees operating throughout Brazil. In
addition, 274 employees (including 190 sales agents) are assigned to KSR, our
paper distribution division.

     Through KSR and our internal sales staff, we focus on developing close,
long-term customer relationships by meeting the customer's specific
requirements. We constantly seek to increase our understanding of our customers
and their industries and to tailor our products to their specific needs. See
"Item 5C--Operating and Financial Review and Prospects--Research and
Development, Patents and Licenses, Etc." for a detailed description of our
technology upgrades in the area of customer relationships.

     Information technology has been one of our high priority areas. To provide
support for our organizational restructuring and a new stage of growth, in 2000
we upgraded our SAP R/3 management software to a more modern version available
on the market. This investment further integrated our day-to-day operations and
added new functions, including e-business projects, which have allowed us to
pursue Internet activities.

     Pulp

     Our internal sales staff handles substantially all of our domestic market
pulp sales. We sell pulp to other Brazilian paper producers, including
Industrias Klabin de Celulose e Papel S.A., or Klabin, and Fabrica de Papel
Santa Therezinha S.A. We deliver this pulp by truck to our customers. In
addition, after the completion of the Jacarei expansion in 2003, we will be
selling substantially more market pulp abroad. In order to distribute and market
this additional market pulp, we operate our own terminal at the port of Santos
and we have been using local agents abroad.

     On April 2001, we incorporated VCP Exportadora, a wholly owned subsidiary
formed to ensure that we are well positioned in the global market for the
production of pulp and uncoated copying paper and that we maintain our position
as a regional leader for coated paper in the regional market. In addition to
being an important instrument in our growth, VCP Exportadora and its
subsidiaries will play an important role in establishing direct relationships
with customers worldwide. We also expect to incorporate or use subsidiaries
abroad that will provide better access to our international customers and their
international financial markets and will act as vehicles for future acquisitions
outside Brazil.

     Paper

     In 2001, approximately 77% of paper sales volume and 80% of our net
revenues derived from paper came from the domestic market. We sell 16% of our
paper products through KSR. Domestically, KSR's distribution network consists of
32 branches, which are strategically located with warehouses used for storage
purposes, and a workforce composed of 190 sales agents. In 2001, KSR was the
segment leader in paper distribution in Brazil, with a market share of
approximately 28% of the distribution sales. Through KSR, we sell our paper
products to approximately 25,000 customers, including small printers, stationery
stores and industrial companies throughout Brazil, as well as to the Brazilian
government. KSR also sells the products of other paper companies in areas where
they do not compete with us, in both the export and domestic markets. As a
result, we are able to offer a wide range of complementary products, with prompt
delivery. In 2001, through KSR we had net revenues of U.S.$86 million,
representing 19% of our total consolidated paper sales in the domestic market.

     Sales of our products to our domestic customers are for cash, credit or
through a program called the "vendor program." For purposes of this prospectus,
we have referred to our credit sales as the "non-vendor program."

     The vendor program is available to some of our domestic paper customers,
and approximately 22% of our domestic paper sales in 2001 were made by this
method. Under the vendor program, the customer agrees to pay the bank and the
bank in turn pays us on behalf of the customer for the purchase price of the
product. We, as the vendor, act as a guarantor under the arrangement with the
bank so that the customer can take advantage of lower interest costs. The lower
interest rate is a result of the bank typically looking to us, and not our
individual customers, as the primary support for the credit risk. The vendor
program is a means by which the bank essentially finances customers' purchases.

     A customer applying for the vendor program must first be approved by us. If
we determine that the customer is creditworthy, the customer enters into a
standard-form agreement with the bank that is providing the


                                       26
<PAGE>

financing, which is guaranteed by VCP. The bank then forwards to us an amount of
money equal to the purchase price of the products sold. The standard-form
agreement into which the customer enters with a bank specifies loan repayment
terms that are generally more favorable than prevailing market rates, as the
customer receives the benefit of our financial strength through our guarantee.
We guarantee full repayment of the loan and, in the event of a customer default,
the bank charges our cash account for the principal amount of the loan, plus
interest, 15 days after the due date of the loan. We closely monitor the
collection of these amounts and are advised by the bank once amounts have been
settled. If we are called to settle the obligation with the bank, we pursue the
customer through legal proceedings for final settlement of amounts due to us.
The accounting and management controls exercised over these "receivables" are no
different from our systems in place to monitor our direct receivables due from
direct sales customers. We consider this vendor program to be an important
component of our sales and marketing efforts, and believe that the favorable
credit terms we are able to offer our customers give us an additional
competitive advantage.

     Additional tax benefits arise under this facility as the interest charged
by the bank to the customer is not subject to the sales taxes that would
otherwise accrue had we incorporated the finance charges into the sales value
and billed the amount directly to our customer.

     Prior to October 1999, all of our customers that had good credit were
allowed to purchase inventory on credit using either the vendor program or our
payment terms. We reviewed the customers' payment history to determine how much
credit we would extend to each customer, but, generally, the program was
available to any customer that had an available credit limit and a good payment
history with us. Sales made under the vendor program were on the same terms as
the cash price offered to that customer. It was typically up to the customer to
decide whether to pay cash, use the vendor program, or agree to the payment
terms established by us.

     Under the current terms of the vendor program, the current maximum
allowable term of 180 days is not extended to all customers as a matter of
course. The terms depend on the customer's credit rating based on our own
internal credit review and analysis as to what terms we are willing to extend to
the customer in view of our guarantee to the bank. We do not allow a customer to
go beyond 180 days in making a payment.

     We estimate that for 2001, 2000 and 1999, an average of approximately 15%
of our total number of regular domestic customers (approximately 22%, 22% and
19%, respectively, of total sales value) obtained our guarantee for their loans.
At December 31, 2001, we had 57 customers under the vendor program, with the
average amount per customer based on our vendor program exposure at U.S.$1
million. Our vendor program exposure was U.S.$61 million at December 31, 2001
and U.S.$75 million at December 31, 2000.

     In October 1999, as part of our credit risk policies, we introduced more
stringent credit risk criteria for the selection of customers to which we sell
through the vendor program. The selection criteria were established based on an
internal credit score ranking (general and financial credit risk evaluation
criteria). Once we receive and fill a sales order, we contact one of five banks
with which we operate, and the bank arranges the terms and conditions of payment
with the customer. Since the implementation of this policy, we have reduced the
customers to which we extend the vendor program from approximately 200 customers
to approximately 57 customers. This reduction was made due to the decline in
bank charges and interest spreads (charged to customers by the banks) in Brazil
and the resulting decrease in bank financing costs available directly to our
customers.

     Historically, amounts of guarantees we have paid, net of amounts recovered
from customers, have been negligible. In 2001 and 2000, we recovered 100% of the
amounts we paid under guarantees compared with a U.S.$1 million loss in 1999.

     We also extend credit to our customers through our own program (the
non-vendor program). Customers with good credit are allowed to use either the
vendor or the non-vendor program. During 2001, 22% of the total domestic sales
were made through the vendor program. In addition, 78% of the total domestic
sales in 2001 were made under cash sales or the non-vendor sales program. The
quality of the vendor receivables and the non-vendor receivables was the same
under both programs, and we bore the same risk with respect to both types of
receivables.

     Our customers who make purchases using credit agree to payment terms that
effectively include finance charges. The finance charge on each sale is the
difference between the amount the customer agrees to pay at the due date and the
cash sales price. The finance charges are recognized over the payment period and
are included in financial income.


                                       27
<PAGE>


     We retain the same risk of loss on customer accounts under the vendor
program that we do under our own non-vendor program. To mitigate this risk, we
continuously monitor the receivables under both programs and periodically update
our assessment of each customer. In addition, we continuously evaluate both
vendor program receivables and our receivables for collectibility.


Competition

     The international markets for pulp and paper products are highly
competitive and involve a large number of producers worldwide. As an integrated
pulp and paper producer, we compete not only with other integrated pulp and
paper producers but also with companies that produce only pulp or paper. Many of
these producers have greater financial resources than we do. Our production
levels have been, and will continue to be, small by comparison to overall world
pulp and paper production, and the prices for our products will depend on
prevailing world prices and other factors.

     Based on 2001 net revenues, we were the third largest Brazilian pulp and
paper producer behind Klabin and Suzano, but ahead of Aracruz. With respect to
market pulp, we were the fourth largest Brazilian producer in terms of volume in
2001, behind Aracruz (1,272,000 tons), Cenibra-Celulose Nipo-Brasileira S.A.
(792,343 tons) and Bahia Sul Celulose S.A., or Bahia Sul (408,000 tons).

     With respect to writing and printing paper, we were the largest Brazilian
producer in 2001 in terms of volume (551,400 tons), ahead of International Paper
(387,610 tons), Suzano (339,000 tons), Ripasa Papel e Celulose (333,193 tons)
and Bahia Sul (208,000 tons). In addition, in 2001 we were a leader in Brazil in
the production of certain specialty papers and carbonless and thermal paper. We
have a leadership position in coated paper in Brazil with a 40% market share
followed by Suzano with a 24% market share and an aggregate 16% of imports. Our
main competitors in carbonless and thermal paper are located outside of Brazil.


Environmental Policies

     As part of our commitment to sustainable development, we developed one of
the largest forested areas in the state of Sao Paulo, with approximately 160,000
hectares located near our industrial plants, of which approximately 28% is
preserved as native forests and/or set aside for environmental recovery. In
partnership with various universities, we conduct research and monitor fauna and
flora of the region. In 2001, we planted approximately 15,900 hectares of
eucalyptus as part of our reforestation efforts.

     In 2001, we implemented a new integrated policy for quality, the
environment, health and safety, based on the following principles:

o    to fulfill the needs and expectations of investors, customers, suppliers,
     professionals, communities and other parties involved in our business;

o    to operate responsibly and in compliance with laws, regulations and
     corporate commitments;

o    to ensure the integrity, qualification and career development of our
     employees;

o    to provide continuous improvement in management systems and processes,
     including the prevention and reduction of wastes, accidents and adverse
     impacts on the environment.

     We use technologies that process and bleach pulp and paper wood pulp with
ozone, which minimizes water consumption and reduces effluents and organic
chlorine compounds.

     We also recently developed an electronic system that monitors and
coordinates all our environmental activities to facilitate operational control,
management of environmental risks and compliance with legal requirements at the
Jacarei plant.


                                       28
<PAGE>


     We are in the process of obtaining ISO 14001 (environmental) certification
for the forestry and industrial processes at the Jacarei plant and we intend to
have all our mills certified under the ISO 14000 rules in the future.

Brazilian Environmental Regulation and Investments

     The federal constitution assigns to the federal government, the states, the
federal district and the municipalities the responsibility for environmental
protection and preservation of the Brazilian fauna and flora. However, the
authority to enact laws and issue regulations with respect to environmental
protection is granted jointly to the legislative branches of the federal
government, the states and the federal district. The municipalities may only
issue regulations with respect to matters of local interest or to supplement
federal and state laws. The state agency for pollution control in the state of
Sao Paulo is CETESB--Companhia de Tecnologia de Saneamento Ambiental. Pursuant
to the pollution control laws of the state of Sao Paulo, as enforced by CETESB,
the installation, construction or expansion, as well as the operation, of
industrial equipment likely to cause pollution must be licensed by CETESB.

     Our operations are subject to various environmental laws and regulations
issued by these authorities, including those relating to air emissions, effluent
discharges, solid wastes, odor and reforestation. During 2001, 2000, and 1999,
our capital expenditures relating to environmental matters were approximately
U.S.$43 million (including expenses relating to the Jacarei expansion), U.S.$12
million, and U.S.$6 million, respectively. In connection with the increase in
production capacity at the Luiz Antonio mill, we agreed in June 1999, at
CETESB's request, to make certain investments at the mill to ensure its
compliance with environmental regulations prior to June 2000. We do not expect
to incur any additional significant expenditures arising from our commitment
with CETESB. In addition, we do not currently anticipate significant ongoing
expenditures for compliance with existing or currently proposed environmental
laws and regulations. We cannot assure you, however, that the implementation of
more stringent environmental regulations in the future will not require
significant capital or other expenditures.

     In Brazil, individuals or legal entities who violate environmental laws can
be punished by sanctions that range from fines to imprisonment (individuals) or
dissolution (legal entities). Administrative sanctions that can be imposed
include, among others:

o    fines;

o    partial or total suspension of activities;

o    forfeiture or restriction of tax incentives or benefits; and

o    forfeiture or suspension of participation in credit lines with official
     credit establishments.

     We have received a number of administrative penalties, warnings and fines
in the past five years for isolated violations of the maximum levels for
emissions or effluents, including odors. None of these penalties has or is
expected to result in payments exceeding U.S.$30,000.

Environmental Indicators

     Our operations and production processes utilize natural resources and
generate liquid effluents, residual wastes and air emissions which may adversely
impact the environment.

     Liquid Effluents

     Water is critical to the process of manufacturing pulp and paper. We obtain
water from the rivers that flow adjacent to our mills. After the water has been
used in the manufacturing process, we pass the effluents through mechanical and
biological treatments before returning them to the rivers. We also have
emergency lagoons and tanks that enable us to avoid releasing untreated
effluents into the rivers in the event of a problem with our effluent process.
Effluent characteristics are monitored constantly through chemical, physical and
biological analyses. We also have a spill control system to avoid disturbances
in the wastewater treatment plant.

     Each of our units uses a two-stage process to treat the effluents generated
during the production process. During the first stage, solids such as fibers,
clay and carbonates are removed from the effluents. During the second stage
these solids undergo a biological treatment in which suspended and dissolved
materials are broken down through


                                       29
<PAGE>

the action of microorganisms. Our industrial units are developing alternatives
that seek to reduce the consumption of water and the generation of effluents by
optimizing the production process and increasing the reuse and recirculation of
water. In 2001, we completed construction of a new effluent treatment system at
the Jacarei mill and completed an upgrade of the effluent treatment system at
the Luiz Antonio facility.

     Solid Wastes

     We have identified productive uses for a portion of the solid wastes
generated during our pulp and paper production processes and have adopted the
following programs for handling and disposal of such solid waste residue:

o    co-processing with ceramic manufacturing companies (Piracicaba mill);

o    composting (all mills); and

o    use in forests as soil correction agents (Luiz Antonio mill).

     With respect to the co-processing activities at our Piracicaba facility, we
use industrial residue as the raw material to manufacture bricks, a product
developed with CETESB and Esalq-Agriculture College of the University of Sao
Paulo. Currently, the facility's solid waste residue is being recycled and used
in ceramic factories around the city. We are presently reevaluating alternatives
for the recycling of organic residue for energy purposes and installing
selective waste collection and recycling systems for the common areas at all of
our facilities.

     The remainder of solid wastes is either sold to third parties for use in
their production processes or disposed of in sanitary landfills.

     Atmospheric Emissions

     As a byproduct of production, certain particles, or particulate emissions,
are released into the atmosphere. In order to control these emissions, the
sources of these emissions are fitted with control equipment such as
electrostatic precipitators, multi-cyclones and gas scrubbers, which minimize or
remove certain particles from the emissions. In order to control odor emissions,
our Jacarei and Luiz Antonio mills use a system for collection and incineration
of odiferous, diluted and concentrated gases and are outfitted with an
alternative gas scrubber removal system to be used when incineration is not
possible. In addition, the auxiliary boilers, which previously burned fuel oil,
were adapted to burn natural gas in 2001.

     Forest Preservation

     All our wood comes from tree plantations rather than native forests. The
land we manage is generally not of high enough quality to be used for other
forms of agriculture. Our cultivation program seeks to preserve the health of
our forests, and Brazilian law requires that at least 20% of our land either be
covered with native forests or cultivated with indigenous species of trees
rather than eucalyptus or pine.



                                       30
<PAGE>


     Natural Resources

     Since the 1990s we have been harvesting eucalyptus through uniform
micro-propagated seedlings from carefully selected trees. The characteristics of
the seedlings we select are matched to different growing regions and our
products. This method allows us to (i) greatly increase forestry productivity,
(ii) comply with environmental regulations, and (iii) contribute to carbon
reduction in the atmosphere.

     We set aside a portion of our forests for preservation, conservation and
environmental recovery. These areas consist of either native forests or riparian
buffer zones, or are maintained to satisfy specific ecological interests. We
also invest in environmental studies, together with domestic and international
universities, research centers and renowned consultants, in order to improve the
environmental conditions of our plantations, and ensure that we protect the
native fauna in the areas in which we operate. We created a program designed to
protect and preserve the fauna of areas with distinctive environmental aspects.
This program has been implemented at Fazenda Sao Sebastiao do Ribeirao Grande, a
large private native forest in the Vale do Paraiba region, and at Varzea do
Jenipapo in the Ribeirao Preto region.


Insurance

     We maintain insurance policies against a number of risks. Our mills and
inventories are insured against damage caused by fires or explosion for up to
approximately U.S.$1,831 million of first loss risk at December 31, 2001.
However, like other forest products companies, we do not maintain insurance
against fire, disease and other risks to our forests. We have taken steps to
prevent fires from occurring at our forests, such as the maintenance of fire
observation towers, a fleet of 13 fire engines and teams of fire-fighting
personnel, which we believe are safe and cost effective methods of fire
prevention. Given the natural protection afforded by the dispersion of our
forests, we do not believe that insuring our forests would be cost-effective. We
do not make provisions for risks of loss from fire and other casualties. We
expense for the necessary amount when the damage is incurred. We have not
suffered a material loss from either fire or disease in the forests that we
harvest.

     We have insured our mills and inventories against the risk of mechanical
shutdowns. From July 25, 2000 to August 14, 2000, our Luiz Antonio facility
experienced a shutdown in the paper segment due to an electrical failure in the
electric control panel link of one of our papermaking machines, which produces
most of our domestic and export cut-size paper. We halted production for 20 days
while the machine was being repaired. The shutdown resulted in a production
reduction of 10,200 tons of paper. We were able to control our losses through
our insurance coverage and through the use of surplus inventories. We received
an insurance reimbursement of U.S.$3 million in 2000 to cover the acquisition
and installation of new equipment.

Overview of the Pulp and Paper Industry

     General Overview

     Pulp Industry Overview. Wood pulp is the principal ingredient in the
manufacture of wood-containing paper. Pulp is classified according to (a) the
type of wood or fiber from which it is made, (b) the manner in which the wood or
fiber is processed, and (c) whether it is bleached.

     There are two types of wood pulp that can be produced. Hardwood pulp is
produced using hardwood trees, such as eucalyptus, aspen, birch and acacia. Pulp
made from hardwood, such as eucalyptus, has short fibers and is generally better
suited to manufacturing coated and uncoated printing and writing papers, tissue
and coated packaging boards. Short fibers are the best type for the manufacture
of wood-free paper with good printability, smoothness, brightness and
uniformity. Softwood pulp is produced using softwood trees, such as pines and
fir. Pulp made from softwoods has long fibers and is generally used in
manufacturing papers that require durability and strength, such as kraftliner,
and those requiring high opacity, such as newsprint and directory papers. We
produce only hardwood pulp from planted eucalyptus trees.

     The pulp manufacturing process may determine a pulp's suitability for
particular end uses. Mechanical pulp refers to pulp processed to leave in some
lignin and other organic materials holding the wood fibers together. Chemical
pulp refers to pulp made using chemical processes to dissolve the lignin. Among
the various chemical



                                       31
<PAGE>


processes for chemical pulp, the most common is the kraft process, which we use
to produce our pulp. The kraft process helps to maintain the inherent strength
of the wood fibers and thus produces a pulp that is especially well suited for
manufacturing printing and writing papers, specialty papers and tissue.

     Bleached pulp is used for a variety of purposes, including printing and
writing papers, specialty papers and tissue. Unbleached pulp is brown in color
and is used in the production of wrapping paper, corrugated containers and other
paper and cardboard materials. Many companies, including VCP, have been using
the ECF and TCF methods in their production of bleached pulp. ECF and TCF are
bleaching processes that do not utilize elementary chlorine and chlorine
chemical compounds, respectively. These two processes have been developed in
part to eliminate any possible carcinogenic effects attributed to the dioxins
that are produced during the bleaching process and released in the water.

     As a result of the variety of wood types and processes used to produce
pulp, the pulp market has become increasingly specialized in terms of technical
characteristics. Hardwood and, particularly, eucalyptus pulp, exhibit many of
the physical and chemical properties most valued by printing and writing paper
manufacturers and other bleached pulp consumers, such as opacity, grade and
printability. As a result of increasing specialization, many manufacturers
developed their own customized mix of pulp inputs known as "furnish" for use in
their paper manufacturing. In addition, as more paper manufacturers have come to
appreciate the technical characteristics of hardwood pulp and rely upon a
significant hardwood pulp component in their furnish, the market for hardwood
pulp has grown more rapidly than the market for softwood pulp.

     Eucalyptus is one of many types of hardwood used to make pulp. We believe
that for certain uses eucalyptus pulp is superior because of the greater
consistency in the quality of its fibers and because it can improve paper's
opacity, formation and printability. Eucalyptus pulp has gained wide acceptance
among producers of printing and writing papers in Europe and among producers of
tissue papers in North America because of its softness and absorbency. In
addition, eucalyptus trees generally grow straighter and have fewer branches
than most other hardwood trees. This allows for dense growth, easy harvesting
and decreased need for pruning.

     Paper Industry Overview. There are six major groups of paper products
produced by the paper industry:

o    newsprint paper, used to print newspaper;

o    printing and writing papers, used for a broad range of purposes, including
     writing, photocopying, commercial printing, business and computer forms;

o    tissue papers, used to produce tissue, toilet papers and paper towels;

o    packaging papers, encompassing kraft paper, containerboard (corrugated
     paper and linerboard) and liquid packaging board;

o    cardboard;and

o    specialty papers.

     We produce printing and writing papers, specialty papers, and thermal and
carbonless paper, a subcategory of specialty papers.

     Printing and writing papers are classified according to whether they are
coated or uncoated, and whether the pulp from which they are made is chemically
processed to eliminate lignin, called wood-free paper, or contains some lignin,
called mechanical or wood-containing. We make uncoated and coated wood-free
printing and writing paper.

     Printing and writing paper is sold either in reels or in packages of
pre-cut sheets, called cut-size. We sell our paper in both reels and cut-size.
Reels of paper are used by manufacturers of paper products such as business
forms, writing pads, packaged sheets of pre-cut paper, books and envelopes.
Customers require different size reels depending on the type of machines they
use. Cut-size paper is used in offices for general commercial purposes, such as
photocopying and writing. There has been a general trend in recent years toward
the use of standardized pre-cut sheets rather than preprinted and continuous
business forms and computer paper. This trend has led many paper


                                       32
<PAGE>

producers, including us, to reduce sales of reels and to integrate cutting
machines in their paper mills, increasing their production of cut-size papers.

     The market for paper has a larger number of producers and consumers and
more product differentiation than the market for pulp. Prices for paper are
cyclical but are less volatile than pulp prices. The prices for paper and
paperboard have historically followed the trends of pulp prices.

     The key factors that drive paper prices are overall economic activity,
capacity expansion and fluctuations in current exchange rates. Prices rose
steadily from 1986 through 1989, when prices dropped because of soft
international economic growth combined with excess capacity expansion. Paper
prices recovered sharply, pushed by the rise in pulp prices, after having
reached the trough of the cycle in March 1994, a four-month lag from pulp.

     In the second half of 1994, the international paper market tightened
dramatically as accelerated economic growth in the United States and end user
inventory restocking pushed demand higher despite limited capacity expansion.
This tightening in the international market eased over the last several months
of 1995, particularly for the commodity grades. In 1996, paper became readily
available and prices started to decrease, and continued to decrease through the
first quarter of 1999. Thereafter, prices for our various grades of paper have
improved, reaching a peak in the first half of 2001. Thereafter, international
paper prices started to decrease again but not as strongly as pulp prices
decreased, due to a more consolidated and less volatile market.

     Although it is possible that market prices for paper will further decline
in the future, or that there will not be sufficient demand for our products to
enable us to operate our production facilities in an economical manner, we have
been minimizing these risks by shifting our focus towards higher value-added
products and by achieving a better sales mix. We are also developing the
flexibility to be able to allocate sales between domestic and export markets.

The Brazilian Pulp and Paper Industry

     Brazil is predominantly a tropical country, with approximately 90% of its
territory located north of the Tropic of Capricorn. As a result, in most regions
of Brazil, the soil and climate are very favorable to forest growth. In Brazil,
eucalyptus trees have short growing cycles of approximately seven years,
compared to 12 to 15 years for eucalyptus trees in Portugal and Spain and 25 to
70 years for other species of hardwood trees in other regions. The production of
wood in Brazil, therefore, requires less time and a smaller growing area than in
North America and Europe, which results in higher yields.

     Brazil's natural advantages in forestry make it one of the world's lowest
cost producers of pulp, and in the last twenty years Brazil has become an
important pulp exporter.

     Capitalizing on its advantages in pulp production, Brazil has developed a
diversified paper industry with modern technology and a potential for growth in
both the domestic and export markets. In recent years, there has been a marked
increase in paper consumption in Brazil, which is an important indicator of the
economic development of a country. Between 1994 and 2001, the average annual
rate of paper consumption increased by 5.7% per year, reaching 6,790,000 tons in
2001. We believe that the growth potential for domestic consumption is great
because per capita consumption is still low in comparison with other developed
countries.

     In 2001, Brazil was the eleventh largest paper producer and the seventh
largest pulp producer in the world. Brazilian pulp and paper companies have made
large investments over the last ten years in order to compete more effectively
and on a larger scale with traditional pulp suppliers in the international
market. In addition, the technological development of the paper industry has
been supported by the research efforts of major producers and financing for
projects from BNDES.

     Consolidation in the Brazilian pulp and paper industry is currently under
way. The table below shows the market participation of the five largest
producers in terms of sales for the years indicated:

<TABLE>
<CAPTION>
<S>                                <C>         <C>        <C>         <C>         <C>

                                     1997        1998       1999        2000        2001
                                                 ----       ----        ----        ----
Brazilian Pulp Production (1)...   6,331.1     6,686.9     7,209.1    7,463.3     7,390.1
Brazilian Paper Production......   6,517.6     6,589.3     6,953.2    7,187.8     7,353.7
Total Pulp and Paper Production.   12,848.7    13,276.2   14,162.3    14,651.1    14,743.8


                                       33
<PAGE>


Total Top Five Producers........   6,262.8     6,535.3      7,086     8,099.9      9,096
% Top Five......................    48.7%       49.2%       50.0%      55.3%       61.7%

-------------------
(1)  Pulp numbers represent pulp volume produced.
Source:  Bracelpa.
</TABLE>


     Brazil produces both commodity grade paper, such as kraft linerboard, and
more value-added paper products, such as thermal and carbonless and fiduciary
paper. Brazil is self-sufficient in all types of paper, except newsprint, coated
paper and certain specialty grades. The paper market is larger than the pulp
market in terms of the numbers of producers, consumers and variety of products.
Paper prices tend to be less volatile than prices for pulp.

     Cyclical Nature of World Pulp Prices

     World pulp prices are cyclical because demand for paper depends heavily on
general economic conditions and because production capacity adjusts slowly to
changes in demand. From 1985 to mid-1989, market prices for bleached hardwood
kraft pulp rose steadily. Beginning in 1989, the recession in North America,
Europe and Japan, combined with the startup of a number of new or expanded pulp
facilities, contributed to depressed prices that continued through 1993. This
decline in world pulp prices to the lowest levels in 20 years (on an
inflation-adjusted basis) forced a number of pulp producers out of the market.
However, international demand began to recover in late 1993, with a
corresponding increase in prices.

     In 1995, the international paper industry was in the second year of what is
believed to be the strongest market upturn in its history. A substantial portion
of the industry reported record earnings levels in 1995 due to strong demand and
surging prices. Virtually all of the industry's major grades were at, or near,
record price levels as a result of tight supply and intense cost pressures
(particularly for non-integrated paper producers that purchase pulp and, to a
lesser extent, for non-integrated pulp producers that purchase fiber).

     The key supply side factor during the 1995 upturn was an abnormally low
rate of capacity expansion, a consequence of the industry's poor performance
during the 1989-1993 downcycle. This low rate of capacity expansion led to a
rapid tightening of markets that, in turn, caused the prices to increase
sharply.

     By the last quarter of 1995, however, the international paper market began
to show signs of strain. Some of the reasons for this slackening were a slowdown
in economic growth, particularly in the United States, more readily available
supplies of certain grades of paper, due to improved mill productivity and the
startup of new machines, and a deceleration in end user inventory-building. By
January 1996, pulp prices were falling and continued to fall through the first
quarter of 1999. In the second quarter of 1999, international pulp prices began
to rise and continued to rise throughout 2000. After reaching a peak of around
U.S.$700 per ton in the second half of 2000, market pulp prices started to fall
through the third quarter of 2001 primarily due to (i) inventory accumulation,
(ii) variations in the European Union unified currency, which raised the cost of
pulp for the production of printing and writing papers and (iii) the scheduled
production downtime by Canadian producers, followed by that of U.S.
manufacturers to combat growing inventory and maintain price levels. At the
beginning of 2001, Brazilian manufacturers, including us, slowed pulp production
in response to the drop in demand and slowdown of the economy and to maintain a
balance between supply and demand.

     During the second half of 2001, market pulp prices were around U.S.$400 per
ton. In the fourth quarter of 2001, the market pulp prices began to increase as
a result of the industry-wide decline in inventory as several producers
scheduled production downtime in order to reduce growing inventory and maintain
price levels. In the first quarter of 2002, pulp prices remained stable due to
the increase in inventory to 1.9 million tons in North America and Scandinavia
at the end of January. In the second quarter of 2002, due to increased demand
and relatively lower inventory, prices began to increase and reached U.S.$450
per ton in the beginning of May.

     The following table sets forth the estimated cash production costs per ton
of bleached hardwood kraft market pulp pre-sold in Northern Europe, Brazil and
the United States for the second quarter of 2001, for producers in the regions
indicated. Cash production costs are total production costs less depreciation
and depletion. Amounts have been expressed on a per ton basis in U.S. dollars,
with local currencies translated at prevailing exchange rates. Particular
producers may have production costs significantly above or below regional
averages.


                                       34
<PAGE>

                                                          Cash Production Costs
 Brazil.....................................             U.S.$      163
 Indonesia..................................                        165
 Sweden.....................................                        243
 France.....................................                        244
 Portugal...................................                        246
 Spain......................................                        264
 Eastern Canada.............................                        271
 Finland....................................                        271
 Southern U.S...............................                        307
 ---------------------------------
 Source:  Hawkins Wright.

C.      Organizational Structure


     Our operations are conducted by Votorantim Celulose e Papel S.A. as the
controlling and principal operating company. We are a member of the Votorantim
group, which has other interests in Brazil and abroad, principally in cement,
metallurgy, agribusiness, chemicals and financial services. In 2001, the
consolidated net revenue of the Votorantim group was approximately U.S.$3.3
billion under the Brazilian corporate law (unaudited), of which 20% represented
pulp and paper activities. Our immediate parent company is Votocel Filmes
Flexiveis Ltda., or Votocel, which is directly controlled by S.A. Industrias
Votorantim, and which in turn is ultimately controlled by Hejoassu Administracao
Ltda., or Hejoassu. Hejoassu is controlled by the Ermirio de Moraes Family. See
"Item 4B -- Information on VCP -- Business Overview -- Our Ownership Structure."

     As of December 31, 2001, we had a 50% stake in Voto-Votorantim Overseas
Trading Operations N.V. and a wholly owned subsidiary, VCP Terminais Portuarios
S.A. In April 2001, we incorporated VCP Exportadora e Participacoes S.A., or VCP
Exportadora, as a wholly owned subsidiary, and in the fall of 2001 we
incorporated Newark.

     In order to facilitate access to our international customers and to the
international financial markets, we have also established two subsidiaries in
Newark, VCP Trading N.V. and VCP North America Inc., to manage our exports to
clients in Europe and in North America, respectively.

     On January 2, 2002, we created VCP Florestal S.A., which assumed all of the
assets and liabilities relating to our forestry operations.

D.   Property, Plant and Equipment

     All of our forests and production facilities are located in the state of
Sao Paulo. The state of Sao Paulo accounts for more than 35% of Brazil's gross
domestic product, and is home to most of the consumers of pulp and paper
products. Our forests are located an average of 210 kilometers from our pulp
mills, and our facilities are located an average of 200 kilometers from Santos,
the port facility that we use for most of our exporting activities. The
relatively short distance between our forests, our plants and most of our
domestic customers results in relatively low transportation costs.

     We own and operate two mills that produce both pulp and paper, and two
mills that produce only paper. At March 31, 2002, our aggregate nominal pulp
production capacity was 850,000 tons per year, and our nominal paper production
capacity is 655,000 tons per year. The following table sets forth the distance
between our forests and our mills, the distance of these mills to the port of
Santos, and the nominal capacity of each mill.


                                       35
<PAGE>
<TABLE>
<CAPTION>

<S>                        <C>           <C>                <C>             <C>              <C>
                                          Distance from                        Pulp/Paper
                                         forest (pulp) or    Distance from      capacity
Facility                    Pulp/Paper   pulp mill (paper)   port of Santos    (tons/year)        Major products
--------                    ----------   -----------------   --------------    -----------        --------------
Jacarei..................  Pulp/Paper          200 km            150 km      480,000/175,000   Uncoated printing
                                                                                               and writing paper;
                                                                                               coated printed and
                                                                                               writing paper
Luiz Antonio.............  Pulp/Paper          220 km            380 km      370,000/310,000   Uncoated printing
                                                                                               and writing paper;
                                                                                               offset, copier,
                                                                                               laser printing and
                                                                                               inkjet paper
Piracicaba...............  Paper               150 km            200 km          150,000       Thermal and
                                                                                               carbonless paper;
                                                                                               coated printing and
                                                                                               writing paper
Mogi das Cruzes..........  Paper               50 km             100 km           20,000       Label paper; finish
                                                                                               foil; soap wrapping
                                                                                               board; light
                                                                                               cardboard and other
_________________                                                                              specialty papers
Sources:  Bracelpa and VCP.
</TABLE>


The Production Process

     Production of paper is a multi-stage process, which begins with the
production of its principal raw material, pulp, from wood. Throughout the
production process from wood to paper, various pulp and paper products are
produced which may be converted internally into value-added products or sold.

     We employ advanced, automated harvesting equipment in our forests. On
easily accessible terrain, the harvesting process involves a feller-buncher that
cuts and gathers a number of trees, and lays them in bundles in the forest.
Branches are removed manually using chainsaws. A skidder then carries the trees
to a track area, where a log cutter removes the tops, cuts the trees into logs
and loads the logs on trucks for transportation to the mill. On difficult
terrain, a harvester cuts, de-limbs and debarks the trees, and then cuts them
into logs and stacks them in bundles in the forest. A forwarder carries the
bundles to a loading area where a loader loads the logs on trucks for
transportation to the mill. Recently, we acquired a simulator to train harvest
equipment operators, which lowers the number of hours dedicated to employee
training in addition to reducing equipment-operating time.

     The logs are transported by truck from the forests. The logs are then taken
by conveyor belt to be debarked and chipped. The chips are sent to digesters,
where they are mixed with chemicals and cooked under pressure. During this
process, lignin and resins are removed from the wood. The removed lignin is used
as fuel for the pulp mill.

     In 2001, we introduced a new, more efficient production process whereby
wood chips for the production of pulp are produced at plantation sites using
portable chipping equipment. With these new chipping machines, we will be able
to carry out chipping in the forest and thereby improve tree utilization and
reduce noise levels at the mill. In addition, forest residues are returned
directly to the plantation soil, contributing to the recycling of nutrients.
Approximately 35% of the wood required for the Jacarei mill is supplied in the
form of chips directly from the forest.

     The unbleached pulp is then sent through the oxygen delignification process
and the chemical bleaching process, traditionally using chlorine dioxide, ozone
and hydrogen peroxide. The cellulose fibers are screened, pressed and dried. The
dried pulp is cut into sheets and baled, resulting in market pulp. In recent
years, pulp customers, particularly in Europe, have preferred pulp that is
bleached with little or no chlorine compounds due to environmental concerns
relating to the pulp production process, and particularly with respect to the
bleaching process. All of the phases in the pulp production process that have
reduced amounts of chlorine create effluents which are sent to an effluent
treatment station where approximately 90% of the organic charge is removed.


                                       36
<PAGE>


     To produce printing and writing paper, we use 100% short-fiber eucalyptus
bleached pulp. Once in the paper mill, the pulp is sent to refiners, which
increases the level of resistance of the fibers for the production of specific
grades of paper. Materials are a process then added to the refined pulp to
strengthen and improve the quality of the paper. These additives include
synthetic glue and precipitated calcium carbonate (the alkaline process). The
mixture is pumped to the paper machine where the paper is pressed and dried.
Finally, the resulting paper is sent to be finished in accordance with client
specifications.

Eucalyptus Forests

     We obtain all of our wood from approximately 160,000 hectares of land
located in the state of Sao Paulo. We own approximately 64% of this land, with
the remaining 36% leased from third parties, including other companies of the
Votorantim group. The leases, most of which commenced in 1991, are typically for
a term of 21 years, which covers approximately three harvest cycles. The lease
payments are equivalent to 30% of the market value of the wood produced on the
property and are payable after each harvest.

     At March 31, 2002, we owned or leased approximately 150 different tracts of
forests for cultivation, making our wood supplies relatively dispersed. Our
forests are located an average of 210 kilometers from our pulp mills. In order
to reduce the average distance from our forests to our mills, we did not renew
the leases of forests which were relatively far from our mills and, instead,
have purchased forests which are closer to our mills. Brazilian law requires
that at least 20% of the land we own either remain uncultivated or planted with
indigenous species of vegetation. Of the 160,000 hectares of land from which we
obtain our wood supplies approximately 67% consists of planted eucalyptus
forest, approximately 28% is reserved for preservation and the remainder is used
for other activities.

     While the dispersion of our forest land entails some additional costs, we
believe that it significantly reduces the risks of fire and disease. We also
seek to minimize fire risk by maintaining a system of fire observation towers
and a fleet of 13 fire engines, all of which are manned by members of our
fire-fighting teams. Given the natural protection afforded by the dispersion of
our forests, we do not believe that insuring our forests would be
cost-effective. We therefore assume all risks of loss from fire and other
casualties. In addition, we annually treat certain of our forests to prevent
tree destruction by ants. We have never suffered a material loss from either
fire or disease in forests that we harvest.

     In 2001, we planted approximately 16,000 hectares of eucalyptus as part of
our reforestation efforts. We grew approximately 25 million seedlings at our
nurseries, all of which were planted in our forests. Forests used to supply the
Luiz Antonio mill typically yield between 40 and 45 cubic meters of pulpwood per
hectare per year, while forests supplying the Jacarei mill generally yield
between 45 and 55 cubic meters of pulpwood per hectare per year. One of the most
important factors with respect to yield is the climate of the forests. We
believe that the state of Sao Paulo provides an excellent climate for growing
eucalyptus trees, with ample amounts of both sun and rain. Eucalyptus trees grow
to an average height of approximately 76 feet in seven years, at which time they
are harvested.

     To develop our eucalyptus forests, we select seedlings after strict
testing, which are denominated as clones and enter into the production process.
We operate three nurseries for seedling production. We use both seeds and
seedlings cloned from rooted cuttings, a method also known as "vegetative
propagation," to carry out the planting of our eucalyptus trees. In 2001,
approximately 95% of our planting activities were conducted through vegetative
propagation, with the remaining 5% conducted using seeds. Vegetative propagation
results in trees with wood fibers that are extremely homogeneous and permits the
propagation of trees with the most favorable genetic characteristics for pulp
production. These characteristics include fast growth rate, good quality of wood
fibers, resistance to disease, "self-pruning" trees with fewer branches, and
significantly less bark per cubic meter. Greater tree standardization provided
by cloning also allows for increased mechanization in tree felling and
transportation, and makes it easier to adjust equipment and machinery to
topographical conditions.


Jacarei Expansion

     The expansion of the Jacarei plant will increase the annual pulp production
capacity at the Jacarei mill by approximately 530,000 tons for an estimated cost
of approximately U.S.$550 million, which will increase our total pulp production
capacity from 850,000 to 1.4 million metric tons per year. The new processes
will use the existing


                                       37
<PAGE>

production to create ECF, improve environmental performance of the mill, and
reduce water consumption per ton. We expect that the additional pulp production
will be sold primarily outside of Brazil.

     At March 31, 2002, we had invested U.S.$282 million in the Jacarei
expansion, including U.S.$75.8 million we borrowed from BNDES. We expect to
spend another U.S.$268 million to complete this project, which we intend to
finance from internal sources. The Jacarei expansion should be completed by
January 2003. The project involves the construction of a new woodyard, which was
completed in 2001, and the following, all of which are to be completed in 2002:

o  improvement of the cooking and washing process;

o  installation of a new fiber line;

o  installation of a new pulp drier;

o  installation of a new liquor recovery system (including a new boiler); and

o  addition of a new effluent treatment system.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     You should read the following discussion in conjunction with our
consolidated financial statements and accompanying notes and other financial
information included elsewhere in this annual report, and in conjunction with
the financial information included under "Item 3A -- Key Information -- Selected
Financial Data." This section contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from those
discussed in the forward-looking statements as a result of various factors,
including, without limitation, those set forth in "Item 3D -- Key Information --
Risk Factors" and the matters set forth in this annual report generally.

Overview

     We produce pulp and paper products in Brazil, including printing and
writing papers (coated and uncoated, wood-free and wood-containing), and
specialty papers.

     Pulp--We produce bleached eucalyptus pulp, part of which we sell
domestically and internationally, and the remainder of which we use for our
paper business.

     Paper--We produce paper for the domestic and international markets. As part
of our strategy for paper products, we have continued to increase the proportion
of our production of value-added products, such as coated, thermal and
carbonless and other specialty papers, and to increase our market share of these
value-added paper products in the domestic market. The percentage of our net
sales of these value-added products in relation to our total net sales for paper
was 46% in 1999 and 2000, and 47% in 2001. We have increased production of
coated paper to expand our domestic market share, as imports have been less
competitive since the 1999 devaluation of the real. Our sales of paper outside
Brazil as a percentage of our total sales of paper in terms of volume decreased
to 20% in 2000 from 27% in 1999, and increased to 23% in 2001 because we took
advantage of the opportunity to sell a greater volume of our paper at higher
prices in the international market due to the devaluation of the real, and also
because of the weaker demand in the domestic market due to lower consumption in
Brazil.

     We have sought to increase the proportion of our production of value-added
paper products, which have higher margins, using various strategies: (i) in the
domestic market, we increased the proportion of our product mix devoted to
coated, chemical and specialty papers, focusing on specific segments of the
market; and (ii) in the export market, we increased sales of uncoated papers,
especially cut-size, which became more competitive in price due to the
devaluation of the real. We have also increased our sales volume of pulp in the
export market in order to capitalize on the lower costs of producing pulp in
Brazil. After the completion of the Jacarei expansion, we expect to benefit from
lower costs, resulting from economies of scale with higher pulp production and
from our low transportation costs relative to other producers, and because fixed
costs will not increase at the same rate as sales volumes. See "Item
4B--Information on VCP--Business Overview--Our Business Strategy." We have also
responded to the increased demand in the international market by increasing our
U.S. dollar denominated pulp


                                       38
<PAGE>

exports. These U.S. dollar sales also serve as a partial natural hedge against
possible unfavorable exchange rate variations for our cash flow purposes.

         The following table shows a breakdown of our total exports in 2001 in
terms of volume per geographic location:
[GRAPHIC OMITTED]

                                 Pulp                        Paper
                            ------------                  ------------
                            Tons   % of Total          Tons    % of Total
                        --------   ----------      --------    ----------
North America             98,590        38.3%        49,802         37.6%
Latin America(1)              --          --         40,302         30.4(2)
Europe                    97,263        37.8         34,599         26.1
Asia/Africa               61,655        23.9          7,801          5.9
                          ------        ----          -----          ---

Total Exports            257,508       100.0%       132,504          100.0%

[GRAPHIC OMITTED]

(1)  Excluding Brazil.
(2) Approximately one-third of this amount was destined to Argentina. Losses
arising from the Argentine economic crisis are not expected to exceed U.S.$0.2
million.

Prices

     All references to prices relate to average prices determined by dividing
the corresponding net sales by the respective tonnage.

     Pulp -- Our pulp operations are affected by prevailing world market prices
for pulp, the amount of pulp produced and sold worldwide, and the pulp
requirements of our paper business. The prices that we are able to obtain for
our pulp depend upon prevailing world market prices, which historically have
been cyclical and subject to significant fluctuations over relatively short
periods of time. The price of pulp is impacted by the U.S. dollar, with domestic
sales denominated in reais and export sales denominated in U.S. dollars. After
reaching a peak in the middle of 1995, pulp prices began to fall, and continued
to fall through the first quarter of 1999, due to a significant drop in demand
for wood-free papers; however, pulp prices began to increase in the second
quarter of 1999 and continued to increase until reaching a peak of around
U.S.$700 per ton in the second half of 2000. In the third quarter of 2000,
market pulp prices began to fall and continued to decline in 2001 due to a
significant drop in demand and a slowdown of the U.S. economy. During the second
half of 2001, market pulp prices were around U.S.$400 per ton. As prices
declined, older pulp facilities in North America and Europe were decommissioned,
which reduced world pulp supplies and inventory levels. In the fourth quarter of
2001, market pulp prices began to increase because industry-wide inventory
declined resulting from the scheduling by several producers of production
downtime in order to reduce growing inventory and maintain price levels. In the
beginning of the first quarter of 2002, pulp prices stabilized due to an
increase in inventory to 1.9 million tons in North America and Scandinavia at
the end of January. In the second quarter of 2002, due to increased demand and
relatively lower inventory, pulp prices began to increase and reached U.S.$450
per ton in the beginning of May. The average Free on Board, or FOB, price per
ton for our export sales of bleached eucalyptus market pulp was U.S.$382 in
2001, U.S.$579 in 2000, and U.S.$413 in 1999. In the fourth quarter of 2001, FOB
prices decreased to U.S.$329 per ton, and in the first quarter of 2002, pulp
prices declined to U.S.$319 per ton due to decreased economic levels in the
United States, Europe and Asia. Since then, the FOB price has been increasing
for our exports of bleached eucalyptus.

     Paper -- Our paper operations are affected primarily by demand for paper in
Brazil and by Brazilian economic conditions and, to a lesser extent,
international paper prices. Although prices for uncoated printing and writing
paper are generally linked to international prices, a high proportion of our
sales of these products is comprised of cut-size paper, the price of which is
not as heavily affected by international prices. In addition, we sell a major
portion of our cut-size paper in the retail market, in which we can charge a
higher price than in the commercial market. Our prices for value-added paper
products are not directly affected by international prices due to freight and
other variable costs. Total tariffs of 18% on imported coated paper products
allows us to pursue a favorable pricing policy. Following the devaluation of the
real in January 1999, we increased our domestic prices in


                                       39
<PAGE>

reais in 1999, 2000 and 2001, partly in response to the increase in the prices
for imported paper, which is priced in U.S. dollars.

     Market prices for paper may decline in the future, or there may not be
sufficient demand for our products to enable us to operate our production
facilities in an economical manner. In response to the cyclical nature of the
paper market, we have increased our production of value-added paper products,
such as coated, thermal, carbonless and other specialty papers, which are less
subject to cyclical price variations.

Costs and Operating Expenses

     Our principal costs of production are incurred in reais and consist of raw
materials (primarily wood and chemicals), labor and depreciation costs. Our
business is capital intensive, and a portion of our costs is fixed. We seek to
maintain high capacity utilization rates to benefit from economies of scale and
production efficiencies resulting from the operation of large, efficient
production facilities and machines. As a percentage of net sales, selling and
marketing expenses were 9% in 2001, 8% in 2000, and 11% in 1999. We paid up to
5% of FOB price to export and shipping agents, which varies by geographic region
and responsibilities. General and administrative expenses, as a percentage of
net sales, increased to approximately 5% in 2001 from 4% in 2000, mainly as a
result of the increase of external consulting expenses.

Financial Income

     We derive financial income from several sources, including interest on cash
and cash equivalents and held-to-maturity investments. We have traditionally
derived financial income from accessing low cost foreign-currency financing and
investing the proceeds in higher-yielding Brazilian financial instruments. The
unrealized gains from foreign currency and interest rate swap contracts are
recorded on our balance sheet as receivables and on our income statement as
"Foreign exchange losses, net." We enter into these arrangements to reduce our
exposure resulting from a possible devaluation of the real in relation to the
U.S. dollar, since a high proportion of our debt is denominated in U.S. dollars
and the majority of our cash is generated in reais. See "--Brazilian Economic
Environment" and "Item 5B--Liquidity and Capital Resources--Capital
Expenditures."

Financial Expenses

     We incur financial expenses from several sources, including short-term debt
and long-term debt. We principally seek long-term financing to fund our projects
which are generally of a long-term nature. Short-term debt is primarily
comprised of U.S. dollar-denominated working capital from commercial banks and
short-term secured loans. Long-term debt consists of both U.S. dollar- and
real-denominated debt. We derive profits from the arbitrage when we borrowed
funds in U.S. dollar-denominated liabilities and invested amounts in
real-denominated assets despite the hedging costs involved. We provide no
assurance that such favorable results will be earned in the future or that we
will continue with these arbitrage transactions. See "Item 5B--Liquidity and
Capital Resources."

Discussion of Critical Accounting Policies

     Critical accounting policies are those that are important both to the
portrayal of our financial condition and results and that require our
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. As the number of variables and assumptions affecting the possible
future resolution of the uncertainties increase, those judgments become even
more subjective and complex. In order to provide an understanding about how our
management forms its judgments about future events, including the variables and
assumptions underlying the estimates, and the sensitivity of those judgments to
different circumstances, we have identified the following critical accounting
policies:

o    revenue recognition and accounts receivable;

o    goodwill, intangible assets and amortization;

o    forest development costs and impairment tests;

o    deferred taxes; and

o    tax contingencies.


                                       40
<PAGE>


Revenue Recognition and Accounts Receivable

     We recognize revenue and associated costs of sales at the time our products
are shipped to our customers, which is the moment title also passes and the
revenue cycle is complete.

     Discounting of Short-term Receivables and Interest Income

     Our customers that purchase on credit agree to payment terms that
effectively include finance charges. The finance charge on each sale is the
difference between the amount the customer agrees to pay at the due date and the
cash sale price at date of sale. The finance charges are recognized over the
payment period and are included in financial income, and accounts receivable
from these transactions, including short-term receivables, are discounted to
present value.

     Vendor Program

     Some of the sales of our products to certain of our customers are performed
through a program called the "vendor program," where the purchases from us are
financed by a bank that has established a direct financing program.

     Under the vendor program, the bank (1) finances the customers' purchases
(by making a payment to us on behalf of the customers in cash equal to the
amount of the purchase price payable by the customers) and (2) obtains from us
in a separate agreement a guarantee providing for the payment by us in the event
that the relevant customer fails to pay the bank. No separate fee is received by
us for the guarantee.

     Under the vendor program, a separate note agreement exists between the bank
and the customer, and the customer is considered to be the primary obligor in
that note agreement. Under our guarantee contract with the bank, we are
considered a secondary obligor of a specified percentage of the amount that the
bank finances for the customer. Although the "receivables" are payable by our
customers directly to the banks under the vendor financing program, we closely
monitor the collection of these amounts and are advised by the bank once amounts
have been settled. In the event of a default by a customer under the vendor
financing program with the bank, the bank will charge, pursuant to the
guarantee, our checking account established with the bank in the amount of the
default. Accordingly, during the period of the guarantee, we assess any
contingent liabilities which may arise from the guarantee.

     Under the vendor program, we recognize revenue as the goods are shipped to
our customers, which is the moment title also passes and the revenue cycle is
complete.

     Allowance for DoubtfulAaccounts

     The allowance for doubtful accounts is recorded in an amount we consider
sufficient to cover any probable losses on realization of our accounts
receivable from our customers and is included under selling expenses; no
adjustment is made to net sales revenue. Our accounting policy for establishing
the allowance for doubtful accounts reserve is summarized as follows: all
overdue invoices over R$100,000 (equivalent to U.S.$43,000 at the March 31, 2002
exchange rate) are individually analyzed by our accounting department, in
connection with the legal, collection and credit

o    departments, in order to measure the amount of the probable expected
     losses, and, consequently, to determine the allowance for doubtful accounts
     to be recorded; and

o    overdue invoices of less than R$100,000 are reviewed by our collection and
     credit department in order to identify probable losses to be recorded based
     on our knowledge of the customer's credit history and current situation.

Goodwill, Intangible Assets and Amortization

     We acquired 28.0% of the voting capital and 12.35% of the total capital of
Aracruz on November 1, 2001, for approximately U.S.$370 million, generating an
excess of the cost of our investment in Aracruz on our portion of the underlying
fair value of the net assets (excluding any possible adjustments for fair value
of property, plant and equipment and intangible assets) amounted to U.S.$155
million of goodwill. Financial Accounting Standards Board


                                       41
<PAGE>

Statement, or SFAS, No. 142, "Goodwill and Other Intangible Assets," was applied
in connection with our acquisition, and no amortization of the goodwill
generated as a result of this acquisition has been recorded.

     SFAS No. 142 establishes the reporting unit concept for impairment testing
purposes. Once a purchase transaction is consummated, all assets and liabilities
of the acquired company--including goodwill--are allocated to one or more
reporting units. No goodwill remains at the enterprise-level for this purpose.
Goodwill is then tested for impairment based upon the fair value of the
company's reporting units.

     While neither goodwill nor indefinite-lived intangible assets are
amortized, they are treated differently for annual impairment testing purposes.
Goodwill is tested for impairment at the reporting unit level and
indefinite-lived intangibles are tested for impairment individually, based upon
any excess of on asset's book value over its fair value.

     In accordance with SFAS No. 142, as from January 1, 2002, we annually
assess the impairment of identifiable intangibles, long-lived assets and related
goodwill whenever events or changes in circumstances indicated that the carrying
value may not be recoverable. Factors which could trigger an impairment review
include, but are not limited to, the following:

o    significant under-performance relative to expected historical or projected
     future operating results of entities acquired;

o    significant changes in the manner in which we use the acquired assets or
     the strategy for our overall business or use of trade names; or

o    significant negative industry or economic trends.

     When we determine that the carrying value of intangibles, long-lived assets
and related goodwill may not be recoverable based upon verification of one or
more of the indicators of impairment listed above, we then measure any
impairment based on a projected discounted cash flow method using a discount
rate determined by our management to be commensurate with the risk inherent in
our current business model.

Forest Development Costs and Impairment Tests

     Forest development costs, primarily project implementation costs
(preparation of soil, planting, pest control and clearing, etc.) and ongoing
maintenance costs are capitalized as incurred. Until December 31, 2000, forests
were normally harvested three times over a twenty-one year period, and we
amortized 60% of accumulated costs at the time of the first harvest, 26% of
accumulated costs through the second harvest plus 65% of costs incurred since
the first harvest, and the remaining costs at the time of the third harvest. As
a result of improvements in forest management techniques, including genetic
improvement in trees, beginning on January 1, 2001, for new project areas, we
now harvest and replant our forests approximately every seven years and
capitalized costs are expensed at the time of each harvest. Depletion of forests
is computed on the unit-of-production method, based on the volume of timber
harvested in each period. Software costs capitalized are amortized on a
straight-line basis over five years.

     Under U.S. GAAP, SFAS No. 144, "Accounting for the Impairment of Long-Lived
Assets" and SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," require companies to periodically
evaluate the carrying value of long-lived assets to be held and used, when
events and circumstances warrant such a review. The carrying value of long-lived
assets is considered impaired when the anticipated undiscounted cash flow from
those asset groups are separately identifiable and is less than their carrying
value. In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair market value of the assets or discounted cash
flows generated by the assets.

Deferred Taxes

     We recognize deferred tax assets and liabilities based on the temporary
differences between the financial statement carrying amounts and the tax basis
of assets and liabilities. If we or one of our subsidiaries operate at a loss or
are unable to generate sufficient future taxable income, or if there is a
material change in the actual effective tax rates or time period within which
the underlying temporary differences become taxable or deductible, we evaluate
the need to establish a valuation allowance against all or a significant portion
of our deferred tax assets


                                       42
<PAGE>

resulting in an increase in our effective tax rate. Due to our enrollment in the
REFIS program (Programa de Recuperacao Fiscal), a Brazilian tax recovery
program, we may elect annually for each year from 2001 to 2005 to calculate and
pay our income taxes either based on the provisions of REFIS (an estimated tax
basis which is based on net sales for the year adjusted by financial income and
other income) or actual pre-tax income. For 2002 and 2001, we have elected to
calculate and pay our income taxes based on the provisions of REFIS.

Tax Contingencies

     We are currently involved in certain tax proceedings and have filed claims
to avoid payment of taxes which we do not believe are due. As discussed in note
11 to our audited financial statements at and for the year ended December 31,
2001, we have accrued our estimate of the costs for the resolution of these
claims when we consider loss of our claim to be probable. The tax contingencies
relate primarily to value-added sales and excise taxes, taxes on revenue, social
security contributions, income tax and tax on bank account transactions. This
estimate has been developed in consultation with outside legal counsel handling
our defense in these matters and is based upon an analysis of potential results,
assuming a combination of litigation and settlement strategies. We do not
believe these proceedings will have a material adverse effect on our financial
position. It is possible, however, that future results of operations could be
materially affected by changes in our assumptions and the effectiveness of our
strategies with respect to these proceedings.

Brazilian Economic Environment

     Our results of operations and financial condition, as reported in our
financial statements, have been affected by the rate of Brazilian inflation and
the rate of devaluation of the Brazilian currency against the U.S. dollar.

     Effects of Inflation and Impact of Real Plan. Since the introduction of the
real as the Brazilian currency in July 1994, inflation was controlled until
January 1999, when it increased due to the devaluation of the real. During
periods of high inflation, such as those prior to the introduction of the real
(when inflation rates reached approximately 80% a month in March 1990), wages in
Brazilian currency tended to fall because salaries typically did not increase as
quickly as inflation. The effect was a progressive decline in purchasing power
of wage earners. The reduction and stabilization of inflation following the
implementation of the real plan resulted in increased spending on consumer goods
(including paper), higher real income growth, increased consumer confidence and
the increased availability of credit. It also resulted in relatively higher
labor costs.

     The table below shows the Brazilian general price inflation (according to
the IGP-DI), devaluation of the real against the U.S. dollar and the period-end
exchange rate and average exchange rates for the periods shown:

[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
<S>                                <C>                     <C>        <C>    <C>      <C>     <C>       <C>
                                                                 Year ended                   Three months
                                                                December 31,                 ended March 31,
                                                            1998       1999   2000     2001    2001      2002

Inflation (IGP-DI)                                            2%        20%    10%      10%      2%      0.5%
Devaluation of the real(1) vs. U.S. dollar                    8%        48%     9       18%     11%      0.1%
Year/period-end exchange rate--U.S.$1.00(1)               R$1.21     R$1.79 R$1.96   R$2.32  R$2.16    R$2.32
Average (daily) exchange rate(2)--U.S.$1.00               R$1.16     R$1.81 R$1.83   R$2.35  R$2.02    R$2.38
</TABLE>


(1)  The real/U.S. dollar exchange rate at July 10, 2002 was 2.8541.
(2)  The average (daily) exchange rate is the sum of the closing exchange rates
at the end of each business day divided by the number of business days in the
period.

     Effects of Exchange Rate Variation and Inflation on Our Financial
Condition and Results of Operations. The devaluation of the real has had and
will continue to have multiple effects on our results of operations. Our
statements of operations expressed in reais are translated to U.S. dollars at
the average rate for the relevant period. The amount in U.S. dollars for the
relevant period in the statements of operations will be reduced at the same rate
as the real has devalued in relation to the U.S. dollar over the period to which
it is being compared.

     Based on transactions and balances as at and for the year ended December
31, 2001, various indicators are as follows: 43% of our cash and
held-to-maturity investments balances were in reais; generally our sales prices
do


                                       43
<PAGE>

not react immediately to a change in exchange rates; approximately 68% of our
sales were determined in reais; as discussed under "Item 11--Qualitative and
Quantitative Disclosure About Market Risk," approximately 95% (estimated) of our
cost of sales and 75% (estimated) of our operating expenses were incurred in
reais.

     Although we present our financial statements in U.S. dollars, our
functional currency is the real. Before 1998, we were required under SFAS No. 52
to use the U.S. dollar as our functional currency because of the highly
inflationary conditions in the Brazilian economy. Based on guidelines accepted
by the U.S. Securities and Exchange Commission, or the Commission, we concluded
that, as of January 1, 1998, the Brazilian economy was no longer highly
inflationary because the increase in the general price index had been less than
100% over the previous three years. Accordingly, beginning in 1998, we changed
our functional currency to the real because, in accordance with SFAS No. 52, a
company operating in an environment that is not highly inflationary is obligated
to use the currency of its operating environment as its functional currency.
Since we adopted the real as our functional currency in 1998, the devaluation
has had the following additional effects on our results of operations:

o  the translation effects of our U.S. dollar transactions (cash, cash
   equivalents, held-to-maturity investments, loans and the unrealized gains and
   losses from foreign currency and interest rate swap contracts, among others)
   are recorded in our statements of income. These effects were not previously
   recorded when we measured our results of operations using the U.S. dollar as
   our functional currency. In our 1999 statement of income, we recorded a
   U.S.$69 million net foreign exchange loss. In 2000, we recorded a U.S.$14
   million net foreign exchange loss. In 2001, we recorded a U.S.$8 million net
   foreign exchange loss.

o  our non-monetary assets, primarily inventories and property, plant and
   equipment, are no longer translated upon acquisition using historical U.S.
   dollar rates and fixed in U.S. dollars. Therefore, any depreciation of the
   real against the U.S. dollar will be reflected as a charge directly to
   shareholders' equity, including the decrease in book value of property, plant
   and equipment in reais when translated to U.S. dollars. These currency
   translation effects are beyond our management's control. Accordingly, in our
   statement of changes in shareholders' equity for 1999, we recorded a U.S.$438
   million charge directly to shareholders' equity, without affecting net
   income, to reflect the devaluation of the real against the U.S. dollar of
   approximately 48%. In 2000, we recorded the same effect in the amount of
   U.S.$107 million to reflect the 9% devaluation of the real against the U.S.
   dollar. In 2001, we recorded this effect in the amount of U.S.$179 million to
   reflect the 18% devaluation of the real against the U.S. dollar.

     For further information on the effects of the change in functional currency
on the presentation of our financial information, see note 2(a) to our
consolidated financial statements.

     Additionally, inflation and exchange rate variations have had, and may
continue to have, effects on our financial condition and results of operations.
One significant effect of inflation and exchange rate variations on us concerns
our costs and operating expenses. Our cash costs (i.e., costs other than
depreciation and depletion) and operating expenses are substantially all in
reais and tend to increase with Brazilian inflation because our suppliers and
service providers generally increase prices to reflect Brazilian inflation. As
expressed in U.S. dollars, however, these increases are typically offset at
least in part by the effect of the appreciation of the U.S. dollar against the
real. If the rate of Brazilian inflation increases more rapidly than the rate of
appreciation of the U.S. dollar, then, as expressed in U.S. dollars, our costs
and operating expenses may increase and (assuming constant U.S. dollar sales
prices) our profit margins decrease. If the rate of appreciation of the U.S.
dollar exceeds the rate of inflation, then, as expressed in U.S. dollars, our
costs and operating expenses may decrease, and (assuming constant U.S. dollar
sales prices) our profit margins increase.

     The devaluation of the real in 2000 and 2001 had the following favorable
effects, among others, on our financial condition and results of operations when
expressed in reais:

o  The 9% devaluation of the real during 2000 increased the sales proceeds of
   our export products, when measured in reais, although without a corresponding
   increase in U.S. dollar sales revenue. This effect is partially reflected in
   our improved net cash flow from operating activities that increased from
   U.S.$205 million in 1999 to U.S.$381 million in 2000. Of our total export
   revenues, 40% are U.S. dollar-denominated.

o  The 18% devaluation of the real during 2001 increased the sales proceeds of
   our export products, when measured in reais, although without a corresponding
   increase in U.S. dollar sales revenue. This effect is reflected in our


                                       44
<PAGE>

   cash flow from operating activities of U.S.$234 million, although it was
   partially offset by the reduction of international prices of pulp and
   paper.

o  Our exports, which represented 31% of our total net revenues in 2000 and 32%
   in 2001, have enjoyed higher margins following the devaluation of the real,
   because exports are U.S. dollar-denominated while our costs are in reais,
   which has increased our ability to adopt an aggressive competitive strategy
   in the international markets in the event we increase production capacity.


o  Because the price of pulp in Brazil traditionally has followed the
   international price of pulp in U.S. dollars, the price in reais increases for
   sales to the domestic market when the real devaluates against the U.S.
   dollar, generating additional revenues. However, this additional revenue in
   reais also generated additional revenue when reported in U.S. dollars.

o  Increases in prices of supplied products and services did not have a
   significant impact on our costs and operating expenses during 2000 and 2001.
   As our costs and operating expenses are generally in reais, the devaluation
   had the effect of decreasing these costs when reported in U.S. dollars.

o  As the devaluation of the real increased the price of imported paper products
   in reais, we increased our competitiveness in the domestic market, mainly for
   coated paper.

     The devaluation of the real impacts the amount of dividends or interest on
equity available for distribution to our shareholders when measured in U.S.
dollars. Amounts of dividends or interest on equity reported as available for
distribution in our statutory accounting records prepared under accounting
principles set forth under the Brazilian corporate law will decrease or increase
when measured in U.S. dollars as the real depreciates or appreciates,
respectively, against the U.S. dollar. In addition, the devaluation of the real
creates foreign exchange gains and losses, which are included in the results of
operations determined under accounting principles set forth under the Brazilian
corporate law and which affect the amount of unappropriated earnings available
for distribution. In 2001, on a consolidated basis, we and our subsidiaries
recorded under accounting principles set forth under the Brazilian corporate law
foreign exchange losses (including gains from foreign currency swaps) of R$12
million (equivalent to U.S.$5 million) compared to R$21 million (equivalent to
U.S.$11 million) in 2000 and R$116 million (equivalent to U.S.$64 million) in
1999.

     We have entered into financial instruments to mitigate the effects of
foreign exchange variations on our U.S. dollar-denominated debt. We believe
entering into these financial instruments partially protected our net assets
from the 1999 devaluation of the real. Although our U.S. dollar-denominated debt
totaled U.S.$753 million at December 31, 1998, we recorded a net foreign
exchange loss of only U.S.$69 million in 1999 while the real devalued by 48%. We
entered into foreign currency and interest rate swap contracts to offset losses
generated by our dollar loans. These contracts have protected us from the
significant losses which would otherwise have been charged to income at the time
of the devaluation. Although 89% of our debt at December 31, 2000 was U.S.
dollar-denominated, the sales proceeds from our exports provide us with a
partial natural hedge in terms of our cash flows against possible unfavorable
exchange variations. The higher level of U.S. dollar-denominated debt when
expressed in reais will generate a higher level of interest expense in reais. In
July 1999, we modified our treasury policy in order to decrease our exposure to
the U.S. dollar. This policy resulted in a foreign currency exposure position in
which our U.S. dollar-denominated assets and the unrealized gains from foreign
currency and interest rate swap contracts, denominated in U.S. dollars, exceed
our U.S. dollar liabilities by approximately U.S.$61 million as at December 31,
1999. See "Item 5B--Liquidity and Capital Resources--Capital
Expenditures--Financial Strategy." We recorded a net foreign exchange loss of
only U.S.$8 million in 2001 while the real devalued by 18%.

     Effects of International Crises on the Brazilian Economy. International
crises have adversely impacted the Brazilian economy from time to time. For
example, the 1997 Asian crisis and the 1998 Russian crisis contributed to the
need for the Central Bank to devalue the real in the beginning of 1999. In 2000,
Brazilian financial markets were negatively affected by the volatility on the
U.S. Nasdaq markets and the decline in values in the technology sector. In 2001,
the Brazilian economy was negatively affected by the country's energy crisis,
the Argentine political and economic crisis and the terrorist attacks of
September 11.

A.       Operating Results


                                       45
<PAGE>


Results of Operations

     The following table sets forth certain items derived from our statements of
income for the years indicated:



                                                        Year ended December 31,
                                                --------------------------------
(U.S.$ in millions)                                    1999      2000       2001
--------------------------------------------------------------------------------
Net sales                                          U.S.$588  U.S.$774   U.S.$654
Cost of sales                                           322       371        344

      Gross profit                                      266       403        310
Selling and marketing expenses                           62        58         56
General and administrative expenses                      27        33         32
Other operating (expenses) income, net                   (1)        2        (5)

      Operating profit                             U.S.$176  U.S.$314   U.S.$217


     The following table sets forth certain items derived from our statements of
income as a percentage of net sales for the years indicated (certain totals may
not sum due to rounding):


                                                        Year ended December 31,
                                                       1999      2000       2001
--------------------------------------------------------------------------------
Net sales                                              100%      100%       100%
Cost of sales                                            55        48         53

      Gross margin                                       45        52         47
Selling and marketing expenses                           11         8          9
General and administrative expenses                       5         4          5

      Operating profit                                   30        40         33
Financial income                                         18        13         11
Financial expenses                                       16        10          6
Foreign exchange (losses) gains, net                    (12)       (1)       (1)
Gain on sale of investee                                  2        --         --
Income tax expenses                                       6        10          9
Cumulative effect of accounting change,
   net of tax                                            --        --          1

      Net income                                        17%       32%        29%



                                       46
<PAGE>



     The following table sets forth information about our pulp and paper sales
for the years indicated:


                                                       Year ended December 31,
                                                  -----------------------------
                                                       1999      2000       2001
--------------------------------------------------------------------------------
Pulp:
Volumes (in metric tons)
   Domestic                                              84       100         85
   Export                                               232       240        258
                                                        ---       ---        ---

         Total                                          316       340        343
Average prices (U.S.$ per ton)(1)
   Domestic                                        U.S.$452  U.S.$600   U.S.$428
   Export                                               440       613        415
Net sales (in millions of U.S.$)
   Domestic                                        U.S.$ 37  U.S.$ 60   U.S.$ 36
   Export                                               103       147        107
                                                        ---       ---        ---

         Total                                     U.S.$140  U.S.$207   U.S.$143

Paper:
Volumes (in metric tons)
   Domestic
      Printing and writing                              299       337        356
      Thermal and carbonless coated                      43        49         52
      Other specialty paper                              28        38         28
   Export
      Printing and writing                              137       105        132
      Thermal and carbonless coated                      --        --          1
                                                       ----       ---        ---

         Total                                          507       529        569
Average prices (U.S.$ per ton)(1)
   Domestic                                        U.S.$959 U.S.$1,12   U.S.$931
   Export                                               685       857        783
Net sales (in millions of U.S.$)
   Domestic                                        U.S.$355  U.S.$477   U.S.$407
   Export                                                93        90        104
                                                       ---         ---       ---
         Total                                     U.S.$448  U.S.$567   U.S.$511

Combined:
Net sales (in millions of U.S.$)
   Domestic                                        U.S.$392  U.S.$537   U.S.$443
    Export                                              196       237        211
                                                        ---       ---        ---
         Total                                     U.S.$588  U.S.$774   U.S.$654

(1)  Determined by dividing the corresponding net sales under U.S. GAAP by
     respective tonnage.


 Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Introduction

                                       47
<PAGE>

     After the first quarter of 2001, Brazil's projections were adversely
impacted by the unfavorable global environment and marked by uncertainty
resulting from the economic slowdown in the major international markets in the
aftermath of the September 11 terrorist attacks, and regionally due to the
Brazilian energy crisis and the ongoing Argentine crisis. This environment and
the high level of inventories affected the pulp market, with the international
price of pulp decreasing by 40% during the first half of the year and remaining
at those levels during the first quarter of 2002. Domestically, we also faced
the unexpected energy rationing program which, together with the reduced GDP
growth, created instability in the exchange rate market and overall
macroeconomic conditions, an 18% devaluation of the real and a reduction in
domestic paper consumption.

Net Sales

     Our ability to capitalize on competitive advantages and to optimize the
market allocation of our products during adverse market conditions led to an
increase in our sales volume in all quarters of the year when compared to the
same quarters of 2000. However, net revenue decreased by 16% in 2001 to U.S.$654
million from U.S.$774 million in 2000 mainly as a result of lower prices in U.S.
dollars--mainly due to a 19% decrease in international pulp prices and to the
devaluation of the real against the U.S. dollar, partially offset by a 5%
increase in the volume of sales. Approximately 68% of our sales volume was in
the domestic market. Of our revenues, 78% related to sales of paper and 22%
related to sales of pulp compared to 73% and 27%, respectively, in 2000.

     Pulp. In the pulp business we concentrated on exports, where a favorable
exchange rate partially compensated for declining prices. Net sales attributable
to pulp decreased by 31% to U.S.$143 million in 2001 from U.S.$207 million in
2000. This decrease was mainly due to a 31% decrease in the average prices of
pulp, which resulted from very high international inventories due to the weak
demand by European, American and Asian paper producers. Pulp exports constituted
75% of both revenues and sales volume in 2001, compared to 71% in 2000.

     In the domestic market, net sales decreased by 39% due to a decrease in
sales volume and in average prices. We reduced sales in the domestic market and
increased our export volumes in order to take advantage of the favorable
international prices. In the domestic market, pulp sales volume as a percentage
of total sales of market pulp decreased to 25% in 2001 from 29% in 2000.

     Paper. Export volumes increased by 26%, primarily due to uncoated paper
exports, and domestic sales volume increased by 3%, primarily due to increased
sales of value-added products like coated paper (art paper). Net sales
attributable to paper decreased by 10% to U.S.$511 million from U.S.$567 million
in 2000 mainly due to a 16% decrease in average prices partially offset by an 8%
growth in total sales volumes. The domestic market accounted for 80% of paper
revenues in 2001, compared to 84% in 2000. The higher growth of the export
market revenues which represented a 16% increase in revenues in our paper
exports resulted from the reallocation of our sales to the global market in
response to the slowdown of the Brazilian economy and to the devaluation of the
real against the U.S. dollar, which increased the competitiveness of our
products in the international markets.

     The decrease in domestic revenues was mainly due to a sharp decline in
revenues from uncoated paper, resulting from a 19% decrease in U.S. dollar
prices as compared to 2000 sales volumes, primarily due to the devaluation of
the real. This reduction was partially offset by a 30% increase in sales volume
of the printing and writing coated (art paper) paper segment, due to a 19%
decrease in average domestic prices, primarily due to the devaluation of the
real.

Cost of Sales

     Cost of sales decreased by 7% to U.S.$344 million in 2001 from U.S.$371
million in 2000. The decrease was attributable to the devaluation of the real,
because most of our costs are in reais and not linked to the U.S. dollar. This
decrease was partially offset by: (i) an increase in the volume of sales; (ii)
the 7.5% wage increase under our collective bargaining agreements negotiated in
October 2000; (iii) the enhancement of the mix of products sold, with a higher
growth for paper relative to pulp and for coated and chemical papers relative to
uncoated papers; (iv) the additional costs of some U.S. dollar-denominated raw
materials also due to the devaluation of the real; and (v) the increase in
variable costs such as fuel and electric power in manufacturing.

     Despite the decrease in U.S. dollars of our costs, our gross margin
decreased to 47% in 2001 from 52% in 2000, reflecting a proportionally larger
decline in gross profits due to lower average sales prices.


                                       48
<PAGE>


Selling and Marketing Expenses

     Selling and marketing expenses decreased by 3% to U.S.$56 million in 2001
from U.S.$58 million in 2000 mainly due to the devaluation of the real, since
most of our selling expenses are in reais and not linked to the U.S. dollar.
This decrease was partially offset by the increase in volume of products sold,
especially those sold to the export market, where the related freight and other
export expenses are denominated in U.S. dollars.

General and Administrative Expenses

     General and administrative expenses decreased by 3% to U.S.$32 million in
2001 from U.S.$33 million in 2000, mainly due to the devaluation of the real,
since most of our general and administrative expenses are in reais and not
linked to the U.S. dollar. This decrease was partially offset by an increase of
U.S.$2.6 million in consulting fees and other projects, and a 7.5% wage increase
under our new collective bargaining agreements.

Operating Profit

     Operating profit decreased by 31% to U.S.$217 million from U.S.$314 million
in 2000. The decrease was primarily due to the decrease in average sale prices
in U.S. dollars.

     The market value of pulp recorded in our paper operations in 2001 was
U.S.$183 million, compared to U.S.$228 million in 2000. Valuing these
transactions at market value, our pulp operating profit would have decreased 46%
to U.S.$128 million in 2001 from U.S.$238 million in 2000, and our paper
operating profit would have increased 17% to U.S.$89 million in 2001 from
U.S.$76 million in 2000.

     The decrease in pulp operating profit was primarily due to the strong
decline in pulp sale prices. The increase in paper operating profit was
primarily due to the enhancement of the product mix in the domestic market, the
cost reduction and the increase in volumes, especially in the export markets,
improving margins due to strong revenues in foreign currency.

Financial Income

     Financial income decreased by 24% to U.S.$71 million in 2001 from U.S.$94
million in 2000. The decrease was primarily due to a decrease in average
invested amounts in reais attributed to the repayment of loans throughout the
year.

     We take advantage of arbitrage opportunities between interest rates on U.S.
dollar-denominated borrowings (principally export credits) and local interest
rates on real-denominated investments. The amount we earn from these activities
is recorded as financial income. These opportunities may not continue to exist
in the future.

Financial Expenses

     Financial expenses decreased by 40% to U.S.$39 million in 2001 from U.S.$65
million in 2000 due mainly to the reduction in our average outstanding debt by
U.S.$82 million to U.S.$569 million from U.S.$651 million and to a decline in
prevailing interest rates. Our average interest rate payable was 5.9% in 2001
compared to 8.6% in 2000.

Foreign Exchange Losses

     Foreign exchange losses decreased by 43% to U.S.$8 million in 2001 from
U.S.$14 million in 2000 primarily due to our lower exposure to foreign currency
despite the 18% devaluation of the real. Since we adopted the real as our
functional currency in 1998, any gains or losses recorded on foreign currency
transactions are translated to U.S. dollars in our income statements. These
transactions consist mainly of U.S. dollar-denominated debt or gains from
foreign currency and interest rate swap contracts.

Income Tax Expense

     Income tax expense decreased by 26% to U.S.$59 million in 2001 from U.S.$80
million in 2000. Our effective tax rate in 2001 remained practically stable at
24% as a result of our participation in the REFIS program.




                                       49
<PAGE>


Cumulative Effect of Accounting Change, Net of Tax

     As of January 1, 2001, we adopted Financial Accounting Standards Board
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133) which was issued in June 1998 and its amendments,
Statement 137, "Accounting for Derivative Instruments and Hedging
Activities/Deferral of the Effective Date" of FASB Statement No. 133 and 138,
"Accounting for Derivative Instruments and Certain Hedging Activities" issued in
June 1999 and June 2000, respectively (collectively referred to as SFAS 133).

     Under SFAS 133, we recognize our foreign currency and interest rate swap
contracts on the balance sheet at fair value and adjustments to fair value are
charged to income. Prior to adopting SFAS 133, we recognized our foreign
currency and interest rate swap contracts on the balance sheet at contract value
and adjustments to contract value were charged to income. We accounted for the
accounting change as a cumulative effect of an accounting principle. The
adoption of SFAS 133 resulted in a cumulative effect of accounting change of
U.S.$10 million, net of applicable tax expense of U.S.$4 million, which resulted
in a gain in our consolidated income statement for the year ended December 31,
2001.

     The table below sets forth the before and after cumulative effect of the
accounting change resulting from the adoption of SFAS 133 in the calculation of
basic earnings per share:

[GRAPHIC OMITTED]
<TABLE>
<CAPTION>

                                                             Year Ended December 31, 2001
                                            -------------------------------------------------------------
                                            Before cumulative effect   Cumulative effect of
                                                of accounting change      accounting change    Net Income
                                                --------------------      -----------------    ----------
<S>                                                             <C>                    <C>           <C>
Per share data:
Basic earnings per 500 shares (in U.S.$):
Preferred                                                       2.51                   0.14          2.65
Common                                                          2.28                   0.13          2.41
Basic earnings per 1,000 shares (in U.S.$):
Preferred                                                       5.03                   0.28          5.31
Common                                                          4.57                   0.26          4.83

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Net Income

     As a result of the foregoing, net income decreased by 23% to U.S.$192
million in 2001 compared to U.S.$249 million in 2000.

Year ended December 31, 2000 compared to year ended December 31, 1999

Introduction

     The 50% devaluation of the real on January 13, 1999 had a significant
impact on our earnings in 1999. This was a result both of the initial high
volatility of financial markets as well as changes to the competitive advantages
of exports. In 2000, the relatively greater exchange rate stability (which had a
variation of approximately 9.3%), an upswing in the pulp cycle and improved
overall macroeconomic conditions favorably affected our financial results.

Net Sales

     Combined pulp and paper. Net sales increased by 32% to U.S.$774 million in
2000 from U.S.$588 million in 1999. The increase was primarily due to a 24%
increase in average prices and a 6% increase in the volume of sales.
Approximately 69% of our sales volume was in the domestic market. Of our
revenues, 73% related to sales of paper and 27% related to sales of pulp
compared with 76% and 24%, respectively, in 1999.

     Pulp. Net sales attributable to pulp increased by 48% to U.S.$207 million
in 2000 from U.S.$140 million in 1999. This increase was mainly due to an 8%
increase in sales volume and to a 36% increase in average prices which resulted
from a recovery of international prices due to an increase in demand from
non-integrated tissue paper


                                       50
<PAGE>

producers and from European and American printing and writing producers. Pulp
exports represented 71% of revenues and sales volume in 2000, compared to 73% in
1999.

     In the domestic market, net sales increased by 62% due to an increase in
sales volume and in average prices. This domestic increase in volume and price
was mainly due to an increase in the number of domestic customers. In the
domestic market, pulp sales volume as a percentage of total sales of market pulp
increased to 29% in 2000 from 27% in 1999.

     Paper. Net sales attributable to paper increased by 27% to U.S.$567 million
in 2000 from U.S.$448 million in 1999 mainly due to a 21% increase in average
prices and a 5% growth in sales volume. The domestic market represented 84% of
paper revenues in 2000, compared to 79% in 1999. The 34% growth in domestic
market revenues relative to the 1% decline on the export market revenues can be
explained by the increase in the domestic sales reflected in all segments of the
domestic market for our paper due to (i) the 48% increase in revenue of the
printing and writing coated (art paper) paper segment; (ii) the 55% increase in
net sales from the printing and writing paper segment; and (iii) the 30%
increase in net sales in the cut-size paper segment.

     The decline in revenues in our paper exports was a result of our strategy
of reallocation of sales to the domestic market to respond to the increased
activity in the Brazilian economy, which presented higher margins and a better
mix of products.

Cost of Sales

     Cost of sales increased by 15% to U.S.$371 million in 2000 from U.S.$322
million in 1999. The increase was attributable to (i) an increase in sales
volume; (ii) the impact of a 6% wage increase under our collective bargaining
agreements negotiated in October 1999; (iii) the additional transportation costs
due to an approximately 45% increase in distance from 145 km to 210 km between
the forests where we are temporarily harvesting wood and our mills which
increased the average cost of wood at our mills; and (iv) the increase in
variable production costs such as fuel and electric power.

     Despite the increase in costs, our gross margin for 2000 increased to 52%
compared to 45% in 1999, reflecting a proportionally larger increase in gross
profits due to an increase in net sales.

Selling and Marketing Expenses

     Selling and marketing expenses decreased by 7% to U.S.$58 million in 2000
from U.S.$62 million in 1999. The decrease was mainly due to a provision of
U.S.$5 million for doubtful accounts which was recorded in 1999.

General and Administrative Expenses

     General and administrative expenses increased by 22% to U.S.$33 million in
2000 from U.S.$27 million in 1999. This increase resulted primarily from (i) an
increase of approximately U.S.$3 million in consulting fees related to the
restructuring of our administrative infrastructure and expenses related to the
maintenance of our IBM and SAP systems; (ii) a U.S.$1 million contribution
related to our defined contribution pension plan, which we implemented in 2000;
and (iii) a 6% wage increase under our collective bargaining agreements
negotiated in October 1999.

Operating Profit

     Operating profit increased by 78% to U.S.$314 million in 2000 from U.S.$176
million in 1999. The increase was primarily due to an increase in average sale
prices in U.S. dollars.

     The market value of pulp recorded in our operations in 2000 was U.S.$228
million compared to U.S.$176 million in 1999. Valuing these transactions at
market value, our pulp operating profit would have increased by 68% to U.S.$238
million in 2000 from U.S.$142 million in 1999 and our paper operating profit
would have increased by 124% to U.S.$76 million in 2000 from U.S.$34 million in
1999. The increase in pulp operating profit and in paper operating profit was
primarily due to an increase in sale prices.

                                       51
<PAGE>

Financial Income

     Financial income decreased by 11% to U.S.$94 million in 2000 from U.S.$106
million in 1999. The decrease was primarily due to the decline in interest rates
on investments to 17% in 2000 from 25% in 1999, which was partially offset by an
increase in cash and cash equivalents which we invested.

Financial Expenses

     Financial expenses decreased by 30% to U.S.$65 million in 2000 from U.S.$93
million in 1999 mainly due to the reduction in our average outstanding debt by
U.S.$112 million from U.S.$763 million to U.S.$651 million and an interest rate
reduction. Our average interest expense was 8.6% in 2000 compared to 9.8% in
1999.

 Foreign Exchange Losses

     Foreign exchange losses decreased by 80% to U.S.$14 million in 2000 from
U.S.$69 million in 1999 primarily due to the high devaluation of the real during
1999. Since we adopted the real as our functional currency in 1998, any gains or
losses recorded on foreign currency are translated to U.S. dollars in our income
statements. These transactions consist mainly of U.S. dollar-denominated debt or
gains from foreign currency and interest rate swap contracts.

Gain on Sale of Investee

     We recorded a gain of U.S.$13 million in 1999 as a result of the sale of
our interest in Industria de Papel de Salto Ltda. to Arjo Wiggins Participacoes
e Comercio Ltda.

Income Tax Expense

     Income tax expense increased by 129% to U.S.$80 million from U.S.$35
million in 1999. The increase was primarily due to an increase of our pretax
income. Our effective tax rate was 24% in 2000 compared to 26% in 1999.

Net Income

     As a result of the foregoing, net income increased by 152% to U.S.$249
million in 2000 compared to U.S.$99 million in 1999.

B.       Liquidity and Capital Resources

Liquidity


     Our principal sources of liquidity have historically consisted of cash
generated from operations and short-term and long-term secured borrowings. We
believe these sources will continue to be adequate to meet our currently
anticipated use of funds, which include working capital, investment in capital
expenditures and acquisitions, debt repayment and dividend payments.

     We have historically made investments in order to, among other things,
increase our production and modernize our facilities. We also review acquisition
and investment opportunities. We may fund these investments through internally
generated funds, the issuance of debt or equity or a combination of these
methods. Our current principal capital expenditure is the Jacarei expansion. See
"Item 4A--Information on VCP--History and Development of VCP."

     As a result of our expenditures in connection with the Jacarei expansion,
there was a decrease in cash and cash equivalents of U.S.$317 million in 2001
compared to a net increase of U.S.$313 million in 2000. At December 31, 2001, we
had cash and cash equivalents of U.S.$172 million.

         At December 31, 2001, we had approximately U.S.$406 million (of a total
in deposits and short-term investments of U.S.$536 million) in deposits and
short-term investments with Banco Votorantim S.A., and U.S.$41 million in
unrealized gains from foreign currency and interest rate swap contracts with
Banco Votorantim S.A. See "Item 7B--Major Shareholders and Related Party
Transactions--Related Party Transactions."


                                       52
<PAGE>

     At December 31, 2000, our cash, cash equivalents and held-to-maturity
investments (current portion) were U.S.$506 million, of which U.S.$27 million
was denominated in U.S. dollars and the remaining in reais. At December 31,
2001, our cash, cash equivalents and held-to-maturity investments (current
portion) were U.S.$259 million, of which U.S.$52 million was denominated in U.S.
dollars and the remainder in reais.

     At December 31, 2001 our balance sheet presents negative working capital of
U.S.$(76) million. We do not expect to have any difficulty in meeting our
short-term obligations.

     The following table summarizes our significant contractual obligations and
commitments that impact our liquidity at March 31, 2002:



<TABLE>
<CAPTION>

<S>                                                          <C>        <C>             <C>      <C>
Contractual Obligations(2)(3)                        Up to 1 year  2-3 Years   After 3 Years     Total
-----------------------------                        ------------  ---------   -------------     -----

(payments due by period)                                         (U.S. dollars in millions)
Long-term debt, including current portion                U.S.$388   U.S.$438        U.S.$178 U.S.$1,004
Pension plan obligations(1)                                     1          2               8         11
Total contractual cash obligations                            389        440             186      1,015

</TABLE>

[GRAPHIC OMITTED]

(1 Amounts estimated for a 10-year period.
(2 At December 31, 2001, commitments for capital expenditures amounted to
approximately U.S.$305 million.
(3 We also have take or pay contractual obligations which are not expected to
exceed U.S.$30 million per year.

Sources of Funds

     Operating activities provided net cash flows of U.S.$234 million in 2001,
compared to U.S.$381 million in 2000 and U.S.$205 million in 1999.

     Financing activities (before distributions to shareholders), which include
short-term and long-term secured and unsecured borrowings and debt repayments,
generated net cash flows of U.S.$562 million in 2001, compared to using cash
flows of U.S.$120 million in 2000 and U.S.$174 million in 1999.

     At December 31, 2001, our debt was U.S.$1,042 million (of which U.S.$458
million had short-term maturities) representing an increase of U.S.$513 million
over the debt recorded at December 31, 2000. The long-term position amounted to
56% at December 31, 2001 compared to 68% in 2000. Approximately 91% of the debt
was denominated in foreign currencies. At December 31, 2001, we had net debt of
U.S.$465 million compared to net cash of U.S.$22 million at December 31, 2000,
due to very large amounts invested in the Jacarei expansion and to our
investment in Aracruz. In 2001, we continued our policy of mitigating the effect
of foreign exchange variations on our U.S. dollar liabilities. This risk
management policy does not take account of the natural hedge provided by our
exports. On December 31, 2001, our net exposure was U.S.$(7) million, which
means that our assets in foreign currency were higher than our liabilities.

Uses of Funds

     Investing activities before proceeds of U.S.$2 million in 2001, U.S.$5
million in 2000 and U.S.$8 million in 1999 from a total of investments,
including acquisitions and the Jacarei expansion and other capital expenditures,
consumed net cash flows of U.S.$1,004 million, compared to providing U.S.$96
million in 2000 and consuming net cash flows of U.S.$53 million in 1999.

     Our significant uses of cash in financing activities included the repayment
of debt, which consumed U.S.$238 million in 2001, U.S.$329 million in 2000 and
U.S.$287 million in 1999.

Debt

     At December 31, 2001, our total debt was U.S.$1,042 million, consisting of
U.S.$458 million in short-term debt and U.S.$584 million in long-term debt. Our
total debt at December 31, 2001 increased by U.S.$513 million from total debt of
U.S.$529 million at December 31, 2000.


                                       53
<PAGE>

     Most of our borrowings are related to our export sales, which have a lower
interest rate. For our expansion projects we use long-term financing in reais
from BNDES, from which we have already received R$141 million as of December 31,
2001.

     In October 2001, Newark Financial Inc., or Newark, a wholly-owned
subsidiary of VCP Exportadora e Participacoes S.A., or VCP Exportadora, our
wholly owned subsidiary, received a bridge financing for U.S.$370 million to
finance the acquisition of our stake in Aracruz.

     On May 23, 2002, VCP Trading N.V., or VCP Trading, and VCP North America
Inc., or VCP North America, two wholly owned subsidiaries of Newark, entered
into a U.S.$380 million credit agreement with ABN Amro Bank N.V., as
administrative agent, The Bank of New York, as collateral agent, and a syndicate
of banks. All of the proceeds from the credit agreement were advanced to Newark
(U.S.$304 million by VCP Trading and U.S.$76 million by VCP North America) as a
prepayment trade financing between Newark, VCP Trading and VCP North America.
Newark used the proceeds from these advances to pay in full the bridge financing
and to make certain payments in connection with the credit agreement. The
obligations of VCP Trading and VCP North America under the credit agreement are
guaranteed directly or indirectly by Newark, VCP Exportadora and us. The loans
under the credit agreement are secured by liens on certain collateral, including
receivables arising under agreements entered into by Newark, VCP Trading or VCP
North America with its respective customers for the sales of certain products.

     As a guarantor under the credit agreement, we are subject to a number of
material covenants including, among others:

o    limitations on our ability to incur debt;

o    limitations on the existence of liens on our properties;

o    limitations on transactions with related parties, which generally must be
     on terms no less favorable than those that could be obtained in a
     comparable arm's-length transaction; and

o    maintenance of certain financial ratios.

     We are in the process of negotiating an export credit advance related to
pre-export financing in the amount of U.S.$1 billion. We cannot assure you that
we will obtain this financing.

     In December 1996, Voto-Votorantim Overseas Trading Operation N.V., a
special purpose unconsolidated company owned 50% by us and 50% by S.A.
Industrias Votorantim, also a member of the Votorantim group, known as
Voto-Votorantim, received bridge financing from ING Barings for U.S.$300
million. Of this amount, U.S.$150 million was advanced to us by Voto-Votorantim
at that time. In June 1997, Voto-Votorantim issued U.S.$400 million 8.5% notes
due 2005, which are jointly and severally guaranteed by us, S.A. Industrias
Votorantim and Cimento Rio Branco, members of the Votorantim group. The bridge
loan was paid in full with the proceeds of the U.S.$400 million Voto-Votorantim
notes, and an additional U.S.$50 million was transferred to us. On the total
U.S.$200 million intercompany loan, Voto-Votorantim charges us an interest rate
identical to the one it pays to the holders of the Voto-Votorantim notes. Under
the Voto-Votorantim notes indenture, each holder of the Voto-Votorantim notes
may upon notice require Voto-Votorantim to repurchase, in whole or in part, the
notes on June 27, 2002 at a repurchase price of 99.5% of the principal amount
plus accrued and unpaid interest and Voto-Votorantim may upon notice repurchase
the Voto-Votorantim notes from the holders, in whole but not in part, on June
27, 2002 at a repurchase price of 99.5% of the principal amount plus accrued
interest. In either case, Voto-Votorantim may procure any other person to
purchase the Voto-Votorantim notes that are subject to its repurchase. On May
10, 2002, Voto-Votorantim gave notice to the trustee, exercising its call option
and indicating that the Voto-Votorantim notes will be purchased by another
person and will remain outstanding.




                                       54
<PAGE>


     As a guarantor of the Voto-Votorantim notes, we are subject to a number of
material covenants including:

o    limitations on the existence of liens on our properties;

o    limitations on transactions with related parties, which generally must be
     on terms no less favorable than those that could be obtained in a
     comparable arm's-length transaction; and

o    maintenance of net indebtedness (as defined in the indenture governing the
     notes) not to exceed five times EBITDA (as defined in the indenture and
     measured under accounting principles set forth in the Brazilian corporate
     law) over the past two semesters.

     We act as guarantor, together with other members of the Votorantim group,
under a U.S.$150 million export finance agreement between VCP Exportadora and
Votorantrade N.V., dated October 29, 2001.

     In 1993, we obtained a U.S.$24 million loan from the International Finance
Corporation, or IFC, U.S.$4 million of which was convertible into preferred
shares at the IFC's option. In April 2002, the remaining outstanding amount was
paid on this loan, and no portion of this loan was converted into VCP shares.

     Our long-term debt also consists of export credits and import credits with
a number of financial institutions. The lines of credit with respect to export
credits generally mature within 24 to 60 months. Upon shipment, the export
credits are associated with that specific, identifiable shipment. The export
credits are repaid with the proceeds of the export receipts from the specific
shipment. At December 31, 2001, the outstanding amount of export credits was
U.S.$296 million. The export credits bear annual interest of Libor plus 1.4%,
for an effective rate of 3.3% at December 31, 2001. At December 31, 2001, the
outstanding amount of import credits was U.S.$18 million. The import credits
bear annual interest of Libor plus 0.7%, for an effective rate of 2.7% at
December 31, 2001. The export credits bear annual interest of Libor plus 1.4%,
for an effective rate of 3.3% at December 31, 2001. At December 31, 2001, the
outstanding amount of import credits was U.S.$18 million. The import credits
bear annual interest of Libor plus 0.7%, for an effective rate of 2.7% at
December 31, 2001.

     BNDES, the parent of BNDESPAR, one of our principal shareholders, has been
an important source of debt financing. At December 31, 2001, the BNDES loans
amounted to U.S.$94 million, of which U.S.$56 million related to the Jacarei
expansion, and were denominated in reais. The BNDES loans are secured by liens
on land, property (including the Jacarei mill) and equipment, and by personal
guarantees of an owner of Hejoassu, the ultimate parent of the Votorantim group.
Our loans with BNDES bear interest at 3.0% per annum on the principal amount and
are indexed using either the Taxa de Juros de Longo Prazo, or TJLP, a nominal
long-term interest rate that includes an inflation factor or the weighted
average of the funding costs incurred by BNDES abroad. For 2001, the TJLP
average for the year was 10%. See note 10 to our consolidated financial
statements.

     At December 31, 2001, the amount of maturities of our long-term debt
(current and long-term portion) is as follows:


[GRAPHIC OMITTED]
Year                                                                 Maturities
------------------------------------------------------  ------------------------
                                                             (U.S.$ in millions)
2002(1)                                                                     389
2003                                                                        184
2004                                                                        237
2005                                                                         79
2006                                                                         56
Thereafter                                                                   28
                                                                        --------
   Total                                                                  $ 973

[GRAPHIC OMITTED]

(1) We have considered the maturity date of the U.S.$200 million intercompany
loan from Voto-Votorantim to be June 27, 2002 because Voto-Votorantim will
repurchase the Voto-Votorantim notes on that date, pursuant to the terms of the
indenture under which the Voto-Votorantim notes were issued.




                                       55
<PAGE>



     At December 31, 2001, all of our short-term debt related to trade financing
was secured. The outstanding amount of that short-term debt was U.S.$69 million
at December 31, 2001, with a weighted average interest rate of 6.1% and U.S.$74
million at December 31, 2000, with a weighted average interest rate of 7.6%.

Capital Expenditures

     During 2001, we spent U.S.$679 million in capital expenditures, an increase
of 443% over the U.S.$125 million invested in 2000 and 708% over the U.S.$84
million invested in 1999. Of this amount, U.S.$370 million was spent in the
acquisition of 12.35% of the total capital of Aracruz, U.S.$206 million was
spent in the construction of the Jacarei expansion, and the remaining U.S.$103
million was invested in the modernization of our plants, the implementation of
our forest maintenance program and the updating of information technology. We
expect to have U.S.$435 million of capital expenditures in 2002, primarily
related to the Jacarei expansion. See "Item 4A--Information on VCP--History and
Development of VCP--Capital Expenditures."

Commitments and Contingencies

     We are subject to numerous commitments and contingencies with respect to
tax, labor, distributors and other claims. See "Item 8A--Financial
Information--Consolidated Statements and Other Financial Information--Legal
Matters," note 11 to our annual audited consolidated financial statements and
discussions on our critical accounting policies.

     The significant contractual obligations and commitments that impact our
liquidity are short-term debt, long-term debt, take or pay, leases and capital
expenditures.

     At December 31, 2001, we had made provisions in the amount of U.S.$12
million for civil, labor and tax legal proceedings in long-term liabilities. In
connection with some of these legal proceedings, we also have made judicial
escrow deposits (included in "Other assets--other" in our balance sheet) in the
amount of U.S.$4 million in 2001.

     We are one of the guarantors, together with other companies of the
Votorantim group, of the U.S.$400 million notes issued by Voto-Votorantim. At
December 31, 2001, we had loans outstanding totaling U.S.$200 million that are
guaranteed by other companies of the Votorantim group. For additional
information on our commitments and contingencies, see "Item 7B--Major
Shareholders and Related Party Transactions--Related Party Transactions" and
note 11 to our consolidated financial statements.

     We have not made any loans to any company of the Votorantim group since
March 2000, and all of our loans were repaid at December 31, 2001. We do not
intend to make these types of loans in the future. See note 13 to our
consolidated financial statements.

     The following is a summary of the guarantees provided by us in favor of
other companies of the Votorantim group:

[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
<S>                                   <C>                       <C>                 <C>
                                                                     Outstanding
                                                                       amount at
Primary Obligor                                     Purpose       March 31, 2002            Beneficiary
----------------------------------   ----------------------     ----------------     -------------------
Voto-Votorantim Overseas Trading     U.S.$400 million Notes                          Noteholders and the
   Operations N.V.                                 Issuance     U.S.$204 million                 Trustee
Votocel Filmes Flexiveis Ltda.            Equipment Finance      U.S.$15 million     Banco do Brasil S.A.
                                                                 ---------------

Total                                                           U.S.$219 million
[GRAPHIC OMITTED]

</TABLE>

Other Events

Buyback Programs



                                       56
<PAGE>

     In 1998, we repurchased 1,421,182,405 outstanding preferred shares for
U.S.$17 million in order to take advantage of low market prices. In 1999, we
resold 283,600,000 preferred shares for U.S.$8 million, which had been purchased
in 1998 at a cost of U.S.$3 million. The gain of U.S.$5 million is included in
"Additional paid-in capital" in our balance sheet without affecting net income.

     In 2000, we repurchased 235,400,000 preferred shares for U.S.$6 million.

     In 2001, the board of directors approved two other stock buyback programs,
from April 6 to July 5, and from September 20 to December 20. We have not
purchased shares under those two programs since December 21, 2001, nor did we
renew them. We carried over the 235,400 lots of 1,000 preferred shares bought
from the first program up to February 2002, when we began selling these shares.
We sold 91,100 lots of 1,000 preferred shares from February to April 2002, and
the weighted average selling price was R$89.07 (U.S.$38.2) per lot of 1,000
preferred shares. The minimum selling price was R$86.74 (U.S.$36.8) and the
maximum was R$92.00 (U.S.$39.2) per lot of 1,000 preferred shares. At March 31,
2002 and at December 31, 2001, we held 163,900,000 preferred shares and
235,400,000 preferred shares, respectively, in treasury.

C.       Research and Development, Patents and Licenses, Etc.

     During 2001, 2000 and 1999, we spent approximately U.S.$1 million per year
on research and development. We direct research and development activities
towards increasing eucalyptus wood and quality yields, making our production
more efficient, developing new products and improving the quality of our
products. We maintain close links with various universities and private research
institutes. As an integrated producer of pulp and paper, we have sought to gain
an even better understanding of the whole production process. We attempt to
identify the characteristics of both wood and pulp that are essential for the
production of high quality paper.

     Capital expenditures in research and development are integrated in all of
the phases of the production process, through pioneering initiatives. Through
these initiatives, we started production of whiter and better-quality alkaline
paper produced from 100% hardwood fiber, adopted micro-stakes for cloning in the
propagation of seedlings from selected trees, and developed new products for the
market. Currently, we are the only manufacturer in Brazil of high-resolution
coated papers designed for labels for inkjet printing and coated paper that is
resistant to humidity. Our research and development are aimed at satisfying
market demand for quality products appropriate for specific applications.

     We are participating in the Eucalyptus Genoma Project, through the
Eucalyptus Genoma Consortium, a consortium of Brazilian companies which includes
Companhia Suzano de Papel e Celulose, or Suzano, Ripasa Papel e Celulose, or
Ripasa, Duraflora S.A. and is also sponsored by FAPESP--Fundacao de Amparo a
Pesquisa do Estado de Sao Paulo, a state-owned foundation to sponsor research
associated with ONSA--Organization for Nucleotide Sequency and Analysis, or The
Virtual Genomics Institute. The objectives of the Eucalyptus Genoma Project are
to (i) develop the eucalyptus genetic sequence, (ii) identify the genes
responsible for patterns in wood quality, drought and disease resistance and
nutrient absorption, and (iii) create tools for assisted selection. The
Eucalyptus Genoma Project started in May 2000, has a budget of approximately
U.S.$3.5 million and will take place over a period of approximately five years.
We have committed approximately 20% of that amount for the project. The
consortium will own the results of the project, and we are entitled to full
access to the technology resulting from the project.

D.       Trend Information

     The trends which influence our sales and production and inventory levels
are primarily: the patterns and cycles of pulp purchases by paper producers,
pulp and paper prices, the level of pulp inventory in the hands of pulp
producers in the global market, global economic conditions and the effect of
currency fluctuations.

     We continue to pursue growth opportunities to create value for our
shareholders through business expansion, strong operational performance and
profitability and/or technological and product improvements, always in the
context of a long-term strategic focus.


                                       57
<PAGE>


ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.       Directors and Senior Management

     We are managed by our Conselho de Administracao, or board of directors,
composed of at least three and at most ten members, and our Diretoria, or board
of executive officers, composed of at least three and at most ten members.

     Pursuant to the recent amendments to the Brazilian corporate law,
shareholders that together hold preferred shares representing at least 10% of
our total share capital are entitled to appoint one member of our board of
directors. Until 2005, the board members that may be elected by holders of
preferred shares shall be chosen from a list of three names drawn up by our
controlling shareholder. The holders of our preferred shares have not yet
elected any member of our board of directors.

     Set forth below are the name, age and position of each member of our board
of directors elected at our shareholders' general meeting on April 27, 2001:

Name                                        Age          Position
----                                        ---          --------

Jose Roberto Ermirio de Moraes(1)........    44          Chairman
Jose Ermirio de Moraes Neto(1)...........    49          Vice-Chairman
Antonio Ermirio de Moraes(3).............    73          Member
Clovis Ermirio de Moraes Scripilliti(2) .    43          Member
Ermirio Pereira de Moraes(3).............    69          Member
Raul Calfat..............................    49          Member

(1) Jose Roberto Ermirio de Moraes and Jose Ermirio de Moraes Neto are sons of
Jose Ermirio de Moraes Filho, who passed away in 2001.
(2) Clovis Ermirio de Moraes Scripilliti is the son of Clovis Scripilliti, who
passed away in 2000. He is also the cousin of Jose Roberto Ermirio de Moraes and
Jose Ermirio de Moraes Neto.
(3) Antonio Ermirio de Moraes and Ermirio Pereira de Moraes are the sons of
Senator Jose Ermirio de Moraes.

Executive Officers

     Our executive officers are responsible for our day-to-day management. The
executive officers have individual responsibilities established by our by-laws
and by the board of directors and are independent from the Ermirio de Moraes
family, our ultimate controlling shareholders. The executive officers are
elected by the board of directors for one-year terms, although any executive
officer may be removed by the board of directors before the expiration of his
term. The current term of all our executive officers ends on April 25, 2003.

     Set forth below are the name, age and position of each of our executive
officers elected on April 25, 2002:

<TABLE>
<CAPTION>

Name                                         Age                            Position
----                                         ---                            --------
<S>                                          <C>    <C>

Raul Calfat...............................    49     President & Chief Executive Officer
Francisco Fernandes Campos Valerio........    54     Technical & Industrial Officer
Luiz Carlos Ganzerli......................    54     Human Resource & Organizational Development Officer
Sergio Marnio Gandra Vaz..................    58     Business Officer
Valdir Roque..............................    51     Chief Financial Officer & Investor Relations Officer
Fabio Faria...............................    44     Director of Information Technology
</TABLE>

Biographical Information

Jose Roberto Ermirio de Moraes. Mr. Jose Roberto Ermirio de Moraes has been the
chairman of our board of directors since 1992 and was our president from 1992 to
April 26, 2002. He has worked in the Votorantim group for 17 years and has
served as president of Celpav and Votocel and as an executive officer of Cia. de
Papel e Papelao Pedras Brancas. He has a B.A. in Metallurgy Engineering from the
Armando Alvares Penteado Foundation College in Sao Paulo, Brazil.

                                       58
<PAGE>

Jose Ermirio de Moraes Neto. Mr. Moraes Neto has served as a member of our board
of directors since 1992 and has been the President of S.A. Industrias
Votorantim, or SAIV since 1993. He served as an executive officer of SAIV from
1976 to 1993 and Cimento Portland from 1978 to 1993. Mr. Moraes Neto has been an
executive officer at Centro das Industrias do Estado de Sao Paulo--CIESP or the
State of Sao Paulo Industry Center, since 1986 and the vice president of the
Sindicato Nacional da Industria do Cimento or the National Cement Industry
Union, at SAIV and of the Associacao Brasileira de Cimento Portland or the
Portland Cement Brazilian Association, since 1988. He holds a B.A. in Business
Administration from the Getulio Vargas Foundation in Sao Paulo, Brazil.

Antonio Ermirio de Moraes. Mr. Antonio Ermirio de Moraes has served as a member
of our board of directors since 1992 and has been the vice chairman of SAIV's
board of directors since 1995. He previously served as director-superintendent
of SAIV for 21 years. He has also been the president of CBA since 1974. Mr.
Antonio Ermirio de Moraes is an officer of the Associacao Brasileira de Aluminio
or the Brazilian Aluminum Association, the Instituto de Chumbo e Zinco or the
Lead and Zinc Institute, and vice president of CESP, Eletropaulo, CPFL and
Comgas, companies in the energy sector in Brazil. He holds a B.A. in Metallurgy
Engineering from the Colorado School of Mines in the United States.

Clovis Ermirio de Moraes Scripilliti. Mr. Scripilliti has served as a member of
our board of directors since 2000. He is also vice president of Votorantim
Cimentos. He has an uncompleted degree in Metallurgy Engineering at Mackenzie
University in Sao Paulo, Brazil.

Ermirio Pereira de Moraes. Mr. Pereira de Moraes has served as a member of our
board of directors since 1992. He also serves as a member of the board of
directors of Cia. Cimento Portland. He was a member of the board of directors of
Cia. Nitro Quimica Brasileira until 2000. He has also been the president of
Nitro Quimica since 1974. He holds a B.A. in Petroleum Production from the
University of Tulsa, Oklahoma in the United States.

Raul Calfat. Mr. Calfat has served as a member of our board of directors since
1992 and is our president and chief executive officer. He began his career at
Papel Simao in 1973, where he held various positions. He became the commercial
director in 1982 and in 1987 was elected president of Papel Simao. Mr. Calfat is
also the vice president of the writing and printing paper division of the
Associacao Nacional dos Fabricantes de Papel e Celulose, the Brazilian
association of pulp and paper producers. He holds a B.A. in Business
Administration from the Getulio Vargas Foundation in Sao Paulo, Brazil and has
completed a CEO's specialization course at IMD in Lausanne, Switzerland.

Francisco Fernandes Campos Valerio. Mr. Valerio joined us in January 1998. He
previously worked in senior positions at Bahia Sul, Aracruz, Suzano, Braskraft
Florestal e Industrial and Olinkraft Celulose e Papel. He holds a B.A. in
Mechanical Engineering from the Universidade Federal de Santa Catarina, Brazil.

Luiz Carlos Ganzerli. Mr. Ganzerli was first elected an executive officer in
February 2000. He previously held positions in the human resources and
organizational development areas at Roche Quimicos e Farmaceuticos in 1999 and
2000, Alpargatas Santista Textil S.A. between 1994 and 1999, and at ZF do Brazil
S.A. He holds a B.A. in Business Administration from Mogi das Cruzes University,
Brazil.

Sergio Marnio Gandra Vaz. Mr. Vaz has been our business director since 1992. He
previously held positions in the sales and marketing areas of Industria Gessy
Lever S.A. between 1970 and 1988. In 1988, he was the commercial director at
Industrias de Papel Simao S.A. and KSR Comercio e Industria de Papel S.A., both
bought by VCP in 1992. He holds a B.A. in Business Administration from FEA, the
Administration and Economics College of the University of Sao Paulo, Brazil, and
has taken specialization courses in Managing Marketing in Lausanne, Switzerland
and at Dynamic Global Marketplace at the Kellogg School/F.D.C. in Chicago,
Illinois in the United States.

Valdir Roque. Mr. Roque has been our chief financial officer and our Investor
Relations director since 1994. He also serves as chief financial officer of
Votocel, another company of the Votorantim group. He previously worked at
Monsanto do Brasil S.A. as Treasurer, and at General Electric and Ford. He has
completed post-graduate courses in Business Administration at the Getulio Vargas
Foundation in Sao Paulo, Brazil, holds a B.A. in Economics from the Catholic
Pontifice University in Sao Paulo, Brazil and has taken specialization courses
in financial management at the Stanford Business School, California in the
United States.

                                       59
<PAGE>

Fabio Faria. Mr. Faria has been the Director of Information Technology since
January 2002. Prior to that, he was the regional information technology director
of Basf S.A. from October 1998 to December 2001, and an administrative director
of Basf S.A. from February 1997 to October 1998. He was also the accounts
manager of EDS from December 1995 to February 1997. He has an international
executive MBA from the University of Sao Paulo.


B.       Compensation

     According to our by-laws, our directors do not receive any compensation. As
of the year ended December 31, 2001, the aggregate compensation, including cash
and benefits-in-kind, paid to our executive officers (a total of five persons at
the time) was approximately R$3.8 million (U.S.$1.6 million).

C.       Board Practices

     Our board of directors generally meets nine times a year and when called by
the chairman or by the majority of the members of the board of directors. Our
board of directors met six times during 2001. Our board of directors is
responsible for, among other things, establishing our general business policies
and for electing our executive officers and supervising their management. The
board of executive officers meets periodically to review production, commercial
and financial operations.

     According to our by-laws, the members of the board of directors are elected
by the holders of our common shares at the general meeting of shareholders.
Members of the board of directors serve two-year terms. The terms of the current
members expired in April 2001, and they were re-elected up to 2003 at the last
annual shareholders' meeting with the exception of Mr. Jose Ermirio de Moraes
Filho, who passed away in 2001.

Defined Contribution Pension Plan

     In March 2000, we began to participate in the Votorantim group's defined
contribution plan, which was made available to each employee who chose to
participate in the plan by April 30, 2000. Under the plan, we match our
employees' contributions to the plan based on their level of compensation. For
employees with lower compensation than the threshold, we match 100% of their
contribution up to 1.5% of the employee's compensation. For employees with
higher compensation than the threshold, we match 100% of their contribution up
to 6% of the employee's compensation. We may also make additional contributions
to the pension plan at our discretion. Under the plan, our contributions will
vest in varying percentages depending on the employee's years of service and
will fully vest, for an employee with at least one year of service, upon the
employee's retirement, death or disability. At December 31, 2001, 3,190
employees have elected to take part in the plan and we have contributed
approximately U.S.$1 million to the pension plan in 2001.

Profit Sharing Plan

     Pursuant to Brazilian federal law, companies operating in Brazil are
required to share profits with employees, excluding management, beginning from
fiscal year 1996. In 1996, we instituted a profit sharing plan for our employees
in addition to providing health and life insurance, transportation, meals and
training. Pursuant to the program, each employee's share of profits is linked to
our operational and financial results. Employees are eligible to receive payment
of up to one month's salary payable in February of each year. Payment is granted
if defined goals set by management are achieved by the process or industrial
unit in which the employee works and based on the individual performance of the
employee. Several unions that represent our employees have agreed to this profit
sharing plan.

Audit Committee

     On April 27, 2001, our shareholders approved the creation of a Conselho
Fiscal. Under the Brazilian corporate law, the Conselho Fiscal, or audit
committee, is a corporate body independent of management and a company's
external auditors. A Conselho Fiscal is not equivalent to, or comparable with, a
U.S. audit committee. Our audit committee is composed of three members, as
required by the Brazilian corporate law, and three alternates. Two members of
the audit committee represent the controlling capital, and one represents the
minority interests. The


                                       60
<PAGE>

members of the audit committee are elected, for one-year terms, but can be
reelected. The primary responsibility of the audit committee is to review
management's activities and the financial statements, and to report its findings
to the shareholders. Under the Brazilian corporate law, the audit committee may
not contain members that (i) are on the board of directors, (ii) are on the
board of executive officers, (iii) are employed by us or a controlled company or
a company of the Votorantim group, and (iv) are spouses or relatives of our
management, up to the third degree. In addition, the Brazilian corporate law
requires the audit committee members receive as remuneration at least 10% of the
average amount paid to each executive officer. The Brazilian corporate law
requires an audit committee to have a minimum of three and a maximum of five
members.



     As of April 24, 2002, our audit committee was composed of the following
members, whose term will expire on the annual shareholders' meeting in 2003:

                                           Age Length of Term Year First Elected
                                           --- -------------- ------------------
Ariovaldo dos Santos...................     52    one year          2001
Joao Carlos Hopp.......................     73    one year          2001
Roberto Martins Ribeiro de Jesus.......     41    one year          2001

D.   Employees

     As of December 31, 2001, we employed 3,767 persons. We use subcontractors
for many of our forestry operations and for substantially all of the
transportation of wood, pulp and other raw materials. These subcontractors
employed 3,492 persons as of December 31, 2001. Approximately 77% of the workers
in our forests are employed by third parties, predominantly in areas such as
maintenance and security. See "Item 4B -- Information on VCP -- Business
Overview -- Raw Materials -- Wood" and "Item 4B -- Information on VCP --
Business Overview -- Transportation." We are in compliance with all local, state
and federal worker health and safety regulations.

     Several unions represent our employees and we consider the unions to be
well organized. Collective bargaining agreements relating to forest workers were
renewed in 2001 and expire in October 2002. Collective bargaining agreements
relating to other employees which expired in September 2001 were renewed for
another year, with the employees receiving a 7.5% pay increase. We are currently
engaged in negotiations to renew the agreements for another year. Since 1989, we
have experienced four labor strikes, all of which affected the pulp and paper
industry generally and lasted an average of three days. We believe we have good
relationships with our employees.

     In March 2000, we began to participate in a Votorantim group pension plan,
which was made available to all of our employees. For more detailed information,
see "Item 6C -- Board of Directors -- Defined Contribution Pension Plan" above.

E.       Share Ownership

     As of December 31, 2001, the members of our board of directors and our
officers, on an individual basis and as a group, directly own less than 1% of
our preferred shares and none of our common shares. For information on the
beneficial ownership by the Ermirio de Moraes family, see "Item 7A -- Major
Shareholders." The following table lists the amount of shares held directly by
each individual member of our board of directors or executive officer and their
representative percentage relative to the total outstanding shares:

                                       61
<PAGE>
<TABLE>
<CAPTION>
<S>                                                <C>               <C>            <C>              <C>
                                                            Common                            Preferred
                                              ---------------------------------   --------------------------------
                                                                   (%) of the                         (%) of the
                                                                      Total            Number            Total
                                                                   Outstanding           of           Outstanding
                                              Number of Shares       Shares            Shares           Shares
                                              ----------------       ------            ------           ------
Board of Directors
Jose Roberto Ermirio de Moraes..............        --                --                   2              --
Antonio Ermirio de Moraes...................        --                --                   2              --
Clovis Ermirio de Moraes Scripilliti........        --                --                   2              --
Ermirio Pereira de Moraes...................        --                --              32,700,000          0.2
Jose Ermirio de Moraes Neto.................        --                --                   2              --
Raul Calfat.................................        --                --                   2              --

Executive Officers
Raul Calfat.................................        --                --                   2              --
Francisco Fernandes Campos Valerio..........        --                --                600,000           --
Luiz Carlos Ganzerli........................        --                --                   --             --
Sergio Marnio Gandra Vaz....................        --                --                  3,763           --
Valdir Roque................................        --                --                  3,000           --
Fabio Faria.................................        --                --                   --             --

Total.......................................    21,140,490,321     100.0%            16,946,809,232     100.0%

</TABLE>


ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
------------------------------------------------------------------------------

A.       Major Shareholders

     The following table sets forth the principal holders of common and
preferred shares and their respective shareholdings as of March 31, 2002:

<TABLE>
<CAPTION>

<S>                                                <C>        <C>     <C>        <C>       <C>         <C>
                                                         Common             Preferred              Total
                                                   ------------------  ------------------   -----------------
Shareholders                                       Shares      (%)     Shares       (%)     Shares       (%)
------------                                       ------      ---     ------       ---     ------       ---
                                                            (in million of shares, except percentages)
Ermirio de Moraes family:

   Votocel Filmes Flexiveis Ltda(1) (2) ........   18,805      88.95%     617       3.59%   19,422     50.68%

   Cimento Rio Branco S.A.(1) ..................       --         --       85       0.50        85      0.22

   Nova HPI Participacoes Ltda.(1)  ............    2,336      11.05      148       0.86     2,484      6.48

     Total Votorantim group ....................   21,141     100.00%      85       4.95%   21,991     57.38%

BNDES Participacoes S.A ........................       --         --    5,797      33.74     5,797     15.12

Treasury Stock .................................       --         --      164       0.95       164      0.43
Public (Free Float) ............................       --         --   10,371      60.36    10,371     27.17
                                                   ------     ------   ------     ------    ------    ------
Total ..........................................   21,141     100.00%  17,182     100.00%   38,323    100.00%
                                                   ======     ======   ======     ======    ======    ======
----------------------

(1)      Companies of the Votorantim group, controlled by the Ermirio de Moraes family.
(2)      Votocel transferred approximately 85.5 million preferred shares to Cimento Rio Branco S.A. in March 2000.
</TABLE>

     The ultimate beneficial owners, in each case, of more than 5% of either our
common shares or our preferred shares through intermediate holdings companies
are the family of Jose Ermirio de Moraes Filho, Antonio Ermirio de Moraes,
Ermirio Pereira de Moraes and Maria Helena de Moraes Scripilliti, or the Ermirio
de Moraes family, who, in the aggregate, beneficially own 100% of the voting
common shares and 5.27% of the preferred shares.

     Votocel Filmes Flexiveis Ltda.

     Votocel Filmes Flexiveis Ltda. is a manufacturer and supplier of packaging
film and is part of the Votorantim group. Votocel is ultimately controlled by
Jose Ermirio de Moraes Neto, Jose Roberto Ermirio de Moraes, Antonio Ermirio de
Moraes, Ermirio Pereira de Moraes and Maria Helena de Moraes Scripilliti, the
sons and daughter of the founder of the Votorantim group.

                                       62
<PAGE>

B.       Related Party Transactions

     We have engaged in a number of transactions with related parties. See note
13 to our consolidated financial statements.

Distributions and Sales Outside of Brazil

     In 2001, we sold approximately 85% of our exports through Votorantrade
N.V., a member of the Votorantim group engaged in the sale and distribution of
certain of the Votorantim group's products, with offices in various locations
throughout the world. In 2002, however, we expect to conduct our distribution
exclusively through Newark, our indirect wholly owned subsidiary.

Banco Votorantim S.A.

     We have entered into a number of financial transactions with or through
Banco Votorantim S.A., a financial institution controlled by the Votorantim
group. At December 31, 2001 we had approximately U.S.$406 million (of a total of
U.S.$536 million) in deposits and short-term investments with Banco Votorantim
S.A. and U.S.$41 million in unrealized gains from foreign currency and interest
rate swap contracts with Banco Votorantim S.A. See "Item 7B--Major Shareholders
and Related Party Transactions--Related Party Transactions."

BNDESPAR

     A shareholder of our preferred shares, BNDES Participacoes S.A., or
BNDESPAR, is a wholly owned subsidiary of BNDES, the Brazilian economic
development bank owned by the Brazilian federal government. We have entered into
a number of financing transactions with BNDES. At December 31, 2001, we had an
aggregate of U.S.$94 million in outstanding loans denominated in reais. The
BNDES loans are secured by liens on land, equipment and property (including the
Jacarei mill), and by personal guarantees of an owner of Hejoassu, the ultimate
parent of the Votorantim group. Our loans with BNDES bear interest at 3% per
annum on the principal amount and are indexed using either the Taxa de Juros de
Longo Prazo, or TJLP, a nominal long-term interest rate that includes an
inflation factor, or the weighted average of the funding costs incurred by BNDES
abroad. In 2001, the TJLP average was 10%. See notes 10 and 13 to our
consolidated financial statements.

Guarantees

     We do not believe that there is doubt as to the viability of the
creditworthiness of the other companies of the Votorantim group, for which we
guarantee certain loans. In addition, given our ability to obtain short-term
financing, we do not believe that there is substantial risk of illiquidity even
if we are called upon to make payments under our guarantees, individually or in
the aggregate. See "Item 5B -- Operating and Financial Review and Prospects --
Liquidity and Capital Resources -- Commitments and Contingencies" for a summary
of the guarantees we provided in favor of other companies of the Votorantim
group.

     At December 31, 2001, we guaranteed U.S.$215 million of debt of other
members of the Votorantim group (not including U.S.$200 million in debt of an
affiliate which was on-lent to us), and other members of the Votorantim group
guaranteed U.S.$200 million of our debt.

     We and S.A. Industrias Votorantim, a member of the Votorantim group, are
equal co-owners of a finance subsidiary, Voto-Votorantim, that has total debt of
U.S.$400 million. We have guaranteed all of Voto-Votorantim's debt, but we
received U.S.$200 million of the proceeds. If Voto-Votorantim defaulted on its
obligations, we would be required to repay the U.S.$400 million. This
arrangement accounts for U.S$200 million of the Votorantim group debt that we
guarantee, and all of the U.S.$200 million of our debt guaranteed by other
members of the group. The balance of the affiliated party debt we guarantee
consists of U.S.$15 million of equipment financing obtained by Votocel Filmes
Flexiveis Ltda., another member of the Votorantim group. For additional
information on our commitments and contingencies, see note 11 to our
consolidated financial statements.


                                       63
<PAGE>


Leases of Forest Land

     We lease approximately 37,000 hectares of forest land, or approximately 23%
of the land devoted to our forestry operations, from other companies of the
Votorantim group. The leases, most of which commenced in 1991, are typically for
a term of 21 years, which covers approximately three harvest cycles. The lease
payments are equivalent to 30% of the market value of the wood produced on the
property and are payable after each harvest. We guarantee a minimum harvest
payment to the lessor. Payments under the leases were less than U.S.$1 million
in each of 2001, 2000 and 1999. We believe that the leases with companies of the
Votorantim group are as favorable to us as similar leases with non-affiliates
would have been.

C.   Interests of Experts and Counsel

     Not applicable.

ITEM 8.  FINANCIAL INFORMATION

A.   Consolidated Statements and Other Financial Information

     See "Item 3A -- Key Information -- Selected Financial Data" and "Item 18 --
Financial Statements."

Legal Matters

     We are party to administrative proceedings and lawsuits that are incidental
to the normal course of our business. These include general civil, tax and
employee litigation and administrative proceedings. At December 31, 2001, the
accruals for legal proceedings were approximately U.S.$12 million, of which
approximately U.S.$7 million relate to tax disputes and approximately U.S.$5
million relate to civil and labor proceedings. We believe that our provisions
for legal proceedings are sufficient to meet probable and reasonably estimable
losses in the event of unfavorable court decisions and that the ultimate outcome
of these matters will not have a material effect on our financial condition or
results of operations. We cannot estimate the amount of all potential costs that
we may incur or penalties that may be imposed on us other than those amounts for
which we have provisions.

     On April 1, 2002, IHU - Instituto Tecnologico de Defesa e Preservacao do
Meio Ambiente, a non-governmental organization, filed a lawsuit seeking to
suspend the licensing process of our co-generation unit at the Jacarei mill,
based on a legal prohibition as to the installation of thermal electric plants
in that particular location. The plaintiff obtained a preliminary injunction to
stop the licensing process. On May 13, 2002, however, we obtained a favorable
preliminary judgment by the State Justice Court of Sao Paulo canceling this
injunction. In addition, the public attorney's office (Ministerio Publico) of
the State of Sao Paulo, in response to the IHU lawsuit, initiated an
investigation procedure in order to determine the legality of the installation
of our co-generation unit. Although we cannot predict the outcome of the IHU
lawsuit and the investigation from the Ministerio Publico, we do not believe
that either of them will result in any finding that the installation of our
co-generation unit is illegal.

     On May 22, 2002, we (along with many other Brazilian companies) received a
notice from the Central Bank requesting that we provide information regarding
our remittances abroad to certain exporters of equipment imported by us. If the
information is not produced within 30 days, we may be subject to a fine. We
believe we have the information requested by the Central Bank and we will be
responding to the Central Bank within the 30-day period.


     We have instituted a number of legal proceedings in which we are seeking a
refund or contesting the imposition of certain taxes. In addition, we are a
party to certain lawsuits and administrative proceedings before various courts
and governmental agencies with respect to certain tax liabilities arising in the
ordinary course of our business. We cannot assure you that we will be successful
in obtaining the right to these tax credits or in contesting the imposition of
these taxes. For more information on our lawsuits, see note 11 to our
consolidated financial statements.


                                       64
<PAGE>


     At December 31, 2001, we were defendants in approximately 335 labor
lawsuits filed by our former employees and 629 labor lawsuits filed by former
employees of our subcontractors. The aggregate amount of such claims was
approximately U.S.$12 million. At December 31, 2001, we were defendants in 85
civil proceedings with claims in an aggregate amount of approximately U.S.$12
million. We believe that we will prevail in the majority of these lawsuits, and
do not consider that these proceedings if decided against us, individually or in
the aggregate, will have a material adverse effect on us.

Dividend Policy and Dividends

     General

     In order to determine the amounts available for dividend distribution, we
are subject to the following procedures, established by the Brazilian corporate
law. We must allocate 5% of our annual net income, determined in accordance with
the requirements of the Brazilian corporate law, to a legal reserve until the
legal reserve equals 20% of our share capital as of the end of the most recent
fiscal year. However, we are not required to make any allocations to our legal
reserve in respect of any fiscal year in which such reserve, when added to our
other capital reserves, exceeds 30% of our capital. The legal reserve may be
used only to offset any accumulated deficit or to increase our share capital and
may not be distributed. At December 31, 2001, the legal reserve outstanding
balance was R$50 million, equivalent to U.S.$22 million at the December 31, 2001
exchange rate.

     According to the Brazilian corporate law, after allocation of any amounts
to the legal reserve, we may, subject to shareholders' approval, make
allocations from the remaining balance to a contingency reserve against future
losses.

     At the end of each fiscal year, all shareholders are entitled to receive a
mandatory dividend, also known as the mandatory distribution. For the mandatory
distribution, we must distribute at least 25% of the net income after taxes and
after deducting the accumulated losses, and as reduced or increased, as the case
may be, by the following amounts:

o    the amount allocated to the legal reserve; and

o    the amount allocated to the contingency reserve and any amount written off
     in respect of the contingency reserve accumulated in previous fiscal years.

     As of March 1, 2002, under Law 10,313 of October 31, 2001, the amount by
which the mandatory distribution exceeds the "realized" portion of net income
for any particular year may be allocated to the unrealized income reserve and
the mandatory distribution may be limited to the "realized" portion of net
income. The "realized" portion of net income is the amount by which "net income"
exceeds the sum of (1) our net positive results, if any, from the equity method
of accounting for earnings and losses of our subsidiaries and certain
affiliates, and (2) the profits, gains or return obtained on transactions
maturing after the end of the following fiscal year. As amounts allocated to the
unrealized income reserve are realized in subsequent years, such amounts must be
added to the dividend payment relating to the year of realization.

     The amounts available for distribution are determined on the basis of
financial statements prepared in accordance with the requirements of the
Brazilian corporate law. In addition, amounts arising from tax incentive
benefits or rebates are appropriated to a separate capital reserve in accordance
with the Brazilian corporate law. This investment incentive reserve is not
normally available for distribution, although it can be used to absorb losses
under certain circumstances, or be capitalized. Amounts appropriated to this
reserve are not available for distribution as dividends.

     Accounting principles set forth under the Brazilian corporate law differ
significantly from U.S. GAAP. Because our financial statements are in accordance
with U.S. GAAP, and dividends are determined based on accounting principles set
forth under the Brazilian corporate law, our U.S. GAAP financial statements have
not been the basis for determining dividend distributions in the past and will
not be used to determine dividend distributions in the future. The principal
differences between accounting principles set forth under the Brazilian
corporate law and those under U.S. GAAP with respect to our consolidated
financial statements are summarized below.



                                       65
<PAGE>

     Under accounting principles set forth under the Brazilian corporate law:

o    we defer certain start-up costs of new facilities to be amortized against
     operating profit over the subsequent ten years. These costs are expensed
     when incurred under U.S. GAAP;

o    due to the Brazilian corporate law requirement to index property, plant and
     equipment for inflation through 1995 and differences between historical
     depreciation rates, the net book values for the Brazilian corporate law and
     U.S. GAAP are different. This results in differences in depreciation
     expense. At present, our depreciation policy, consistent with U.S. GAAP, is
     to depreciate our machinery, equipment and installations over 25 years.
     Under U.S. GAAP, up to 1997 our depreciation was calculated on a consistent
     basis based on the underlying historical amounts in U.S. dollars. After
     1997 we changed our functional currency to reais and converted the prior
     balance of property, plant and equipment expressed in U.S. dollars into
     reais using the exchange rate in force at December 31, 1997. The new basis
     for property, plant and equipment in reais has been depreciated on a
     consistent basis;

o    we determined goodwill on the purchase of our interests in Celpav by
     comparing the purchase consideration with the underlying book value of the
     assets. Under U.S. GAAP, the interest purchased from our controlling
     shareholders was recorded on a carry-over basis, and goodwill was
     determined based on the interest purchased from third parties by comparing
     the fair value of stock issued with the fair value of the assets acquired
     and liabilities assumed;

o    interest was only capitalized on construction in process for certain
     periods after 1997 and in which financing had been obtained. Under U.S.
     GAAP, interest has been capitalized for all periods in which construction
     was in process; and

o    amortization of goodwill related to the purchase of the participation in
     Aracruz, which is amortized under Brazilian GAAP and is not amortized but
     reviewed annually for impairment under U.S. GAAP.

     The Brazilian corporate law permits a company to pay interim dividends out
of preexisting and accumulated profits for the preceding fiscal year or
semester, based on financial statements approved by its shareholders. The
dividends paid in 2000 relate to accumulated reserves up to December 31, 1999.

     Unappropriated retained earnings, as reported in our U.S. GAAP financial
statements, represent retained earnings after appropriations specified in the
Brazilian corporate law as described in the fourth paragraph under "--General."
Unappropriated retained earnings in U.S. GAAP have no relevant impact on U.S.
investors since the distributable earnings are those recorded in our books in
accordance with the Brazilian corporate law. The appropriated reserve balances
in the U.S. GAAP financial statements at the balance sheet dates reflect the
underlying Brazilian statutory accounts translated at historical exchange rates.
The unappropriated retained earnings balance in the U.S. GAAP financial
statements does not reflect amounts available for distribution. At December 31,
2001, in our legal books prepared in accordance with the Brazilian corporate law
accounting principles, we had unappropriated retained earnings (sum of the
accounts Reserve for Accumulated Financial Results (Reserva de Resultados
Acumulados) and Reserve for Retained Earnings (Reserva de Retencao de Lucros))
of R$777 million, equivalent to U.S.$335 million at the exchange rate at
December 31, 2001. We had unappropriated retained earnings of U.S.$259 million
at December 31, 2000 and U.S.$130 million at December 31, 1999 at the exchange
rate at the referred dates. Unappropriated retained earnings as reported in
accordance with accounting principles set forth under the Brazilian corporate
law may be used to make additional discretionary dividend payments, but we
cannot assure you that we will make dividend payments out of these
unappropriated retained earnings in the foreseeable future. No dividend
distribution can be made if an accumulated deficit is reported in accordance
with the Brazilian corporate law accounting principles, unless the negative
balance is reversed by releasing other reserves.

     The devaluation of the real impacts the amount available for distribution
when measured in U.S. dollars. Amounts reported as available for distribution in
our statutory accounting records prepared under accounting principles set forth
under the Brazilian corporate law will decrease or increase when measured in
U.S. dollars as the real depreciates or appreciates, respectively, against the
U.S. dollar. In addition, the devaluation of the real creates foreign exchange
gains and losses that are included in the results of operations determined under
accounting principles set forth under the Brazilian corporate law and which
affect the amount of unappropriated earnings available for distribution. At
December 31, 2001, on a consolidated basis, we and our subsidiaries recorded
under accounting principles set forth under the Brazilian corporate law foreign
exchange losses (including gains from


                                       66
<PAGE>

foreign currency swap contracts) of R$12 million (equivalent to U.S.$5 million
at the average exchange rate for 2001).

     Mandatory Distribution

     Under our by-laws, at least 25% of our adjusted net income for the
preceding fiscal year must be distributed as a mandatory annual dividend. The
dividend must be distributed within 60 days of the annual shareholders' meeting
at which the distribution is approved, unless a shareholders' resolution
determines another date for distribution, which may not be later than the end of
the fiscal year in which such dividend was declared. Pursuant to our by-laws,
holders of preferred shares are not entitled to a fixed or minimum dividend, but
have the right to receive dividend payments per share that are 10% greater than
those paid to holders of common shares. The mandatory distribution is based on a
percentage of adjusted net income, which may not be lower than 25%, rather than
a fixed monetary amount per share. The Brazilian corporate law permits, however,
a public company to suspend the mandatory distribution of dividends if the board
of directors and the Conselho Fiscal report to the shareholders' meeting that
the distribution would be incompatible with the financial condition of the
company, subject to approval by the shareholders. The board of directors must
file a justification for a dividend suspension with the CVM within five days of
the date of the shareholders' meeting. Profits not distributed by virtue of the
suspension mentioned above must be attributed to a special reserve and, if not
absorbed by subsequent losses, must be paid as dividends as soon as the
financial situation of the company permits such payments. The rules regarding
suspension apply to the holders of preferred shares and, consequently, to the
holders of ADSs.

     Payment of Dividends

     We are required by the Brazilian corporate law to hold an annual
shareholders' meeting by April 30 of each year at which, among other things, the
shareholders have to decide on the payment of our annual dividend. Under the
Brazilian corporate law, dividends are required to be paid within 60 days
following the date the dividend was declared, unless a shareholders' resolution
sets forth another date of payment, which must occur prior to the end of the
fiscal year in which such dividend was declared. A shareholder has a three-year
period from the dividend payment date to claim dividends (or interest payments
as described under "--Additional Payments on Shareholders' Equity") in respect
of its shares, after which we will have no liability for such payments.

     We may prepare financial statements semiannually or for shorter periods.
Our board of directors may declare a distribution of dividends based on the
profits reported in such financial statements. The board of directors may also
declare a distribution of interim dividends based on profits previously
accumulated which are reported in such financial statements or in the last
annual financial statement approved by resolution taken at a shareholders'
meeting.

     In general, shareholders who are not residents of Brazil must register
their equity investment with the Central Bank to have dividends, sales proceeds
or other amounts with respect to their shares eligible to be remitted outside of
Brazil. The preferred shares underlying the ADSs are held in Brazil by Banco
Itau S.A., also known as the custodian, as agent for the depositary, that is the
registered owner on the records of the registrar for our shares. The current
registrar is Banco Itau S.A. The depositary registers the preferred shares
underlying the ADSs with the Central Bank and, therefore, is able to have
dividends, sales proceeds or other amounts with respect to the preferred shares
remitted outside Brazil.

     Payments of cash dividends and distributions, if any, are made in Brazilian
reais to the custodian on behalf of the depositary, which then converts such
proceeds into U.S. dollars and causes such U.S. dollars to be delivered to the
depositary for distribution to holders of ADSs. In the event that the custodian
is unable to convert immediately the Brazilian currency received as dividends
into U.S. dollars, the amount of U.S. dollars payable to holders of ADSs may be
adversely affected by devaluations of the Brazilian currency that occur before
the dividends are converted. See "Item 10B--Memorandum and Articles of
Association--Preferred Shares and Common Shares." Under the current Brazilian
corporate law, dividends paid to persons who are not Brazilian residents,
including holders of ADSs, will not be subject to Brazilian withholding tax,
except for dividends declared based on profits generated prior to December 31,
1995, which will be subject to Brazilian withholding income tax at varying tax
rates. See "Item 10E -- Additional Information -- Taxation -- Certain Brazilian
Tax Consequences."


                                       67
<PAGE>


     Holders of ADSs have the benefit of the electronic registration obtained
from the Central Bank, which permits the depositary and the Custodian to convert
dividends and other distributions or sales proceeds with respect to the
preferred shares represented by ADSs into foreign currency and remits the
proceeds outside of Brazil. In the event the holder exchanges the ADSs for
preferred shares, the holder will be entitled to continue to rely on the
depositary's certificate of registration for five business days after the
exchange. Thereafter, in order to convert foreign currency and remit outside
Brazil the sales proceeds or distributions with respect to the preferred shares,
the holder must obtain a new certificate of registration in its own name that
will permit the conversion and remittance of such payments through the
commercial rate exchange market. See "Item 10B -- Additional Information --
Memorandum and Articles of Association -- Regulation of Foreign Investment."


     If the holder is not a duly qualified investor and does not obtain an
electronic registration, a special authorization from the Central Bank must be
obtained in order to remit from Brazil any payments with respect to the
preferred shares through the commercial rate exchange market. Without this
special authorization, the holder may currently remit payments with respect to
the preferred shares through the floating rate exchange market, although no
assurance can be given that the floating rate exchange market will be accessible
for these purposes in the future.

     In addition, a holder who is not a duly qualified investor and who has not
obtained an electronic registration or a special authorization from the Central
Bank may remit these payments by international transfer of Brazilian currency
pursuant to Central Bank Resolution No. 1,946, dated July 29, 1992, and Central
Bank Circular No. 2677, dated April 10, 1996. The subsequent conversion of such
Brazilian currency into U.S. dollars may be made by international financial
institutions under a mechanism currently available in the floating rate exchange
market. However, we cannot assure you that this mechanism will exist or be
available at the time payments with respect to the preferred shares are made.

     Under current Brazilian legislation, the federal government may impose
temporary restrictions of foreign capital abroad in the event of a serious
imbalance or an anticipated serious imbalance of Brazil's balance of payments.


     Additional Payments on Shareholders' Equity


     Law No. 9,249, dated December 26, 1995, as amended, provides for
distribution to shareholders of interest attributed to shareholders' equity
instead of dividends, which payments may be treated by a company as an expense
for income tax and social contribution purposes. Such interest is limited to the
daily pro rata variation of the TJLP, a nominal long-term interest rate
determined by the federal government that includes an inflation factor, and
cannot exceed the greater of:

o    50% of net income (after the deduction of the provisions for social
     contribution on net profits but before taking into account the provision
     for income tax and the interest attributable to shareholders' equity) for
     the period in respect of which the payment is made; or

o    50% of the sum of retained earnings and profit reserves as of the beginning
     of the year in respect of which such payment is made.


     Any payment of interest in respect of preferred shares to shareholders
(including the holders of the ADSs) is subject to Brazilian withholding tax at
the rate of 15%, or 25% in the case of a shareholder domiciled in a tax haven
(see "Item 10E -- Additional Information -- Taxation -- Certain Brazilian Tax
Consequences"), and such payments may be included, at their net value, as part
of any mandatory dividend. In case we distribute interest attributed to
shareholders' equity in any year, and that distribution is not accounted for as
part of mandatory distribution, Brazilian withholding tax would be borne by the
shareholders.


                                       68
<PAGE>


     Dividend Policy

     We intend to declare and pay dividends and/or interest on equity, as
required by the Brazilian corporate law and our by-laws. The declaration of
annual dividends, including dividends in excess of the mandatory distribution,
requires approval by the vote of a majority of the holders of our common stock
and will depend on many factors. These factors include our results of
operations, financial condition, cash requirements, future prospects and other
factors deemed relevant by our shareholders. Our shareholders have historically
acted on these matters at the recommendation of our board of directors. Within
the context of our tax planning, we may in the future determine that it is to
our benefit to distribute interest attributed to shareholders' equity.

         Dividends

         The following table sets forth the dividends paid to holders of our
capital stock since 1995. The amounts in the table below relate to cash
dividends declared, which differ from the dividends reported in U.S. dollars in
the statement of changes in shareholders' equity in our consolidated financial
statements due to translation effects recorded through to the date of dividend
payment.
<TABLE>
<CAPTION>

                                          Common Shares  Preferred Shares   Common Shares(1)   Preferred Shares(1)
                                          -------------  ----------------   ----------------   -------------------
First Payment Date               Fiscal Year  (in R$ per 1,000 shares)        (in U.S.$ per 1,000 shares)
------------------               -----------   ----------------------          -------------------------
<S>  <C> <C>                         <C>        <C>          <C>                 <C>               <C>
June 17, 1996 ...................    1995      R$0.1115     R$0.1115         U.S.$ 0.1113      U.S.$0.1113
June 30, 1997 ...................    1996        0.5219       0.5219               0.4846           0.4846
June 30, 1998 ...................    1997        0.2497       0.2747               0.2159           0.2375
June 30, 1999 ...................    1998        0.2599       0.2859               0.1469           0.1616
June 30, 2000 ...................    1999        1.0471       1.1518               0.5817           0.6399
June 26, 2001 ...................    2000        2.5941       2.8536               1.1211           1.2332
June 21, 2002(2) ................    2001        2.3068       2.5375               0.8103           0.8913
--------------
</TABLE>

(1)  Based on declared cash dividends translated to U.S. dollars at the exchange
     rate in effect on the first payment date and divided by the number of
     shares outstanding on the date declared.
(2)  The calculations were made using the June 21, 2002 exchange rate.


     The dividends we paid amounted to U.S.$37 million in 2001, U.S.$23 million
in 2000 and U.S.$6 million in 1999.

     At our annual shareholders' general meeting on April 24, 2002, our board of
directors approved the payment of dividends in the amount of approximately R$92
million (approximately U.S.$39.6 million), which represents approximately 25% of
adjusted net income in reais for the year 2001, in accordance with the Brazilian
corporate law. The preferred shares will have the right to a dividend per share
of 10% more than that paid to the common shares. In 2001, we paid U.S.$37
million in the form of dividends, which represented 25% of adjusted net income
in reais.

B.       Significant Changes

     On May 23, 2002, VCP Trading N.V., or VCP Trading, and VCP North America
Inc., or VCP North America, two wholly owned subsidiaries of Newark, entered
into a U.S.$380 million credit agreement with ABN Amro Bank N.V., as
administrative agent, The Bank of New York, as collateral agent, and a syndicate
of banks. For additional information, see "Item 5B--Operating and Financial
Review and Prospects--Liquidity and Capital Resources--Debt."

ITEM 9.  THE OFFER AND LISTING

A.   Offer and Listing Details

     Before the offering of 7,920,000 ADS, on April 13, 2000, or the ADS
Offering, there was no active public market for the ADSs. The ADSs are listed on
the New York Stock Exchange under the trading symbol "VCP." Our


                                       69
<PAGE>

preferred shares trade on the Sao Paulo Stock Exchange under the symbol "VCPA4"
(prior to December 3, 1999 we traded under the symbol "PSIM4"). At December 31,
2001, we had approximately 3,641 shareholders of record.

Market Price Information

     The table below sets forth, for the periods indicated, the reported high
and low closing sale prices in nominal reais for 1,000 preferred shares on the
Sao Paulo Stock Exchange. The table also sets forth prices per ADS assuming that
ADSs had been outstanding on such dates and translated into U.S. dollars at the
commercial market rate for the sale of U.S. dollars at the last day of each
respective quarter. See "Item 3A -- Key Information -- Selected Financial Data
-- Exchange Rates" for information with respect to exchange rates applicable
during the periods set forth below:


<TABLE>
<CAPTION>




                                                                    Reais per 1,000               U.S. Dollars
                                                                   Preferred Shares                  per ADS
                                                                  ------------------           ------------------
                                                                  High           Low           High           Low
                                                                  ----           ---           ----           ---
1997:
<S>                                                             <C>            <C>              <C>            <C>
             Annual.........................................   R$ 34.00       R$ 19.50      U.S.$ --       U.S.$ --

1998:
             Annual.........................................      25.00          10.50            --             --

1999:
             Annual.........................................      83.00          10.80            --             --

2000:
             First Quarter..................................      85.00          54.50            --             --
             Second Quarter.................................      67.88          50.50            18.38          14.00
             Third Quarter..................................      82.00          68.00            23.06          18.06
             Fourth Quarter.................................      73.30          50.53            19.81          13.00
             Annual.........................................      85.00          50.50            23.06          13.00
2001:
             First Quarter .................................      64.90          52.55            16.50          12.10
             Second Quarter.................................      76.50          51.00            15.88          11.80
             Third Quarter..................................      74.50          58.92            15.00          11.49
             Fourth Quarter.................................      84.00          67.00            17.74          12.23
             Annual.........................................      84.00          51.00            17.74          11.49

Share price for the most recent six months:
             January 2002...................................      84.50          76.30            17.70          15.90
             February 2002..................................      89.00          79.80            18.70          16.45
             March 2002.....................................      91.50          86.16            19.54          18.27
             April 2002.....................................      97.30          88.52            20.80          18.95
             May 2002.......................................     104.00          92.50            20.75          18.96
             June 2002......................................     110.00          93.00            20.86          16.20
             July 2002 (through July 10)....................     107.10         100.50            18.20          17.64

</TABLE>

     On July 10, 2002, the last reported closing sale price for the preferred
shares on the Sao Paulo Stock Exchange was R$100.50 per 1,000 preferred shares,
equivalent to U.S.$17.61 per ADS translated at the exchange rate of R$2.8541 per
U.S.$1.00, the commercial market rate on that date.

     On April 13, 2000, we issued preferred shares in the form of ADSs issued by
Citibank N.A., as depositary, and became a U.S. registered company listed on the
New York Stock Exchange. Our offering raised U.S.$118.8 million (before
underwriting discounts and commissions), we received U.S.$29.8 million (before
expenses) and the selling shareholders U.S.$85.4 million (before expenses). The
above table sets forth, for the periods indicated, the reported high and low
sales prices for our ADSs listed on the New York Stock Exchange, in U.S. dollars
and reais. On April 30, 2002, the CVM approved the replacement of our depositary
bank for The Bank of New York, and on May 17, 2002, the SEC declared effective
the Form F-6 filed in connection with the change of depositary.


                                       70
<PAGE>


B.       Plan of Distribution

         Not applicable.

C.       Markets

Trading on the Sao Paulo Stock Exchange

     Settlement of transactions conducted on the Sao Paulo Stock Exchange is
effected three business days after the trade date. Delivery of, and payment for,
shares are made through the facilities of separate clearing houses for each
exchange, which maintain accounts for member brokerage firms. The seller is
ordinarily required to deliver the shares to the clearing house on the third
business day following the trade date. The clearing house for the Sao Paulo
Stock Exchange is Companhia Brasileira de Liquidacao de Custodia, or CBLC, which
is wholly owned by that exchange.

     In order to better control volatility, the Sao Paulo Stock Exchange has
adopted a "circuit breaker" system pursuant to which trading sessions may be
suspended for a period of 30 minutes or one hour whenever the indices of these
stock exchanges fall below the limits of 10% and 15%, respectively, in relation
to the index registered in the previous trading session.

     The Sao Paulo Stock Exchange is less liquid than the New York Stock
Exchange or other major exchanges in the world. At March 31, 2002, the aggregate
market capitalization of the 428 companies listed on the Sao Paulo Stock
Exchange was equivalent to approximately U.S.$185.4 billion, and the ten largest
companies listed on the Sao Paulo Stock Exchange represented approximately 16%
of the total market capitalization of all listed companies. Although any of the
outstanding shares of a listed company may trade on a Brazilian stock exchange,
in most cases fewer than half of the listed shares are actually available for
trading by the public, the remainder being held by small groups of controlling
persons, by governmental entities or by one principal shareholder. For the
period from January 2002 to March 2002, we accounted for approximately 0.75% of
the market capitalization of all listed companies on the Sao Paulo Stock
Exchange.

     Trading on the Sao Paulo Stock Exchange by non-residents of Brazil is
subject to certain limitations under Brazilian foreign investment and tax
legislation. See "Item 10B -- Additional Information -- Memorandum and Articles
of Association -- Regulation of Foreign Investment" and "Item 10D -- Additional
Information -- Exchange Controls."

Differentiated Levels of Corporate Governance

     On November 14, 2001, we agreed to comply with heightened corporate
governance and disclosure requirements established by the Sao Paulo Stock
Exchange in order to qualify for a differentiated listing qualification as a
company admitted to the "Level 1 of Corporate Governance Requirements."

     To become a Level 1 company, an issuer must agree to (i) ensure that shares
of the issuer representing 25% of its total capital are effectively available
for trading; (ii) adopt offering procedures that favor widespread ownership of
shares whenever making a public offering; (iii) comply with minimum quarterly
disclosure standards; (iv) follow stricter disclosure policies with respect to
transactions made by controlling shareholders, directors and officers involving
securities issued by the issuer; (v) disclose any existing shareholders'
agreements and stock option plans; and (vi) make a schedule of corporate events
available to the shareholders.

Regulation of Brazilian Securities Markets

     The Brazilian securities markets are regulated by the CVM, which has
authority over stock exchanges and the securities markets generally, by the
Conselho Monetario Nacional, the National Monetary Council, and by the Central
Bank, which has, among others, licensing authority over brokerage firms and
regulates foreign investment and foreign exchange transactions.

     Under the Brazilian corporate law, a corporation is either public
(companhia aberta), such as we are, or closely held (companhia fechada). All
publicly held companies, including us, are registered with the CVM and are


                                       71
<PAGE>

subject to reporting requirements, in order to be allowed to have their
securities offered to the public and to be listed in a Brazilian stock exchange.
Our preferred shares are traded on the Sao Paulo Stock Exchange but may be
traded privately subject to certain limitations or may, under certain
circumstances, be tradable on all other Brazilian stock exchanges. The Brazilian
over-the-counter market consists of direct trades in which a financial
institution registered with the CVM serves as intermediary.

     We have the option to ask that trading in securities on the Sao Paulo Stock
Exchange be suspended in anticipation of a material announcement. Trading may
also be suspended at the initiative of the Sao Paulo Stock Exchange or the CVM,
among other reasons, based on or due to a belief that a company has provided
inadequate information regarding a material event or has provided inadequate
responses to the inquiries by the CVM or the Sao Paulo Stock Exchange.

     The Brazilian securities law, the Brazilian corporate law and the
regulations issued by the CVM, the National Monetary Council and the Central
Bank provide, among other things, disclosure requirements and restrictions on
insider trading, price manipulation and protection of minority shareholders.
However, the Brazilian securities markets are not as highly regulated and
supervised as the U.S. securities markets or markets in some other
jurisdictions.

D.       Selling Shareholders

         Not applicable.

E.       Dilution

         Not applicable.

F.       Expenses of the Issue

         Not applicable.

ITEM 10.          ADDITIONAL INFORMATION

A.       Share Capital

         Not applicable.

B.       Memorandum and Articles of Association

     Set forth below is certain information concerning our capital stock and a
brief summary of certain significant provisions of our by-laws and the Brazilian
corporate law. This description does not purport to be complete and is qualified
by reference to our by-laws (an English translation of which has been filed with
the Commission) and to the Brazilian corporate law.

Corporate Purposes

     We are a share company with principal place of business and jurisdiction in
the City of Sao Paulo, Brazil, governed mainly by our by-laws and by the
Brazilian corporate law.

     In accordance with our by-laws, our main purposes are: (a) the manufacture
and trade, wholesale or retail, of pulp, paper, cardboard and any other products
derived from these materials, for our own account or for third parties, (b) the
trade, wholesale or retail, of products destined for printing use in general,
(c) the development of all industrial and trade activities directly or
indirectly related to our corporate objectives, (d) the import of goods and
merchandise connected with our corporate purposes, (e) the export of products,
whether manufactured by us or by third parties, (f) the representation of our
products for our own account or for third parties, (g) the participation as
partner, quotaholder or shareholder in other corporations, domestically or
abroad, (h) the rendering of administration, organization and finance control
services to associated corporations or to third parties, (i) the



                                       72
<PAGE>

administration and implementation of forestation and reforestation projects for
our own account or for third parties, including management of all agricultural
activities that make production, supply and provisioning of raw material to the
pulp, paper, cardboard paper industry and of any other products derived from
these materials possible, and (j) the rendering of technical services through
consulting or assistance to our wholly owned or controlled subsidiaries or to
third parties.

Capital Stock and Dividend Policy

     General

     As of December 31, 2001, our capital stock in reais was R$1,701,900,122.76.
Our share capital is comprised of common shares and preferred shares, all
without par value. The share capital consists of a total of 38,322,699,553
issued shares, without par value, of which 21,140,490,321 are common shares, and
17,182,209,232 are preferred shares, including 235,400,000 preferred shares held
as treasury shares as of December 31, 2001. The by-laws authorize the board of
directors to increase the capital stock up to 28,000,000,000 common shares and
up to 56,000,000,000 preferred shares, without seeking specific shareholder
approval. The shareholders must approve any further capital increase at a
shareholders' meeting. Under the Brazilian corporate law, as amended, however,
the number of our non-voting preferred shares may not exceed two-thirds of the
total number of shares.

     The board of directors approved a share buyback program on September 20,
2001, April 5, 2001 and October 19, 2000 in order to keep the shares in treasury
for resale at a later date. For more detailed information on the buyback
programs, see "Item 10C -- Material Contracts."

     Preferences of Preferred Shares

     According to our by-laws, the preferred shares are non-voting except under
limited circumstances provided for in Brazilian corporate law and, upon
liquidation, are entitled to receive, prior to any distribution to the holders
of the common shares, an amount equal to their pro rata share of the book value
of our net worth, based on their proportional share of our share capital prior
to any distribution. Holders of preferred shares are not entitled to receive, in
the case of liquidation, payments that are 10% greater than the payments
received by holders of the common shares.

     Holders of preferred shares are not entitled to a fixed or minimum dividend
payment. However, holders of preferred shares are entitled to receive dividends
per share in an amount 10% greater than the dividends per share paid to holders
of common shares.

     Under our by-laws, at least 25% of our adjusted net income for the
preceding fiscal year must be distributed as a mandatory annual distribution, to
be paid out within 60 days of the annual shareholders' meeting in which the
distribution is approved. The Brazilian corporate law permits, however, a public
company to suspend payment of the mandatory distribution if the board of
directors and the Conselho Fiscal report to the shareholders' meeting that the
distribution would be incompatible with our financial condition, subject to
approval by the shareholders' meeting. The board of directors must file a
justification for a distribution suspension with the CVM within five days of the
shareholders' meeting. Profits not distributed due to such suspension must be
allocated to a special reserve and, if not absorbed by subsequent losses, must
be paid as dividends as soon as our financial situation permits such payments.
There is no restriction on our repurchase or redemption of shares while the
mandatory distribution is suspended due to duly approved and justified financial
reasons, other than the generally applicable restrictions on trading by
companies with their own shares, as set forth in the Brazilian corporation law
and in the rules and regulations issued by CVM.

     Voting Rights


     Each common share entitles its holder to one vote at our shareholders'
meetings. Preferred shares do not entitle the holder to vote except as set forth
below. Holders of preferred shares are entitled to attend meetings of
shareholders and to participate in the discussion.


                                       73
<PAGE>


     The Brazilian corporate law requires that non-voting preferred shares which
are entitled to receive fixed or minimum dividends shall acquire voting rights
in the event a company fails to pay, for three consecutive fiscal years as
established in the by-laws, the fixed or minimum dividend to which such shares
are entitled. Because our preferred shares are not entitled to the payment of
any fixed or minimum dividend, they cannot acquire voting rights under this
rule. The mandatory distribution does not constitute a fixed or minimum dividend
for this purpose.

     Any change in the preference or rights of preferred shares, or the creation
of a class of shares having priority or preference over preferred shares,
requires the approval of holders of a majority of the outstanding preferred
shares at a special meeting of holders of preferred shares. The meeting may be
called by publication of a notice in the Diario Oficial do Estado de Sao Paulo
and in a newspaper of general circulation in our principal place of business at
least 15 days prior to the meeting. In such special meetings, each preferred
share will entitle the holder thereof to one vote.

     Pursuant to the recent amendments to the Brazilian corporate law,
shareholders that together hold preferred shares representing at least 10% of
our total share capital are entitled to appoint a member of our board of
directors. Until 2005, the board members that may be elected by the preferred
shareholders as described above are to be chosen from a list of three names
drawn up by our controlling shareholder.

     To date, none of our directors was appointed by our preferred shareholders.

     Allocation of Net Income

     At each annual shareholders' meeting, our by-laws require our board of
directors to recommend that net income for the preceding fiscal year from which
income tax has already been deducted be allocated as follows:

o    5% for a legal reserve that will not exceed 20% of our paid-in capital; o
     an amount for a contingency reserve;

o    at least 25% for mandatory distribution to shareholders, to be distributed
     within 60 days of the annual shareholders' meeting that approves the
     distribution; and

o    any balance to be allocated in the manner determined by the shareholders.

     Under the Brazilian corporate law, payment of the mandatory dividend is not
required if the board of directors has formally declared such distribution to be
inadvisable in view of the company's financial condition and has provided the
shareholders at the annual shareholders' meeting with an opinion to that effect
which has been reviewed by the Conselho Fiscal and reported to the CVM prior to
such meeting. See "Item 8A -- Financial Information -- Consolidated Statements
and Other Information -- Dividend Policy and Dividends -- Mandatory
Distribution."

     Regulation of Foreign Investment

     There are no restrictions on ownership of our preferred shares by
individuals or legal entities domiciled outside Brazil. However, the right to
convert dividend payments and proceeds from the sale of preferred shares into
foreign currency and to remit such amounts outside Brazil is subject to
restrictions under foreign investment legislation which generally requires,
among other things, the electronic registration with the Central Bank. Foreign
investors may register their investment under Law No. 4,131 of September 3, 1962
or Resolution No. 2,689 of January 26, 2000 of the National Monetary Council.
Registration under Law No. 4,131 or under Resolution No. 2,689 generally enables
foreign investors to convert into foreign currency dividends, other
distributions and sales proceeds received in connection with registered
investments and to remit such amounts abroad. Resolution No. 2,689 affords
favorable tax treatment to foreign investors who are not resident in a tax haven
jurisdiction as defined by Brazilian tax laws (i.e., a country that does not
impose taxes or where the maximum income tax rate is lower than 20%).

     Under Resolution No. 2,689, foreign investors may invest in almost all
financial assets and engage in almost all transactions available in the
Brazilian financial and capital markets, provided that certain requirements are
fulfilled. In accordance with Resolution No. 2,689, the definition of foreign
investor includes individuals, legal entities, mutual funds and other collective
investment entities that are domiciled or headquartered abroad.


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         Pursuant to Resolution No. 2,689, foreign investors must:

o    appoint at least one representative in Brazil with powers to perform
     actions relating to the foreign investment;

o    complete the appropriate foreign investor registration form;

o    register as a foreign investor with the CVM; and

o    register the foreign investment with the Central Bank.

     Securities and other financial assets held by foreign investors pursuant to
Resolution No. 2,689 must be registered or maintained in deposit accounts or
under the custody of an entity duly licensed by the Central Bank or the CVM. In
addition, securities trading is restricted to transactions carried out in the
stock exchanges or organized over-the-counter markets licensed by the CVM. The
right to convert dividend payments and proceeds from the sale of our capital
stock into foreign currency and to remit these amounts outside Brazil is subject
to restrictions under foreign investment legislation, which generally requires,
among other things, that the relevant investment be registered with the Central
Bank. Restrictions on the remittance of foreign capital abroad could hinder or
prevent the Custodian for the preferred shares represented by ADSs, or holders
who have exchanged ADSs for preferred shares, from converting dividends,
distributions or the proceeds from any sale of preferred shares, as the case may
be, into U.S. dollars and remitting such U.S. dollars abroad. Delays in, or
refusal to grant, any required governmental approval for conversions of
Brazilian currency payments and remittances abroad of amounts owed to holders of
ADSs could adversely affect holders of ADSs.

     Resolution No. 1,927 of the National Monetary Council, which is the
restated and amended Annex V to Resolution No. 1,289 of the National Monetary
Council, or the Annex V Regulations, provides for the issuance of depositary
receipts in foreign markets in respect of shares of Brazilian issuers. We filed
an application to have the ADSs approved under the Annex V Regulations by the
Central Bank and the CVM, and we received final approval before the offering of
the preferred shares underlying the ADSs in April 2000.

     An electronic registration, which replaced the amended Certificate of
Registration, was issued in the name of the Depositary with respect to the ADSs
and is maintained by the custodian on behalf of the Depositary. This electronic
registration was carried on through the Central Bank Information
System--SISBACEN, an online network for exchange of information between the
Central Bank and Brazilian financial institutions. Pursuant to the electronic
registration, the Custodian and Depositary are able to convert dividends and
other distributions with respect to the preferred shares represented by the ADSs
into foreign currency and remit the proceeds outside Brazil. In the event that a
holder of ADSs exchanges such ADSs for preferred shares, such holder will be
entitled to continue to rely on the Depositary's electronic registration for
only five business days after such exchange, following which such holder must
seek to obtain its own electronic registration. Thereafter, unless the preferred
shares are held pursuant to Resolution No. 2,689, by a duly registered investor,
or if not a registered investor under Resolution No. 2,689, a holder of
preferred shares who applies for and obtains a new electronic registration, such
holder may not be able to obtain and remit abroad U.S. dollars or other hard
currencies upon the disposition of the preferred shares, or distributions with
respect thereto, and generally will be subject to less favorable tax treatment
when it obtains its own electronic registration. In addition, if the foreign
investor resides in a tax haven jurisdiction, the investor will be also subject
to less favorable tax treatment. See "Item 10E -- Taxation -- Certain Brazilian
Tax Consequences."

     Form and Transfer

     Because our shares are in registered book-entry form, the transfer of such
shares is made under the rules of Article 35 of the Brazilian corporate law, in
accordance with which a transfer of shares is effected by an entry made by the
registrar, by debiting the share account of the transferor and crediting the
share account of the transferee. Banco Itau S.A. performs all the services of
book-entry safekeeping and transfer of shares for us and related services.

     Transfers of shares by a foreign investor are made in the same way and
requested by that investor's local agent on the investor's behalf except that,
if the original investment was registered with the Central Bank pursuant to


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Resolution No. 2,689, the foreign investor should also seek amendment, if
necessary, through its local agent, of the electronic registration with the
Central Bank to reflect the new ownership.

     The Sao Paulo Stock Exchange operates a central clearing system through
Companhia Brasileira de Liquidacao e Custodia, or CBLC. A holder of our shares
may choose, at its discretion, to hold through this system and all shares
elected to be put into the system will be deposited in custody with CBLC
(through a Brazilian institution duly authorized to operate by the Central Bank
having a clearing account with CBLC). The fact that those shares are held in
custody with the relevant stock exchange will be reflected in our register of
shareholders. Each participating shareholder will, in turn, be registered in our
register of beneficial shareholders maintained by the relevant stock exchange
and will be treated in the same way as are registered shareholders.

C.       Material Contracts

Shareholders' Agreement of Aracruz Celulose S.A.

     A subsidiary of ours became a party to the Aracruz shareholders' agreement,
along with BNDESPAR, the Lorentzen Group and the Safra Group. Under the
shareholders' agreement, our subsidiary will be entitled to appoint three
directors to the Aracruz's board, which currently consists of ten directors. The
shareholders' agreement, which expires in 2008, provides that the maximum number
of shares of voting stock of Aracruz to be held by any party to the
shareholders' agreement may not exceed 28% of the total outstanding shares of
voting stock. In addition, the shareholders' agreement requires that each person
or entity who acquires shares of voting stock of Aracruz from any of the parties
to the shareholders' agreement become a party to such agreement.

Agreements in Connection with Aracruz Acquisition

     We entered into a series of agreements in October 2001 to finance the
acquisition of our participation in Aracruz in the total aggregate amount of
approximately U.S.$370 million. The agreements contain certain covenants and
events of default customary for these types of transactions. The agreements also
contain provisions for market interest rates. For additional information, see
"Item 5B - Liquidity and Capital Resources."

D.       Exchange Controls

     There are no restrictions on ownership of our common shares or preferred
shares by individuals or legal entities domiciled outside Brazil. However, the
right to convert dividend payments and proceeds from the sale of common shares
or preferred shares into foreign currency and to remit such amounts outside
Brazil are subject to exchange control restrictions and foreign investment
legislation which generally require, among other things, obtaining an electronic
registration with the Central Bank.

     Under Resolution No. 2,689, foreign investors may invest in almost all
financial assets and engage in almost all transactions available in the
Brazilian financial and capital markets, provided that some requirements are
fulfilled. In accordance with Resolution No. 2,689, the definition of foreign
investor includes individuals, legal entities, mutual funds and other collective
investment entities that are domiciled or headquartered abroad.

     Investors under Resolution No. 2,689 who do not reside in a "tax haven," or
a country that does not impose income tax or in which the maximum income tax
rate is lower than 20%, are entitled to favorable tax treatment. See "Item 10E
-- Taxation -- Certain Brazilian Tax Consequences."

     Resolution No. 1,927 provides for the issuance of depositary receipts in
foreign markets in respect of shares of Brazilian issuers. An application was
filed to have the ADSs approved by the Central Bank and the CVM under Annex V,
and we received final approval before the ADS Offering.

     An electronic registration, which replaced the amended Certificate of
Registration, was issued in the name of the depositary with respect to the ADSs
and is maintained by the Custodian on behalf of the Depositary. This electronic
registration was carried on through the SISBACEN. Pursuant to the electronic
registration, the Custodian and Depositary are able to convert dividends and
other distributions with respect to the preferred shares represented by the ADSs
into foreign currency and remit the proceeds outside Brazil. In the event that a
holder of ADSs


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exchanges the ADSs for preferred shares, the holder will be
entitled to continue to rely on the depositary's electronic registration for
only five business days after the exchange, and a holder must seek to obtain its
own electronic registration. Thereafter, unless the preferred shares are held
pursuant to Resolution No. 2,689 by a duly registered investor or a holder of
preferred shares who applies for and obtains a new electronic registration, that
holder may not be able to obtain and remit abroad U.S. dollars or other hard
currencies upon the disposition of the preferred shares, or distributions with
respect thereto when it obtains its own electronic registration. In addition, if
the foreign investor resides in a tax haven jurisdiction, the investor will also
be subject to less favorable tax treatment.

Preemptive Rights


     Each of our shareholders has a general preemptive right to subscribe for
shares or convertible securities in any capital increase, in proportion to its
shareholding, except in the event of the grant and exercise of any option to
acquire shares of our capital stock. A minimum period of 30 days following the
publication of notice of the issuance of convertible securities or shares is
allowed for exercise of the right, and the right is negotiable. However,
according to our by-laws, our board of directors can eliminate this preemptive
right or reduce the 30-day period in case we issue debentures that are
convertible into shares or shares within the limits authorized by the by-laws:
(i) through a stock exchange or through a public offering or (ii) through an
exchange of shares in a public offering to acquire control of another company.

     In the event of a capital increase that would maintain or increase the
proportion of capital represented by preferred shares, the holders of preferred
shares, except as described above, would have preemptive rights to subscribe to
our newly issued preferred shares. You may not be able to exercise the
preemptive rights relating to the preferred shares underlying your ADSs unless a
registration statement under the Securities Act is effective with respect to the
shares to which the rights relate or an exemption from the registration
requirements of the Securities Act is available and the ADS depositary
determines to make the rights available to you. In the event of a capital
increase that would reduce the proportion of capital represented by preferred
shares, the holders of the preferred shares, except as described above, would
have preemptive rights to subscribe for preferred shares in proportion to their
shareholdings, and for common shares, only to the extent necessary to prevent
dilution of their interest in their shares. See "Item 3D -- Key Information --
Risk Factors -- Risks Relating to the Preferred Shares and ADSs -- You may not
be able to exercise preemptive rights."

Redemption

     According to our by-laws, the common shares and the preferred shares are
not redeemable. However, we may redeem shares of minority shareholders if, after
a tender offer, our controlling shareholder increases its participation in our
total share capital to more than 95%.

Right of Withdrawal

     The Brazilian corporate law provides that, under certain circumstances, a
shareholder has the right to withdraw its equity interest from the company and
to receive payment for the portion of shareholders' equity attributable to its
equity interest. Such right of withdrawal may be exercised by a dissenting or
non-voting shareholder, including any holder of preferred shares, if a vote of
at least 50% of voting shares authorize us:

o    to establish new classes of preferred shares or to disproportionately
     increase an existing class of preferred shares relative to the other
     classes of shares, unless such action is provided for or authorized by the
     by-laws (our by-laws currently authorize such action);

o    to modify a preference, privilege or condition of redemption or
     amortization conferred on one or more classes of preferred shares, or to
     create a new class with greater privileges than the existing classes of
     preferred shares;

o    to reduce the mandatory distribution of dividends;

o    to change our corporate purpose;

o    to merge with another company (including if we are merged into one of our
     controlling companies) or to


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     consolidate;

o    to transfer all of our shares to another company or to receive shares of
     another company in order to make the company whose shares are transferred a
     wholly owned subsidiary of such company, known as an incorporacao de acoes;

o    to approve the acquisition of control of another company at a price which
     exceeds certain limits set forth in the Brazilian corporate law;

o    to approve our participation in a centralized group of companies, as
     defined under the Brazilian corporate law, and subject to the conditions
     set forth therein; or

o    to conduct a spin-off that results in (a) a change of our corporate
     purposes, except if the assets and liabilities of the spun-off company are
     contributed to a company that is engaged in substantially the same
     activities, (b) a reduction in the mandatory dividend or (c) any
     participation in a centralized group of companies, as defined under
     Brazilian corporate law.

     In addition, in the event that the entity resulting from a merger, or
incorporacao de acoes, or a spinoff of a listed company fails to become a listed
company within 120 days of the shareholders' meeting at which such decision was
taken, the dissenting or non-voting shareholders may also exercise their
withdrawal.

     Only holders of shares adversely affected by the changes mentioned in the
first and second items above may withdraw their shares. The right of withdrawal
lapses 30 days after publication of the minutes of the relevant shareholders'
meeting. In the first two cases mentioned above, however, the resolution is
subject to confirmation by the preferred shareholders, which must be obtained at
a special meeting held within one year. In those cases, the 30-day term is
counted from the date the minutes of the special meeting are published. We would
be entitled to reconsider any action giving rise to withdrawal rights within 10
days following the expiration of such rights if the withdrawal of shares of
dissenting shareholders would jeopardize our financial stability.

     The Brazilian corporate law allows companies to redeem their shares at
their economic value as set forth in the Brazilian corporate law, subject to
certain requirements. Because our by-laws currently do not provide that our
shares be subject to withdrawal at their economic value, our shares would be
subject to withdrawal at their book value, determined on the basis of the last
balance sheet approved by the shareholders. If the shareholders' meeting giving
rise to withdrawal rights occurs more than 60 days after the date of the last
approved balance sheet, a shareholder may demand that its shares be valued on
the basis of a new balance sheet that is of a date within 60 days of such
shareholders' meeting.

     According to the Brazilian corporate law, in events of consolidation,
merger, incorporacao de acoes, participation in a group of companies, and
acquisition of control of another company, the right to withdraw does not apply
if the shares meet certain tests relating to liquidity and dispersal of the type
or class of shares in question on the market. In these cases, shareholders will
not be entitled to withdraw their shares if the shares are a component of a
general stock index in Brazil or abroad and the shares held by persons
unaffiliated with the controlling shareholder represent more than half of the
outstanding shares of the relevant type or class.

E.       Taxation

     The following discussion contains a description of the material Brazilian
and United States federal income tax consequences of the purchase, ownership and
disposition of preferred shares or ADSs by a holder, also called a U.S. holder,
that is for U.S. federal income tax purposes a citizen or resident of the United
States of America, a corporation, or other entity taxable as a corporation,
created or organized in or under the laws of the United States of America or any
state thereof, an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or a trust, if a court within the United
States of America is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust.

     This description does not purport to be a comprehensive description of all
of the tax considerations that may be relevant to any particular investor,
including tax considerations that arise from rules of general application to


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all taxpayers or to certain classes of investors or that are generally assumed
to be known by investors. In particular, this summary deals only with U.S.
holders that will hold preferred shares or ADSs as capital assets and does not
apply to certain classes of U.S. holders, such as holders of 10% or more of our
voting shares, financial institutions, tax-exempt organizations, insurance
companies, dealers in securities or currencies, securities traders who elect to
account for their investment in preferred shares or ADSs on a mark-to-market
basis, persons holding preferred shares or ADSs as part of a "straddle,"
"hedging transaction" or "conversion transaction," and persons that have a
"functional currency" other than the U.S. dollar.

     This summary is based upon tax laws of Brazil and the United States as in
effect on the date of this prospectus, which are subject to change, possibly
with retroactive effect, and to differing interpretations. You should consult
your own tax advisors as to the Brazilian, United States or other tax
consequences of the purchase, ownership and disposition of preferred shares or
ADSs, including, in particular, the effect of any non-U.S., state or local tax
laws.

     Although there is presently no income tax treaty between Brazil and the
United States, the tax authorities of the two countries have had discussions
that may culminate in such a treaty. No assurance can be given, however, as to
whether or when a treaty will enter into force or how it will affect the U.S.
holders of preferred shares or ADSs.

     Certain Brazilian Tax Consequences

     The following discussion, subject to the limitations therein, summarizes
certain Brazilian tax consequences of the acquisition, ownership and disposition
of preferred shares or ADSs, as the case may be, by a holder that is not
domiciled in Brazil for purposes of Brazilian taxation, or by a holder of
preferred shares with an investment in preferred shares registered with the
Central Bank as a U.S. dollar investment (in each case, a "non-Brazilian
holder"). It is based on Brazilian law as currently in effect, and, therefore,
any change in such law may change the consequences described below. Each
non-Brazilian holder should consult his or her own tax adviser concerning the
Brazilian tax consequences of an investment in preferred shares or ADSs.

     Pursuant to Brazilian law, the preferred shares may be registered under
Resolution No. 2,689. The rules of Resolution No. 2,689 allow foreign investors
to invest in almost all financial assets and to engage in almost all
transactions available in the Brazilian financial and capital markets, provided
that they fulfill certain requirements. According to Resolution No. 2,689, a
foreign investor includes individuals, legal entities, mutual funds and other
collective investment entities domiciled or headquartered abroad.

     Pursuant to these rules, a foreign investor must: (1) appoint at least one
representative in Brazil with powers to perform actions related to the foreign
investment; (2) complete the appropriate foreign investor registration form; (3)
register as a foreign investor with the CVM; and (4) register the foreign
investment with the Central Bank.

     Securities and other financial assets held by a foreign investor pursuant
to Resolution No. 2,689 must be registered or maintained in deposit accounts or
under the custody of an entity duly licensed by the Central Bank or the CVM. In
addition, securities trading is restricted to transactions carried out in the
stock exchanges or organized over-the-counter markets licensed by the CVM.




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     Taxation of Dividends

     As a result of tax legislation adopted on December 26, 1995, dividends
based on profits generated after January 1, 1996, including dividends paid in
kind, payable by us in respect of preferred shares, are exempt from withholding
income tax. Stock dividends with respect to profits generated before January 1,
1996 are not subject to Brazilian tax, provided that the stock is not redeemed
by us or sold in Brazil within five years after distribution of such stock
dividends. Dividends relating to profits generated prior to January 1, 1996 may
be subject to Brazilian withholding income tax at varying rates, depending on
the year the profits were generated.

     Taxation of Gains

     Gains realized outside Brazil by a non-Brazilian holder on the disposition
of ADSs to another non-Brazilian holder are not subject to Brazilian tax.

     The withdrawal of ADSs in exchange for preferred shares is not subject to
Brazilian tax. The deposit of preferred shares in exchange for ADSs may be
subject to Brazilian capital gain tax at the rate of 15%, if the amount
previously registered with the Central Bank as a foreign investment in the
preferred shares is lower than (1) the average price per preferred share on a
Brazilian stock exchange on which the greatest number of such shares were sold
on the day of deposit; or (2) if no preferred shares were sold on that day, the
average price on the Brazilian stock exchange on which the greatest number of
preferred shares were sold in the 15 trading sessions immediately preceding such
deposit. In this case, the difference between the amount previously registered
and the average price of the preferred shares, calculated as above, shall be
considered a capital gain. On receipt of the underlying preferred shares, the
non-Brazilian holder registered under Resolution No. 2,689 will be entitled to
register the U.S. dollar value of such shares with the Central Bank as described
below in "--Registered Capital." However, if this non-Brazilian holder does not
register under Resolution No. 2,689, it will be subject to the less favorable
tax treatment described below.

     Non-Brazilian holders are not subject to tax in Brazil on gains realized on
sales of preferred shares that occur abroad to persons who are not resident in
Brazil. Non-Brazilian holders are generally subject to income tax imposed at a
rate of 15% on gains realized on sales or exchanges of preferred shares that
involve a resident of Brazil, if the transaction is carried out outside any
Brazilian stock, future or commodities exchange. Gains realized by a
non-Brazilian holder upon the redemption of preferred shares will be treated as
gain from the disposition of such preferred shares to a Brazilian resident
occurring outside of a stock exchange and will accordingly be subject to tax at
a rate of 15%.

     Non-Brazilian holders are subject to income tax, at a rate of 20%, on gains
realized on sales or exchanges in Brazil of preferred shares that occur on the
Brazilian stock exchanges, unless such a sale is made by a non-Brazilian holder
who is not a resident in a "tax haven" (as described below) and (1) such sale is
made within five business days of the withdrawal of the preferred shares in
exchange for ADSs and the proceeds thereof are remitted abroad within such
five-day period, or (2) such sale is made under Resolution No. 2,689 by
registered non-Brazilian holders who obtain registration with the CVM. In these
two last cases, the gains realized are exempt from income tax. The gain realized
from transactions on the Bovespa is the difference between the amount in
Brazilian currency realized on the sale or exchange and the acquisition cost,
measured in Brazilian currency, without any correction for inflation, of the
shares sold. The gain realized as a result of a transaction that occurs other
than on the Bovespa is the positive difference between the amount realized on
the sale or exchange and the acquisition cost of the preferred shares, both
values in reais; there are grounds, however, to hold that the gain realized
should be calculated based on the foreign currency amount registered with the
Central Bank, such foreign currency amount to be translated into Brazilian
currency at the commercial market rate. There is no assurance that the current
preferential treatment for holders of ADSs and non-Brazilian holders of
preferred shares under Resolution No. 2,689 will continue in the future or that
it will not be changed in the future.

     Any exercise of preemptive rights relating to the preferred shares will not
be subject to Brazilian taxation. Any gain on the sale or assignment of
preemptive rights relating to the preferred shares by a holder of preferred
shares, or by the depositary on behalf of holders of the ADSs, will be subject
to Brazilian taxation at the same rate applicable to the sale or disposition of
preferred shares.




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     Interest attributed to Shareholders' Equity

     Distribution of a notional interest charge attributed to shareholders'
equity in respect of the preferred or common shares as an alternative form of
payment to shareholders who are either Brazilian residents or non-Brazilian
residents, including holders of ADSs, is subject to Brazilian withholding income
tax at the rate of 15%. Such payments, subject to certain limitations, are
deductible for Brazilian income tax and for social contribution purposes as long
as the payment of a distribution of interest is credited to a shareholders'
account and approved at our general meeting of shareholders. Current Brazilian
corporate law establishes that a notional interest charge attributed to
shareholders' equity can either be accounted for as part of the mandatory
dividend or not. In case the payment of such interest is accounted for as part
of the mandatory dividend, we would be required to pay an additional amount to
ensure that the net amount received by the shareholders, after the income tax,
is at least equal to the mandatory dividend. The distribution of interest
attributed to shareholders' equity would be proposed by our board of directors
and subject to subsequent declaration by the shareholders at a general meeting.

     Beneficiaries Resident or Domiciled in Tax Havens or Low Tax Jurisdictions

     Law No. 9,779/99, in effect as of January 1, 1999, states that, with the
exception of certain prescribed circumstances, income derived from operations by
a beneficiary, resident or domiciled in a country considered as a tax haven, is
subject to withholding income tax at a rate of 25%. Accordingly, if the
distribution of interest attributed to shareholders' equity is made to a
beneficiary resident or domiciled in a tax haven, the income tax rate applicable
will be 25% instead of 15%. Capital gains for gains realized are not subject to
this 25% tax even if the beneficiary is a resident in a tax haven.

Other Brazilian Taxes

     There are no Brazilian inheritance, gift or succession taxes applicable to
the ownership, transfer or disposition of preferred shares or ADSs by a
non-Brazilian holder. However, some Brazilian states may impose gift and estate
taxes on gifts made or inheritances bestowed by individuals or entities not
resident or domiciled within such state to individuals or entities residing or
domiciled within such state in Brazil. There are no Brazilian stamp, issue,
registration, or similar taxes or duties payable by holders of preferred shares
or ADSs.

     Tax on Bank Account Transactions (CPMF)

     As a general rule, financial transactions or CPMF tax is imposed on any
removal of funds from accounts at banks. Transactions by the depositary or by
holders of preferred shares that involve the transfer of Brazilian currency
through Brazilian financial institutions will be subject to the CPMF tax. When
non-Brazilian holders transfer the proceeds from the sale or assignment of
preferred shares by an exchange transaction, the CPMF tax is imposed on the
amount to be remitted abroad in Brazilian reais. The responsibility for the
collection of the CPMF tax is borne by the financial institution that carries
out the relevant financial transaction. The CPMF tax is generally imposed on
bank account debits at a current rate of 0.38%. The CPMF tax is scheduled to
expire on June 16, 2002. However, the extension of such period is currently
under discussion by the Brazilian Congress. If approved, the CPMF can be levied
in 90 days from the date of approval by the Brazilian Congress. In the event we
perform any exchange transaction in connection with ADSs or preferred shares, we
will be responsible for collecting the CPMF tax.

     Taxation of Foreign Exchange Transactions (IOF/Cambio)

     Pursuant to Decree No. 2,219 of May 2, 1997, IOF/Cambio may be imposed upon
the conversion of Brazilian currency into a foreign currency (e.g., for purposes
of paying dividends and interest) and on the conversion of foreign currency into
Brazilian currency. Except under specific circumstances, there is no current IOF
tax on such conversions, but the Minister of Finance has the legal power to
increase the rate to a maximum of 25% at any time, but only in relation to
future transactions.

     Tax on Bonds and Securities Transactions (IOF/Titulos)

     Law No. 8,894/94 created the Tax on Bonds and Securities Transactions (the
IOF/Titulos), which may be imposed on any transactions involving bonds and
securities, even if these transactions are performed on Brazilian stock, futures
or commodities exchanges. The applicable rate for these transactions is
currently 0%, although the executive branch may increase the rate up to 1.5% per
day, but only with respect to futures transactions.

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     Registered Capital

     The amount of an investment in preferred shares held by a non-Brazilian
holder who qualifies under Resolution No. 2,689 and obtains registration with
the CVM, or by the depositary representing such holder, is eligible for
registration with the Central Bank; such registration (the amount registered is
referred to as registered capital) allows the remittance of foreign currency
outside Brazil, converted at the commercial market rate, acquired with the
proceeds of distributions on, and amounts realized with respect to dispositions
of, such preferred shares. The registered capital for each preferred share
purchased as part of the international offering, or purchased in Brazil after
that date, and deposited with the Depositary will be equal to its purchase price
in U.S. dollars. The registered capital for a preferred share that is withdrawn
upon surrender of an ADS will be the U.S. dollar equivalent of (i) the average
price of a preferred share on the Brazilian stock exchange on which the greatest
number of such shares was sold on the day of withdrawal, or (ii) if no preferred
shares were sold on that day, the average price on the Brazilian stock exchange
on which the greatest number of preferred shares was sold in the 15th trading
session immediately preceding such withdrawal. The U.S. dollar value of the
preferred shares is determined on the basis of the average commercial market
rates quoted by the Central Bank on such date (or, if the average price of
preferred shares is determined under clause (ii) above, the average of such
quoted rates on the same 15 dates used to determine the average price of the
preferred shares).

     A non-Brazilian holder of preferred shares may experience delays in
effecting such registration, which may delay remittances abroad. Such a delay
may adversely affect the amount in U.S. dollars received by the non-Brazilian
holder.

     The financial availability of the respective amounts of interest to the
shareholders, withholding of income tax at source, was defined at the general
shareholders' meeting held on April 27, 2001. The interest on shareholders'
equity was paid on June 26, 2001.

     U.S. Federal Income Tax Consequences

     The following discussion, subject to the limitations therein, sets forth
the material United States federal income tax consequences to U.S. holders in
respect of the purchase, ownership and disposition of the preferred shares or
ADSs.

     In general, for purposes of the U.S. Internal Revenue Code of 1986, as
amended (also called the Code), holders of ADSs will be treated as the
beneficial owners of the preferred shares represented by those ADSs.

     Taxation of Dividends

     Distributions with respect to the preferred shares or the ADSs (other than
distributions in redemption of the preferred shares subject to section 302(b) of
the Code or in a liquidation of VCP) (including distributions of notional
interest charges on shareholders' equity) will, to the extent made from current
or accumulated earnings and profits of VCP as determined under U.S. federal
income tax principles, constitute dividends for U.S. federal income tax
purposes. Whether such current or accumulated earnings and profits will be
sufficient for all such distributions on the preferred shares or ADSs to qualify
as dividends for U.S. federal income tax purposes depends on the future
profitability of VCP and other factors, many of which are beyond our control. To
the extent that such a distribution exceeds the amount of VCP's earnings and
profits, it will be treated as a nontaxable return of capital to the extent of
the U.S. holder's adjusted tax basis in the preferred shares or ADSs, and
thereafter as capital gain. As used below, the term "dividend" means a
distribution that constitutes a dividend for U.S. federal income tax purposes.
Dividends (including amounts withheld in respect of Brazilian taxes) paid with
respect to:

          o    the preferred shares generally will be includible in the gross
     income of a U.S. holder as ordinary income on the day on which the
     dividends are received by the U.S. holder, or

          o    the preferred shares represented by ADSs generally will be
     includible in the gross income of a U.S. holder as ordinary income on the
     day on which the dividends are received by the depositary,

     and, in either case, will not be eligible for the dividends received
deduction allowed to corporations under the Code. Dividends paid in reais will
be includible in the income of a U.S. holder in a U.S. dollar amount calculated
by reference to the exchange rate for conversion of reais into U.S. dollars in
effect on the day the


                                       82
<PAGE>

distribution is received by the U.S. holder, in the case of preferred shares, or
the depositary, in the case of preferred shares represented by ADSs, regardless
of whether the payment is in fact converted to U.S. dollars.

     If dividends paid in reais are converted into U.S. dollars on the day they
are received by the U.S. holder or the Depositary, as the case may be, U.S.
holders should not be required to recognize foreign currency gain or loss in
respect of the dividend income. Generally, any gain or loss resulting from
currency exchange fluctuations during the period from the date the dividend
payment is included in the gross income of a U.S. holder through the date such
payment is converted into dollars (or otherwise disposed of) will be treated as
U.S.-source ordinary income or loss. However, U.S. holders should consult their
own tax advisors regarding the treatment of any foreign currency gain or loss if
any reais received by the U.S. holder or the depositary are not converted into
U.S. dollars on the date of receipt, as well as the tax consequences of the
receipt of any additional reais from the custodian on account of Brazilian
inflation.

     Dividends received by most U.S. holders generally will constitute foreign
source "passive income" for U.S. foreign tax credit purposes. Subject to
limitations under U.S. federal income tax law concerning credits or deductions
for foreign taxes, the Brazilian income tax withheld in connection with any
distribution with respect to ADSs or preferred shares will be treated as a
foreign income tax eligible for credit against a U.S. holder's U.S. federal
income tax liability (or, at a U.S. holder's election, may be deducted in
computing taxable income). The rules with respect to foreign tax credits are
complex and U.S. holders should consult their own tax advisors regarding the
availability of foreign tax credits in light of their particular circumstances.
The Internal Revenue Service has expressed concern that intermediaries in
connection with depository arrangements may be taking actions that are
inconsistent with the claiming of foreign tax credits by U.S. persons who are
holding depositary shares. Accordingly, investors should be aware that the
discussion above regarding the ability to credit Brazilian withholding tax on
dividends could be affected by future action taken by the Internal Revenue
Service.

     It is not entirely clear whether the preferred shares will be treated as
"preferred stock" or "common stock" within the meaning of section 305 of the
Code. For the purposes of section 305, the term "preferred stock" generally
refers to stock that, in relation to other classes of stock outstanding, enjoys
certain limited rights and privileges (generally associated with specific
dividend and liquidation priorities) but does not participate in corporate
growth to any significant extent. If the preferred shares are treated as "common
stock" for purposes of section 305, distributions to U.S. holders of additional
shares of such "common stock," or preemptive rights relating to such "common
stock" with respect to their preferred shares or ADSs that are made as part of a
pro rata distribution to all our shareholders, in most instances will not be
subject to United States federal income tax. On the other hand, if the preferred
shares are treated as "preferred stock" within the meaning of section 305, and
if the U.S. holder receives a distribution of additional shares or preemptive
rights as described in the preceding sentence, such distributions (including
amounts withheld in respect of any Brazilian taxes) will be treated as dividends
that are includible in the U.S. holder's gross income to the same extent and in
the same manner as distributions payable in cash. In that event, the amount of
such distribution (and the basis of the new shares or preemptive rights so
received) will equal the fair market value of the shares or preemptive rights on
the date of distribution.

     Taxation of Capital Gains

     Deposits and withdrawals of preferred shares by U.S. holders in exchange
for ADSs will not result in the realization of gain or loss for U.S. federal
income tax purposes.

     A gain or loss realized by a U.S. holder on the sale or other disposition
of preferred shares or ADSs will be subject to U.S. federal income taxation as
capital gain or loss in an amount equal to the difference between such U.S.
holder's basis in the preferred shares or the ADSs and the amount realized on
the disposition. Capital gains of individuals with respect to capital assets
held for more than one year are eligible for reduced rates of taxation. The
deductibility of capital losses is subject to certain limitations. Gain realized
by a U.S. holder on a sale or disposition of preferred shares or ADSs, including
gain that arises because the U.S. holder's basis in the preferred shares or ADSs
has been reduced because a distribution is treated as a return of capital rather
than as a dividend, will be treated as U.S.-source income for U.S. foreign tax
credit purposes in most instances. Consequently, if Brazilian tax is imposed on
such gain, the U.S. holder will not be able to use the corresponding foreign tax
credit, unless the holder has other foreign source income of the appropriate
type in respect of which the credit may be used. Loss realized by a U.S. holder
on a sale or disposition will be treated as U.S.-source loss in most instances.


                                       83
<PAGE>


     If a Brazilian withholding tax is imposed on the sale or disposition of
preferred shares (see "--Certain Brazilian Tax Consequences"), the amount
realized by a U.S. holder will include the gross amount of the proceeds of such
sale or disposition before deduction of the Brazilian withholding tax. The
availability of U.S. foreign tax credits for these Brazilian taxes and any
Brazilian taxes imposed on distributions that do not constitute dividends for
U.S. tax purposes is subject to various limitations and involves the application
of rules that depend on a U.S. holder's particular circumstances. U.S. holders
are urged to consult their own tax advisors regarding the application of the
foreign tax credit rules to their investment in, and disposition of, preferred
shares or ADSs.

     Passive Foreign Investment Companies

     If during any taxable year of a non-U.S. corporation, 75% or more of the
corporation's gross income consists of certain types of "passive" income, or the
average value during a taxable year of the "passive assets" of the corporation
(generally assets that generate passive income) is 50% or more of the average
quarterly value of all the corporation's assets, the corporation will be treated
as a "passive foreign investment company," or PFIC, under U.S. federal income
tax law. If we are treated as a PFIC, a U.S. holder may be subject to increased
tax liability and form filing requirements upon the sale of preferred shares or
ADSs, or upon the receipt of certain dividends, unless such U.S. holder makes an
election to be taxed currently on its pro rata portion of our income, whether or
not such income is distributed in the form of dividends, or otherwise makes a
"mark-to-market" election with respect to the corporation's stock as permitted
by the Code. Based on our operations and business plans, we do not believe that
we are currently a PFIC and do not expect to become a PFIC in the foreseeable
future.

     Information Reporting and Backup Withholding

     Information reporting requirements will apply to dividends in respect of
the preferred shares or ADSs or the proceeds received on the sale, exchange, or
redemption of the preferred shares or ADSs paid within the United States (and,
in certain cases, outside of the United States) to U.S. holders other than
certain exempt recipients (such as corporations), and a 30% backup withholding
tax (subject to reduction in future years) may apply to such amounts if the U.S.
holder fails to provide an accurate taxpayer identification number or to report
interest and dividends required to be shown on its federal income tax returns.
The amount of any backup withholding tax from a payment to a U.S. holder will be
allowed as a credit against the U.S. holder's United States federal income tax
liability, provided that the required information is furnished to the Internal
Revenue Service.

F.       Dividends and Paying Agents

         Not applicable.

G.       Statements by Experts

         Not applicable.

H.       Documents on Display

     We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, pursuant to which we file reports and other information
with the Securities and Exchange Commission, or the Commission. These materials,
including this annual report and the accompanying exhibits, may be inspected and
copied at the Commissions' Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at 500 West
Madison Street, Suite 1400, Chicago Illinois 60661, and 233 Broadway, New York,
New York 10279. Copies of the materials may be obtained from the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The public may obtain information on the operation of
the Commission's Public Reference Room by calling the Commission in the United
States at 1-800-SEC-0330. In addition, material we filed can be inspected at the
offices of the New York Stock Exchange at 20 Broad Street, New York, New York
10005, on which our ADSs are listed.

     We also file financial statements and other periodic reports with the CVM
located at Rua Sete de Setembro, 111, Rio de Janeiro, Rio de Janeiro 20159-900.


                                       84
<PAGE>


     Copies of our annual reports on Form 20-F and accompanying documents and
our by-laws will be available for inspection at our headquarters.

I.       Subsidiary Information

         Not required.

ITEM 11.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as foreign
currency exchange rates and interest rates.

General

     We purchase financial hedges in the market to reduce our foreign currency
exposure and do not take into account the natural hedge provided by our exports
in determining our hedging needs, and we establish strict internal policies with
respect to our currency exposure positions and revise these policies from time
to time in response to new economic information on the macroeconomic environment
in Brazil. The exposure to foreign currency risk is guided by closely monitored
policies.

     We use currency and interest rate swap contracts to hedge U.S.
dollar-denominated debt. We do not use derivatives for trading or speculative
purposes. The unrealized gains and losses on these contracts are recorded on our
balance sheet as receivables or payables and in our statement of income in
"Foreign exchange losses, net" in 2001, 2000 and 1999.

     These financial instruments have been used extensively as part of a defined
financial strategy designed to optimize opportunities in the Brazilian foreign
exchange and interest rate markets. Like many other Brazilian exporters, we have
had access to U.S. dollar-denominated sources of long-term financing in the form
of export prepayments or credits. Opportunities arise between the lower interest
rates payable on the U.S. dollar-denominated export credits and borrowings, the
proceeds of which are invested in real-denominated cash, cash equivalents and
held-to-maturity investments, which provide higher yields.

     After the currency devaluation in January 1999, we decided to reduce
significantly our net exposure in U.S. dollars. As of December 31, 1999, our net
foreign currency exposure was U.S.$61 million (U.S. dollar asset position
exceeded U.S. dollar liability position). This policy limited our foreign
exchange loss to U.S.$69 million in 1999, despite the effects of the 48%
devaluation of the real on our U.S. dollar-denominated debt of U.S.$753 million
at December 31, 1998. In 2000, we continued our policy of protection of our
dollar assets and liabilities taking into account the natural hedge provided by
our exports. On December 31, 2001, our net exposure was a negative U.S.$11
million, indicating we were overhedged. As of March 31, 2002, we increased our
exposure to U.S.$13 million due to low exchange rate volatility, which is
equivalent to less than one month of exports. At present, we, along with other
Brazilian companies, have limited sources of long-term financing denominated in
reais. We believe we have access to a sufficient number of foreign currency
financing sources to meet our needs without resorting to more expensive
real-denominated financing.

     Our foreign currency debt reflects a strategy to continue raising funds in
U.S. dollars, and to invest the proceeds in investments bearing higher interest
rates in the local market. We succeeded in lengthening the average maturity of
our debt between 1997 and 1999. The percentage of our short-term debt (i.e., the
debt, including the current portion of long-term debt, maturing within 12
months) compared to our total debt increased from 32% at December 31, 2000 to
44% at December 31, 2001.

Foreign Currency Risk

     Our foreign currency exposure gives rise to market risks associated with
exchange rate movements against the U.S. dollar. Foreign currency denominated
liabilities as of December 31, 2001 included borrowings


                                       85
<PAGE>

denominated mainly in U.S. dollars. Our net foreign currency exposure (U.S.
dollar-denominated debts less our foreign currency and interest rate swap
contracts in our U.S. dollar-denominated assets) was negative U.S.$1 million
(assets were higher than liabilities) at December 31, 2001 compared to positive
U.S.$11 million in 2000. As of December 31, 2001, approximately 57% of our cash,
cash equivalents and held-to-maturity investments were denominated in U.S.
dollars. Our sales outside of Brazil are largely U.S. dollar-denominated, while
sales of pulp within Brazil are denominated in reais but based on U.S. dollar
prices, with most of our operating costs being denominated in reais. Our foreign
currency and interest rate swap contracts partially hedge our exposure arising
from our U.S. dollar-denominated debt. We evaluate the macroeconomic situation
and its impact on our financial position on a weekly basis.

     The specific foreign currency risks which have caused us to enter into swap
contracts to protect ourselves against a possible devaluation of the real were
associated with the exposures generated by our U.S. dollar-denominated (short-
and long-term) debt. The contracts protect against these risks by committing us
and the counterparties to positions in foreign currency, thereby offsetting, to
the extent of these contracts, the effects of currency fluctuations on our
foreign currency debts. The management of our net exposure position takes into
account a number of current and projected economic factors and market
conditions. At December 31, 2001 and 2000, the notional amounts of our
outstanding foreign currency swap contracts were U.S.$253 million and U.S.$243
million, respectively, and their fair values were U.S.$32 million and U.S.$59
million, respectively. The weighted average pay rates on our outstanding foreign
currency swap contracts are floating rate-based on the Certificado de Deposito
Interbancario, or CDI. The fair values of our foreign currency and interest rate
swap contracts were estimated based on quoted market prices of comparable
contracts.

     The table below provides information on our debt outstanding as of December
31, 2001. The amounts have been translated into U.S. dollars based on the
exchange rate prevailing on December 31, 2001, as determined by the Central Bank
(R$2.3204 for U.S.$1.00).
<TABLE>
<CAPTION>

                                                                   As of December 31, 2001
                                               ----------------------------------------------------
                                                      Expected Maturity Date
                                                      ----------------------
                                                                           After              Fair
                                                 2002     2003     2004     2004    Total   Value(1)
                                                 ----     ----     ----     ----    -----   --------
                                                               (U.S.$ in millions)
<S>                                            <C>      <C>      <C>      <C>      <C>      <C>
Short-term debt:
     U.S. dollars ..........................   $   69   $ --     $ --     $ --     $   69   $   69
                                               ------   ------   ------   ------   ------   ------
Long-term debt:
     Reais .................................     --          9       14       71       94       94
     U.S. dollars ..........................      389      175      223       92      879      878
                                               ------   ------   ------   ------   ------   ------
         Total long-term debt ..............      389      184      237      163      973      972
                                               ------   ------   ------   ------   ------   ------

Total ......................................   $  458   $  184   $  237   $  163   $1,042   $1,041
                                               ======   ======   ======   ======   ======   ======
</TABLE>

(1) The methodology used to determine the fair value included is described in
note 12 to our consolidated financial statements.

     We incurred most of this debt principally to take advantage of the
opportunities that arise due to interest rate differentials between
real-denominated financial instruments (cash and cash equivalents and
held-to-maturity investments) and our foreign currency export credits and to
finance the acquisition of a participation in Aracruz and the Jacarei expansion.
See "Item 5B -- Operating and Financial Review and Prospects -- Liquidity and
Capital Resources -- Capital Expenditures -- Financial Strategy." We believe
that, given our level of assets and resources, we should have sufficient cash
and sources of working capital to meet our debt service.

     On December 31, 2001, the carrying value of our U.S. dollar-denominated
short-term debt was U.S.$69 million and our U.S. dollar- and real-denominated
long-term debt, including the current portion, was U.S.$973 million.

     We estimate that the foreign currency-denominated component of our paper
costs does not exceed 10% of our total costs. We are self-sufficient in pulp,
the principal raw material used in producing paper products. The energy, labor
and other domestic components of our paper production costs are denominated in
reais and, together with the cost of pulp, account for almost 90% of our paper
costs. Although, in the long term, there is a clear


                                       86
<PAGE>

correlation between international U.S. dollar-denominated pulp prices,
reflecting the international nature of this commodity, and the prices we are
able to charge, fluctuations in exchange rate are not always immediately
reflected in our domestic prices. In the long term, when the international price
of pulp increases, the domestic price follows and our domestic sales in reais
also increase. In the short term, our domestic prices may deviate from the
international U.S. dollar-denominated pulp prices. Timing of the reflection of
the fluctuations in exchange rate in our prices may vary with the type of
product, generally as follows:

     o    immediately for commodity products, such as pulp and uncoated
          wood-free paper;

     o    with a relatively short lag for coated papers, due to the sale of
          imported products in the domestic market; and

     o    with some lag for other specialty papers with limited exposure to
          external factors.

     The percentage of our debt subject to fixed and floating interest rates is
as follows:
<TABLE>
<CAPTION>

<S>                                                        <C>                           <C>
                                                    As of December 31, 2001       As of December 31, 2000
                                                    -----------------------       -----------------------
Floating rate debt:
         Denominated in U.S. dollars............            37%                           51%
         Denominated in reais...................             9                            11
                                                            --                            --
             Subtotal...........................            46%                           62%

Fixed rate debt:
         Denominated in U.S. dollars............            54%                           38%
         Denominated in reais...................            --                            --
                                                            --                            --
             Subtotal...........................            54%                           38%
                                                           ---                           ---
                  Total.........................           100%                          100%
                                                           ===                           ===
</TABLE>

     Our foreign currency and interest rate swap contracts are effected to
mitigate the potential foreign currency exchange losses which would be generated
by our U.S. dollar-denominated liabilities in the event of a devaluation. We
make our export sales in U.S. dollars, which also helps us to mitigate the
potential losses in the event of a devaluation.

Interest Rate Risk

     Our floating interest rate exposure is primarily subject to the variations
of LIBOR as it relates to U.S. dollar-denominated borrowings and to the
variations of the TJLP, an annual long-term interest rate that includes an
inflation factor and is determined quarterly by the Central Bank. The TJLP was
fixed at 9.25% on December 31, 2000, and during 2000 averaged 10.75% per year.
On December 31, 2001, the TJLP was fixed at 10%, and during 2001 averaged 9.50%
per year.

     The interest rate on our cash, cash equivalents and held-to-maturity
investments denominated in reais is based on the CDI rate, the benchmark
interest rate set by the interbank market on a daily basis.

     The table below provides information about our significant interest
rate-sensitive instruments. For variable interest rate debt, the rate presented
is the weighted average rate calculated as of December 31, 2001.

                                       87
<PAGE>
<TABLE>
<CAPTION>
<S>                                               <C>      <C>     <C>      <C>       <C>       <C>

                                                                         As of December 31, 2001
                                                --------------------------------------------------------------------------
                                                    Expected Maturity Date
                                                ---------------------------------
                                                                             After                Fair       Average Annual
                                                    2002    2003     2004     2005      Total    Value(1)    Interest Rate
                                                    ----    ----     ----     ----      -----    --------    --------------
                                                                  (U.S.$ in millions)
Assets:
Cash and cash equivalents denominated in reais   $   137     $--      $--      $--    $   137   $   137        102% of CDI
Cash and cash equivalents denominated in U.S.
     dollars .................................        35      --       --       --         35        37           16.7%
Held-to-maturity investments denominated in
reais ........................................        70      --       24       --         94        94      103.5% of CDI
Held-to-maturity investments denominated in U.S.
     dollars ..................................       17      15       63      175        270       266           11.8%
Total cash, cash equivalents and held-to-maturity
     investments ...............................   $ 259   $  15    $  87    $ 175     $  536    $  534
                                                  =======  =======   =======  ======   =======    =======
Liabilities:
Short-term debt:
     Floating rate, denominated in U.S. ......
     dollars .................................   $   238   $  --    $  --    $  --    $   238   $   238    2.0% over Libor
     Fixed rate, denominated in U.S. dollars .       200      --       --       --        200       199           8.5%
     Floating rate, denominated in reais .....        20      --       --       --         20        20    3.0% over TJLP
         Total short-term debt ...............   $   458   $  --    $  --    $  --    $   458   $   457
Long-term debt:
     Floating rate, denominated in U.S. ......
     dollars .................................    $   --   $ 175   $  223   $  112    $   510   $   510    1.6% over Libor
     Floating rate, denominated in reais .....        --       9       14       51         74        74    3.0% over TJLP
                                                                    -------   -------    -------   -------
         Total long-term debt ................        --   $ 184   $  237      163    $   584   $   584
                                                           -------  -------   -------    -------   -------
Total debt ...................................    $  458   $ 184   $  237   $  163    $ 1,042   $ 1,041
                                                   ======= =======   =======  =======  ======== ==========
(1)   The methodology used to determine the fair value included in the table above is described in note 14 to our consolidated
      financial statements ...................
</TABLE>


Foreign Currency and Interest Rate Swaps

         We primarily use derivatives to hedge our U.S. dollar-denominated debt.
Because a large portion of our debt is denominated in U.S. dollars, we protect
ourselves from the effects of unfavorable exchange movements by entering into
foreign currency and interest rate swap contracts or Brazilian public bonds. See
note 14 to our consolidated financial statements for a discussion of the
accounting policies for derivatives and other financial instruments.

         Our counterparties are financial institutions, including Banco
Votorantim, a member of the Votorantim group. Banco Votorantim is a commercial
banking institution and is subject to Central Bank regulations. The rates that
we negotiate with Banco Votorantim generally reflect those available in the
current financial market. Our treasury department also compares these rates to
those offered by other banks before closing the deal in order to assure that we
receive the most favorable terms and conditions available for each transaction.

         At December 31, 2001, all swap transactions were conducted with Banco
Votorantim and refer to reais to U.S. dollar swap contracts. Our swap activities
are contracted specifically to fulfill our needs.

         The table below provides information about our foreign currency and
interest rate swap contracts:
<TABLE>
<CAPTION>
<S>                                     <C>    <C>    <C>   <C>      <C>          <C>         <C>            <C>

                                                                      As of December 31, 2001
                                       -------------------------------------------------------------------------------------
                                         Expected Maturity Date
                                       -------------------------------

                                                                             Fair Value of
                                                            After            Assets             Average Paying   Average
                                       2002   2003   2004    2004    Total   (Liabilities)(1)   Rate in Reais  Receiving Rate
                                       ----   ----   ----    ----    -----   ----------------   -------------  --------------
                                                        (U.S.$ in millions)
Foreign currency and interest rate
    swap contracts notional amount
Reais to U.S. dollars......             $--    $39    $--   $214     $253           $32          100% of CDI    13.1% per annum
                                                                                                                in U.S. dollars


                                       88
<PAGE>


         U.S. dollars to reais......     $9     $9     $8     $79     $105          $9         106.4% of CDI      11.3% per annum
                                                                                                                  in U.S. dollars
</TABLE>

--------------------
(1)  The methodology used to determine the fair value included in the table
     above is described in note 14 to our consolidated financial statements.


ITEM 12.          DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

         Not applicable.

                                    PART II

ITEM 13.          DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

         None.

ITEM 14.          MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
                  USE OF PROCEEDS
         None.

ITEM 15.          [Reserved]

ITEM 16.          [Reserved]

                                    PART III

ITEM 17.          FINANCIAL STATEMENTS

         Not applicable.

ITEM 18.          FINANCIAL STATEMENTS

         The following financial statements are filed as part of this annual
report, together with the report of the independent auditors:
<TABLE>
<CAPTION>

<S>                                                                               <C>

Report of Independent Auditors..............................................     F-3

Report of Independent Auditors of Aracruz S.A...............................     F-4

Consolidated Balance Sheets as of December 31, 2001 and 2000................     F-5

Consolidated Statements of Income for the years ended December 31, 2001, 2000    F-7
and 1999....................................................................

Consolidated Statements of Cash Flows for the years ended December 31, 2001,     F-9
2000 and 1999...............................................................

Consolidated Statements of Changes in Shareholders' Equity for the years ended   F-10
December 31, 2001, 2000 and 1999............................................

Notes to Consolidated Financial Statements..................................     F-11
</TABLE>

                                       89
<PAGE>

         All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.

ITEM 19.          EXHIBITS

Exhibit
Number   Description
-----    ------------
1+   English translation of the By-laws.

2**  Form of Amended and Restated Deposit Agreement among us, The Bank of New
     York, as depositary, and the Owners and Beneficial Owners of American
     Depositary Receipts, including the form of American Depositary Receipts.

2.1* Indenture, dated June 27, 1997, among Voto-Votorantim Overseas Trading
     Operations N.V., as issuer, The Chase Manhattan Bank, as trustee,
     registrar, transfer agent and paying agent, and S.A. Industrias Votorantim,
     Votorantim Celulose e Papel S.A., Celpav Celulose e Papel Ltda., and
     Companhia de Cimento-Portland Gaucho, as guarantors.

3.1+ Shareholders'Agreement of Aracruz Celulose S.A. dated January 22, 1988
     among the Lorentzen Business Group, the Safra Business Group, Companhia
     Souza Cruz Industria e Comercio, BNDESPAR and Billerud Aktiebolag.

3.2+ First Amendment and Ratification to the Shareholders' Agreement of Aracruz
     Celulose S.A. dated June 30, 1989.

3.3+ Terms of Adhesion to the Shareholders' Agreement of Aracruz Celulose S.A.,
     dated November 1, 2001.

4.1* Share Retention Agreement, dated May 27, 1993, among Industrias de Papel
     Simao S.A., Industria de Papel e Celulose de Salto S.A., KSR - Comercio e
     Industria de Papel S.A., Florin Florestamento Integrado S.A., Agro -
     Florestal Simao S.A., Risipar S.A. and International Finance Corporation.

4.2* Investment Agreement, dated May 27, 1993, between Industrias de Papel Simao
     S.A. and International Finance Corporation.

4.3* Guarantee Agreement, dated May 27, 1993, between Companhia de Cimento
     Portland Rio Branco and International Finance Corporation

4.4* Financing Agreement, dated February 3, 1987, among Banco Nacional de
     Desenvolvimento Economico e Social - BNDES, Industria de Papel Simao S.A.
     and International Finance Corporation.

4.5* Financing Agreement, dated January 31, 1992, between Banco Nacional de
     Desenvolvimento Economico e Social - BNDES and Industria de Papel Simao
     S.A.

4.6* Financing Agreement, dated August 13, 1997, between Banco Nacional de
     Desenvolvimento Economico e Social - BNDES and Industria de Papel Simao
     S.A.

4.7* Financing Agreement, dated February 26, 1996, between Banco Nacional de
     Desenvolvimento Economico e Social - BNDES and Industria de Papel Simao
     S.A.

4.8* Financing Agreement, dated February 10, 1998, between Banco Nacional de
     Desenvolvimento Economico e Social - BNDES and Celpav Celulose e Papel
     Ltda.

4.9*+  Pulp Supply Agreement, dated January 1, 1999, between Kimberly-Clark
       International and Votorantim International North America.

4.10*+ Technology Transfer Agreement, dated September 1, 1989, between Kanzaki
       Paper Mfg. Co., Ltd. and Industrias de Papel Simao S.A.

4.11*+ Second Amendment Agreement to Technology Transfer Agreement, dated
       October 4, 1999, between New Oji Paper Co., Ltd. and Industrias de Papel
       Simao S.A.

4.12*+ Second Addendum to the Industrial Technology License Agreement, dated as
       of October 4, 1999,



                                       90
<PAGE>
Exhibit
Number   Description
-----    ------------
       between the Registrant and Oji Paper Co., Ltd.

4.13*  Agreement, dated December 29, 1999, between the Registrant and Maspha
       Comercial Ltda.

4.14*  Amendment to the Investment Agreement, dated as of February 25, 2000,
       between the Registrant and International Finance Corporation.

4.15*  Amendment to the Loan Conversion Agreement, Share Retention Agreement and
       Guarantee Agreement, dated as of February 25, 2000, among the Registrant,
       Cimento Rio Branco S.A. and International Finance Corporation.

4.16+  Loan Agreement, dated October 29, 2001, among POBT Bank and Trust
       Limited, Newark Financial Inc. and VCP.

4.17+  Loan Agreement, dated October 26, 2001, among Banco Bradesco S.A., Grand
       Cayman, Newark Financial Inc. and VCP.

4.18+  Loan Agreement, dated October 26, 2001, among Unibanco-Uniao de Bancos
       Brasileiros S.A., Nassau Branch, Newark Financial Inc. and VCP.

4.19+  Loan Agreement, dated October 19, 2001, among Banco BBA-Creditanstalt
       S.A.- Nassau branch, Newark Financial Inc. and VCP.

4.20+  Offshore Export Prepayment Agreement No. G-5261/01, dated October 29,
       2001, between ABN Amro Bank N.V. and Newark Financial Inc.

4.21+  Term Loan Facility Letter, dated October 24, 2001, between Dresdner Bank
       Lateinamerika AG and Newark Financial Inc.

4.22+  Promissory Note, dated October 29, 2001, between Banco ABC Brasil S.A.,
       Cayman Islands branch, and Newark Financial Inc.

4.23+  Export Finance Agreement dated as of October 29, 2001 by and between VCP
       Exportadora e Participacoes S.A., Votorantrade N.V., S.A. Industrias
       Votorantim, Citrovita Agroindustrial Ltda., Cia. Nitroquimica Brasileira,
       Cia. Niquel Tocantins, Votorantim Celulose e Papel S.A., Votocel Filmes
       Flexiveis Ltda., Votorantim Mineracao e Metalurgica Ltda. and Cia.
       Mineira

6+     See note 2(j) to our financial statements for information explaining how
       earnings per share information was calculated.

8+     See note 2(b) to our financial statements for information regarding our
       subsidiaries.

-------------------

*    Incorporated herein by reference to our registration statement on Form F-1
     (No. 333-11766).

**   Incorporated herein by reference to our registration statement on Form F-6
     (No. 333-84964).

+    Portions of the exhibit have been omitted pursuant to a request for
     confidential treatment filed separately with the Securities and Exchange
     Commission.

+    Previously filed.





                                       91
<PAGE>




                                   SIGNATURES

     Pursuant to the requirements to Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all the requirements for filing
this annual report on Form 20-F and has duly caused this annual report or
amendment thereto to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        VOTORANTIM CELULOSE E PAPEL S.A.

                                        By: /s/ Valdir Roque
                                            -----------------------------------
                                            Name:  Valdir Roque
                                            Title:  Chief Financial Officer


                                        By: /s/ Raul Calfat
                                            -----------------------------------
                                            Name:  Raul Calfat
                                            Title:  Chief Executive Officer

Date:   July 12, 2002

<PAGE>


                        Consolidated Financial Statements

                        Votorantim Celulose e Papel S.A.

                        Years ended December 31, 2001, 2000 and 1999


<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

                        CONSOLIDATED FINANCIAL STATEMENTS

                                      Index

<TABLE>
<S>                                                                                     <C>
Report of Independent Auditors ....................................................     F-3

Report of Independent Auditors of Aracruz S.A. ....................................     F-4

Consolidated Balance Sheets as of December 31, 2001 and 2000 ......................     F-5

Consolidated Statements of Income for the Years Ended December 31, 2001, 2000
and 1999 ..........................................................................     F-7

Consolidated Statements of Cash Flows for the Years Ended December 31, 2001,
2000 and 1999 .....................................................................     F-9

Consolidated Statements of Changes in Shareholders' Equity for the Years Ended
December 31, 2001, 2000 and 1999 ..................................................     F-10

Notes to Consolidated Financial Statements ........................................     F-11
</TABLE>

                                       F-2

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders of
Votorantim Celulose e Papel S.A

We have audited the accompanying consolidated balance sheets of Votorantim
Celulose e Papel S.A. as of December 31, 2001 and 2000, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The financial statements of Aracruz Celulose S.A, (a corporation in
which the Company has a 12.35% equity interest), have been audited by other
auditors whose report has been furnished to us; insofar as our opinion on the
consolidated financial statements relates to balance sheet data included for
Aracruz Celulose S.A, it is based solely on their report.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, based upon our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Votorantim Celulose e Papel S.A. at
December 31, 2001 and 2000, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
2001, in conformity with accounting principles generally accepted in the United
States of America.

                   ERNST & YOUNG
                   Auditores Independentes S.C.
                   25P015199/O-6


                               Idesio S. Coelho Jr
                                     Partner

Sao Paulo, Brazil
January 28, 2002

                                       F-3

<PAGE>

PricewaterhouseCoopers [LOGO]

                     [LETTERHEAD OF PRICEWATERHOUSECOOPERS]


Report of Independent Accountants

To the Board of Directors and Stockholders of
Aracruz Celulose S.A.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of changes in stockholders'
equity, expressed in United States dollars, present fairly, in all material
respects, the financial position of Aracruz Celulose S.A. and its subsidiaries
at December 31, 2000 and 2001 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America. These consolidated financial statements are the responsibility of the
management of Aracruz Celulose S.A.; our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.


/s/ PricewaterhouseCoopers
PricewaterhouseCoopers                                           Vitoria, Brazil
Auditores Independentes                                         January 10, 2002

                                      F-4

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2000
                     (Expressed in millions of U.S. dollars)

<TABLE>
<CAPTION>
                                                                            2001         2000
                                                                     -------------------------------
  <S>                                                                <C>                 <C>
  Assets
  Current assets
    Cash and cash equivalents                                                172          489
    Held-to-maturity investments                                              87           17
    Unrealized gains from foreign currency and interest
       rate swaps                                                              -           36
    Trade accounts receivable                                                171          159
    Inventories                                                               60           63
    Deferred income tax                                                        3            6
    Other                                                                     15            8
                                                                     -------------------------------
  Total current assets                                                       508          778

  Property, plant and equipment, net                                       1,100          997


  Other assets
    Equity investees                                                         371            -
    Held-to-maturity investments                                             277            -
    Unrealized gains from foreign currency and interest
       rate swaps                                                             41            9
    Other                                                                     24            6
                                                                     -------------------------------
  Total other assets                                                         713           15








                                                                     -------------------------------
  Total assets                                                             2,321          1,790
                                                                     ===============================
</TABLE>

                                       F-5

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

                     CONSOLIDATED BALANCE SHEETS (Continued)
                           December 31, 2001 and 2000
        (Expressed in millions of U.S. dollars, except numbers of shares)

<TABLE>
<CAPTION>
                                                                            2001            2000
                                                                     ----------------------------------
  <S>                                                                <C>                    <C>
  Liabilities and Shareholders' equity
  Current liabilities
    Trade payable                                                             57              28
    Short-term debt                                                           69              74
    Current portion of long-term debt                                        389              94
    Payroll and related charges                                               12              13
    Income taxes                                                               3               4
    Dividends payable                                                         40              45
    Other                                                                     14              11
                                                                     ----------------------------------
  Total current liabilities                                                  584             269

  Long-term liabilities
    Long-term debt, less current portion                                     584             361
    Deferred income tax                                                       34              13
    Provision for tax, legal proceedings and other                            12              13
                                                                     ----------------------------------
  Total long-term liabilities                                                630             387

  Commitments and contingencies

  Shareholders' equity
    Preferred stock, no par value, 56,000,000,000 shares
      authorized, 17,182,209,232 shares issued                               553             553
    Common stock, no par value, 28,000,000,000 shares
      authorized,  21,140,490,321 shares issued                              767             767
    Additional paid-in-capital                                                23              23
    Treasury stock, at cost, 235,400,000 preferred shares                     (6)             (6)
    Appropriated retained earnings                                            27              19
    Unappropriated retained earnings                                         518             374
    Accumulated other comprehensive loss                                    (775)           (596)
                                                                     ----------------------------------
  Total shareholders' equity                                               1,107           1,134
                                                                     ----------------------------------
  Total liabilities and shareholders' equity                               2,321           1,790
                                                                     ==================================
</TABLE>


See notes to consolidated financial statements.

                                       F-6

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

                       CONSOLIDATED STATEMENTS OF INCOME
                  Years ended December 31, 2001, 2000 and 1999
       (Expressed in millions of U.S. dollars, except earnings per share)

<TABLE>
<CAPTION>
                                                                          2001         2000        1999
                                                                       -------------------------------------
<S>                                                                    <C>             <C>         <C>
Net operating revenue
 (Net of sales taxes: 2001 - $99; 2000 - $92 and 1999 - $67)
  Domestic sales                                                          443           537         392
  Export sales (Includes related party sales: 2001 - $194; 2000 -
     $196 and 1999 - $174)                                                211           237         196
                                                                       -------------------------------------
                                                                          654           774         588
Operating cost and expenses
  Cost of sales                                                           344           371         322
  Selling and marketing                                                    56            58          62
  General and administrative                                               32            33          27
  Other operating expenses (income), net                                    5            (2)          1
                                                                       -------------------------------------
                                                                          437           460         412
                                                                       -------------------------------------
Operating profit                                                          217           314         176

Non-operating income  (expenses)
  Financial income                                                         71            94         106
  Financial expenses                                                      (39)          (65)        (93)
  Foreign exchange losses, net                                             (8)          (14)        (69)
  Gain on sale of investee                                                  -             -          13
                                                                       -------------------------------------
                                                                           24            15         (43)
                                                                       -------------------------------------
Income before income tax, equity income of investee and
   cumulative effect of accounting change                                 241           329         133
  Income tax expense                                                      (59)          (80)        (35)
                                                                       -------------------------------------

Income before equity income of investee and cumulative effect of
   accounting change                                                      182           249          98

 Equity income of investee                                                  -             -           1

                                                                       -------------------------------------
Income before cumulative effect of accounting change                      182           249          99

 Cumulative effect of accounting change, net of tax                        10             -           -

                                                                       -------------------------------------
Net income                                                                192           249          99
                                                                       =====================================

Net income applicable to preferred stock                                   90           116          45
Net income applicable to common stock                                     102           133          54
                                                                       -------------------------------------
Net income                                                                192           249          99
                                                                       =====================================
</TABLE>


See notes to consolidated financial statements.

                                       F-7

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

                  CONSOLIDATED STATEMENTS OF INCOME (Continued)
                  Years ended December 31, 2001, 2000 and 1999
       (Expressed in millions of U.S. dollars, except earnings per share)

<TABLE>
<CAPTION>
Per share data:                                                               Years ended December 31,
                                                           -----------------------------------------------------------
                                                                          2001                    2000        1999
                                                           -----------------------------------------------------------
                                                             Before
                                                            cumulative  Cumulative
                                                            effect of    effect of
                                                            accounting  accounting     Net         Net        Net
                                                              change      change      Income     Income      Income
                                                           -----------------------------------------------------------
<S>                                                            <C>         <C>         <C>        <C>         <C>
Basic earnings per 500 shares - in U.S. dollars
  Preferred                                                    2.51        0.14        2.65       3.45        1.41
  Common                                                       2.28        0.13        2.41       3.13        1.28

Basic earnings per 1000 shares - in U.S. dollars
  Preferred                                                    5.03        0.28        5.31       6.89        2.81
  Common                                                       4.57        0.26        4.83       6.27        2.56

Weighted average number of shares outstanding (thousands)
    Preferred                                               16,946,809  16,946,809  16,946,809 16,867,058  15,973,367
    Common                                                  21,140,490  21,140,490  21,140,490 21,140,490  21,140,490
</TABLE>

See notes to consolidated financial statements.

                                       F-8

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 2001, 2000 and 1999
                     (Expressed in millions of U.S. dollars)

<TABLE>
<CAPTION>
                                                                            2001      2000        1999
                                                                         -------------------------------
<S>                                                                          <C>       <C>          <C>
Cash flows from operating activities
Net income                                                                   192       249          99
Adjustments to reconcile net income to cash provided by operating
   activities:
   Foreign exchange losses, net                                                8        14          69
   Deferred income tax                                                        19        24          27
   Depreciation and depletion                                                 52        63          63
   Cumulative effect of accounting change, net of tax                        (10)        -           -
   Disposals of property, plant and equipment                                  4         2          (2)
   Disposal of investee                                                        -         -         (13)
Changes in operating assets and liabilities
   Trade accounts receivable                                                 (35)       (8)        (66)
   Inventories                                                                (8)      (11)        (11)
   Other assets                                                              (10)       29          (2)
   Liabilities                                                                22        19          41
                                                                         -------------------------------
Net cash provided by operating activities                                    234       381         205

Cash flows from investing activities
  Held-to-maturity investments
    Purchases                                                               (329)      (32)       (187)
    Maturities                                                                 4       187         186
  Acquisition of property, plant and equipment                              (309)     (125)        (84)
  Investment in equity investee                                             (370)        -           -
  Proceeds from disposals of property, plant and equipment                     2         5           8
  Proceeds from sale of investee                                               -         -          23
  Loans to related parties                                                     -        66           9
                                                                         -------------------------------
Net cash provided (used) in investing activities                          (1,002)      101         (45)

Cash flows from financing activities
  Short-term debt                                                             13        (4)          6
  Long-term debt
    Issuances                                                                787       187          99
    Repayments                                                              (238)     (329)       (287)
  Acquisition of treasury shares                                               -        (6)          -
  Proceeds from sales of treasury shares                                       -        32           8
  Dividends paid                                                             (37)      (23)         (6)
                                                                         -------------------------------
Net cash provided by (used in) financing activities                          525      (143)       (180)
Effect of exchange rate changes on cash and cash equivalents                 (74)      (26)        (83)
                                                                         -------------------------------
Net increase (decrease) in cash and cash equivalents                        (317)      313        (103)
Cash and cash equivalents at beginning of year                               489       176         279
                                                                         -------------------------------
Cash and cash equivalents at end of year                                     172       489         176
                                                                         ===============================
</TABLE>

See notes to consolidated financial statements.

                                       F-9

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  Years ended December 31, 2001, 2000 and 1999
       (Expressed in millions of U.S. dollars, except numbers of shares)

<TABLE>
<CAPTION>
                                                                                   2001        2000         1999
                                                                                -------------------------------------
<S>                                                                             <C>            <C>          <C>
Preferred stock
  At beginning and end of year (2,520 shares issued in 1999)                       553          553          553

Common stock
  At beginning and end of year                                                     767          767          767

Additional paid-in-capital
  At beginning of year                                                              23            5            -
  Gain on sale of treasury stock                                                     -           18            5
                                                                                -------------------------------------
  At end of year                                                                    23           23            5

Treasury stock
  At beginning of year                                                              (6)         (14)         (17)
  Preferred stock acquired  ( 2000 - 235,400,000)                                    -           (6)           -
  Preferred stock  sold ( 2000 - 1,137,582,405 and 1999 - 283,600,000)               -           14            3
                                                                                -------------------------------------
  At end of year                                                                    (6)          (6)         (14)

Retained earnings
  Appropriated retained earnings
    At beginning of year                                                            19            9            7
    Transferred from unappropriated retained earnings                                8           10            2
                                                                                -------------------------------------
    At end of year                                                                  27           19            9

Unappropriated retained earnings
    At beginning of year                                                           374          188          114
    Net income                                                                     192          249           99
    Transferred to appropriated retained earnings                                   (8)         (10)          (2)
    Dividends
       Preferred                                                                   (19)         (23)         (10)
       Common                                                                      (21)         (30)         (13)
                                                                                -------------------------------------
    At end of year                                                                 518          374          188

Accumulated other comprehensive (loss) - Cumulative
     Translation Adjustments
     At beginning of year                                                         (596)        (489)         (51)
     Change for the year                                                          (179)        (107)        (442)
     Sale of investee                                                                -            -            4
                                                                                -------------------------------------
     At end of year                                                               (775)        (596)        (489)
                                                                                -------------------------------------
Shareholders' equity at end of year                                              1,107        1,134        1,019
                                                                                =====================================

Comprehensive income (loss)
   Net income                                                                      192          249           99
   Translation adjustments                                                        (179)        (107)        (438)
                                                                                -------------------------------------
  Comprehensive income (loss)                                                       13          142         (339)
                                                                                =====================================
</TABLE>

See notes to consolidated financial statements.

                                      F-10

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)


  1.  Operations

      Votorantim Celulose e Papel S.A. ("VCP" or "we") is a limited liability
      company constituted in accordance with the laws of the Federative Republic
      of Brazil and headquartered in the state of Sao Paulo.

      We produce eucalyptus pulp which we use in our own integrated paper
      manufacturing facilities or, to a lesser extent, sell in the domestic and
      foreign markets. We also have forestry operations which produce the pulp
      wood required for our production.

      Our business has experienced, and is likely to continue to experience,
      cycles relating to available industry capacity and general industry
      economic conditions. Our sales (volumes and prices) are effected by such
      conditions which are beyond our control.

      Although the economic situation in Brazil has remained relatively stable
      in recent years, a return to higher levels of inflation and currency
      fluctuations could adversely affect the Company's operations. In 1999,
      there was a significant devaluation of the Brazilian real in relation to
      the US dollar." (See Note 2.a).

      We are a member of the Votorantim Group, which has other interests in
      Brazil and abroad, principally in cement, metallurgy, agribusiness,
      chemicals and financial services. Our immediate parent company is Votocel
      Filmes Flexiveis Ltda., which is directly controlled by S.A. Industrias
      Votorantim, and which in turn is ultimately controlled by Hejoassu
      Administracao Ltda. ("Hejoassu"). Hejoassu is controlled by the Ermirio de
      Moraes Family.


  2.  Significant Accounting Policies

      We have prepared these financial statements in accordance with accounting
      principles generally accepted in the United States of America ("US GAAP"),
      using the U.S. dollar as our reporting currency. The accounting principles
      adopted under US GAAP differ in certain respects from those required under
      Brazilian GAAP, which we use to prepare our statutory financial statements
      as filed with the Comissao de Valores Mobiliarios (Brazilian Securities
      Commission or "CVM").

                                      F-11

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)


  2.  Significant Accounting Policies (Continued)

      a)  Translation of real amounts to U.S. dollars

          In accordance with Statement of Financial Accounting Standards
          ("SFAS") 52 ("Foreign Currency Translation") we have used the real as
          our functional. We translate our assets and liabilities from reais to
          U.S. dollars using the official exchange rates reported by the
          Brazilian Central Bank at the balance sheet date (December 31, 2001 -
          US$ 1.00 : R$ 2.3204; December 31, 2000 - US$ 1.00 : R$ 1.9554;
          December 31, 1999 - US$ 1.00 : R$ 1.7890) and revenues, expenses,
          gains and losses are translated using the average exchange rates for
          the year. We record translation gains and losses in the cumulative
          translation adjustment ("CTA") component of shareholders' equity. In
          2001 we have incorporated a foreign wholly owned subsidiary named
          Newark Financial INC, located in the British Virgin Islands which
          major activities are directly performed in U.S. dollars and
          accordingly has elected the U.S. dollars as its functional currency.

          In January 1999, the Brazilian Government announced that it would no
          longer establish ceilings and floors for the exchange rate of the real
          against foreign currencies. This change resulted in an immediate
          devaluation of the real with significant effects on our financial
          statements, when expressed in U.S. dollars, for the year ended
          December 31, 1999.

      b)  Principles of consolidation

          Our consolidated financial statements include the accounts of VCP and
          our directly and indirectly controlled subsidiaries, all of which are
          wholly owned. Significant intercompany accounts and transactions have
          been eliminated in the consolidation. The 12.35% owned equity
          investee, Aracruz Celulose S.A. ("Aracruz"), which we acquired during
          2001 (See note 3) and our 50 percent owned equity investee, Voto -
          Votorantim Overseas Trading Operations N.V. ("Voto") are accounted for
          on the equity method.

          Certain reclassification have been made to the prior years' financial
          statements to conform to the current year presentation.

                                      F-12

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)


  2.  Significant Accounting Policies (Continued)

      c)  Cash and cash equivalents

          We consider all highly liquid investments with a maturity of three
          months or less when purchased to be cash equivalents.

      d)  Held-to-maturity investments

          We consider our debt securities as held-to-maturity when we intend and
          have the ability to hold the securities to maturity. Held-to-maturity
          securities are carried at cost plus accrued income which is included
          in financial income in the statements of income.

      e)  Inventories

          Inventories, including timber, are stated at average acquisition or
          production cost, which is lower than market.

      f)  Property, plant and equipment

          Property, plant and equipment are stated at cost of acquisition or
          construction, including interest during the construction period.
          Expenditures which materially extend the useful lives of the existing
          facilities and equipment are capitalized. We depreciate property,
          plant and equipment costs using the straight-line method at rates we
          judge to be compatible with the useful lives, principally 25 years for
          plant and equipment, 10 years for furniture and fixtures and five
          years for vehicles. Depletion of forests is computed on the
          unit-of-production method, based on the volume of timber harvested in
          each period. Software costs capitalized are amortized on a
          straight-line basis over five years.

          Forest development costs, primarily project implementation costs
          (preparation of soil, planting, pest control and clearing, etc.) and
          on-going maintenance costs are capitalized as incurred. Through 2000,
          forests were normally harvested three times over a twenty-one year
          period and we amortized 60% of accumulated costs at the time of the
          first harvest, 26% of accumulated costs through the first harvest and
          65% of costs incurred since the first harvest at the time of the
          second harvest, and the remaining costs at the time of the third
          harvest. As a result of improvements in forest management techniques,
          including genetic improvement in trees, beginning in 2001 we now
          harvest and replant our forests approximately every seven years and
          capitalized costs are expensed at the time of each harvest.

                                       F-13

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)


  2.  Significant Accounting Policies (Continued)

      f)  Property, plant and equipment (Continued)

          We review our property, plant and equipment for possible impairment
          whenever events or changes in circumstances indicate that the carrying
          value of an asset or group of assets may not be recoverable on the
          basis of undiscounted future cash flows. The reviews are carried out
          at the lowest level of groups of assets to which we are able to
          attribute identifiable future cash flows. Asset groups are forestry
          projects or production facilities for paper and pulp. We adjust the
          net book value of the underlying assets if the sum of the expected
          future cash flows is less than book value. These reviews to date have
          not indicated the need to recognize any impairment losses.

      g)  Income taxes

          We account for income taxes in accordance with SFAS 109 - "Accounting
          for Income Taxes".

      h)  Revenues and expenses

          We recognize revenue and associated costs of sales at the time our
          products are shipped. Revenue is recorded net of sales returns of $7
          in 2001, $7 in 2000 and $5 in 1999. Our customers that purchase on
          credit agree to payment terms that effectively include finance
          charges. The finance charge on each sale is the difference between the
          amount the customer agrees to pay at the due date and the cash sale
          price. The finance charges are recognized over the payment period and
          are included in financial income.

          Research and development expenses are charged to expense as incurred
          and totaled approximately $1 in each of 2001, 2000 and 1999. Start-up
          expenses of new facilities and restructuring charges are also directly
          expensed.

          Shipping and handling costs are charged to selling and marketing
          expenses and totaled approximately $27, $28 and $25 in 2001, 2000 and
          1999, respectively.

      i)  Comprehensive income (loss)

          We report comprehensive income (loss) in accordance with SFAS 130
          ("Reporting

                                       F-14

<PAGE>

          Comprehensive Income") and have elected to present this in the
          statement of changes in shareholders' equity. In our case,
          comprehensive income (loss) comprises the results of our operations
          and the translation adjustments included in the "CTA" component of
          shareholders' equity.

                                       F-15

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)


  2.  Significant Accounting Policies (Continued)

      j)   Earnings per share

           In conformity with SFAS 128 ("Earnings per Share") we have presented
           earnings per share for each class of shares, taking into account that
           the preferred shares are entitled to a dividend 10% greater than that
           of the common shares. The computation has been made as if the net
           income for each period will be fully distributed. Earnings may be
           capitalized or otherwise appropriated, consequently such earnings
           would no longer be available as dividends. Therefore, there is no
           assurance that preferred shareholders will receive a 10% premium on
           undistributed earnings. We also may pay dividends through interest
           attributed to capital in accordance with our by-laws. The unit of
           1,000 shares is used because this is the basis for quotation and
           trading on the Brazilian stock exchanges. We have also presented
           earnings per 500 shares because this unit reflects the number of
           preferred shares represented by one of our American Depository
           Shares.

      k)   Use of estimates

           In order to prepare our financial statements in conformity with
           generally accepted accounting principles we make estimates and
           assumptions that affect the amounts that we reported in the financial
           statements and accompanying notes. Actual results could differ from
           our estimates.

      l)   Employee benefits and other related matters

           In March 2000 we began participation in a defined contribution plan
           which provides pension and post-retirement benefits (see Note 20). We
           also contribute to the Government pension, welfare and redundancy
           plans on behalf of our employees and these contributions are expensed
           as incurred. Most of our employees are members of unions, with which
           we enter into collective-bargaining arrangements annually. The
           liability for future compensation for employee vacations is accrued
           as earned.

      m)   Environmental matters

           Our production facilities and forestry operations are subject to a
           number of environmental risks which we seek to mitigate by strict
           operating procedures and investments in pollution control equipment
           and systems. Ongoing environmental compliance expenditures are
           expensed as incurred and new equipment and systems are capitalized.
           We believe that no provision for losses related to environmental
           matters is currently required based on prevailing laws and
           regulations in Brazil.

                                      F-16

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)


  2.  Significant Accounting Policies (Continued)

      n)   Accounting for Derivative Instruments and Hedging Activities

           As of January 1, 2001, we adopted Financial Accounting Standards
           Board Statement No. 133, "Accounting for Derivative Instruments and
           Hedging Activities" (Statement 133) which was issued in June, 1998
           and its amendments Statements 137, Accounting for Derivative
           Instruments and Hedging Activities--Deferral of the Effective Date of
           FASB Statement No. 133, and 138, Accounting for Derivative
           Instruments and Certain Hedging Activities issued in June 1999 and
           June 2000, respectively (collectively referred to as Statement 133).

           As a result of adoption of Statement 133, we recognize our foreign
           currency and interest rate swap agreements on the balance sheet at
           fair value and adjustments to fair value are recorded through income.
           Prior to adoption of Statement 133, we recognized our foreign
           currency and interest rate swap contracts on the balance sheet at
           contract value and adjustments to contract value were recorded
           through income. We accounted for the accounting change as a
           cumulative effect of an accounting principle. The adoption of
           Statement 133, resulted in a cumulative effect of accounting change
           of $10, net of applicable tax expense of $4, which resulted in a gain
           in the consolidated statement of income for the year ended December
           31, 2001.

                                      F-17

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)


3.    Incorporated and Acquisition of Company

     On October 3, 2001, our wholly-owned subsidiary VCP Exportadora e
     Participacoes S.A. through its wholly-owned subsidiary Newark Financial
     INC, which is incorporated in the British Virgin Islands, signed a Share
     Purchase and Sale Agreement under which, we agreed to acquire from Mondi
     Brazil Ltd. and Mondi International S.A ("Group Mondi") for $370,
     127,506,457 common shares of Aracruz Celulose S.A. ("Aracruz"),
     representing 28.0% of the voting shares capital and 12.35% of equity share
     capital of Aracruz. The transfer of the shares occurred on November 1, 2001
     when we became a member of the controlling group of Aracruz, together with
     Lorentzen and Safra Group, (each member owning 28% of the voting shares and
     with three seats on the board of directors), and BNDES Participacoes (with
     12.5% of the voting shares and one seat on the board of directors). This
     transaction is subject to approval by the Brazilian regulatory authorities
     and we believe such approval will be given. The excess of the cost of our
     investment in Aracruz over our portion of the underlying fair value of the
     net assets (excluding any possible adjustments for fair value of property,
     plant and equipment and intangible assets) amounted to $155. The excess of
     the cost of our investment over our portion of the underlying fair value of
     the net assets is tentative pending completion of appraisals of property,
     plant and equipment and intangible assets. The allocation may change with
     the completion of the pending procedures.

     Aracruz's summarized financial position at December 31, 2001 is as follows:

<TABLE>
      <S>                                                                                       <C>
      Currents assets                                                                             641
      Property, plant, and equipment, investments in affiliated company and other assets        2,137
      Current liabilities                                                                         425
      Long-term debt (long-term portion)                                                          537
      Total equity                                                                              1,738
</TABLE>


4.    Income Taxes

     Income taxes in Brazil include federal income tax and social contribution.
     The composite tax rate was 34% for 2001 and 2000 and 37% for 1999.

                                       F-18

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)


4.    Income Taxes (Continued)

      a) Income tax reconciliation

         Income tax expense computed at Brazil's statutory rate is reconciled to
         income tax expense in our consolidated statements of income for the
         years ended December 31, 2001, 2000 and 1999 as follows:

<TABLE>
<CAPTION>
                                                             2001           2000         1999
                                                      -----------------------------------------
<S>                                                   <C>           <C>             <C>
Income before income taxes                                    242            329         133
                                                      -----------------------------------------
Income tax expense at statutory tax rate                       82            112          49
Reconciliation of statutory to effective rate
   Effect of REFIS election (see below)                       (23)             -           -
   Tax exempt income                                            -              -          (6)
   Valuation Allowance                                          -              -          (7)
   Interest attributed to capital                               -            (19)          -
   Goodwill amortization for tax                                -            (11)         (1)
   Other                                                        -             (2)          -
                                                      -----------------------------------------
Income tax expense                                             59             80          35
                                                      =========================================
</TABLE>

         Due to our the enrollment in the Program of Tax Recovery (REFIS) we may
         elect annually for each year from 2001 to 2005 to calculate and pay our
         income taxes either based on the provisions of REFIS (an estimated tax
         basis which is based on net sales for the year adjusted by financial
         income and other income) or actual pretax income. For 2001 we elected
         to calculate and pay our income taxes based on the provisions of REFIS.

      b) Analysis of deferred tax balances

<TABLE>
<CAPTION>
                                                                 2001                 2000
                                                          ------------------------------------
<S>                                                       <C>                        <C>
   Deferred tax assets
     Preoperating costs capitalized for tax and other             10                   22
     Provision for tax, legal proceedings and other                -                    4
     Other                                                         4                    -
                                                          ------------------------------------
     Total deferred tax assets                                    14                   26
   Deferred tax liabilities
     Foreign currency and interest swap contracts                (12)                   -
     Property, plant and equipment                               (33)                 (33)
                                                          ------------------------------------
                                                                 (45)                 (33)
                                                          ------------------------------------
   Net deferred tax liabilities                                  (31)                  (7)
                                                          ====================================
</TABLE>

                                      F-19

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)


4.    Income Taxes (Continued)

       c)  Composition of provision for income tax

<TABLE>
<CAPTION>
                                                                2001             2000             1999
                                                          ---------------------------------------------------
           <S>                                            <C>                    <C>            <C>
           Current                                                40               56                8
           Deferred                                               19               24               27
                                                          ---------------------------------------------------
                                                                  59               80               35
                                                          ===================================================
</TABLE>


5.    Held-to-maturity investments

      The following is a summary of our held to maturity investments at December
      31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                                             2001
                                                  ------------------------------------------------------------
                                                                     Gross            Gross        Estimated
                                                    Amortized      Unrealized      Unrealized        Fair
                                                      Cost           Gains           Losses          Value
                                                  ------------------------------------------------------------
      <S>                                         <C>              <C>             <C>           <C>
      December 31, 2001
      In reais
         Bank Certificate of deposits                     54               1            -              55
         Debentures                                       34               5            -              39

      In U.S. dollars
          Brazilian Public Bonds                         262              12            -             274
                                                  ------------------------------------------------------------
      Total                                              350              18            -             368
                                                  ============================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                             2000
                                                  ------------------------------------------------------------
                                                                     Gross            Gross        Estimated
                                                    Amortized      Unrealized      Unrealized        Fair
                                                      Cost           Gains           Losses          Value
                                                  ------------------------------------------------------------
      <S>                                         <C>              <C>             <C>           <C>
      December 31, 2000
      In reais
         Debentures                                       15               2            -             17
                                                  ------------------------------------------------------------
      Total                                               15               2            -             17
                                                  ============================================================
</TABLE>

                                       F-20

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

5.   Held-to-maturity investments (Continued)

     The amortized cost and estimated fair value of our held-to-maturity
     investments at December 31, 2001, by contractual maturity, are shown below:

                                                Amortized        Estimated
      Maturity periods                            Cost           Fair Value
                                           -------------------------------------

      Due in less than one year                     83                87
      Due in one to three years                     97               105
      Due in three to five years                    79                83
      Due after five years                          91                93
                                           -------------------------------------
      Total                                        350               368
                                           =====================================

6.   Trade Accounts Receivable

                                                             2001          2000
                                                        ------------------------
      Export receivables, denominated in U.S. dollars         77           74
      Domestic receivables                                    98           88
      Allowance for doubtful accounts                         (4)          (3)
                                                        ------------------------
                                                             171          159
                                                        ========================

     During 2001, 2000 and 1999, no single customer or group represented more
     than 10% of our consolidated sales.

7.   Inventories

                                                      2001              2000
                                               ---------------------------------
      Finished products                                21                26
      Work in process                                   5                 6
      Raw materials and supplies                       30                27
      Imports in transit and other                      4                 4
                                               ---------------------------------
                                                       60                63
                                               =================================

                                      F-21

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

8.   Property, Plant and Equipment

                                                      2001              2000
                                                 -------------------------------
      Land                                              44                50
      Buildings                                         97                97
      Machinery, equipment and installations           766               807
      Forests                                          210               206
      Other                                             62                66
      Construction in process                          229                78
                                                 -------------------------------
                                                     1,408             1,304
      Accumulated depreciation and depletion          (308)             (307)
                                                 -------------------------------
                                                     1,100               997
                                                 ===============================

9.   Short-term debt

     Short-term debt represents commitments under recourse provisions to honor
     export receivables transferred to banks accounted for as secured
     borrowings. Historically, we have not been called upon to honor any
     material unpaid amounts.

     At December 31, 2001 and 2000, the weighted average interest rates on
     short-term debt were Libor plus 4.2% (6.1%) and Libor plus 1.4% (7.6%),
     respectively

                                      F-22

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

10.  Long-term debt

<TABLE>
<CAPTION>
                                                     Interest rate at
                                                     December 31, 2001        2001            2000
                                                                        -------------------------------
      <S>                                                               <C>                  <C>
      In U.S. dollars
        Voto loan                                          8.5%               200             200
        International Finance Corporation - IFC        LIBOR + 2.1%             1               6
        Syndicated Bank Loan                               4.9%               353               -
        Votorantrade N.V. loan                             4.9%                11               -
        Export credits                                 LIBOR + 1.3%           296             176
        Import credits                                 LIBOR+ 0.7%             18              13

      In reais
        Banco Nacional de Desenvolvimento
           Economico e Social - BNDES                  TJLP + 3.0 %            94              60
                                                                        -------------------------------
                                                                              973             455
      Less: current portion                                                  (389)            (94)
                                                                        -------------------------------
      Long-term portion                                                       584             361
                                                                        ===============================
</TABLE>

      Note: LIBOR = London Interbank Offered Rate. At December 31, 2001, the
            Libor rate was 1.98% per annum.
            TJLP  = "Taxa de Juros de Longo Prazo", a long-term interest rate
            reset quarterly by the Brazilian Central Bank. At December 31, 2001,
            the TJLP rate was 10% per annum.

     The export credits relate to pre-export advances usually with initial
     maturities between 24 and 60 months. Upon shipment the export credits are
     refinanced with short-term secured borrowings.

                                      F-23

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

  10. Long-term Debt (Continued)

      In December 1996, Voto received a bridge financing from ING Bearings for
      $300. Of this amount, $150 was advanced to us at that time. In June 1997
      Voto - Votorantim Overseas Trading Operations N.V. (a special purpose
      unconsolidated company owned 50% by us and 50% by S.A. Industrias
      Votorantim, also a member of the Votorantim Group) issued $400, 8.5% notes
      due 2005 ( "Voto Notes"), jointly and severally guaranteed by us and
      Cimento Rio Branco S.A., a subsidiary of S.A. Industrias Votorantim,
      members of the Votorantim Group (collectively the "Guarantors"). The
      bridge loan was paid in full with the proceeds of this issue and an
      additional $50 was transferred to us. On the total $200 intercompany loan,
      Voto charges us an interest rate identical to that which it pays to the
      holders of the notes. Under the Voto Notes indenture, each holder of the
      notes may upon notice require Voto to repurchase, in whole or in part, the
      notes on June 27, 2002 at a repurchase price of 99.5% of the principal
      amount plus accrued and unpaid interest. Also, under the Voto Notes
      indenture, Voto may upon notice repurchase the notes from holders, in
      whole but not in part, on June 27, 2002 at a repurchase price of 99.5% of
      the principal amount plus accrued and unpaid interest. In either case,
      Voto may procure any other person to purchase the notes that are subject
      to its repurchase.

      The intercompany loan from Voto has the same terms as the Voto Notes
      including a put and call option in 2002. If the call option is exercised
      by the holders of the Voto Notes, we will pay our loan to Voto prior to
      the payment dates on the Notes. The intercompany loan contract does not
      mention any discount on the payment of the loan in case the put and call
      option is exercised, and only sets the maximum amount that would be paid
      in 2002. Because we and SAIV are the shareholders of Voto, we have full
      control of the amount and the discount that will be exercised in the loan
      payment. We will pay to Voto the same amount that Voto will pay to holders
      of Notes. Any event of default with respect of the Notes will also
      constitute or give rise to an event of default with respect to the
      intercompany loan from Voto.

      Voto has no operation and its only significant liability was the
      non-current 8.5% $400 Notes and its only significant asset was the
      non-current 8.5% $400 loan receivable from us and SAIV. Current assets and
      current liabilities were less than $1 in 2001 and 2000. Stockhoders'
      equity was approximately $1 in 2001, 2000 and 1999. Net income was less
      than $1 for the years ended December 2001, 2000 and 1999.

      In connection with our guarantee of the Voto Notes we are subject to
      covenants, basically relating to the maintenance of a certain level of net
      borrowing (debt less our cash equivalents and held-to-maturity
      investments).

                                      F-24

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

 10.  Long-term Debt (Continued)

      The BNDES loans are secured by property, plant and equipment and a lien on
      certain land and personal guarantees of an owner of Hejoassu, our ultimate
      Parent Company. The IFC loan is secured by certain of our properties. The
      carrying amount of our assets securing these loans was approximately $215
      at December 31, 2001.

      In November 2001, Newark Financial Inc obtained a $370 a bridge financial
      from certain banks with maturity in February 2002. This loan was used to
      finance the acquisition of our investment in Aracruz. We have classified
      this bridge in long term liabilities because we have obtained a firm
      commitment from a financial institution that will provide us with a long
      financing. We will use the proceeds of this long term financing to repay
      the bridge loan.

      At December 31, 2001, long-term debt maturities are as follows:

                               2002                             389
                               2003                             184
                               2004                             237
                               2005                              79
                               2006                              56
                               Thereafter                        28
                                                        ---------------------
                                                                973
                                                        =====================

      We have considered the maturity of the Voto loan as 2002 because the Voto
      Notes are redeemable at each holder's or Voto's option in that year; the
      final maturity of the Voto Notes is 2005 if the notes are not so redeemed.
      We will pay the Voto loan on the same date the Voto Notes are redeemed.

      The Company has an unused line of credit agreement with BNDES for
      investment in property, plant and equipment of $142 subject to TJLP plus
      3% at December 31, 2001:

                                      F-25

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

11.   Commitments and Contingencies

      a)  We are party to certain legal proceedings in Brazil arising in the
          normal course of business, and have made provisions when we believe
          that we can reasonably estimate probable losses. In connection with
          some of these proceedings we have made deposits (included in other
          noncurrent assets - other in our balance sheet) which will only be
          released to us upon a judgment in our favor. The position of such
          provisions for tax and other litigation and deposits is as follows:

<TABLE>
<CAPTION>
                                              2001                           2000
                               -------------------------------------------------------------
          Type of proceeding       Deposits     Provisions      Deposits     Provisions
                               -------------------------------------------------------------
<S>                                    <C>            <C>           <C>            <C>
          Tax-related                  2              7             2              9
          Civil-related                -              2             -              2
          Labor-related                2              3             2              2
                               -------------------------------------------------------------
                                       4             12             4             13
                               =============================================================
</TABLE>

          The activity in our provision account for 2001, 2000 and 1999 were as
          follows:

                                                     2001      2000      1999
                                                 -------------------------------
          At beginning of year                       13        17        15
          Translation adjustment                     (2)       (1)       (5)
          Provisions for new legal proceedings        2         -         7
          Amounts paid to settle litigation          (1)       (3)        -
                                                 -------------------------------
          At end of year                             12        13        17
                                                 ===============================


      b)  We do not maintain insurance for our forests; rather, our policy is to
          self-insure against fire, disease and other risks to our forests. We
          have taken measures to mitigate these risks, but any losses from
          damage outside of our control would be for our own account.

                                      F-26

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

  11. Commitments and Contingencies (Continued)

      c)  In addition to the Voto Notes described in Note 10 we are the
          guarantor of the following loans of other companies of the Votorantim
          Group:

<TABLE>
<CAPTION>
                                                                         Amount of guarantee
                                               Date of expiration of      at December 31,
                                                   the guarantee                2001
                                              -------------------------------------------------
<S>                                             <C>                          <C>
          Votocel Filmes Flexiveis Ltda.
           Equipment finance                      10/15/2004                   15
</TABLE>

          At December 31, 2001, VCP has loans totaling $200 that are guaranteed
          by other companies of the Votorantim Group.

      d)  We provide guarantees to banks, not in excess of 180 days, which
          finance sales to certain of our selected customers. We recognize
          revenue on these sales at the time our products are shipped which is
          the time we transfer title to our customers. Under the vendor program
          we are the secondary obligor to the bank and monitor the amount due
          from the customer to the bank. We periodically review the adequacy of
          our allowance for estimated losses and adjust our allowance
          accordingly. At December 31, 2001, customer guarantees provided by us
          totaled $61 ($75 at December 31,2000). Our guarantees are usually
          secured by the personal guarantee of the customer's owner.

      e)  We lease forest land under operating leases from other companies of
          the Votorantim Group as a source for raw material for our products.
          The leases, most of which commenced in 1991, are typically for a term
          of 21 years. We are required to assure the timberlands are cleared and
          the soil quality recovered by the end of the lease term. Lease
          payments, equal to 30% of the market value of the wood harvested on
          the property, are payable after each harvest. We guarantee to the
          lessor a minimum harvest payment. Payments under these operating
          leases were approximately $1 in each of 2001, 2000 and 1999.

                                      F-27

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

  11. Commitments and Contingencies (Continued)

      f)  We have long-term sales contracts with certain of our customers. These
          contracts generally provide for sales of specified volumes of pulp at
          market prices. Early termination is provided for in the event of,
          among other things, a material breach, the insolvency of one of the
          parties or force majeure events of extended duration. One sales
          contract includes provisions that permit us to terminate the contract
          or reduce the quantities shipped if sales to the purchaser would
          exceed a specified percentage of our annual production capacity. These
          contracts, which began in 1999, represent not more than 30% of our
          current annual pulp production. The contracts expire from 2002 to
          2004.

      g)  We have commitments for capital expenditures amounted to approximately
          $305 at December 31, 2001.

  12. Shareholders' Equity

      Our by-laws require that we pay a mandatory dividend to our common and
      preferred shareholders of at least 25% of our annual net distributable
      income determined in accordance with Brazilian Corporate Law. As from
      1997, preferred shareholders are entitled to receive a dividend per share
      10% higher than common shareholders. In 2001, 2000 and 1999 we paid
      dividends in excess of the mandatory amount.

      The preferred shareholders may not vote at shareholders meetings but have
      the right to receive priority in repayment of their capital, in the case
      of liquidation.

      In accordance with the Brazilian Corporate Law and our by-laws we are
      required to make annual appropriations to certain reserves (appropriated
      retained earnings). These comprise mainly (a) 5% of the net income in our
      statutory accounts which must be transferred to a legal reserve until such
      reserve reaches 20% of our share capital and (b) appropriation of an
      amount equal to income tax rebates available for investments in certain
      underdeveloped regions of Brazil to an investment incentive reserve. The
      legal and investment incentives reserves cannot be used to distribute
      dividends to our shareholders.

                                      F-28

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

  12. Shareholders' Equity (Continued)

      Brazilian law permits the payment of dividends only in reais, limited to
      the unappropriated retained earnings in our financial statements prepared
      in accordance with Brazilian Corporate Law.

      The devaluation of the Real impacts the amount available for distribution
      when measured in U.S. dollars. Amounts reported as available for
      distribution in our statutory accounting records prepared under accounting
      principles set forth under Brazilian Corporate Law will decrease or
      increase when measured in U.S. dollars as the Real depreciates or
      appreciates, respectively, against the U.S. dollar. The devaluation of the
      Real results in net foreign exchange losses which are included in the
      results of income determined under accounting principles set forth under
      Brazilian corporate law and which reduces the amount of unappropriated
      earnings available for distribution. At December 31, 2001, we had
      unappropriated retained earnings of R$777 million (R$506 million in 2000)
      in our statutory books, equivalent, at the exchange rate at December 31,
      2001, to $335 ($259 in 2000).

      Dividends paid per thousand shares in U.S. dollars were as follows:

                                     2001             2000            1999
                                ------------------------------------------------

          Preferred                  1.02             0.65            0.16
          Common                     0.93             0.59            0.15

      Brazilian corporations are permitted to attribute interest on
      shareholders' equity similar to dividends declared, which is deductible
      for income tax purposes if the corporation opts to use the method of
      calculating the income tax based on pre-tax income. We elected to pay such
      interest to our shareholders on December 31, 2000, and accrued the amount
      with a direct charge to shareholders' equity. The distribution to the
      shareholders is subject to withholding income tax generally at the rate of
      15%.

                                       F-29

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

  13. Related Parties

      Balances and transactions with related parties are as follows:

<TABLE>
<CAPTION>
                                                   Nature and business purpose
                                                         of transactions                2001          2000
                                                 -------------------------------------------------------------

<S>                                                <C>                                  <C>           <C>
      Cash, cash equivalents and                    Surplus cash funds invested
      held-to-maturity investments                          with Group
        Votorantim Group company                       Financial institution
           Banco Votorantim S.A.                                                        406           254

      Trade accounts receivable                          Sales to trading
        Votorantim Group company                              company
           Votorantrade N.V.                                                             69            70

      Unrealized gains from foreign currency        Arising from swap contract
      and interest rate swaps                          transactions in which
                                                         the Group financial
        Votorantim Group company                        institution acts as
           Banco Votorantim S.A.                           counter-party                 41            45


      Long-term loans from related parties          Loans from related parties
        Votorantim Group company
          Voto-Votorantim Overseas Trading
             Operations N.V.                                                            200           200
             Votorantrade N.V.                                                           11             -
        Parent of a significant shareholder
             outside Votorantim Group
          Banco Nacional de Desenvolvimento
             Economico e Social - BNDES                                                  94            60
</TABLE>

      The above cash equivalent, held-to-maturity investments and loans earn
      interest at market rates.

                                      F-30

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

  13. Related Parties (Continued)

      The loan to Cimento Rio Branco S.A. was made on identical terms and
      conditions (including the 8.5% interest) as the $200 in proceeds
      transferred to us by Voto-Votorantim Overseas Trading Operations N.V. We
      believe that, the Guarantors, including Cimento Rio Branco, would not have
      been able to obtain a similar loan from an unrelated party at comparable
      terms had they obtained the financing individually. The purpose of that
      loan was to optimize the availability of funds offered by the market to
      finance other Votorantim Group needs.

      The business purpose of the loan from Voto - Votorantim Overseas Trading
      Operations N.V. was to finance our capital expenditures and to provide us
      an additional working capital. VCP, S.A. Industrias Votorantim, Companhia
      de Cimento Portland Rio Branco and Companhia de Cimento Gaucho
      (subsequently merged into Rio Branco) have guaranteed, jointly and
      severally, the $400 notes issued by Voto-Votorantim Overseas Trading
      Operations N.V. Through the joint and several guarantee, we and the other
      guarantors were able to secure higher rating and lower interest rate on
      the notes.

      Revenue, income and expenses from transactions with related parties were
      as follows:

                                                2001        2000         1999
                                           -------------------------------------

          Export sales revenue                   194         196         174
          Domestic sales revenue                   -           -           6
          Purchases of special papers              -           -           2
          Selling and marketing                    -           -           5
          Other operating income                   -           -           1
          Financial income                        50          76          63
          Financial expenses                      21          24          38

      Export sales revenue primarily relates to sales made to Votorantrade N.V.,
      domestic sales revenue relates to sales of pulp made to Salto, purchases
      of special papers relates to purchases from Salto, selling and marketing
      expenses relate to commissions payable to Votorantrade N.V., other
      operating income relates to fee received from Salto for administrative
      support services provided by us, financial income arises from loans made
      to related parties and investments made in Banco Votorantim, and financial
      expenses represent charges on intercompany loans from related parties.

                                       F-31

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

  14. Financial Instruments and Derivatives

      We primarily use foreign currency and interest rate swap contracts or
      Brazilian Public bonds indexed to U.S. dollar to hedge our U.S. dollar
      denominated debt. By entering into these contracts or purchasing Brazilian
      Public bonds, we partially protect ourselves from the effects of
      unfavorable exchange movements. Accordingly, if the real devalues against
      the U.S. dollar and results in a foreign exchange loss, we are at least in
      part protected by an offsetting gain from the swap contracts.

      We used the following methods and assumptions in estimating the fair value
      disclosures of our financial instruments:

      Cash and cash equivalents: The carrying amounts reported in our balance
      sheet for cash and cash equivalents approximate their fair values.

      Held-to-maturity investments: The carrying amounts reported in our balance
      sheet for held-to-maturity investments approximate their fair value.

      Long-and short-term debt: The carrying amounts of our short-term debt
      approximate their fair values. The fair values of our long-term debt were
      estimated based on available quoted rates for loans of substantially
      similar terms and maturities.

      Foreign currency and interest rate swap contracts: The fair values of our
      foreign currency and interest rate swap contracts were estimated based on
      quoted market prices of comparable contracts. At December 31, 2001 and
      2000 the notional amounts of our outstanding foreign currency and interest
      rate swap contracts were $253 and $243, respectively and their fair values
      were $32 and $59, respectively. In 2000 and 1999 we recognized these swap
      contracts on the balance sheet at contract value and adjustments to
      contract value were recorded through income. In 2001, with the adoption of
      Statement 133, we recognized these swap contracts on the balance sheet at
      fair value and adjustments to fair value were recorded through income. The
      actual cash settlement on the contracts occur at times specified in each
      agreement. We do not terminate any of our contracts prior to maturity.

                                       F-32

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

  14. Financial Instruments and Derivatives (Continued)

      The carrying amounts and fair values of our financial instruments at
      December 31 were as follows:

<TABLE>
<CAPTION>
                                                                 2001                       2000
                                                                 ----                       ----
                                                      ------------------------------------------------------
                                                        Carrying        Fair        Carrying       Fair
                                                         Amount        Value         Amount        Value
                                                      ------------------------------------------------------
<S>                                                        <C>           <C>           <C>          <C>
      Cash and cash equivalents                            172           173           489          491
      Held-to-maturity investments                         364           368            17           17
      Unrealized gains from foreign currency and
      interest rate swaps                                   41            41            45           59
      Short-term debt                                       69            69            74           74
      Long term-debt                                       973           972           455          454
</TABLE>

  15. Segment and Related Information

      a) Segment information

         The following information about segments is based upon information used
         by our senior management to assess the performance of our operating
         segments and decide on the allocation of resources. This approach is
         required by SFAS 131 ("Disclosure about Segments of an Enterprise and
         Related Information"), and has been applied for all periods presented.
         Our paper and pulp operations are based solely in Brazil.

         Intersegment revenues are accounted for at amounts which approximate
         those that would be obtained in a sale to third parties.

         The accounting policies underlying the financial information provided
         for the segments are based on Brazilian accounting principles used for
         statutory purposes. We evaluate segment performance information
         generated from the statutory accounting records. The local currency
         information related to statement of income data has been translated to
         U.S. dollars, for convenience purposes, at the average rate of each
         year presented. The information as at the balance sheet dates has been
         translated at the respective year-end exchange rates.

                                       F-33

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

15.  Segment and Related Information (Continued)

     a) Segment information (Continued)

<TABLE>
<CAPTION>
                                                         2001        2000        1999
                                                      ------------------------------------
        <S>                                           <C>           <C>          <C>
        Revenue
          Revenue from external customers
             Pulp                                         143          207           140
             Paper                                        511          567           448
                                                      ------------------------------------
          Total revenue from external customers           654          774           588

         Intersegment sales of pulp to paper
          Segment                                         183          228           176
                                                      ------------------------------------
             Total intersegment revenue                   183          228           176
                                                      ------------------------------------
         Total revenue                                    837        1,002           764
         Reconciling items
             Total intersegment revenue                  (183)        (228)         (176)
                                                      ------------------------------------
         Total consolidated revenue                       654          774           588
                                                      ====================================

<CAPTION>
                                                         2001         2000          1999
                                                      ------------------------------------
         <S>                                          <C>            <C>           <C>
         Depreciation and depletion expense
          Pulp                                             48           58            56
          Paper                                            21           23            25
                                                      ------------------------------------
            Total depreciation and depletion
               expense allocated to segments               69           81            81

         Reconciling items US GAAP
           Adjustments
            Pulp                                          (12)         (13)          (13)
            Paper                                          (5)          (5)           (5)
                                                      ------------------------------------
         Total depreciation and depletion
           Expense                                         52           63            63
                                                      ====================================
</TABLE>

        There are certain differences between the methodologies we use to
        determine the operating profit shown in the following table and
        operating profit reported in our US GAAP statement of income. For
        segment reporting purposes we defer start-up costs of new facilities and
        amortize them against operating profit over the subsequent 10 years. We
        also allocate depreciation to segments based on property, plant and
        equipment amounts which have been indexed for inflation, rather than the
        historical real amounts. Also, we depreciated our machinery, equipment
        and installations over 10 years up to December 31, 1996 and over 25
        years thereafter. These differences are reconciled as follows:

                                      F-34

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

15.  Segment and Related Information (Continued)

     a) Segment information (Continued)

<TABLE>
<CAPTION>
                                                                          2001       2000       1999
                                                                       --------------------------------
         <S>                                                           <C>           <C>        <C>
         Segment operating profit
           Pulp                                                            115        212        131
           Paper                                                            72         62         33
                                                                       --------------------------------
            Total segment operating profit                                 187        274        164

         Reconciling items - US GAAP
           Adjustments
           Difference in depreciation and
            amortization expense
            Pulp                                                            15         13         13
            Paper                                                            6          5          5
           Start-up costs
            Pulp                                                            (3)        (1)         -
            Paper                                                           (1)        (2)        (2)
           Other adjustments
            Pulp                                                             1         14         (2)
            Paper                                                           12         11         (2)
                                                                       --------------------------------
           Total pulp                                                      128        238        142
           Total paper                                                      89         76         34
                                                                       --------------------------------
          Total operating profit                                           217        314        176
          Financial income                                                  71         94        106
          Financial expenses                                               (39)       (65)       (93)
          Foreign exchange losses, net                                      (8)       (14)       (69)
          Gain on sale of investee                                           -          -         13
                                                                       --------------------------------
         Income before income tax and equity income of investees
          and cumulative effect of accounting change                       241        329        133
                                                                       ================================
</TABLE>

                                      F-35

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

15.  Segment and Related Information (Continued)

     a) Segment information (Continued)

<TABLE>
<CAPTION>
                                                                        2001        2000       1999
                                                                      -------------------------------
        <S>                                                           <C>          <C>         <C>
        Segment assets
           Pulp                                                          683         585         603
           Paper                                                         385         362         387
                                                                      -------------------------------
            Total segment assets                                       1,068         947         990

         Reconciling items to US GAAP
           Pulp                                                           22          34          38
           Paper                                                          10          16           4
                                                                      -------------------------------
            Total pulp                                                   705         619         641
            Total paper                                                  395         378         391
                                                                      -------------------------------
              Total property, plant and equipment                      1,100         997       1,032

         Reconciling items - corporate assets
           Cash and cash equivalents                                     172         489         176
           Held-to-maturity investments                                  364          17         174
           Trade accounts receivable                                     171         159         162
           Equity investees (pulp)                                       371           -           -
           Other corporate assets                                        143         128         262
                                                                      -------------------------------
         Total assets                                                  2,321       1,790       1,806
                                                                      ===============================

<CAPTION>
                                                                        2001        2000        1999
                                                                      -------------------------------
        <S>                                                           <C>          <C>         <C>
        Capital expenditures
          Pulp                                                           217          72          49
          Paper                                                           81          48          30
                                                                      -------------------------------
            Total segment capital expenditures                           298         120          79

        Reconciling items - US GAAP
          Adjustment
          Capitalized interest
            Pulp                                                           8           4           3
            Paper                                                          3           1           2
                                                                      -------------------------------
              Total capitalized interest                                  11           5           5
                                                                      -------------------------------
                Total pulp                                               225          76          52
                Total paper                                               84          49          32
                                                                      -------------------------------
        Total capital expenditures                                       309         125          84
                                                                      ===============================
</TABLE>

                                      F-36

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)

15.  Segment and Related Information (Continued)

     b)  Export sales by region

         The following table includes our sales made directly to unaffiliated
         customers (the final customers) as well as our sales made to
         Votorantrade and related parties (also a member of the Votorantim
         Group) to the final customers.

<TABLE>
<CAPTION>
                                                        2001                2000                 1999
                                                ----------------------------------------------------------------
                                                  Paper      Pulp      Paper      Pulp       Paper      Pulp
                                                ----------------------------------------------------------------
          <S>                                   <C>          <C>       <C>        <C>        <C>        <C>
          North America                             37         47        18         51        16         38
          Europe                                    26         45        37         77        41         44
          Middle East and Asia                       4         15         5         19         6         21
          Africa                                     2          -         -          -         -          -
          South America, other than Brazil          35          -        30          -        30          -
                                                ----------------------------------------------------------------
                                                   104        107        90        147        93        103
                                                ================================================================
</TABLE>

16.  Concentration of Credit Risk

     We are potentially subject to credit risk with respect to our cash
     equivalents, held-to-maturity investments, guarantees provided to banks
     which finance our customers, and derivative contracts. We limit our risk
     associated with cash equivalents and held-to-maturity investments by
     placing our investments with Banco Votorantim S.A. and other highly rated
     financial institutions for relatively short periods of time and we only
     take out derivative contracts with financially sound counter-parties. With
     respect to trade receivables and guarantees, provided to banks financing
     our customers, we perform initial and ongoing credit evaluations of our
     customers and, when deemed necessary, obtain collateral or letters of
     credit to protect our interests. Additionally, most of our export sales to
     the US and Europe are secured by letters of credit. We establish an
     allowance for doubtful accounts against receivables we believe will not be
     fully collected. The provision for doubtful accounts was $1 in 2001 and $5
     in 1999.

                                      F-37

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)


17.   Supplemental Cash Flow Information

<TABLE>
<CAPTION>
                                                                        2001       2000        1999
                                                                     ----------------------------------
       <S>                                                           <C>          <C>        <C>
       Income tax paid                                                    34         39           4
       Interest paid                                                      38         57          69
</TABLE>

      Interest capitalized on construction in process in each of the periods
      was: 2001 - $11; 2000 - $5 and 1999 - $5


18.   Supplemental Financial Income and Financial Expense Information

<TABLE>
<CAPTION>
                                                                       2001        2000       1999
                                                                     ----------------------------------
       <S>                                                           <C>          <C>        <C>
       Financial income
         Interest income on cash equivalents                              41         43          44
         Held-to-maturity investments
               Realized gains                                              -         17          31
               Unrealized gains                                           16         12           7
         Interest income on credit sales                                   1          2           6
         Other                                                            13         20          18
                                                                     ----------------------------------
                                                                          71         94         106
                                                                     ==================================

       Financial expenses
         Interest and charges on real debt                                 6         11          20
         Interest and charges on U.S. dollar debt                         30         49          52
         Other                                                             3          5          21
                                                                     ----------------------------------
                                                                          39         65          93
                                                                     ==================================
</TABLE>


19.   Sale of Investee

      On December 29, 1999, we sold our 51% interest in Industria de Papel de
      Salto Ltda. to Arjo Wiggins Participacoes e Comercio Ltda. The purchase
      price was $23 in cash. On this sale we made a gain of $13. Under the terms
      of the sale, we have indemnified Arjo Wiggins against certain losses in
      excess of amounts recorded limited to R$22 million (approximately $10)
      until 2005. No amounts have been paid under this indemnification and we
      believe such amounts ultimately paid, if any, will not be significant.


                                      F-38

<PAGE>

                        VOTORANTIM CELULOSE E PAPEL S.A.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                  Years ended December 31, 2001, 2000 and 1999
            (In millions of U.S. dollars, unless otherwise indicated)


20.   Defined Contribution Plan

      In March 2000 we began participation in a defined contribution plan of the
      Votorantim Group which is available to all of our employees. For employees
      below a certain income level we will match 100% of the employee's
      contribution up to 1.5% of the employee's compensation. For employees
      above that income level we will match 100% of the employee's contribution
      up to 6% of the employee's compensation. At our option we may also make
      additional contributions. Our contributions will vest in varying
      percentages depending on the employee's years of service and will fully
      vest upon the employee's retirement, death or disability, provided the
      employee has at least one year of service. Our contribution was $1 in 2001
      and 2000.

21.   Public Offering of our American Depositary Shares

      In April 2000 we made our initial public offering of our American
      Depositary Shares. Each American Depositary Share represents 500 of our
      preferred shares. We sold 2,047,648 American Depositary Shares, and
      certain of our shareholders sold 5,872,352 American Depositary Shares. The
      U.S. underwriters offered 6,336,000 American Depositary Shares in the
      United States and Canada, and the international managers offered 1,584,000
      American Depositary Shares outside the United States and Canada. In
      addition, the Brazilian underwriters offered 440,000,000 preferred shares
      in Brazil. Our preferred shares are traded on the Sao Paulo Stock Exchange
      and the other Brazilian stock exchanges under the symbol "VCPA4." Our
      American Depositary Shares are traded on the New York Stock Exchange under
      the symbol "VCP."

                                      F-39