UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 20-F

/ /  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, 2002

                                       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 on which
                                                registered:
Preferred Shares, without par value            New York Stock Exchange*
American Depositary Shares (as evidenced       New York Stock Exchange
 by American Depositary Receipts), each
 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, 2002.

                        21,140,490 Shares of Common Stock
                      17,182,209 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 LLP
                              599 Lexington Avenue
                               New York, NY 10022

<PAGE>

                                TABLE OF CONTENTS

                                                                           Page


                                     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..................................................14
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS........................40
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES..........................60
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS...................65
ITEM 8. FINANCIAL INFORMATION...............................................66
ITEM 9. THE OFFER AND LISTING...............................................72
ITEM 10. ADDITIONAL INFORMATION.............................................74
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........84
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. CONTROLS AND PROCEDURES............................................89
ITEM 16. [Reserved].........................................................90

                                    PART III

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




<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    "the Ermirio de Moraes family" are to the families of Antonio Ermirio
          de Moraes, Ermirio Pereira de Moraes and Maria Helena de Moraes
          Scripilliti;

     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.

     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 3--Key Information--Selected
Financial Data--Exchange Rates" for information regarding exchange rates
applicable to the Brazilian currency since 1998.

     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. Our reporting currency in this annual report for
all periods is the U.S. dollar.

     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, and Valois Vision, which is a monthly report on the pulp markets. In
2002, Bracelpa restated some of the results of its reports relating to 2001
figures, which were used by us in prior annual reports. We have restated these
figures in this annual report to reflect those restatements. 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.

<PAGE>

                           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:

     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;

     o    ability to successfully undertake expansion projects and manage the
          engineering, construction and regulatory challenges and costs involved
          in such projects; and

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

     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

A. Selected Financial Data

     We maintain our books and records in reais, which are the basis for our
statutory financial statements prepared as prescribed under Law No. 6,404/76, as
amended, known as the Brazilian corporate law, and used to

                                       2
<PAGE>

determine income taxes and mandatory minimum dividend calculations. The
statutory financial statements (not included in this annual report) are prepared
in accordance with accounting practices adopted in Brazil, or Brazilian GAAP,
which are based on the Brazilian corporate law, the rules and regulations of the
CVM, and the accounting standards issued by the Instituto dos Auditores
Independentes do Brasil, the Brazilian Institute of Independent Accountants, or
IBRACON. We have also prepared consolidated balance sheets at December 31, 2002
and 2001 and the related consolidated statements of income, cash flows and
changes in shareholders' equity for the years ended December 31, 2002, 2001 and
2000, 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 year ended December 31, 2002 is derived from our U.S.
GAAP financial statements audited by PricewaterhouseCoopers Auditores
Independentes, Sao Paulo, Brazil. The selected financial information at and for
the years ended December 31, 2001 and 2000 is derived from our U.S. GAAP
financial statements audited by Ernst & Young Auditores Independentes S.C., Sao
Paulo, Brazil. The selected financial information at and for the years ended
December 31, 1999 and 1998 is derived from our U.S. GAAP financial statements.

     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>
<CAPTION>
                                                                         For the Years Ended December 31,
                                                        -----------------------------------------------------------------------
                                                          2002            2001            2000             1999          1998
                                                          ----            ----            ----             ----          ----
                                                              (U.S. dollars in millions, unless otherwise indicated)
<S>                                                      <C>        <C>            <C>               <C>            <C>
STATEMENT OF INCOME DATA
      Net operating revenue:
      Domestic sales.................................. U.S.$  410     U.S.$   443     U.S.$  537        U.S.$  392   U.S.$  393
      Export sales....................................        199             211            237               196          207
                                                       ----------      ----------     ----------        ----------   ----------
      Total net sales.................................        609             654            774               588          600

      Operating costs and expenses:
      Cost of sales...................................        329             344            371               322          435
      Selling, marketing, general and
      administrative..................................         88              88             91                89          105
      Other operating expenses (income), net..........         15               5              2                 1            3
                                                       ----------      ----------     ----------        ----------   ----------
      Total...........................................        432             437            460               412          543
                                                       ----------      ----------     ----------        ----------   ----------
      Operating profit................................        177             217            314               176           57
                                                       ----------      ----------     ----------        ----------   ----------
      Non-operating income (expenses):
      Financial income, net...........................         14              32             29                13           27
      Foreign exchange losses, net....................        (11)             (8)           (14)              (69)         (54)
      Gain on sale of affiliate.......................         --              --             --                13           --
                                                       ----------      ----------     ----------        ----------   ----------
      Total...........................................          3              24             15               (43)         (27)
                                                       ----------      ----------     ----------        ----------   ----------
      Income before income tax, equity in results
           of affiliates and cumulative effect of
           accounting change..........................        180             241            329               133           30
      Income tax expense..............................         10             (59)           (80)              (35)         (14)
                                                       ----------      ----------     ----------        ----------   ----------
      Income before equity in results of
           affiliates and cumulative effect of
           accounting change..........................        190             182            249                98           16
      Equity income (loss) of affiliates..............       (121)             --             --                 1           (1)
                                                       ----------      ----------     ----------        ----------   ----------
      Income before cumulative effect of accounting
           change.....................................         69             182            249                99           15
      Cumulative effect of accounting change, net
      of tax..........................................         --              10             --                --           --
                                                       ----------      ----------     ----------        ----------   ----------
      Net income...................................... U.S.  $ 69      U.S.$  192     U.S.$  249        U.S.$   99   U.S.$   15
                                                       ==========      ==========     ==========        ==========   ==========
      Net income applicable to preferred stock........ U.S.  $ 32      U.S.$   90     U.S.$  116        U.S.$   45   U.S.$    7
      Net income applicable to common stock...........         37             102            133                54            8
                                                       ----------      ----------     ----------        ----------   ----------

      Net income...................................... U.S.  $ 69      U.S.$  192     U.S.$  249        U.S.$   99   U.S.$   15
                                                       ==========      ==========     ==========        ==========   ==========
Basic earnings per 500 shares (in U.S.
    dollars):(1)
Preferred............................................. U.S. $0.96      U.S.$ 2.65     U.S.$ 3.45        U.S.$ 1.41   U.S.$ 0.21
Common................................................       0.87            2.41           3.13              1.28         0.19

Basic earnings per 1,000 shares (in U.S.
    dollars):(1)
Preferred.............................................       1.91            5.31           6.89              2.81         0.42
Common................................................       1.74            4.83           6.27              2.56         0.38

Weighted average number of shares outstanding
    (in thousands):
Preferred............................................. 17,021,387      16,946,809     16,867,058        15,973,367   16,607,199
Common................................................ 21,140,490      21,140,490     21,140,490        21,140,490   21,140,490

Dividends per 1,000 shares (in U.S.
    dollars):(2)
Preferred............................................. U.S. $0.91      U.S.$ 1.02      U.S.$0.65         U.S.$0.16    U.S.$0.24
Common................................................       0.83            0.93           0.59              0.15         0.22

</TABLE>


                                       4
<PAGE>



<TABLE>
<CAPTION>

                                                    -----------------------------------------------------------------------
                                                                        For the Years Ended December 31,
                                                    -----------------------------------------------------------------------
                                                        2002           2001           2000           1999           1998
                                                        ----           ----           ----           ----           ----
                                                                       (U.S. dollars in millions)
<S>                                                 <C>             <C>             <C>            <C>            <C>
BALANCE SHEET DATA
Cash and cash equivalents.......................... U.S.$  90       U.S.$ 172       U.S.$ 489      U.S.$ 176      U.S.$279
Held-to-maturity investments(3)....................       320             364              17            174           269
Property, plant and equipment, net.................       907           1,100             997          1,032         1,496
Investment in goodwill.............................       218             216              --             --            --
Total assets.......................................     1,918           2,321           1,790          1,806         2,416
Short-term debt(4).................................        66              69              74             82            76
Long-term debt, including current portion..........       973             973             455            601           843
Shareholders' equity...............................       767           1,107           1,134          1,019         1,373
</TABLE>

<TABLE>
<CAPTION>
                                                    -----------------------------------------------------------------------
                                                                        For the Years Ended December 31,
                                                    -----------------------------------------------------------------------
                                                        2002           2001           2000           1999           1998
                                                        ----           ----           ----           ----           ----
                                                               (U.S. dollars in millions, except for percentages)
<S>                                                 <C>             <C>            <C>            <C>           <C>
OTHER FINANCIAL DATA
Gross margin.......................................    46.0%           47.4%           52.1%          45.2%         27.5%
Operating margin...................................    29.1%           33.2%           40.6%          29.9%          9.5%
Adjusted EBITDA(5)................................. U.S.$228        U.S.$269       U.S.$ 377      U.S.$ 239     U.S.$ 133
Capital expenditures(6)............................      317             309             125             84           120
Acquisition of interest in equity
affiliate(7).......................................       --             370              --             --            --
Goodwill impairment in investee(8)  ...............      136              --              --             --            --
Depreciation and depletion(9)......................       51              52              63             63            76
Cash flow provided by (used in):
   Operating activities............................      185             234             381            205           150
   Investing activities............................     (260)         (1,002)            101            (45)         (349)
   Financing activities............................       36             525            (143)          (180)           51
</TABLE>

<TABLE>
<CAPTION>

                                                    -----------------------------------------------------------------------
                                                                        For the Years Ended December 31,
                                                    -----------------------------------------------------------------------
                                                        2002           2001           2000           1999           1998
                                                        ----           ----           ----           ----           ----
<S>                                                     <C>            <C>            <C>            <C>           <C>
OPERATIONAL DATA
Number of employees (at period end)................     3,848          3,767          3,658          3,682         3,840
Nominal production capacity (thousand metric
tons):
   Pulp............................................       850            800            800            800           800
   Paper...........................................       655            655            655            635           635
Sales volumes (thousand metric tons):
Domestic market:
   Market pulp.....................................        82             85            100             84            90
   Paper...........................................       439            437            424            369           306
     Printing and writing..........................       353            357            337            299           239
     Thermal and carbonless........................        55             52             49             43            37
     Other specialty papers(10)....................        31             28             38             27            30
International market:
   Market pulp.....................................       253            258            240            232           177
   Paper...........................................       132            133            105            137           172

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

(1)  Based on the weighted average number of shares outstanding for each period.
     For additional information on earnings per share, see Note 2(k) 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)  "Adjusted EBITDA" means earnings before financial income, financial
     expenses, translation (losses) gains, foreign exchange (losses) gains, gain
     on sale of affiliate, income taxes, equity income (loss) of affiliates,
     cumulative effect of accounting change, net of tax, depreciation,
     amortization and depletion. Adjusted 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 Adjusted EBITDA (as defined above) may not be comparable
     with EBITDA as defined by other companies. Although Adjusted EBITDA (as
     defined above) does not provide a U.S. GAAP measurement of operating

                                       5
<PAGE>

     cash flows, our management uses it to measure our operating performance and
     it is commonly used by financial analysts and others in the pulp and paper
     industry.


     Adjusted EBITDA is calculated as follows:

<TABLE>
<CAPTION>

                                         2002         2001          2000          1999         1998
                                         ----         ----          ----          ----         ----
<S>                                      <C>           <C>          <C>           <C>           <C>
    Net operating revenue .........       609           654          774           588           600
      Subtract:
      Cost of sales................      (329)         (344)        (371)         (322)         (435)
      Selling and marketing........       (58)          (56)         (58)          (62)          (62)
      General and administrative...       (30)          (32)         (33)          (27)          (43)
       Other operating expenses,
         net.......................       (15)           (5)          (2)           (1)           (3)
      Add:
       Depreciation and depletion..        51            52           63            63            76
    Adjusted EBITDA................       228           269          377           239           133
</TABLE>

(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. of
     U.S.$155 million over the underlying fair value of net assets on the
     acquisition of a 12.35% interest in the total capital of Aracruz Celulose
     S.A. Consistent with Statement of Financial Accounting Standard (SFAS) No.
     142, "Goodwill and Other Intangible Assets," this excess has not been
     amortized.

(8)  Pursuant to Accounting Principles Board Opinion No. 18, "The Equity Method
     of Accounting for Investment in Common Stock," we reduced the carrying
     value of our investment in Aracruz Celulose S.A. to quoted market value at
     December 31, 2002. This impairment provision of U.S.$136 million (gross of
     deferred income tax effects of U.S.$46 million) was charged directly to
     income ("Equity loss of investee").

(9)  SFAS No. 142, "Goodwill and Other Intangible Assets," requires that,
     starting in 2002, goodwill and identifiable indefinite-lived intangible
     assets no longer be amortized but instead tested for impairment at least
     annually and that intangible assets with finite useful lives be amortized
     over their respective estimated useful lives to their estimated residual
     values, and reviewed for impairment. As noted in footnote (8) above, all
     goodwill was written off in 2002.

(10) Includes sales of third-party products by KSR and sales of specialty papers
     produced at the Mogi das Cruzes mill.

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. The real reached a low of
R$1.4659 on January 15, 1999 and a high of R$3.9552 on October 22, 2002. At June
24, 2003, the commercial market rate for purchasing U.S. dollars was R$2.8616 to
U.S.$1.00. We cannot assure you that the real will not appreciate or devalue
substantially in the near future. See "Item 5--Operating and Financial Review
and Prospects--Overview--Brazilian Economic Environment."

                                       6
<PAGE>

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

<TABLE>
<CAPTION>
                                                         Exchange Rate of Reais per U.S.$1.00
--------------------------------------------------------------------------------------------------
Year Ended December 31,                          Low          High     Average(1)      Period-end
-----------------------------------------        ---          ----     ---------       ----------
<S>                                            <C>             <C>        <C>             <C>
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
2002.....................................      2.2709          3.9552     2.9203          3.5333
</TABLE>

                                           Exchange Rate of Reais per U.S.$1.00
                                           ------------------------------------
Month Ended                                         Low            High
-----------                                         ---            ----
December 31, 2002..............................   3.4278          3.7980
January 31, 2003...............................   3.2758          3.6623
February 28, 2003..............................   3.4930          3.6580
March 31, 2003.................................   3.3531          3.5637
April 30, 2003.................................   2.8898          3.3359
May 31, 2003...................................   2.8653          3.0277
June (through June 24), 2003...................   2.8491          2.9780

-------------------
Source:  Central Bank.

(1)  Represents the daily average exchange rate during each of the relevant
     periods.


B.   Capitalization and Indebtedness

     Not applicable.

C.   Reasons for the Offer and Use of Proceeds

     Not applicable.

D.   Risk Factors

     We are subject to various risks resulting from changing competitive,
economic, political and social conditions that could harm our business, results
of operations or financial condition. The risks described below are not the only
ones we face.

Risks Relating to VCP and the Pulp and Paper Industry

     The market prices for our products are cyclical.

     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 and 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
fell in 2001 to approximately an average of U.S.$400 per ton in the second

                                       7
<PAGE>

half of 2001. In the second quarter of 2002, pulp prices increased and reached
approximately U.S.$510 per ton, but, at the end of 2002, they decreased to an
average of approximately U.S.$470 per ton. 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 the 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 the domestic pulp market, we face competition from larger
          international companies that have greater ability than we do to
          support strategic expenditures directed to increase market share; and

     o    in the international pulp and paper markets, we compete with larger
          competitors that compared to us 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, logistical costs of
and tariff rates on importing 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, water, chemicals and labor. Some of our competitors have greater
financial and marketing 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 and results
of operations.

     As part of our strategy to increase our international market share and
improve our competitiveness through greater economies of scale, we may expand
one or more of our production facilities. For example, we recently completed the
expansion of our pulp production capacity at the Jacarei mill by 570,000 tons,
which raised our total current annual installed pulp production capacity from
850,000 to 1.42 million tons per year. This project is currently in the initial
operational phase and we expect it to be fully operational by the end of 2003.
The expansion of a production facility involves various risks. These risks
include engineering, construction, regulatory and other significant challenges
that may delay or prevent the successful operation of the project or
significantly increase our costs. Our ability to complete successfully any
expansion project on time is also subject to financing and other risks.

     We may be adversely affected because:

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

     o    our new or modified facilities may not operate at designed capacity or
          may cost more to operate than we expected; 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, effluent discharges, solid wastes, odor and
reforestation, and we require permits from governmental agencies for certain of


                                       8
<PAGE>

our operations. 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 could be
substantial.

     It is possible that governmental agencies or other authorities 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 compliance 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 or that existing permits will be
renewed.

     Our insurance coverage may be insufficient to cover our losses, including
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 and 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 0.13%
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. Some
of our competitors may be better positioned to acquire other pulp and paper
businesses.

     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, finance 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.

     Our failure to integrate new businesses or manage new alliances
successfully could adversely affect our business and financial performance.
Furthermore, 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 to
regulatory approval. We may not be successful in obtaining required regulatory
approvals on a timely basis or at all.

                                       9
<PAGE>

     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 our affiliates and us
create the potential for, or could result in, conflicts of interests. For a
discussion of certain related party transactions, see "Item 7--Major
Shareholders and Related Party Transactions--Related Party Transactions."

     We rely on third parties for some of our technology.

     We rely on third parties for the technology that we use to make some of our
value-added paper products. For example, Oji Paper Co., Ltd. of Japan, or Oji
Paper, 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 countries. Our agreement with Oji Paper is scheduled to expire on
October 3, 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.

     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,
strikes, port closings, shipping costs, electrical failures and factory
explosions, which could have a material adverse effect on our financial results.

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 2002, we sold approximately
58% by volume of our products 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 0.2% in 1998, 0.8%
in 1999, 4.4% in 2000, 1.5% in 2001 and 1.4% in 2002. 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 Brazil's growth rates
and, consequently, the consumption of pulp and paper. As a result, these
developments could impair our business strategies, financial condition or
results of operations.

     In the past, the Brazilian government has intervened in the Brazilian
economy and occasionally made drastic changes in policy. The Brazilian
government's actions to control inflation and institute other policies have
included wage and price controls, currency devaluations, capital controls, and
limits on imports. Our business, financial condition and results of operations
may be adversely affected by changes in government policies as well as general
economic factors, including:


     o    currency fluctuations;

                                       10

<PAGE>


     o    inflation;

     o    price instability;

     o    energy policy;

     o    interest rates;

     o    tax policy; and

     o    other political, diplomatic, social and economic developments in or
          affecting Brazil.

     At the end of 2002, Brazil elected a new president from the Workers' Party,
Luis Inacio Lula da Silva, known as Lula. In the period leading up to and
following his election, there was substantial uncertainty relating to the
policies that the new government would pursue, including the potential
implementation of macroeconomic policies that differed significantly from those
of the prior administration. This uncertainty resulted in a loss of confidence
in the Brazilian capital markets and the continued devaluation of the real.
Although the new government has not yet departed in any material way from
previous policies, it is premature to determine what policies might be
implemented, whether these policies will be effective, and how investors and the
capital markets will react to them. Any substantial negative reaction to the
policies of the Brazilian government could adversely affect our business,
operations and the market 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 inflation in Brazil because our suppliers and providers generally increase
prices to reflect the depreciation of the value of the real. 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 inflation in Brazil increases more rapidly than the rate of appreciation of
the U.S. dollar, then our operating expenses, as expressed in U.S. dollars, 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 5--Operating and Financial Review and
Prospects--Overview--Brazilian Economic Environment."

     Exchange rate instability may adversely affect our financial condition and
results of operations and the market price of our 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 3--Key Information--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 inflation in Brazil increases more
rapidly than the rate of appreciation of the U.S. dollar against the real, then
our operating expenses, as expressed in U.S. dollars, may increase and (assuming
constant U.S. dollar sales prices) our profit margins decrease. In addition, any
significant devaluation of the real would produce exchange losses on unhedged
debt denominated in foreign currency.

     The real devalued against the U.S. dollar 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 2002, the depreciation of the real relative
to the U.S. dollar totaled 52%, due in part to the continued

                                       11
<PAGE>

economic and political uncertainties in emerging markets and the global economic
slowdown. From January 1, 2003 through May 31, 2003, the real appreciated 16%.

     The Central Bank has intervened occasionally to control unstable movements
in the foreign exchange rate. At the present time, it is not 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 in the future impose a band within which the
real/U.S. dollar exchange rate could fluctuate or set a fixed exchange rate, and
what impact such an event might have on our operations.

     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 our preferred
shares and ADSs.

     In addition, political and economic uncertainty resulting from the new
president elected in October 2002 may have an adverse effect on the Brazilian
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."

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

     The market for securities issued by Brazilian companies is influenced by
economic and market conditions in Brazil and, to varying degrees, market
conditions in other Latin American and emerging market countries. Although
economic conditions are different in each country, the reaction of investors to
developments in one country may cause the capital markets in other countries to
fluctuate. Developments or conditions in other emerging market countries have at
times significantly affected the availability of credit in the Brazilian economy
and resulted in considerable outflows of funds and declines in the amount of
foreign currency invested in Brazil.

     For example, in 2001 after a prolonged recession followed by political
instability, the Argentine government announced that it would no longer continue
to service its public debt. In order to address the deteriorating economic and
social conditions, the Argentine government abandoned its decade-old fixed
dollar-peso exchange rate, allowing the peso to float to market rate levels. In
2002, the Argentine peso experienced a 237% devaluation against the U.S. dollar.
The situation in Argentina has negatively affected investors' perceptions of
Brazilian securities.

     The recent political crisis in Venezuela may also influence investors'
perception of risk in Brazil. If market conditions in Argentina and Venezuela
continue to deteriorate, they may adversely affect our ability to borrow funds
at a favorable interest rate or to raise equity capital when and if there is a
need. Adverse developments in Argentina, Venezuela or in other emerging market
countries could lead to a reduction in both demand and the market price for our
preferred shares and ADSs.

Risks Relating to Our 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 Brazilian government imposes
restrictions on the remittance to foreign investors of the proceeds of their
investments in Brazil and the conversion of the real 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 the remittance of U.S. dollars abroad.
We cannot assure you that the government will not take similar measures in the
future. Holders of our ADSs could be adversely

                                       12
<PAGE>

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.

     An exchange of ADSs for preferred shares risks loss of certain foreign
currency remittance and Brazilian tax advantages.

     The ADSs benefit from the certificate of foreign capital registration,
which permits The Bank of New York, as Depositary, to convert dividends and
other distributions with respect to preferred shares into foreign currency, and
to remit the proceeds abroad. Holders of ADSs who exchange their ADSs for
preferred shares will then be entitled to rely on the Depositary's certificate
of foreign capital registration for five business days from the date of
exchange. Thereafter, they will not be able to remit non-Brazilian currency
abroad unless they obtain their own certificate of foreign capital registration
or unless they qualify under Resolution No. 2,689 of the Central Bank, dated
January 26, 2000, known as Resolution 2,689, which entitles certain investors to
buy and sell shares on Brazilian stock exchanges without obtaining separate
certificates of registration.

     If holders of ADSs do not qualify under Resolution 2,689, they will
generally be subject to less favorable tax treatment on distributions with
respect to our preferred shares. There can be no assurance that the Depositary's
certificate of registration or any certificate of foreign capital registration
obtained by holders of ADSs will not be affected by future legislative or
regulatory changes or that additional Brazilian law restrictions applicable to
their investment in the ADSs may not be imposed in the future.

     The relative volatility and illiquidity of the Brazilian securities markets
may adversely affect holders of ADSs.

     Investments in securities, such as the preferred shares or the ADSs, of
issuers from emerging market countries including Brazil involve a higher degree
of risk than investing in securities of issuers from more developed countries.

     The Brazilian securities market is substantially smaller, less liquid, more
concentrated and more volatile than major securities markets in the United
States. These features may substantially limit holders' ability to sell the
preferred shares underlying the ADSs at a price and time at which holders wish
to do so. The Sao Paulo Stock Exchange (Bolsa de Valores de Sao Paulo), or
BOVESPA, the main Brazilian stock exchange, had a market capitalization of
approximately U.S.$124 billion as of December 31, 2002, and an average monthly
trading volume of approximately U.S.$4.1 billion in 2002. In comparison, the
NYSE had a market capitalization of U.S.$9.7 trillion as of December 31, 2002,
and an average monthly trading volume of approximately U.S.$859 billion for
2002.

     There is also significantly greater concentration in the Brazilian
securities market than in major securities markets in the United States. The ten
largest companies in terms of market capitalization represented approximately
46.8% of the aggregate market capitalization of BOVESPA as of December 31, 2002.
The top ten stocks in terms of trading volume accounted for approximately 56.5%
of all shares traded on BOVESPA.

     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 than investors in U.S. companies.

     Our corporate affairs are governed by our by-laws and the Brazilian
corporate law, which 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 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 securities markets in the United States or certain other
jurisdictions. For example, certain provisions of the U.S. Sarbanes-Oxley Act of
2002 that apply to U.S.

                                       13
<PAGE>

companies do not apply to us. 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 our preferred shares and ADSs. When compared to
Delaware general corporation law, the Brazilian corporate law and practice have
less detailed and less well established rules and judicial precedents relating
to the review of management decisions under 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 the necessary
standing to bring shareholders' derivative suits. Shareholders ordinarily do not
have standing to bring a class action.

     Also, in accordance with Brazilian corporate law and our by-laws, holders
of our preferred shares, and therefore of our ADSs, are not entitled to vote at
meetings of our shareholders except in limited circumstances. See "Item
10--Additional Information--Memorandum and Articles of Association."

     You may be unable 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, the rights will be
allowed to lapse. See "Item 10--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. Our principal
executive offices are located at Alameda Santos, 1357, 6th floor, 01419-908, Sao
Paulo, SP, Brazil (telephone: 55-11-3269-4168/4261). 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 December 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 77% of our paper sales volume and 24% of our pulp sales volume is
sold to the domestic market.

     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 and that is supported by a
specialized transportation fleet for deliveries throughout Brazil.

     We began our activities 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

                                       14
<PAGE>

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, while 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 2002.

     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 are obligated to indemnify Arjo Wiggins
against certain losses in excess of amounts recorded. Our obligation, however,
is limited to R$22 million (approximately U.S.$6 million at the exchange rate on
December 31, 2002) until 2005. To date, we have not paid any amounts under this
indemnification provision, and we believe any amounts 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 has expanded the pulp production capacity at our Jacarei mill by
approximately 570,000 metric tons, raising our total current annual installed
capacity from 850,000 to 1.42 million metric tons per year in 2003. The Jacarei
expansion project included reforestation projects, which were completed at the
same time as the Jacarei expansion. For the year ended December 31, 2002, we had
invested U.S.$227 million in the Jacarei expansion, and we expect to invest
approximately U.S.$66 million in 2003. The government-owned development bank,
Banco Nacional de Desenvolvimento Economico e Social--BNDES, or BNDES, has
disbursed R$336 million as of March 31, 2003 to finance part of our investment
in the Jacarei expansion. See "Item 4--Information on VCP--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., or Aracruz, 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 under the symbol "ARA."
We acquired our interest in Aracruz in order to increase our exposure to the
international pulp market, and we accounted for this investment under the equity
method. We financed this acquisition with a bridge loan in the amount of
U.S.$370 million in 2001, which was refinanced in May 2002 with a U.S.$380
million syndicated loan. See "Item 5--Operating and Financial Review and
Prospects--Liquidity and Capital Resources--Debt." Our acquisition of 28% of
Aracruz's voting shares is still subject to approval by 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. We
believe that the CADE approval will be forthcoming. Pursuant to a U.S. GAAP
requirement, we reduced the book value of our investment in Aracruz to market
price value at December 31, 2002. The impairment provision of U.S.$136 million
(gross of deferred income tax effects of U.S.$46 million) was determined based
on the market price of U.S.$18.56 for the Aracruz ADRs on December 31, 2002, and
it was charged directly to income.

     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 is entitled to and has appointed
three directors to the Aracruz board of directors, 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 of Aracruz. In

                                       15
<PAGE>

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 December 1, 2001, VCP Exportadora e Participacoes S.A., or VCP
Exportadora, indirectly acquired VCP North America Inc., incorporated in
Delaware, United States, or VCP North America, and VCP Trading N.V. incorporated
in Curacao, or VCP Trading, from Votorantim International Holding N.V., for
U.S.$50,000 and U.S.$30,000, respectively, for the purpose of centralizing our
commercial operations in VCP Exportadora.

     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.

     On March 1, 2002, we created VCP Overseas Holding KFT, or VCP Overseas, a
Hungarian company owned by VCP Exportadora (97%) and VCP (3%), for the purpose
of its becoming a holding company of our European operations and the focus of
our trading operations.

     On June 11, 2002, VCP filed a registration statement on Form F-3
(Registration No. 33-90262) with the U.S. Securities and Exchange Commission, or
the Commission, relating to a proposed global secondary offering by BNDES of
4,321,999,000 preferred shares, a portion of which would be represented by ADSs.
At the end of June 2002, BNDES decided to postpone the offering, due to market
conditions.

Capital Expenditures

     Our capital expenditures totaled U.S.$317 million in 2002, U.S.$679 million
in 2001 (including U.S.$370 million to acquire our 12.35% interest of the total
capital of Aracruz), and U.S.$125 million in 2000. During the past two years, we
have invested principally in our capacity expansion projects at the Jacarei
mill.

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

<TABLE>
<CAPTION>
                                                                           For the years ended December 31,
                                                                     ---------------------------------------
                                                                         2002         2001         2000
                                                                     ------------- ------------ ------------
                                                                              (in U.S.$ millions)
<S>                                                                    <C>         <C>          <C>
Jacarei expansion..................................................    U.S.$ 227   U.S.$  206   U.S.$   --
Other increase in pulp production..................................          --            --           40
Increase in coated paper production................................          --            --           20
Increase in thermal and carbonless paper production................          --            --            1
Forests (includes land purchase)...................................           37           37           29
Improvements/modernization.........................................           19           24           --
Acquisition of equity participation in Aracruz.....................           --          370           --
Other (includes maintenance and information technology)............           34           42           35
                                                                     ------------- ------------ ------------
     Total.........................................................    U.S.$ 317   U.S.$  679   U.S.$  125
                                                                     ============= ============ ============
</TABLE>

     As part of our capital investment program for 2003, we intend to invest
U.S.$220 million for several projects, including the initial operational phase
of the expanded Jacarei facility. The following table shows the estimated
breakdown of planned capital expenditures during 2003, 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:


                                       16
<PAGE>



                                                              U.S.$ in millions
 Jacarei expansion.........................................      $     66
 Forests (includes land purchase)..........................            64
 Improvements/modernization................................            34
 Other (includes maintenance and information technology)...            56
                                                             ------------------
      Total................................................       $   220
                                                             ==================

     As part of our strategy to increase our international pulp market share and
improve our competitiveness through greater economies of scale, we expanded our
pulp production capacity at the Jacarei mill by approximately 570,000 tons,
raising our total current annual installed capacity from 850,000 metric tons to
1.42 million metric tons per year, for a total cost of approximately U.S.$498
million. Approximately U.S.$370 million was funded with internal cash flows and
U.S.$130 million was funded by lines of credit from BNDES. The project is in the
initial operational phase, and we expect it to be fully operational by the end
of 2003. The Jacarei expansion project included reforestation projects at the
Jacarei mill, which were completed at the same time as the expansion project. In
2002, we invested U.S.$227 million in the Jacarei expansion. BNDES has disbursed
U.S.$70 million of its $200 million commitment in connection with the Jacarei
expansion.

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. In
2002, we sold 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 papers, carbonless papers and other specialty papers. Exports account
for a significant portion of our revenues. In 2002, we sold 42% of our pulp and
paper tonnage outside of Brazil.

Operations

     In 2002, we produced 823,162 tons of eucalyptus pulp compared to 807,761
tons in 2001 and 798,917 tons in 2000. In 2002, we sold 334,342 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 also increased during 2002. In 2002, our sales volume of market pulp
outside Brazil totaled 76% of our market pulp tonnage, compared to 75% in 2001
and 71% in 2000. In 2002, we sold approximately U.S.$130 million of market pulp
compared to U.S.$143 million in 2001 and U.S.$207 million in 2000. Our market
pulp revenues decreased in 2002 as compared to 2001 and in 2001 as compared to
2000 due to the significant reduction in the average international price of
pulp.

     In 2002, our sales volume of paper products increased to 571,302 tons from
569,398 tons in 2001 and 529,523 tons in 2000. However, our revenues from paper
products decreased to U.S.$479 million in 2002 from U.S.$511 million in 2001 and
from U.S.$567 million in 2000 primarily due to the effect of the translation of
the prices in reais to U.S. dollars. Uncoated and coated printing and writing
paper sales accounted for 75% of our total paper products revenues in 2002. The
remainder of our revenues from paper products in 2002 was made up of sales of
thermal and carbonless paper, accounting for 18% 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 2002 was 40% for coated papers and 21% for uncoated papers.
We sold 23% of our total printing and writing paper sales volume outside of
Brazil in 2002. 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 was 905,644 tons in 2002, representing a 1% decrease
from 2001. Net revenues decreased 7% to U.S.$609 million as a result of the
price decrease in U.S. dollars due to the devaluation of the real, the lower
international prices of pulp and decreases in volume production. The lower
average price of pulp and paper more than offset the better mix of products sold
in 2002.

                                       17
<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 terrorist attacks in the United States on September 11, 2001 and the general
global economic slowdown. In 2002, the domestic market paper consumption
remained low due to the worldwide financial, economic and political crisis,
which also affected Brazil's economic situation. Brazil's economy was also
affected by the Argentine crisis. Paper consumption in Brazil decreased as a
consequence of those factors.

     In 2002, 58% of the volume and 67% of the revenues of our total sales came
from the domestic market compared to 57% and 68%, respectively, in 2001. In the
pulp market, the export market was responsible for 76% of both the sales volume
and revenues. In the paper market, the export market was responsible for 23% of
the sales volume and 21% of revenues.

     The table below sets forth the percentages of our net revenues and volume
in 2002 that correspond to the domestic and export markets and the breakdown by
product:

                                            For the year ended Decmeber 31, 2002
                                            ------------------------------------
                                             Domestic                   Export
                                             --------                   ------
                                                      (in percentages)
Revenues:
         Paper.........................        79%                        21%
         Pulp..........................        24%                        76%
Volume
         Paper.........................        77%                        23%
         Pulp..........................        24%                        76%

Our Ownership Structure

     We are part of the Votorantim group, one of the largest privately held
Brazilian conglomerates. 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, metals, and pulp and
paper. In 2002, pulp and paper accounted for approximately 17% 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, 2003:

|------------------|  |-----------------| |------------------| |---------------|
|     BNDESPAR     |  |   VOTORANTIM    | |   FREE FLOAT     | |  TREASURY     |
|  33.7% preferred |  |     GROUP       | |  60.4% preferred | | 0.9% preferred|
|    0% voting     |  |  5.0% preferred | |   0% voting      | |  0% voting    |
|    15.1% total   |  |  100.0% voting  | |  27.1% total     | |  0.4% total   |
|                  |  |   57.4% total   | |                  | |               |
|------------------|  |-----------------| |------------------| |---------------|
        |                    |                    |                    |
        |____________________|____________________|____________________|
              |
              |
              |
              |                                     |----------------------|
|--------------------------------------|            | Preferred Shares     |
|[VOTARANTIM LOGO]Celulose e Papel(1)  | ------->   | Traded on Bovespa    |
|                                      |            |     and NYSE         |
|--------------------------------------|            |      (ADSs)          |
                                                    |----------------------|



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


                                       18
<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 strong position in the Brazilian printing and writing
paper market. Our strategy is mainly to:

o    expand our presence in the international pulp market;

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

o    shift our paper sales mix toward higher-margin 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 2002, we sold approximately
76% of our market pulp tonnage outside of Brazil (a slight increase from 75% in
2001), 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 in 2001 and our Jacarei expansion in 2002
reinforce 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 and writing
papers, with a 40% market share in Brazil. We also have a strong position in the
market for uncoated printing and writing paper, with a 21% 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 high-resolution printing and is
targeted at small businesses 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 the customer's specific needs. We increased our
cut-size capacity in the Luiz Antonio mill to be able to meet the demand for the
product in both domestic and international markets.

     Shift our paper sales mix toward higher-margin 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 46% of our net paper sales in
2002, from approximately 33% in 1997. We are producing higher margin products to
replace products that Brazilian consumers previously had to import, such as
labels for beer and soft drinks.

     We have developed our production facilities for thermal and carbonless
papers through an alliance with a leading producer in the area, Oji Paper, 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.

                                       19
<PAGE>

     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:

     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 the
expansion of existing facilities (including the Jacarei expansion) and strategic
acquisitions.

     The Jacarei expansion has increased the annual pulp production capacity at
the Jacarei mill by approximately 570,000 tons. For a more complete description
of the Jacarei expansion, see "Item 4--Information on VCP--Property, Plant and
Equipment--Jacarei expansion."

     Between 1994 and 2002, the average annual rate of paper consumption in
Brazil increased by 5.8% 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
increased our pulp production capacity through our U.S.$500 million expansion
project at our Jacarei mill to a production capacity of 1.42 million tons
annually. Through December 31, 2002, we had invested U.S.$432 million in this
project, and we expect it to be fully operational by the end of 2003. We also
closely monitor developments in 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 participate 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 to the Brazilian domestic market and to the export market.
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:

                                               For the Years ended December 31,
                                            ------------------------------------
                                                 2002         2001        2000
                                                 ----         ----        ----
    Pulp ..................................       21%          22%         27%
    Paper:
         Printing and writing..............       60%          59%         54%
         Thermal and carbonless............       14%          13%         12%
         Other specialty papers............        5%           6%          7%

     Pulp

     Production

     We produced 823,162 tons of eucalyptus pulp in 2002 compared with 807,761
tons in 2001. The following table sets forth our total hardwood pulp production,
total Brazilian hardwood pulp production and our hardwood

                                       20

<PAGE>

pulp production as a percentage of total Brazilian pulp production for the years
ended December 31, 2002, 2001 and 2000:

<TABLE>
<CAPTION>
                                                  2002         2001        2000
                                                  ----         ----        ----
<S>                                              <C>         <C>          <C>
VCP's production (in tons)......................   823,162     807,761      798,917
Total Brazilian production (in tons)............ 6,018,581   5,500,118    5,539,258
VCP's production as percentage of total
  Brazilian production..........................     13.7%       14.7%        14.4%
</TABLE>
------------
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 that 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 pulp, which utilizes a
smaller amount of chlorine chemical compound than the ECF process, but is not as
costly as the TCF process. In 2002, approximately 80% of our pulp was produced
without the use of elementary chlorine.

     Sales

     In 2002, we sold 334,342 tons of bleached pulp as market pulp to third
parties in the domestic market and outside of Brazil. We had a 16% share of the
Brazilian domestic market for bleached hardwood pulp in 2002. In recent years,
however, we have sought to increase significantly our sales of market pulp
outside of Brazil. In 2002, approximately 76% of our market pulp sales volume
was to customers located outside of Brazil. The following table sets forth our
net sales of pulp to the export market by geographic region for the years ended
December 31, 2002, 2001 and 2000:

<TABLE>
<CAPTION>

                                          2002                     2001                       2000
                                  ----------------------  -----------------------   ----------------------
                                   Tons       % of Total   Tons       % of Total      Tons      % of Total
                                  ---------- -----------  ---------- -----------    ---------- -----------

<S>                               <C>          <C>         <C>         <C>          <C>           <C>
North America................     103,736        41.1 %     98,590      38.3%        88,903        37.0%
Europe.......................     108,520        42.9       97,263      37.8        115,333        48.0
Asia.........................      40,323        15.9       61,655      23.9         36,042        15.0
Africa.......................          65         0.1           --       --             --          --
                                  -------       -----      -------     -----        -------       -----
Total Exports................     252,644       100.0 %    257,508     100.0%       240,278       100.0%
                                  =======       =====      =======     =====        =======       =====
</TABLE>

     In 2002, Fabrica de Papel Santa Therezinha S.A. and Arjo Wiggins Ltda. were
our largest domestic customers of pulp, and Kimberly-Clark Corporation, M-real
and Georgia-Pacific were our largest customers 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 a study conducted in November
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 5.4% per year from 2001 to 2006, while the total white pulp
(including BEKP) projected average growth is 1.8% per year in the same period.

     We have long-term sales contracts with substantially all of our customers,
in the domestic and the export markets. These contracts generally provide for
the sale of our market pulp production at prices announced each month. These
prices may vary among the different geographic areas in which our customers are
located. Usually the price arrangements under our long-term contracts are
consistent with prices for our other sales within the same region and follow the
established list price of BEKP announced by major global pulp producers. The
sales contracts provide for early termination in the event of a material breach,
the insolvency of one of the parties or force majeure events of extended
duration.

                                       21
<PAGE>

     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 were our major lines
of business in 2002, accounting for approximately 75% of our total net paper
sales and 97% 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:

<TABLE>
<CAPTION>
Product                                                        Description                            Facility

<S>                                           <C>                                                     <C>
Coated printing and writing paper.........    Coated free sheet paper used for labels,                Jacarei
                                              self-adhesive, flexible packaging markets and           Piracicaba
                                              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
                                              high-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, sheets              Luiz Antonio
                                              and cut-size designed for maximum performance           Jacarei
                                              in photocopying machines and laser and inkjet
                                              printers, and alkaline offset paper.

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

Thermal paper.............................    Traditionally used in fax machines; new                 Piracicaba
                                              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 paper for              Mogi das Cruzes
                                              catalogues, folders, letters, envelopes, etc.

</TABLE>

     Production

     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 that 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 by advanced equipment. 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, 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

                                       22
<PAGE>

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 are 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
30% 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, 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.

     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. Certain materials are then added to the refined pulp to
strengthen and improve the quality of the paper. These additives include
synthetic sizing 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.

     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, 2002, 2001 and 2000:

<TABLE>
<CAPTION>
                                                                       2002             2001             2000
                                                                       ----             ----             ----

<S>                                                                 <C>               <C>             <C>
VCP's production (in tons)....................................        570,696           551,400         535,340
Total Brazilian production (in tons)..........................      7,661,184         7,437,767       7,115,513
VCP's production as percentage of total Brazilian production..           7.4%              7.4%            7.5%
</TABLE>
------------
Sources:  Bracelpa and VCP.

     Printing and Writing Paper. According to Bracelpa, we are Brazil's second
largest producer of uncoated wood-free printing and writing paper, and we ranked
first in coated paper production in 2002. During 2002, we produced 501,174 tons
of printing and writing paper consisting of approximately 372,814 tons of
uncoated and 128,360 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 in cut-size paper. We
have estimated domestic market shares of 40% and 21% 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, 2002, 2001 and 2000:

                                       23
<PAGE>

<TABLE>
<CAPTION>
                                                                    2002              2001             2000
                                                                    ----              ----             ----
<S>                                                              <C>               <C>              <C>
  VCP's production (in tons).................................      501,174           488,400          474,455
      Uncoated paper (in tons)...............................      372,814           358,200          363,835
      Coated paper (in tons).................................      128,360           130,200          110,620
  Total Brazilian production (in tons).......................    2,163,201         2,150,364        2,099,593
  VCP's percentage of Brazilian production...................        23.1%             22.7%            22.6%
</TABLE>
---------------
Sources:  Bracelpa and VCP.

     Carbonless and Thermal Papers. During 2002, we manufactured 55,612 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, 2002, 2001, and 2000 was approximately U.S.$1 million in each year. 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 2002, we produced 13,910 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, 2002,
2001 and 2000:

<TABLE>
<CAPTION>
                                                                            2002           2001          2000
                                                                            ----           ----          ----
<S>                                                                        <C>            <C>           <C>
  VCP's carbonless paper production (in tons)..........................     43,398         40,281        37,132
  VCP's thermal paper production (in tons).............................     12,214         11,139        10,346
  VCP's other specialty paper production (in tons).....................     13,910         11,550        13,405
                                                                           -------        -------       -------
         Total (in tons)...............................................     69,522         62,970        60,883
                                                                           =======        =======       =======
  Brazilian production (in tons).......................................    179,033        169,460       171,531
  VCP's percentage of Brazilian production.............................      38.8%          37.2%         35.5%
</TABLE>
---------------
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,
2002, 2001 and 2000:

                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                            2002                     2001                    2000
                                                     -------------------       ------------------     ------------------
                                                     Tons      % of Total      Tons     % of Total    Tons    % of Total
                                                     -------  -----------      -------  -----------   -------  ---------
<S>                                                 <C>          <C>         <C>          <C>        <C>        <C>
North America...................................     47,791       36.2%       49,802       37.6%      14,706     14.0%
South America(1)................................     32,618       24.7        40,302       30.4       43,069     41.0
Europe..........................................     34,674       26.3        34,599       26.1       35,716     34.0
Middle East/Asia/Africa/Other...................     16,760       12.8         7,801        5.9       11,555     11.0
                                                    -------      -----       -------      -----      -------    -----
       Total Exports............................    131,843      100.0%      132,504      100.0%     105,046    100.0%
                                                    =======      =====       =======      =====      =======    =====
</TABLE>
---------------
(1) Excluding Brazil.

     In 2003, we expect the demand for cut-size paper in Europe to increase,
beginning in the second half of 2003, followed by a price increase of three to
five percent due to the increase in demand. In the United States, even though we
expect demand to remain stable, we believe prices may also increase after June
2003. In Latin America and other markets, we expect a general stabilization of
prices and demand in 2003.

     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, 2002, 2001 and 2000:

<TABLE>
<CAPTION>
                                                                         2002           2001          2000
                                                                         ----          -----          ----
<S>                                                                    <C>             <C>           <C>
VCP's Carbonless and Thermal Paper Sales (in tons)................      55,335          52,446        49,061
VCP's Other Specialty Paper Sales(1) (in tons)....................      30,673          28,388        37,381
                                                                       -------         -------       -------
Total (in tons)...................................................      86,008          80,834        86,442
                                                                       =======         =======       =======
Brazilian Market (in tons)........................................     163,843         152,185       154,812
VCP's Percentage of Brazilian Market..............................       52.5%           53.1%        55.8%
</TABLE>
---------------
Sources: Bracelpa and VCP.
(1)  Includes sales of third-party products by KSR and sales of specialty papers
     produced at the Mogi das Cruzes mill.

     Printing and writing paper represents the largest category of paper exports
from Brazil. In 2002, we exported 129,876 tons of printing and writing paper,
which primarily consisted of uncoated paper.

     The following table sets forth our exports of uncoated and coated papers
for the years ended December 31, 2002, 2001 and 2000:

<TABLE>
<CAPTION>
                                                                        2002            2001         2000
                                                                        ----            ----         ----
<S>                                                                   <C>             <C>          <C>
VCP's exports (in tons)...........................................      129,876         131,749      105,046
Brazilian exports (in tons).......................................      623,436         623,671      589,740
VCP's percentage of Brazilian exports.............................        20.8%           20.6%        17.8%
VCP's domestic sales (in tons)....................................      353,451         356,059      337,340
Brazilian market (in tons)........................................    1,509,385       1,471,781    1,457,190
VCP's percentage of Brazilian market..............................        23.4%           24.4%        23.2%
</TABLE>
---------------
Sources:  Bracelpa and VCP.


     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 2002, except for Votorantrade N.V., a member of the Votorantim
group engaged in the sale and distribution of certain of the Votorantim group's
products. See Note 12 to our consolidated financial statements.

                                       25
<PAGE>

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 in producing ECF pulp and VCF pulp.

     We rely exclusively on eucalyptus trees to meet our pulpwood requirements.
Eucalyptus trees are among the fastest-growing trees 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.

     Energy and Chemicals

     We use several sources to generate thermal and electrical energy for the
pulp and paper production process, 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 54% of our energy requirements for the
pulp and paper production process internally, of which 76% is from renewable
fuels, such as biomass and black liquor and 24% is from non-renewable fuels,
such as fossil fuels (oil and gas). 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 46% of our energy requirements from
concessionaires, including CPFL--Companhia Paulista de Forca e Luz (for the Luiz
Antonio and Piracicaba facilities), Bandeirante (for the Jacarei and Mogi das
Cruzes facilities) and Eletropaulo (for our headquarters), as well as from fuel
oil and natural gas suppliers. The voting shares of CPFL are owned by VBC, a
joint venture that is 33% owned by VPAR, our shareholder. 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 as well. We believe our secure sources of supply will allow us to
maintain a cost advantage in these areas for the foreseeable future.

     Hydroelectric power is a major source of energy for Brazilian industry.
During 2001, low levels of investment and below-average rainfall have resulted
in low reservoir levels of critical hydroelectric capacity in Brazil's
southeast, central, west and northeast regions. The construction of gas-fired
thermal generation plants has been delayed due to regulatory and other issues.
On May 18, 2001, the government announced an electric rationing and consumption
reduction plan with the objective of reducing electricity use by approximately
20% during 2001 for individual and commercial users, including industries such
as market pulp production, wood and furniture, petrochemicals, chemicals, mining
and integrated steel; and 25% for energy-intensive industries like metallurgy,
pelletization, non-integrated steel, aluminum, industrial gas, soda, chlorine,
paper and iron. Our pulp operations were subject to the 20% limitation.

     The government then relaxed the plan and reduced the limitation applicable
to industrial consumers to 10% and, in the beginning of March 2002, the
government announced that the plan was terminated.

     At December 31, 2002, we had take-or-pay contracts with suppliers of
chemical products for terms ranging from ten to fifteen years. The contractual
obligations under those contracts are in an aggregate amount of U.S.$38 million
per year.

     Water

     We require about 40 cubic meters of water per metric ton of pulp. We get
our water from several rivers in the state of Sao Paulo, Brazil, including the
Paraiba do Sul, Piracicaba and Mogi Guacu. We believe our water supplies are
currently adequate and that, while the Jacarei expansion will increase our water
needs, our water

                                       26
<PAGE>

consumption per ton will be lower because of that facility's use of more modern
technology, which will result in overall lower water consumption.

     As required by Brazilian federal and state water laws, we have obtained all
water permits necessary to use water for industrial purposes.

     The Brazilian government created a committee to propose new legislation for
the imposition of tariffs on the industrial use of water. For the Paraiba do Sul
river, which is located near the Jacarei mill, the levying of tariffs related to
water consumption started in the beginning of 2003. The levying of tariffs for
water consumption from other rivers that we use is likely to start in the next
two years.

Transportation

     We use trucks that are owned and operated by independent contractors to
transport wood from our forests to our production facilities. Our forests are
located an average distance of 310 kilometers from our pulp mills. We also use
trucks owned and operated by third parties to transport 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 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, which is the government-owned
corporation that owns and operates the port. This lease is non-cancellable
during the initial period and, if not renewed, will expire in September 2007.
The terminal has facilitated the growth of our exports because it allows us to
load vessels with pulp directly from our terminal, thereby significantly
reducing freight and handling costs. Our expense for this lease in each of 2002,
2001 and 2000 was approximately U.S.$0.1 million, and future annual lease
payments under the CODESP lease will also be 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 in Santos to 12,520 square
meters from 9,550 square meters, and our total warehouse volume capacity in
Santos increased to 38,000 tons from 28,000 tons.

     In December 2002, we signed a contract with MRS Logistica S.A., or MRS, a
private railway concession, in order to invest in a private railway from the
Jacarei plant to the port of Santos to transport wood to the Jacarei plant and
to transport pulp to the port of Santos from the Jacarei plant. We expect that
the private railway will help reduce transportation costs for the Jacarei plant
by 25%. As part of our agreement with MRS, MRS is responsible for the
reconstruction of the 27-kilometer railway, the building of terminals inside the
Jacarei plant and at the port of Santos and for the acquisition of new cars to
be used for transportation. This investment is estimated to be approximately
U.S.$6 million. We are responsible for 50% of the costs incurred by MRS. The
agreement also requires the transportation of a tonnage minimum, equivalent to
U.S.$3 million per year, over a ten-year period.

Marketing and Distribution

     We sell our pulp and paper products in both the domestic and export
markets. In 2002, approximately 76% of our sales volume of market pulp and 23%
of our sales volume of paper products were made outside of Brazil. Our internal
sales staff consists of 71 employees operating throughout Brazil. In addition,
275 employees (including 100 sales agents) are assigned to KSR, which is 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 5--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.

                                       27
<PAGE>

     Information technology has been one of our high-priority areas. In 2000, in
order to provide support for our organizational restructuring and a new stage of
growth, 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. In addition, due to the expansion of the Jacarei facility,
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 contracted with local agents abroad to sell this market pulp
in the international market.

     In April 2001, we incorporated VCP Exportadora, a wholly owned subsidiary,
which was 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 leader for coated paper in our regional market. In addition to
being an important component to our growth, VCP Exportadora and its subsidiaries
play an important role in establishing direct relationships with our 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. Currently, our pulp and paper products are distributed overseas through
VCP Overseas, Newark Financial Inc., or Newark, a wholly owned subsidiary of VCP
Exportadora, VCP North America and VCP Trading.

     Paper

     In 2002, approximately 77% of our paper sales volume and 79% of our net
revenues derived from paper came from the domestic market. We sell 18% 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 100 sales agents. In 2002, KSR was the
segment leader in paper distribution in Brazil with a market share of
approximately 22% 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 in
which these companies 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 2002, through KSR, we had net revenues of
U.S.$79 million, representing 19.2% 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 annual
report, we have referred to our credit sales as the "non-vendor program."

     The vendor program is available to some of our selected domestic paper
customers. 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 financing, which is
guaranteed by us. 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 because 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

                                       28
<PAGE>

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 because 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.

     Under the terms of our vendor program, the maximum allowable term for
payment is 360 days, and it may be extended. The terms of the vendor program
depend on the customer's credit rating, which is based on our own internal
credit review.

     We estimate that for 2002, 2001 and 2000, an average of approximately 2% of
our total number of regular domestic customers (approximately 21%, 22% and 22%,
respectively, of total domestic sales value) obtained our guarantee for their
loans. At December 31, 2002, we had eleven customers under the vendor program
with the average amount per customer based on our vendor program exposure at
U.S.$4 million. Our vendor program exposure was U.S.$39 million at December 31,
2002 and U.S.$61 million at December 31, 2001.

     Historically, amounts of guarantees we have paid, net of amounts recovered
from customers, have been negligible. In 2002, 2001 and 2000, we recovered 100%
of the amounts we paid under guarantees.

     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 2002, 21% of the total domestic sales
were made through the vendor program. In addition, 79% of the total domestic
sales in 2002 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 that 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.

     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 2002 net revenues of Brazilian pulp and/or paper producers, we
were the fourth largest Brazilian producer, behind Klabin, Cia. Suzano de Papel
e Celulose S.A., or Suzano, and Aracruz. In the domestic market, with respect to
market pulp, we had the second largest Brazilian market share in terms of volume
behind Lwarcel Celulose e Papel S.A. with 91,000 tons.

     According to Bracelpa, with respect to writing and printing paper, we were
the second largest Brazilian producer in 2002 in terms of volume, producing more
than Suzano, Ripasa Papel e Celulose and Bahia Sul, but less

                                       29
<PAGE>

than International Paper. In addition, in 2002, we were the 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 22% market share. Our main competitors in carbonless
and thermal paper are located outside of Brazil.

     On May 30, 2003, Aracruz announced that it had agreed to purchase from
Klabin all shares of capital stock of Riocell S.A.

Environmental Policies

     As part of our commitment to sustainable development, we plan to develop
one of the largest forested areas in the state of Sao Paulo with approximately
176,000 hectares located near our industrial plants, of which approximately 28%
will be preserved as native forest and/or set aside for environmental recovery.
In partnership with various universities, we conduct research and monitor the
fauna and flora of the region. In 2002, we planted approximately 15,000 hectares
of eucalyptus as part of our reforestation efforts.

     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 have 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.

     We have obtained an ISO 14001 (environmental) certification for the
forestry area at the Jacarei mill, and we intend to obtain a certification for
the industrial area of the Jacarei mill during 2003. We also expect to have all
our integrated mills certified under the ISO 14000 standard in 2004.

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, or CETESB.
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.

     Since December 2002, all new environmental licenses issued by CETESB must
be renewed within 2-5 years, as the case may be. The licenses that we have
already obtained from CETESB until December 2002 must also be renewed within a
five-year term.

     Our operations are subject to various environmental laws and regulations
issued by these authorities, including those relating to air emissions, effluent
discharges, solid waste, odor and reforestation. During 2002, our capital
expenditures relating to environmental matters were approximately U.S.$44
million (including expenses relating to the Jacarei expansion). Since 2002, we
have implemented new procedures for minimizing environmental risks associated
with spills and other potential releases and also to improve control of
potential incidents and non-compliance. We expect to spend U.S.$1 million in
2003 to implement these procedures. 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. For a description of
certain legal matters relating to environmental regulation, see "Item
8--Financial Information--Consolidated Statements and Other Financial
Information--Legal Matters."

                                       30
<PAGE>

     In Brazil, individuals or legal entities that violate environmental laws
can be punished by criminal sanctions that range from fines to imprisonment, in
the case of individuals, or dissolution, in the case of legal entities. In
addition, 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.

     In addition to eventual criminal and administrative sanctions, pursuant to
Brazilian environmental laws, the violator must also recover or indemnify the
damage that was caused to the environment and third parties, regardless of the
existence of actual fault.

     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 individually. On June 9,
2003, CETESB fined us R$30,000 as a result of odorous emissions from our
Jacarei plant.

Environmental Indicators

     Our operations and production processes utilize natural resources and
generate liquid effluents, residual waste and air emissions that may adversely
affect the environment.

     Liquid Effluents

     Water is critical to the process of manufacturing pulp and paper. We obtain
water from the rivers that are 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 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. For a description of the imposition of tariffs on river water use, see
"--Raw Materials--Water" above.

     Solid Wastes

     We have identified productive uses for a portion of the solid waste
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 and
          Jacarei mills);

     o    licensed landfills (Jacarei and Mogi das Cruzes mills); and

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


                                       31
<PAGE>

     With respect to the co-processing activities at our Piracicaba and Jacarei
facilities, we use industrial residue as the raw material to manufacture bricks.
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 we are installing
selective waste collection and recycling systems for the common areas at the
Mogi das Cruzes mill. We started using these selective waste collection and
recycling systems at the Jacarei facility in 2001 and the Piracicaba and Luiz
Antonio facilities in 2002.

     The remainder of solid waste is either sold to third parties for use in
their production processes or disposed of in sanitary landfills. The small
amount of hazardous waste generated at our facilities is collected, treated and
disposed of in accordance with Brazilian law.

     Atmospheric Emissions

     As a byproduct of production, certain compounds and 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 and compounds from the emissions. In order to control
odor emissions, our Jacarei and Luiz Antonio mills use an efficient 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. In the
recently completed expansion of the Jacarei facility, we installed similar
equipment and processes to control emissions.

     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.

Forestry Certification System

     In October 2002, VCP Florestal received ISO 9001/2000 and ISO 14001
certifications. In 2003, VCP Florestal started the process for the FSC
Certification, which should take from 18 to 24 months. VCP Florestal aims to
have around 30% to 40% of the Jacarei pulpwood production certified.

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.$170 million of first loss risk at December 31, 2002. Due to
the Jacarei expansion, we increased the amount of coverage under those policies.
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, including 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 electrical
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.

                                       32
<PAGE>

Overview of the Pulp and Paper Industry

     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 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 us, 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, particularly eucalyptus pulp, exhibits 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;

                                       33
<PAGE>

     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 paper. 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 producers,
including us, to reduce sales of reels and to integrate cutting machines in
their paper mills to increase 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. 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
improved and reached a peak in the first half of 2001. In the second half of
2001 and 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.

     Despite the domestic and international economic crises, pulp and paper
companies increased their revenues in 2002, due to the increase in sales volumes
(in Brazil and abroad) and in prices in the domestic market. Although paper
prices in the international market were low, the devaluation of the real also
increased revenues.

     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. We
plan to continue to increase the production in large scale and to increase
productivity through the modernization of the industrial units and through
improvements in our product mix.

                                       34
<PAGE>

     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 20 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 20 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 2002, the average annual
rate of paper consumption in Brazil increased by 5.2% per year and reached 6,928
tons in 2002. 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 2002, Brazil was the eleventh largest paper producer and the sixth
largest pulp producer in the world. Brazil was also the second largest market
pulp producer, behind the United States and tied with Canada. 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, technological development in the paper
industry in Brazil 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 volume for the years indicated:

<TABLE>
<CAPTION>
                                                 1998          1999           2000          2001           2002
                                                ------        ------         ------        ------         ------
<S>                                          <C>            <C>           <C>            <C>           <C>
Brazilian pulp production (1)..............   6,686.9        7,209.1       7,463.3        7,412.0       8,011.5
Brazilian paper production.................   6,589.3        6,953.2       7,187.8        7,437.8       7,661.2
Total pulp and paper production............  13,276.2       14,162.3      14,651.1       14,743.8      15,672.7
Total top five producers...................   6,535.3        7,086.0       8,099.9        9,125.0       9,812.0
% Top five.................................     49.2%          50.0%         55.3%          61.9%         62.6%
</TABLE>
---------------
Source:  Bracelpa
(1) Pulp numbers represent pulp volume produced.

     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.

                                       35
<PAGE>

     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, which is 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 the 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.

     The average price for BEKP in 2002 was U.S.$458 per ton (CIF North Europe).
Prices increased in the second quarter of 2002 and reached their highest level
of U.S.$510 in the third quarter of 2002. The average price for BEKP in the
fourth quarter of 2002 was U.S.$470 per ton. Pulp inventories also influenced
prices with Norscan inventories totaling 1,339 thousand tons in June 2002, which
was their lowest level since September 2000.

     In the beginning of 2003, prices started to increase primarily due to bad
weather conditions in the southern portion of the United States that affected
market pulp production and production curtailment in Asia caused by technical
problems.

     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 third quarter of 2002 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.

                                       36
<PAGE>

                                                                Cash Production
                                                                     Costs
                                                                ---------------
 Brazil....................................................      U.S. $140
 Indonesia.................................................            213
 Eastern Canada............................................            264
 Sweden....................................................            269
 Finland...................................................            275
 France....................................................            277
 Portugal..................................................            297
 Spain.....................................................            297
 Southern U.S..............................................            300
 ---------------------------------------
 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 2002, the
consolidated net revenue of the Votorantim group was approximately U.S.$3.6
billion under Brazilian GAAP (unaudited), of which 17% represented pulp and
paper activities. Our immediate parent company is Votocel, which is directly
controlled by VPAR, and which in turn is ultimately controlled by Hejoassu.
Hejoassu is controlled by the Ermirio de Moraes family. See "Item 4--Information
on VCP--Business Overview--Our Ownership Structure."

     As of December 31, 2002, we had a 50% stake in Voto-Votorantim Overseas
Trading Operations N.V. and three wholly owned subsidiaries, VCP Terminais
Portuarios S.A., VCP Exportadora and VCP Florestal. In April 2001, we
incorporated VCP Exportadora as a wholly owned subsidiary, and in the fall of
2001 we incorporated Newark, which was used to acquire our interest in Aracruz.

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

     On January 2, 2002, we incorporated VCP Florestal, which assumed all of the
assets and liabilities relating to our forestry operations. On March 1, 2002, we
incorporated VCP Overseas, our wholly owned subsidiary incorporated in Hungary.
In June 2002, we incorporated St. Helen Holding III, B.V., located in Curacao.

     The chart below shows our structure as of March 31, 2003:

                                       37

<PAGE>

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

                                           --------------------------------
                                          |                                |
                                          |Votorantim Celulose e Papel S.A.|
                                          |                                |
                                           --------------------------------
                                                          |
      |---------------------------------------------------|-----------------------------------------|
      |                           |               |       |                  |                      |
      |                           |  100%         |       | 20%              | 100%                 | 50%
      |                     -------------------   |   -------------    ------------------    --------------------
      |                    | VCP Florestal S.A.|  |  |Pakprint S.A.|  |VCP Term Port S.A.|  | Voto-Voto Overseas |
      |                    |                   |  |  |             |  |                  |  | Trading Operations |
      |                    |                   |  |  |             |  |                  |  |        N.V.        |
      |                     -------------------   |   -------------    ------------------    --------------------
      | 100%                                      |
      |                                           |
 ------------------        ---------------------  |
|VCP Exportadora   | 100% |St. Helen Holding III| |
|Participacoes S.A.|------|                     | |
 ------------------        ---------------------  |
      |                                           |
      |                                           | 3%
      |                                           |
      |                                    ------------------               ------------------------
      |                             97%   |      Normus      |     100%    |VCP Overseas Holding KFT|
      |-----------------------------------|Empreendimentos e |-------------|                        |
      |                                   |Participacoes Ltda|             |                        |
      |                                    ------------------               ------------------------
      |
      |                                    ---------------------            ----------------------
      |                             100%  |                     |    100%  |                      |
      |-----------------------------------|Newark Financial Inc.|-|--------|VCP North America Inc.|
                                          |                     | |        |                      |
                                           ---------------------  |         ----------------------
                                                                  |
                                                                  |         ----------------------
                                                                  |  100%  |                      |
                                                                  |--------|   VCP Trading N.V.   |
                                                                  |        |                      |
                                                                  |         ----------------------
                                                                  |
                                                                  |         ----------------------
                                                                  |  12.35%|                      |
                                                                  |--------| Aracruz Celulose S.A.|
                                                                           |                      |
                                                                            ----------------------
</TABLE>


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 33% of Brazil's gross
domestic product, and is home to most of the domestic consumers of pulp and
paper products. Our forests are located an average of 310 kilometers from our
pulp mills, and our facilities are located an average of 200 kilometers from
Santos, which is 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. As part of the Jacarei expansion, we purchased 6,685
hectares of land in 2002 for forestry. At December 31, 2002, our aggregate
nominal pulp production capacity was 850,000 tons per year and our nominal paper
production capacity was 655,000 tons per year. Through the expansion, we
increased our annual installed capacity to 1.42 million tons annually. 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 at December 31, 2002:

                                       38
<PAGE>
<TABLE>
<CAPTION>

                                           Distance from                         Pulp/Paper
                                          forest (pulp) or   Distance from        capacity
Facility                    Pulp/Paper   pulp mill (paper)   port of Santos     (tons/year)          Major products
--------                    ----------   -----------------   --------------     -----------          --------------
<S>                        <C>           <C>                <C>             <C>                  <C>
Jacarei (1)..............  Pulp/Paper          420 km            150 km      1,050,000/175,000   Uncoated printing and
                                                                                                 writing paper; coated
                                                                                                 printing and writing
                                                                                                 paper
Luiz Antonio.............  Pulp/Paper          200 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
</TABLE>
-----------------
Source:  VCP.
(1) Including the Jacarei expansion.


Eucalyptus Forests

     We obtain all of our wood from approximately 168,000 hectares of land
located in the state of Sao Paulo. We own approximately 65% of this land with
the remaining 35% leased from third parties of which 61% are other companies of
the Votorantim group. See "Item 7--Major Shareholders and Related Party
Transactions--Related Party Transactions--Leases of Forest Land."

     At December 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 310 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 that were relatively far from our mills and, instead, have
purchased forests that are closer to our mills. Brazilian law requires that at
least 20% of the land we own either remains uncultivated or planted with
indigenous species of vegetation. Of the 168,000 hectares of land from which we
obtain our wood supplies approximately 65% consists of planted eucalyptus
forest, approximately 30% is reserved for preservation and the remainder is used
for other activities.

     While the dispersion of our woodland 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 2002, we planted approximately 15,000 hectares of eucalyptus as part of
our reforestation efforts. We grew approximately 35 million seedlings at our
nurseries, all of which were planted in our forests or supplied to the tree-farm
project. New 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 50 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.

                                       39
<PAGE>

     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 2002,
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 and "self-pruning" trees with fewer branches.
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

     Through the expansion of our Jacarei plant, which cost approximately
U.S.$498 million, our annual pulp production capacity increased by approximately
570,000 tons. Our total pulp production capacity increased from 850,000 to 1.42
million metric tons per year. The project is currently in the initial
operational phase and we expect it to be fully operational by the end of 2003.
The new processes use the existing 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.

     Through December 31, 2002, we had invested U.S.$432 million in the Jacarei
expansion, including U.S.$126 million that we borrowed from BNDES. We expect to
spend another U.S.$66 million to complete this project, which we intend to
finance from internal sources. The project involved the construction of a new
woodyard, which was completed in 2001, and the following, all of which were
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 wood-free printing
and writing papers 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 sales of value-added products, such as coated, thermal

                                       40
<PAGE>

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 2000 and 47% in each of 2001 and 2002. In 2002, we also
increased our exports of uncoated papers, particularly cut-size paper, due to
the favorable exchange rate. We also have increased production of coated paper
to expand our domestic market share because the devaluation of the real has made
imports less competitive. Our sales of paper outside Brazil as a percentage of
our total sales of paper in terms of volume were 23% in each of 2002 and 2001
and were 20% in 2000. We have taken 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 weaker demand 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 decreased our total volume of pulp sales due to
the completion of the Jacarei expansion, which limited production in the second
half of 2002 as a result of integration and testing of new equipment. Since the
new production line started up in December 2002, we have benefited from our
ability to produce larger volumes of pulp at fixed costs that have not grown
proportionally and from lower transportation costs relative to other producers.
See "Item 4--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 exports.

     The following table shows a breakdown of our total exports in 2002 in terms
of volume by geographic location:

<TABLE>
<CAPTION>

                                                                       Pulp                         Paper
                                                                       ----                         -----
                                                             Thousands                    Thousands
                                                             of Tons       % of Total      of Tons        % of Total
                                                             ---------     ----------     ----------      ----------
<S>                                                       <C>               <C>           <C>             <C>
North America........................................         103.7             41%           47.8            36%
Latin America(1)....................................           --               --            32.7            25%
Europe..............................................          108.5             43%           34.7            26%
Asia and Africa.....................................           40.4             16%           16.7            13%
                                                             ------           ------        -------          -----
 Total Exports......................................          252.6            100%          131.9           100%
</TABLE>
-------------------------
(1) Excluding Brazil.


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 affected by the U.S. dollar, with domestic
sales denominated in reais and export sales generally denominated in U.S.
dollars. After reaching a peak in the middle of 1995, listed 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 early 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 second quarter of 2002, pulp prices

                                       41
<PAGE>

rose to a high of U.S.$480 per ton as the result of increased demand and
relatively lower inventories. After stabilizing in the third quarter of 2002,
prices fell in the fourth quarter of 2002 because seasonal factors resulted in
higher inventories. In the first quarter of 2003, severe weather conditions
reduced harvesting in the United States and resulted in reduced pulp production.
This factor, along with strong demand in China, reduced inventories and caused
prices to climb to U.S.$570 per ton in the United States, U.S.$540 per ton in
Europe and U.S.$510 per ton in Asia.

     The average Free on Board, or FOB, price per ton for our export sales of
bleached eucalyptus market pulp was U.S.$355 in 2002, U.S.$382 in 2001, and
U.S.$579 in 2000. In the first quarter of 2003, average FOB prices increased to
U.S.$426 per ton.

     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. Prices for printing and writing papers are generally
linked to international prices. In the second half of 2002, an increase in the
exchange rate and the resulting increase in export volumes, especially for
cut-size paper, created a shortage of paper in the domestic market and average
prices increased approximately 35% in reais, which partially offset the strong
devaluation of the real.

     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, and we have increased our export capacities to respond to weaker
periods in the domestic market.

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. 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 10% in 2002, 9% in 2001 and 8% in 2000. The slight
increase resulted from the increase of export volumes and lower international
prices. We generally pay up to 5% of the FOB price to export and shipping
agents, which varies by geographic region and responsibilities. General and
administrative expenses as a percentage of net sales were 5% in both 2002 and
2001.

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 cross-currency interest rate swap contracts are recorded
at fair market value on our balance sheet as an asset 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 because 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 "Liquidity and Capital Resources--Debt."

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
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 have consistently derived profits from the arbitrage
when we borrow funds in U.S. dollar-denominated liabilities and invest amounts
in real-denominated assets despite the hedging costs involved, but we do not
incur such debt in order to gain from that arbitrage. We provide no assurance
that such favorable results will be earned in the future or that we will
continue with these arbitrage transactions. See "--Liquidity and Capital
Resources."

                                       42
<PAGE>

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    impairment of investments, goodwill, intangible assets and
          amortization;

     o    forest development costs and impairment tests;

     o    deferred taxes; and

     o    tax contingencies.

     Revenue Recognition and Accounts Receivable

     We recognize revenue and associated costs of sales at the time our products
are delivered to our customers or when title passes to our customers.

     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 domestic 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, (1) the bank 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) we issue separate
guarantees in which we guarantee payment to the bank 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 under
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 banks, 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 that may arise from the guarantee.

                                       43
<PAGE>

     Under the vendor program, we recognize revenue as the goods are delivered
to our customers or when title passes to our customers.

     Allowance for Doubtful Accounts

     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:

     o    all overdue invoices over R$100,000 (equivalent to U.S.$28,300 at the
          December 31, 2002 exchange rate) are individually analyzed by our
          accounting department, in connection with the legal, collection and
          credit 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.

     Impairment of Investments, Goodwill, Intangible Assets and Amortization

     We acquired 28.0% of the voting capital and 12.3% of the total capital of
Aracruz on November 1, 2001, for U.S.$370 million, generating goodwill on our
portion of the underlying fair value of the net assets of U.S.$155 million.
Financial Accounting Standards Board 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 annually for impairment based upon the fair value of the
company's reporting units.

     Accounting Principles Board Opinion No. 18, "The Equity Method of
Accounting for Investment in Common Stock," requires us to record an impairment
provision in the event the quoted market price of the investee's publicly traded
stock is quoted below book value. A goodwill impairment provision was made in
2002 based on the market price of U.S.$18.56 for the Aracruz ADRs on December
31, 2002. The impairment charge of U.S.$136 million (gross of deferred income
tax effects of U.S.$46 million) was taken directly as a charge to income
("Equity loss of investee"). The deferred tax effect of U.S.$34 million is
included in "Deferred income tax benefit."

     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 21-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.

     U.S. GAAP, SFAS No. 144, "Accounting for the Impairment of Long-Lived
Assets," requires companies to periodically evaluate the carrying value of
long-lived assets to be held and used and long-lived assets to be disposed of,
when events and circumstances warrant such a review. Companies are required to
identify the smallest unit or group of assets at which cash flows generated by
the group can be measured. The projected undiscounted

                                       44
<PAGE>

cash flows from each such asset group is compared to its carrying value. A loss
is recognized if the carrying value exceeds the fair market value of the assets
for that group of 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 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. Since 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 that we do not believe are due. As discussed in Note
14 to our audited financial statements at and for the year ended December 31,
2002, 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), real
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:

<TABLE>
<CAPTION>
                                                                            For the Years Ended December 31,
                                                             ----------------------------------------------------
                                                             2002        2001       2000        1999         1998
                                                             ----        ----       ----        ----         ----
<S>                                                         <C>        <C>         <C>         <C>          <C>
Inflation (IGP-DI).......................................     26%        10%         10%         20%          2%
Devaluation (appreciation) of the real vs. U.S. dollar...     52%        18%         9%          48%          8%
Year/period-end exchange rate-- U.S.$1.00................   R$3.53      R$2.32     R$1.96      R$1.79       R$1.21
Average (daily-weighted) exchange rate(1)-- U.S.$1.00....   R$2.92      R$2.35     R$1.83      R$1.81       R$1.16
</TABLE>

     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.

                                       45
<PAGE>

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, 2002, various indicators are as follows: 11% of our cash and
held-to-maturity investments balances were in reais; generally, our sales prices
do not react immediately to a change in exchange rates; approximately 67% of our
sales were determined in reais; and, as discussed under "Item 11--Qualitative
and Quantitative Disclosure About Market Risk," approximately 90% (estimated) of
our cost of sales and 70% (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. 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 effects of our U.S. dollar transactions (cash, cash equivalents,
          held-to-maturity investments, loans and the unrealized gains and
          losses from cross-currency interest rate swap contracts, among others)
          are recorded in our statements of income. In our 2000 statement of
          income, we recorded a U.S.$14 million net foreign exchange loss. In
          2001, we recorded a U.S.$8 million net foreign exchange loss. In 2002,
          we recorded a U.S.$11 million net foreign exchange loss.

     o    Our non-monetary assets, primarily inventories and property, plant and
          equipment, are translated to U.S. dollars at the period end exchange
          rates. 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 2000, we recorded a U.S.$107
          million charge directly to shareholders' equity, without affecting net
          income, to reflect the devaluation of the real against the U.S. dollar
          of approximately 9%. In 2001, we recorded the same effect in the
          amount of U.S.$179 million to reflect the 18% devaluation of the real
          against the U.S. dollar. In 2002, we recorded this effect in the
          amount of U.S.$412 million to reflect the 52% 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 Brazilian 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, 2001 and 2002 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 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 revenues, 33% derive from our exports.

                                       46
<PAGE>

     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 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    The 52% devaluation of the real during 2002 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 cash flow from operating activities of
          U.S.$185 million although it was partially offset by the reduction of
          international prices for pulp and paper.

     o    Our exports, which represented 31% of our total net revenues in 2000,
          32% in 2001 and 33% in 2002, have enjoyed higher margins following the
          devaluation of the real, because exports are U.S. dollar-denominated
          while most of our costs are in reais, which has increased our ability
          to adopt an aggressive competitive strategy in the international
          markets, given our higher 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 devalues
          against the U.S. dollar, generating additional revenues. This
          additional revenue in reais reflects 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,
          2001 and 2002. Because our costs and operating expenses are generally
          in reais, the devaluation had the effect of decreasing these costs
          when reported in U.S. dollars.

     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 Brazilian GAAP
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 Brazilian GAAP and which
affect the amount of unappropriated earnings available for distribution. In
2002, on a consolidated basis, we and our subsidiaries recorded under Brazilian
GAAP foreign exchange losses (including gains from foreign currency swaps) of
R$15 million (equivalent to U.S.$5 million) compared to R$12 million (equivalent
to U.S.$5 million) in 2001 and R$21 million (equivalent to U.S.$11 million) in
2000.

     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 significant devaluations of the real in 1999 and 2002. We entered into
cross-currency interest rate swap contracts to offset losses generated by our
U.S. dollar denominated loans. These contracts have protected us from the
significant losses that would otherwise have been charged to income at the time
of the devaluation. Although our debt totaled U.S.$1,042.4 million at December
31, 2002, we recorded a net foreign exchange loss of U.S.$11 million in 2002
(1%) while the real devalued by 52%. See "--Liquidity and Capital
Resources--Capital Expenditures."

     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 volatility on the U.S.
Nasdaq markets and the decline in value 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 in the United
States on September 11, 2001. In 2002, the Brazilian economy was negatively
affected by uncertainties caused by the country's elections, the political and
economic uncertainties in other emerging markets and the threat of war in Iraq.

                                       47
<PAGE>

A.   Operating Results

Results of Operations

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

<TABLE>
<CAPTION>
                                                                    For the Years Ended December 31,
                                                                    -------------------------------
                                                                       2002        2001        2000
                                                                       ----        ----        ----
                                                                           (U.S.$ in millions)
<S>                                                                 <C>           <C>        <C>
Net sales.....................................................      $    609      $    654   $    774
Cost of sales.................................................          (329)         (344)      (371)
                                                                       -----        ------      -----
     Gross profit.............................................           280           310        403
Selling and marketing expenses................................           (58)          (56)       (58)
General and administrative expenses...........................           (30)          (32)       (33)
Other operating (expenses) income, net........................           (15)           (5)         2
                                                                       -----        ------      -----
     Operating profit.........................................      $    177      $    217   $    314
                                                                       -----        ------      -----
</TABLE>

     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 agree due to rounding):
<TABLE>
<CAPTION>

                                                                     For the Years Ended December 31,
                                                                     --------------------------------
                                                                       2002        2001        2000
                                                                      ------      ------      ------
<S>                                                                    <C>          <C>        <C>
Net sales.....................................................         100%         100%       100%
Cost of sales.................................................         (54)         (53)       (48)
                                                                      -----        -----      -----
     Gross margin.............................................          46           47         52
Selling and marketing expenses................................         (10)          (9)        (8)
General and administrative expenses...........................          (5)          (5)        (4)
                                                                      -----        -----      -----
     Operating profit.........................................          29           33         40
Financial income..............................................          12           11         13
Financial expenses............................................         (10)          (6)       (10)
Foreign exchange losses, net..................................          (2)          (1)        (1)
Gain on sale of affiliate.....................................          --           --         --
Income tax expenses...........................................           2           (9)       (10)
Equity loss of affiliate......................................         (20)          --         --
Cumulative effect of accounting change, net of tax............          --            1         --
                                                                      -----        -----      -----
     Net income...............................................          11%          29%        32%
</TABLE>

     We operate in two business segments: pulp and paper, which together account
for 100% of our sales. The following table sets forth, by reportable segment,
our net sales as determined in accordance with U.S. GAAP:

<TABLE>
<CAPTION>

                                                                     For the Years Ended December 31,
                                                                     ---------------------------------
                                                                       2002        2001        2000
                                                                      ------      ------      ------
                                                                            (U.S.$ in millions)
<S>                                                                  <C>          <C>        <C>
Revenue from customers:
     Pulp.....................................................       $   129      $   143    $   207
     Paper....................................................           480          511        567
         Total net revenues...................................       $   609      $   654    $   774
                                                                       -----       ------      -----
Pulp revenue (including intersegment sales)...................       $   287      $   326    $   435
Paper revenue.................................................           480          511        567
                                                                       -----       ------      -----
     Total revenues (including intersegment sales)............           767          837      1,002
Segment elimination-- intersegment revenue....................          (158)        (183)      (228)
                                                                       -----       ------      -----

     Total net revenues.......................................       $   609      $   654    $   774
                                                                       -----       ------      -----
</TABLE>
                                       48

<PAGE>

     For further information on our segments, see Note 15(a) to our consolidated
financial statements.

     The following table sets forth certain of our sales volume information for
pulp and paper for the periods indicated:

<TABLE>
<CAPTION>
                                                                       For the Years Ended December 31,
                                                                       --------------------------------
                                                                       2002           2001          2000
                                                                       ----           ----          ----
                                                                               (in metric tons)
<S>                                                                <C>           <C>               <C>
Pulp:
Sales volume to customers:
     Domestic.................................................         81,698        85,057        100,314
     Export...................................................        252,644       257,509        240,278
                                                                   -----------    ----------      ---------
         Total................................................        334,342       342,566        340,592
                                                                   -----------    ----------      ---------

Paper:
Sales volume to customers:
     Domestic:
         Printing and writing.................................        353,451       356,059        337,340
         Thermal and carbonless...............................         55,335        52,446         49,061
         Other specialty paper................................         30,673        28,388         38,076
              Total...........................................        439,459       436,893        424,477
     Export:
         Printing and writing.................................        129,876       131,749        105,046
         Thermal and carbonless...............................          1,967           755             --
                                                                   ===========    ==========      =========
                Total.........................................        131,843       132,504        105,046
                                                                   ===========    ==========      =========
Total.........................................................        571,302       569,397        529,523
</TABLE>

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     Introduction

     In 2002, the devaluation of the real, political uncertainty, weak economic
growth and low international pulp prices created poor market conditions, but our
extensive line of products, access to international markets, cost reduction and
productivity gains helped us offset those conditions. Additionally,
cross-currency interest rate swap transactions aided us in mitigating market
risks.

     Net Sales

     Because of our ability to adapt to adverse market conditions by
capitalizing on competitive advantages and by optimizing the market allocation
of our products, net sales decreased only 7% even though the real devalued by
52%. The decrease primarily resulted from the translation of net sales to U.S.
dollars and prices being 6% lower on average when expressed in U.S. dollars. In
2002, sales volume remained stable. Approximately 67% of our net sales were in
the domestic market. Of our revenues, 79% related to sales of paper and 21%
related to sales of pulp compared with 78% and 22%, respectively, in 2001.

     Pulp. In the pulp segment, sale volumes decreased to 334,342 metric tons in
2002 from 342,566 metric tons in 2001. The decrease in volume was due to the
testing of equipment that occurred at the Jacarei plant in connection with the
Jacarei expansion, which caused a decrease of 12,000 tons in production, and the
reduction of the pulp inventories due to the annual scheduled maintenance
stoppages in the second quarter of 2002. Net sales attributable to pulp
decreased by 10% to U.S.$129 million in 2002 from U.S.$143 million in 2001. This
decrease was mainly due to a decrease of 7% in the average price of pulp, which
resulted from high international inventories mainly in the first half of 2002,
and the 2% decline in volumes caused by the testing at the Jacarei plant. Pulp
exports constituted 76% of both revenues and volume of sales of pulp in 2002,
compared to 75% in 2001.

                                       49
<PAGE>

     In the domestic market, the volume of net sales of pulp decreased by 13%.
Revenues from domestic pulp sales decreased from 25% in 2001 to 24% in 2002.
This decrease is mainly due to the shift in our focus to sales in international
markets.

     Paper. In the paper segment, domestic sale volumes increased by 1% in 2002
as compared to 2001, mainly due to our large export volumes, primarily of
uncoated paper, which was due to an increase on higher value-added products such
as coated, carbonless, thermal papers and specialties. Net sales attributable to
paper decreased by 6% to U.S.$480 million in 2002 from U.S.$511 million in 2001,
mainly due to a 6% decrease in the average prices of paper. The domestic market
accounted for 79% of paper revenues in 2002, compared to 80% in 2001.

     Our domestic market strategy was to increase sales of value-added papers.
This volume increase was partially offset by a reduction in uncoated paper
volumes. Domestic prices increased 35%, which partially offset the 52%
devaluation of the real. The increase of cut-size paper exports resulted from a
reallocation of sales to global markets to counter the slowdown of the Brazilian
economy and to capitalize on the relatively stronger U.S. dollar, which provided
higher margins for our products in the international markets.

     Cost of Sales

     Cost of sales decreased by 4% to U.S.$329 million in 2002 from U.S.$344
million in 2001. This decrease was due to our ability to offset the effects of
the real devaluation by offering a more value-added product mix comprised of
cut-size, coated and chemical paper, which was partially offset by an increase
in the prices of raw materials as a result of the real devaluation and an
increase in labor costs due to wage increases under our collective bargaining
agreements negotiated in October 2001. The increase in the price of variable
production expenses, such as fuel and electricity, also contributed to higher
production costs.

     Our gross margin decreased to 46% in 2002 as compared to 47% in 2001 due to
the devaluation of the real, which caused per-unit costs not to fully offset
lower average domestic prices in U.S. dollars, even considering the increase in
prices in reais in the domestic market and the improvements in our product mix.

     Selling and Marketing Expenses

     Despite the devaluation of the real, which had the effect of reducing
amounts reported in U.S. dollars upon translation, sales expenses increased 4%
to U.S.$58 million in 2002, equivalent to 9.5% of net revenues, as compared to
8.6% in 2001. This increase resulted mainly from a U.S.$3 million provision for
bad debts that we recorded in 2002.

     General and Administrative Expenses

     General and administrative expenses decreased 6% to U.S.$30 million in 2002
from U.S.$32 million in 2001. The decrease partly resulted from the effect of
the currency devaluation on expenses, which are primarily denominated in reais.
This decrease was partially offset by payments to outside consultants of
U.S.$0.8 million, amortization of recent technology projects of U.S.$1.3
million, expenses related to other projects of U.S.$0.4 million and a wage
increase. As a portion of net revenue, general and administrative expenses
remained stable at 5%.

     Operating Profit

     Operating profit (before financial expenses) totaled U.S.$177 million,
which was 18% lower than in 2001. This decrease was caused by lower average
prices and an impairment charge of U.S.$12 million related to the equipment
retired at the Jacarei plant due to the expansion project.

     Pulp (including intersegment transactions at market values). Operating
profit attributable to pulp as reported under U.S. GAAP decreased by 27% to
U.S.$93 million from U.S.$128 million in 2001. The decrease was primarily due to
the 7% decline in pulp sale prices.

                                       50
<PAGE>

     Paper (including intersegment transactions at market values). Operating
profit attributable to paper as reported under U.S. GAAP decreased by 6% to
U.S.$84 million from U.S.$89 million in 2001. The decrease was primarily due to
the 6% decline in paper sale prices in U.S. dollars, which was partially offset
by the enhancement of the product mix in the domestic market and the increase in
volumes.

     Financial Income

     Financial income increased by 3% to U.S.$73 million in 2002 from U.S.$71
million in 2001. This change was primarily due to the increase in average
Brazilian interest rates. The increase was partially offset by the decrease of
our cash position from U.S.$578 million at the end of 2001 to U.S.$503 million
at the end of 2002. We optimized arbitrage positions between interest rates on
dollar-denominated borrowings (principally export credits) and local interest
rates available on real-denominated investments. The amount we earned from these
activities was recorded as financial income.

     Financial Expenses

     Financial expenses increased by 51% to U.S.$59 million in 2002 from U.S.$39
million in 2001 due mainly to the increase in our average gross debt. The
U.S.$370 million loan that was disbursed in October 2001 as part of our
acquisition of 28.0% of the voting shares of Aracruz and the financial expenses
associated with the transaction had an effect on the fourth quarter of 2001 and
in 2002.

     Foreign Exchange Losses

     Foreign exchange losses increased by 38% to U.S.$11 million in 2002 from
U.S.$8 million in 2001 primarily due to the effect of higher exchange rate
variation on our exposure to foreign currency in 2002 compared to 2001. Because
we have adopted the real as our functional currency, the losses recorded on
foreign-currency based transactions, which are mainly U.S. dollar-denominated
debt or gains from cross-currency interest rate swap contracts, are translated
to U.S. dollars and reported in our statement of income.

     Income Tax Expense

     In 2002 we recorded an income tax benefit of U.S.$10 million (the result of
U.S.$37.6 million of income tax expense and U.S.$46.2 million of income tax
benefit of the impairment charge of Aracruz) as compared to an income tax
expense of U.S.$59 million in 2001. We have opted to determine our income taxes
for 2001 and 2002 based on the provisions of the REFIS program, pursuant to
which the income tax calculation is based on an estimated tax basis rather than
on actual pretax income and therefore a comparative analysis of effective tax
rates is not applicable.

     Equity Loss of Investee

     In November 2001, we acquired 28.0% of the voting shares of Aracruz for
U.S.$370 million (including U.S.$155 million of goodwill). Consistent with U.S.
GAAP practices, we reduced the carrying value of our investment in Aracruz to
market value on December 31, 2002. Equity loss of investee of U.S.$121 million
was mainly due to the impairment of the goodwill in Aracruz of U.S.$136 million.

     Net Income

     As a result of the foregoing, net income decreased by 64% to U.S.$69
million in 2002 compared to U.S.$192 million in 2001.

                                       51
<PAGE>

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

     Introduction

     After the first quarter of 2001, the Brazilian economy was adversely
affected 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, 2001 terrorist attacks in the United States, and
regionally due to the Brazilian energy crisis and the ongoing Argentine crisis.
This environment and the high level of inventories negatively 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 that,
together with the reduced Brazilian 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 of pulp in 2001, compared to 71% in 2000.

     In the domestic market, net sales of pulp decreased by 39% due to a
decrease in sales volume and in average prices. We reduced sales of pulp 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.

                                       52
<PAGE>

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.

     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, in which 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 used 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.

                                       53
<PAGE>

     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. As we opted to determine our income taxes for 2001 based on
provisions of the REFIS program pursuant to which tax is based on an estimated
tax basis rather than on actual pretax income, a comparative analysis of
effective tax rates is not appropriate. In 2000, income tax was based on actual
pretax income.

     Cumulative Effect of Account Change, Net of Tax

     Upon adoption of SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities," we recognize our cross-currency 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 cross-currency
interest rate swap contracts on the balance sheet at contract value and
adjustments to contract value were charged to income. 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.

     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.

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 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,
debt repayment and dividend payments.

     We have historically made capital 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 4--Information on VCP--History and Development of
VCP--Capital Expenditures."

     As a result of our expenditures in connection with the Jacarei expansion,
there was a decrease in cash and cash equivalents of U.S.$82 million in 2002
compared to a decrease of U.S.$317 million in 2001. At December 31, 2002, we had
cash and cash equivalents of U.S.$90 million.

     At December 31, 2001, we had approximately U.S.$406 million (of a total in
deposits and investments of U.S.$536 million) in deposits and investments
principally with Banco Votorantim S.A., and U.S.$41 million in unrealized gains
from cross-currency interest rate swap contracts with Banco Votorantim S.A. At
December 31, 2002, we had approximately U.S.$320 million (of a total in deposits
and investments of U.S.$410 million) in deposits and investments principally
with Banco Votorantim S.A., and U.S.$86 million in unrealized gains from

                                       54

<PAGE>

cross-currency interest rate swap contracts principally with Banco Votorantim
S.A. See "Item 7--Major Shareholders and Related Party Transactions--Related
Party Transactions."

     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,
2002, our cash, cash equivalents and held-to-maturity investments (current
portion) were U.S.$121 million, of which U.S.$88 million was denominated in U.S.
dollars and the remainder in reais.

     At December 31, 2002 our balance sheet presents negative working capital of
U.S.$62 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 December 31, 2002:

<TABLE>
<CAPTION>
Contractual Obligations(2)(3)               Up to 1 year          2-3 years        After 3 years          Total
---------------------------------------- --------------------  -----------------  ----------------   -----------------
                                                                  (U.S. dollars in millions)

<S>                                         <C>                  <C>                 <C>                <C>
Long-term debt, including current
   portion................................  U.S.$ 249            U.S.$    613        U.S.$  111         U.S.$  973
Commitment with MRS.......................          1                       4                23                 28
Jacarei Expansion Project.................         66                      --                --                 66
Take-or-pay contractual obligations.......         38                      76               266                380
Pension plan obligations(1)...............          1                       2                 8                 11
                                               -----------        -----------       -----------        ------------
     Total contractual cash obligations     U.S.$ 355            U.S.$    695        U.S.$  408         U.S.$1,458
</TABLE>
------------
(1)  Amounts estimated for a ten-year period.
(2)  At December 31, 2002, commitments for capital expenditures amounted to
     approximately U.S.$66 million.
(3)  We also have take-or-pay contractual obligations, which are not expected to
     exceed U.S.$38 million per year.


Sources of Funds

     Operating activities provided net cash flows of U.S.$185 million in 2002,
compared to U.S.$234 million in 2001 and U.S.$381 million in 2000.

     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.$70 million in 2002 compared to cash flows of
U.S.$562 million generated in 2001.

     At December 31, 2002, our debt was U.S.$1,039 million (of which U.S.$315
million had short-term maturities) representing a decrease of U.S.$3 million
over the debt recorded at December 31, 2001. The long-term position amounted to
70% at December 31, 2002 compared to 56% in 2001. Approximately 89% of the debt
was denominated in foreign currencies. At December 31, 2002, we had net debt of
U.S.$536 million compared to net debt of U.S.$465 million at December 31, 2001,
due to investments in the Jacarei expansion. In 2002, 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, 2002, our net exposure to U.S.
dollar liabilities was a negative amount of U.S.$39 million, which means that
our assets in foreign currency were higher than our liabilities because we were
overhedged.

Uses of Funds

     Investing activities before proceeds of U.S.$8 million in 2002, U.S.$2
million in 2001 and U.S.$5 million in 2000 from a total of investments,
including acquisitions and the Jacarei expansion and other capital expenditures,
consumed net cash flows of U.S.$268 million compared to U.S.$1,004 million in
2001 and providing U.S.$96 million in 2000.

     Our significant uses of cash included the repayment of debt, which consumed
U.S.$910 million in 2002, U.S.$238 million in 2001 and U.S.$329 million in 2000.

                                       55
<PAGE>

Debt

     At December 31, 2002, our total debt was U.S.$1,039 million, consisting of
U.S.$315 million in short-term debt, including the current portion of long-term
debt, and U.S.$724 million in long-term debt. Our total debt at December 31,
2002 decreased by U.S.$3 million from total debt of U.S.$1,042 million at
December 31, 2001.

     Most of our U.S. dollar-denominated borrowings are either advances made in
respect of our export sales or international bank loans, which have lower
interest rates than domestic financings. For our expansion projects, we use
long-term financing in reais from BNDES, from which we have already received
R$324 million as of December 31, 2002.

     In October 2001, Newark received a bridge financing for U.S.$370 million to
finance the acquisition of our stake in Aracruz.

     On May 23, 2002, VCP Trading and VCP North America 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.

     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, now VPAR, 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 could 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
could 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 could
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 through St. Helen Holding II B.V., a subsidiary owned
by VPAR and us, on June 27, 2002.

                                       56
<PAGE>

     In order to finance our acquisition of the Voto-Votorantim notes through
St. Helen II, on September 23, 2002, St. Helen Holding III Ltd., a subsidiary of
VCP Exportadora and a 50%-owner of St. Helen II, entered into a credit agreement
in the amount of U.S.$203 million, which is guaranteed by us and by VCP
Exportadora. The principal is due September 23, 2003.

     We are in the process of establishing an export secured note program
related to pre-export financing in the amount of U.S.$300 million. We cannot
assure you that we will obtain this financing.

     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, dated October 29, 2001.

     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, 2002, the outstanding amount of export credits was
U.S.$264 million. The export credits bear annual interest of LIBOR plus 1.64%,
for an effective rate of 3.08% at December 31, 2002. At December 31, 2002, the
outstanding amount of import credits was U.S.$13 million. The import credits
bear annual interest of 4.20% at December 31, 2002.

     BNDES, the parent of BNDESPAR, one of our principal shareholders, has been
an important source of debt financing. At December 31, 2002, the BNDES loans
amounted to U.S.$116 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% to 3.5% 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. At December 31, 2002, the
TJLP was fixed at 11%, and during 2002 averaged 9.875% per year. See Note 11 to
our consolidated financial statements. On March 27, 2003, the TJLP was fixed at
12% for the three-month period starting April 1, 2003.

     At December 31, 2002, the amount of maturities of our long-term debt
(current and long-term portion) is as follows:

Year                                                              Amount
----------------------------------------------------------  --------------
                                                                  (U.S.$
                                                               in millions)
2003...................................................               249
2004...................................................               267
2005...................................................               346
2006...................................................                62
2007...................................................                19
Thereafter.............................................                30
                                                            --------------
      Total............................................     U.S.$     973

     At December 31, 2002, all of our short-term debt related to trade financing
was secured. The outstanding amount of that short-term debt was U.S.$66 million
at December 31, 2002, with a weighted average interest rate of 5.2% and U.S.$69
million at December 31, 2001, with a weighted average interest rate of 6.1%.

Capital Expenditures

     During 2002, we spent U.S.$317 million in capital expenditures, a decrease
of 53% from the U.S.$679 million invested in 2001 (which includes our investment
in Aracruz) and an increase of 443% over the U.S.$125 million invested in 2000.
Of this amount, U.S.$227 million was spent on the Jacarei expansion project, and
the remaining U.S.$90 million was invested in the modernization of our plants,
the implementation of our forest maintenance program and the updating of
information technology. As of December 31, 2002, capital expenditures already
realized or allocated to the Jacarei expansion project totaled U.S.$432 million
and the total estimated project budget was U.S.$498 million. We expect to
disburse U.S.$220 million in capital expenditures in 2003, including

                                       57
<PAGE>

U.S.$66 million related to the Jacarei expansion project. See "Item
4--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 and other claims. See "Item 8--Financial Information--Consolidated
Statements and Other Financial Information--Legal Matters," Note 14 to our
annual audited consolidated financial statements and discussions on our critical
accounting policies.

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

     At December 31, 2002, we had made provisions in the amount of U.S.$27
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.$12 million in 2002. The position of such provisions for tax and
other litigation and deposits is as follows:

<TABLE>
<CAPTION>
                                                              2002                                2001
                                                --------------------------------     ----------------------------
                                                   Deposits         Provisions        Deposits         Provisions
                                                --------------   --------------      -------------    -----------
                                                                            (in millions)
<S>                                             <C>              <C>                <C>              <C>
Tax-related.................................     U.S.$ 10         U.S.$ 19           U.S.$ 2          U.S.$ 4
Civil-related...............................           --                5                --                4
Labor-related...............................            2                3                 2                4
                                                --------------   --------------      -------------   ------------
                                                U.S.$   12       U.S. $ 27           U.S.$ 4         U.S.$ 12
                                                ==============   ==============      =============   ============
</TABLE>

     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, 2002, 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 7--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 11 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:

<TABLE>
<CAPTION>
                                                             Outstanding amount
           Primary Obligor                    Purpose      at December 31, 2002                        Beneficiary
---------------------------     ----------------------    ----------------------     ------------------------------

<S>                                 <C>                          <C>                   <C>
Votocel Filmes Flexiveis            Equipment finance            U.S.$8 million              Banco Nacional de
Ltda.                                                                                  Desenvolvimento Economico e
                                                                                       Social-BNDES
</TABLE>

     We estimate that, for 2002, 2001 and 2000, an average of approximately 2%
of our total number of regular domestic customers (approximately 21%, 22% and
22%, respectively, of total domestic sales value) obtained our guarantee for
their loans. At December 31, 2002, we had eleven customers under the vendor
program with the average amount per customer based on our vendor program
exposure at U.S.$4 million. Our vendor program exposure was U.S.$39 million at
December 31, 2002 and U.S.$61 million at December 31, 2001.

Buyback Programs

     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

                                       58
<PAGE>

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 the two programs since December 21, 2001, nor have we
renewed the programs. We carried over the 235,400 lots of 1,000 preferred shares
bought from the 2000 buyback 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.

     At December 31, 2002 and 2001, treasury shares totaled 144,300,000 and
235,400,000 preferred shares respectively, at the weighted average selling price
of R$53.11 per lot of 1,000 shares. The minimum price was R$50.96 per lot of
1,000 shares and the maximum price was R$54.78 per lot of 1,000 shares.

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

     During 2002, 2001 and 2000, 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-cuttings for cloning
selected trees to produce rooted cuttings, 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 two eucalyptus genome projects. One project, called
FORESTs, is sponsored by the Eucalyptus Genome Consortium, which is a consortium
of Brazilian pulp, paper and wood product companies, and FAPESP (The State of
Sao Paulo Research Foundation). The Eucalyptus Genome Project seeks to (i)
develop the eucalyptus genetic sequence (the results of the partial sequencing
already made results in 130,000 ESTs - Expressed Sequence Tags), (ii) identify
the genes responsible for patterns in wood quality, drought and disease
resistance and nutrient absorption, and (iii) create tools for marker assisted
selection. FORESTs, 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 to fund approximately 30% of this 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.

     Another project, called the GENOLYPTUS Project, recently began with the
support of the Brazilian Ministry of Science and Technology. The project
involves seven universities, three Embrapa centers and 12 major forest-based
companies. The funding for the project comes from the government (70%) and the
consortium of forestry companies (30%). This project has a total budget of
approximately U.S.$4 million over a period of approximately five years. The
focus of the GENOLYPTUS project is to generate a suite of experimental resources
and genomic tools to discover, map, validate and further investigate genes of
economic importance in species of eucalyptus. The main objective of the project
is to translate this knowledge to improved forest tree breeding and production
technologies.

                                       59
<PAGE>

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.

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.

Board of Directors

     Pursuant to Brazilian corporate law, shareholders of publicly traded
companies such as us that together hold preferred shares representing at least
10% of our total share capital for at least three months are entitled to appoint
one member of our board of directors as long as no multiple voting procedure has
been requested. 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 24, 2003:

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

Jose Roberto Ermirio de Moraes(1)........    45          Chairman
Fabio Ermirio de Moraes(2)...............    41          Vice-Chairman
Carlos Ermirio de Moraes(3)..............    47          Member
Clovis Ermirio de Moraes Scripilliti(4) .    44          Member
Raul Calfat..............................    50          Member
---------------
(1)  Jose Roberto Ermirio de Moraes is the son of Jose Ermirio de Moraes Filho,
     who passed away in 2001.
(2)  Fabio Ermirio de Moraes is the son of Ermirio Pereira de Moraes who was
     once a board member. He is also the cousin of Jose Roberto Ermirio de
     Moraes.
(3)  Carlos Ermirio de Moraes is the son of Antonio Ermirio de Moraes who was
     once a board member. He is also the cousin of Jose Roberto Ermirio de
     Moraes.
(4)  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.

Board of 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, 2004.

                                       60
<PAGE>

     Set forth below are the name, age and position of each of our executive
officers elected on April 25, 2003:

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

Raul Calfat.........................  50  President & Chief Executive Officer
Francisco Fernandes Campos Valerio..  55  Technical & Industrial Officer
Luiz Carlos Ganzerli................  55  Human Resource & Organizational
                                            Development Officer
Sergio Marnio Gandra Vaz............  59  Business Officer
Valdir Roque........................  52  Chief Financial Officer & Investor
                                            Relations Officer
Nelson Zanella......................  52  Director of Integrated Logistics
Fabio Faria.........................  45  Director of Information Technology

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.

     Fabio Ermirio de Moraes. Mr. Fabio Ermirio de Moraes is a mechanical
engineer and has been working for the Votorantim group since 1985. He has held
the position of Director Vice-President of Votorantim Cimentos Ltda, Director
President of Cia. Cimento Portland Itau, Director President of Cimento Tocantins
S.A., and Director President of Fazenda Sao Miguel Ltda. Fabio Ermirio de Moraes
is a member of the board of Votorantim Participacoes.

     Carlos Ermirio de Moraes. Mr. Carlos Ermirio de Moraes has been working for
the Votorantim group since 1983. He was the Director President of Cimento
Portland Itau. He is a founder and counselor member of Nickel Development
Institute - NiDI, Toronto/Canada and a founder and counselor member of Ayrton
Senna Institute. He is a counselor of ALUNORTE, which is a joint venture with
Industry Vale do Rio Doce. He has also been the Director President of Votorantim
Metais since 1997. He is the President Administration Counselor of CPFL (Cia.
Paulista de Forca e Luz) and VBC Energia S/A (Votorantim, Bradesco e Camargo
Energia). He was elected President of the Executive Committee of Votorantim
Participacoes in April 2001.

     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 studied Metallurgy Engineering at Mackenzie University
in Sao Paulo, Brazil.

     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 departments at Roche Quimicos e Farmaceuticos from
1999 to 2000 and Alpargatas Santista Textil S.A. from 1994 to 1999. 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. from 1970 to 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

                                       61
<PAGE>

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 and our direct
parent. He previously worked at Monsanto do Brasil S.A. as Treasurer, and at
General Electric and Ford. He has completed postgraduate 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 specialized courses in financial management at the Stanford
Business School, California in the United States.

     Nelson Zanella. Mr. Zanella has been the Director of Integrated Logistics
since June 2002. He holds a degree in Engineering and Business Administration.
He was previously the Director of Integrated Logistics of Sadia S.A., Business
Director and President of Fratelli Vita (AmBev), and Vice-President of
Operations of Panamco/Coca-Cola.

     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 the accounts
manager of EDS Brasil S.A. from December 1995 to February 1997. He has an
international executive MBA from the University of Sao Paulo, Brazil.

Fiscal Committee

     Under the Brazilian corporate law and our by-laws, we are not required to,
and currently do not, maintain a permanent fiscal committee (conselho fiscal).
However, we are required to establish a fiscal committee upon the request of
shareholders who, in the aggregate, hold at least 10% of the common shares or 5%
of the preferred shares. On April 27, 2001, our shareholders approved the
creation of a Conselho Fiscal. Under the Brazilian corporate law, the Conselho
Fiscal, or fiscal committee, is a corporate body independent of management. A
Conselho Fiscal is not equivalent to, or comparable with, a U.S. audit
committee. Our fiscal committee is composed of three members, as required by the
Brazilian corporate law, and three alternates. Two members of the fiscal
committee represent the controlling shareholders, and one represents the
minority shareholders' interests. The members of the fiscal committee are
elected for one-year terms, but can be reelected. The primary responsibility of
the fiscal 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 fiscal 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 that the fiscal committee members
receive as remuneration at least 10% of the average amount paid to each
executive officer. The Brazilian corporate law requires a fiscal committee to
have a minimum of three and a maximum of five members.

                                       62

<PAGE>

     As of April 30, 2003, our fiscal committee was composed of the following
members, whose term will expire on the annual shareholders' meeting in April
2004:

<TABLE>
<CAPTION>
                    Name                        Age     Length of Term     Year First Elected         Position
                    ----                        ---     --------------     ------------------         --------



<S>                                             <C>        <C>                    <C>                 <C>
Ariovaldo dos Santos........................    50         one year               2001                 Member
Joao Carlos Hopp............................    74         one year               2001                 Member
Roberto Martins Ribeiro de Jesus............    41         one year               2001                 Member
Lazaro Peacido Lisboa.......................    65         one year               2001                Alternate
Roque Antoni Carraza........................    53         one year               2001                Alternate
Jose Godinho Neto...........................    64         one year               2001                Alternate
</TABLE>


B.   Compensation

     According to our by-laws, our directors do not receive any compensation. As
of the year ended December 31, 2002, the aggregate compensation, including cash
and benefits-in-kind, paid to our executive officers (a total of seven persons
at the time) was approximately R$4.5 million (corresponding to U.S.$1.5
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 12 times during 2002. 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 expire on April 24, 2005.

D.   Employees

     As of December 31, 2002, we employed 3,848 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 3,740 persons for our business as of December 31, 2002. Approximately
78% of the workers in our forests are employed by third parties, predominantly
in areas such as maintenance and security. See "Item 4--Information on
VCP--Business Overview--Raw Materials--Wood" and "Item 4--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 2002 and expire in 2003. Collective bargaining agreements relating to
other employees which expired in September 2002 were renewed for another year,
with the employees receiving a 9.7% 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 a
good relationship 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 "--Board Practices--Defined Contribution Pension Plan" above.

Defined Contribution Pension Plan

     In March 2000, we began to participate in the Votorantim group's defined
contribution plan, which is made available to all of our employees. For
employees with lower compensation than a certain threshold, we match 100% of
their contribution up to 1.5% of the employee's compensation. For employees with
higher compensation than that 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. 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 at VCP, upon the employee's
retirement, death or disability. At December 31, 2002, 3,087 employees have
elected to take part in the plan and we have contributed approximately U.S.$1.0
million to the pension plan in 2002.

                                       63
<PAGE>

Profit Sharing Plan

     Pursuant to Brazilian federal law, companies operating in Brazil are
required to share profits with employees 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. Part of the profit
sharing payment relating to the income for that year is advanced in August.
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.

E.   Share Ownership

     As of December 31, 2002, 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 7--Major
Shareholders and Related Party Transactions--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 as of April 30, 2003:

<TABLE>
<CAPTION>
                                                      Common                               Preferred
                                             --------------------------------     ----------------------------------
                                                                                                    Percentage of
                                                              Percentage of                           the Total
                                               Number of        the Total          Number of         Outstanding
                                                 Shares     Outstanding Shares       Shares            Shares
                                             ------------   ------------------     ---------       ----------------
<S>                                          <C>              <C>                  <C>              <C>
Board of Directors
Jose Roberto Ermirio de Moraes...........          0                0%                 2                 0%
Fabio Ermirio de Moraes..................          0                0%                 2                 0%
Clovis Ermirio de Moraes Scripilliti.....          0                0%                 2                 0%
Carlos Ermirio de Moraes.................          0                0%                 2                 0%
Raul Calfat..............................          0                0%                 2                 0%

Executive Officers
Raul Calfat..............................          0                0%                 2                 0%
Francisco Fernandes Campos Valerio.......          0                0%              600,000              0%
Luiz Carlos Ganzerli.....................          0                0%                 0                 0%
Sergio Marnio Gandra Vaz.................          0                0%               3,763               0%
Valdir Roque.............................          0                0%               3,000               0%
Fabio Faria..............................          0                0%                 0                 0%
Nelson Zanella...........................          0                0%                 0                 0%

Total....................................          0                0%              606,775              0%
</TABLE>
---------------
Source:  Itau Custodia.


                                       64
<PAGE>

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 April 30, 2003:

<TABLE>
<CAPTION>
                                                         Common             Preferred              Total
                                                        --------           -----------            -------
Shareholders                                       Shares      (%)     Shares       (%)     Shares       (%)
------------                                      -------     -----    --------    -----   ---------    ------
                                                            (in million of shares, except percentages)
<S>                                                <C>         <C>       <C>      <C>      <C>        <C>
Votocel Filmes Flexiveis Ltda(1) (2)...........     18,805      88.95%      617      3.59%  19,421     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%      850      4.95%  21,990     57.38%
BNDES Participacoes S.A........................      --         --        5,797     33.74%   5,797     15.13%
Treasury Stock.................................      --         --          144      0.84%     144      0.38%
Public (Free Float)............................      --         --       10,391     60.47%  10,391     27.11%
                                                   -------     --------  -------   -------  ------    --------
Total..........................................     21,141     100.00%   17,182    100.00%  38,322    100.00%
                                                   =======     ========  =======   =======  ======    ========
</TABLE>
----------------------
(1)  Companies of the Votorantim group, controlled by the Ermirio de Moraes
     family.

     The ultimate beneficial owner, in each case, of more than 5% of either our
common shares or our preferred shares through intermediate holdings companies is
the Ermirio de Moraes family who, in the aggregate, beneficially owns 100% of
our voting common shares and 4.09% of our preferred shares. All holders of our
voting common shares have the same voting rights. Each of our directors, other
than Raul Calfat, have material beneficial interests in these holdings.

     Votocel Filmes Flexiveis Ltda.

     Votocel Filmes Flexiveis Ltda. is a manufacturer and supplier of packaging
film and is part of the Votorantim group and engages in the production and sale
of bi-oriented polypropylene (B.O.P.P.) for packaging. Votocel is ultimately
controlled by the Ermirio de Moraes family.

B.   Related Party Transactions

     We have engaged in a number of transactions with related parties. For a
description of those transactions, see Note 12 to our consolidated financial
statements.

Distributions and Sales Outside of Brazil

     In 2002 and 2001, we sold approximately 56% and 85%, respectively, of our
exports through Votorantrade, 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, part of our
distribution was carried out through VCP Trading and VCP North America.

Banco Votorantim S.A.

     We have entered into a number of financial transactions with or through
Banco Votorantim S.A., or Banco Votorantim, a financial institution controlled
by the Votorantim group and its affiliates. At December 31, 2002 we had
approximately U.S.$320 million (of a total of U.S.$410 million) in deposits and
short-term investments with Banco Votorantim and U.S.$86 million in unrealized
gains from cross-currency interest rate swap contracts with Banco Votorantim.

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, 2002, we had an
aggregate of U.S.$116 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% to 3.5%
per annum on the principal amount and are indexed using the TJLP, a nominal
long-term interest rate that includes an inflation factor.

                                       65
<PAGE>

     At December 31, 2002, the TJLP was fixed at 11%, and during 2002 averaged
9.875% per year. See Notes 11 and 12 to our consolidated financial statements.
On March 27, 2003, the TJLP was fixed at 12% for the three-month period starting
April 1, 2003.

Guarantees

     At December 31, 2002, we guaranteed U.S.$8 million of debt of other members
of the Votorantim group, and other members of the Votorantim group (other than
our subsidiaries) guaranteed U.S.$200 million of our debt.

     We believe the other companies of the Votorantim group, whose debt we
guarantee, are creditworthy and we do not expect to be called on to make
payments on our guarantees. 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 5--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.

Leases of Forest Land

     We lease approximately 39,000 hectares of forestland, or approximately 23%
of the land devoted to our forestry operations. Approximately 24,000 hectares of
the planted area are leased from other companies of the Votorantim group (other
than our subsidiaries). 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 prices of the
wood produced on the property and are payable after each harvest, based on
market prices. We guarantee a minimum harvest payment to the lessor. Payments
under the leases were approximately U.S.$1 million in each of 2002, 2001 and
2000. 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 3--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, 2002, the
accruals for legal proceedings were approximately U.S.$27 million, of which
approximately U.S.$19 million relate to tax disputes and approximately U.S.$8
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 Ecologico de Defesa e Preservacao do Meio
Ambiente, a non-governmental organization, began a public civil action seeking
to suspend the licensing of our co-generation unit at the Jacarei mill, based on
a legal prohibition as to the installation of thermal electric plants in the
city. IHU obtained an injunction to stop the licensing. On May 13, 2002,
however, we obtained a favorable judgment by the State Justice Court of Sao
Paulo, canceling the injunction. On December 18, 2002, we obtained the licensing
of installation of the co-generation with CETESB (government environmental
entity). However, on April 2, 2003, the Justice Court upheld the suspension of
the licensing. On April 4, 2003, we presented another defense to obtain the


                                       66
<PAGE>

license of installation focusing on the continuity of the licensing.
Additionally, the Public Prosecutor Office began an investigative proceeding to
verify the legal possibility of installation of a co-generation plant. We
believe that possibilities of success in both actions are reasonable.
Furthermore, a prohibition of the installation of the co-generation unit would
not damage the energy plant at the Jacarei mill.

     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. We
responded to the Central Bank within the 30-day period with the information that
was requested. In spite of this, the Central Bank issued a fine in the amount of
U.S.$4 million. We presented our defense to the Central Bank to refute the
payment of the fine, and we believe that our chances of success are high because
we have the documents necessary to prove the transactions.

     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 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 14 to our
consolidated financial statements.

     At December 31, 2002, we were defendants in approximately 313 labor
lawsuits filed by our former employees and 705 labor lawsuits filed by former
employees of our subcontractors. The aggregate amount of such claims was
approximately U.S.$10 million. At December 31, 2002, we were defendants in 103
civil proceedings with claims in an aggregate amount of approximately U.S.$13
million. We believe that we will prevail in the majority of these lawsuits, and
do not consider that, if decided against us, these proceedings individually or
in the aggregate, will have a material adverse effect on us.

Dividend Policy and Dividends

     General

     The amounts that are available for dividend distribution are determined in
accordance with procedures established by the Brazilian corporate law. Under
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 net loss or accumulated deficit
or to increase our share capital and may not be distributed. At December 31,
2002, the legal reserve outstanding balance was R$55 million, equivalent to
U.S.$16 million at the December 31, 2002 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 reversion of
          amounts allocated to the contingency reserve in previous fiscal years.

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<PAGE>

     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.

     Brazilian GAAP differs significantly from U.S. GAAP. Because our financial
statements are in accordance with U.S. GAAP and dividends are determined based
on Brazilian GAAP, 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 Brazilian GAAP and U.S. GAAP with respect to our consolidated financial
statements are summarized below.

     Under Brazilian GAAP:

     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 GAAP requirement to index property, plant and
          equipment for inflation through 1995 and differences between
          historical depreciation rates, the net book values for the Brazilian
          GAAP 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 progress 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;

     o    we recognized our foreign currency and interest rate swap contracts on
          our balance sheet at fair value, and adjustments to fair value are
          charged to income. Prior to adopting SFAS 133, we accounted for the
          accounting charge as a cumulative effect on an accounting principle;
          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. No
          impairment charge was taken against the book value of our investment
          in Aracruz under Brazilian

                                       68
<PAGE>

          GAAP. Under U.S. GAAP, an impairment provision was recorded to reduce
          the carrying value of our investment in Aracruz to market value.

     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.

     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 Brazilian GAAP. The appropriated reserve balances in the U.S.
GAAP financial statements at the balance sheet dates reflect the underlying
Brazilian GAAP 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, 2002, in
our statutory books prepared in accordance with Brazilian GAAP, 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$976 million, equivalent to
U.S.$269 million at the exchange rate at December 31, 2002. We had
unappropriated retained earnings of U.S.$269 million at December 31, 2002,
U.S.$335 million at December 31, 2001 and U.S.$259 million at December 31, 2000
at the exchange rate at the referred dates. Unappropriated retained earnings as
reported in accordance with Brazilian GAAP 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 under Brazilian GAAP, 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 Brazilian GAAP 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 or
appreciation of the real creates foreign exchange gains and losses that are
included in the results of operations determined under Brazilian GAAP and which
affect the amount of unappropriated earnings available for distribution. At
December 31, 2002, on a consolidated basis, we and our subsidiaries recorded
under Brazilian GAAP foreign exchange losses (including gains from
cross-currency interest rate swap contracts) of R$15 million (equivalent to
U.S.$5 million at the average exchange rate for 2002).

     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 reports to the shareholders' meeting that the distribution would be
incompatible with the financial condition of the company, subject to approval by
the shareholders and to a review by the Conselho Fiscal. 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

                                       69
<PAGE>

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, who 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 10--Additional Information--Memorandum
and Articles of Association." Under the current Brazilian tax law, dividends
paid to any person, 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 10--Additional Information--Taxation--Certain
Brazilian Tax Consequences."

     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 10--Additional
Information--Memorandum and Articles of Association."

     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.

     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.

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<PAGE>

     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 tax-deductible interest is
limited to the product of 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 the stockholders' equity of the company 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 10--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.

     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 1998. 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>
June 30, 1999.........      1998          R$   0.2599         R$   0.2859      U.S.$   0.1469      U.S.$   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.........      2001               2.3068              2.5375              0.8103              0.8913
June 20, 2003.........      2002               2.8555              3.1410              0.988(2)            1.087(2)
</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 April 30, 2003 exchange rate.

     The dividends we paid amounted to U.S.$34 million in 2002, U.S.$37 million
in 2001 and U.S.$23 million in 2000.

     In 2002, we paid U.S.$34 million in the form of dividends, which
represented 42% of adjusted net income in reais.

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<PAGE>

B.   Significant Changes

     Other than as disclosed in this annual report, no significant change has
occurred since the date of our most recent audited financial statements.

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 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, 2002, we
had approximately 3,770 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, for the periods indicated,
the reported high and low sales 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 3--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
                                                                 -------        --------      ------        ------
<S>                                                             <C>            <C>            <C>           <C>
1998:
             Annual.........................................      25.00          10.50          --             --

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

2000:
             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

2002:
             First Quarter .................................      93.00          75.00          19.67          15.70
             Second Quarter.................................     111.00          86.16          21.12          16.00
             Third Quarter..................................     109.00          90.03          18.89          13.40
             Fourth Quarter.................................     122.19          98.50          17.62          12.50
             Annual.........................................     108.79          87.42          19.32          14.40

Share price for the most recent six months:
             December 2002..................................     122.19         115.00          17.62          15.04
             January 2003...................................     131.00         116.01          19.07          16.00
             February 2003..................................     135.39         121.22          19.05          17.47
             March 2003.....................................     135.00         122.99          19.54          17.07
             April 2003.....................................     129.99         105.00          20.50          18.33
             May 2003.......................................     113.20          96.00          19.10          16.33
             June 2003 (through June 24, 2003)..............     114.50         105.01          19.84          18.30

</TABLE>

                                       72
<PAGE>

     On June 24, 2003, the last reported closing sale price for the preferred
shares on the Sao Paulo Stock Exchange was R$109.85 per 1,000 preferred shares,
equivalent to U.S.$19.15 per ADS translated at the exchange rate of R$2.8626 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 registered company with the
Commission and were 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 received
U.S.$85.4 million (before expenses). On April 30, 2002, the CVM approved The
Bank of New York as our replacement depositary bank. On May 17, 2002, the
Commission declared effective the Form F-6 filed in connection with the change
of depositary.

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 is made through the facilities of separate clearinghouses for each
exchange, which maintain accounts for member brokerage firms. The seller is
ordinarily required to deliver the shares to the clearinghouse on the second
business day following the trade date. The clearinghouse for the Sao Paulo Stock
Exchange is Companhia Brasileira de Liquidacao e Custodia, or CBLC.

     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 December 31, 2002, the
aggregate market capitalization of the 399 companies listed on the Sao Paulo
Stock Exchange was equivalent to approximately U.S.$124 billion, and the ten
largest companies listed on the Sao Paulo Stock Exchange represented
approximately 49% 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. In March 2003, we accounted for approximately 1% 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 10--Additional Information--Memorandum and Articles of
Association" and ""Item 10--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


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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
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 on the Brazilian
over-the-counter market. 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
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, among other reasons.

     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

     Incorporated by reference to our annual report on Form 20-F/A filed on July
12, 2002.

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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 of directors, 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 February 7, 2003, the Lorentzen group and the Safra group announced the
signing of an agreement in which the Lorentzen group and the Safra group agreed
that, until the termination of the existing Aracruz shareholders' agreement, a
sale by either party of its voting interest in Aracruz must be approved by the
other party. This new agreement provides that (i) neither party may take any
action or omit to take any action which results in the extension or renewal of
the existing shareholders' agreement, and (ii) after 2008 (the date of
termination of the existing shareholders' agreement), (A) the sale by either
party shall be subject to rights of first refusal by the other party and to
"tag-along" rights (the right of a party to the agreement to sell on a pro rata
basis its shares if another party is selling shares) and (B) in the event of a
sale by either of them to a third party, the purchaser must adhere to the
provisions of the new 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 5--Operating and Financial Review and Prospects--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
"--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 the Depositary are able to convert dividends and
other distributions with respect to the preferred shares

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represented by the ADSs into foreign currency and remit the proceeds outside
Brazil. In the event that a holder of ADSs 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.
Thereafter, a holder must seek to obtain its own electronic registration. 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 foreign currencies upon the disposition of the
preferred shares, or distributions with respect thereto. In addition, if the
foreign investor resides in a tax haven jurisdiction or is not an investor
registered pursuant to Resolution No. 2,689, 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 shares or convertible securities 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 3--Key Information--Risk
Factors--Risks Relating to Our Preferred Shares and ADSs--You may not be able to
exercise preemptive rights with respect to our preferred shares."

Right of Withdrawal

     The Brazilian corporate law provides that, under certain circumstances, a
shareholder has the right to withdraw its equity interest from a 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 consolidate;

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<PAGE>

     o    to transfer all of our shares to another company or in order to make
          us 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, a consolidation or a spin-off 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, as defined by the Brazilian securities
commission, 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 U.S. 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 alien
individual 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, or a trust that has validly
elected under applicable Treasury regulations to be treated as a U.S. person.

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<PAGE>

     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 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, partnerships and other
pass-through entities, 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. If a
partnership holds preferred shares of ADSs, the U.S. federal income tax
treatment of a partner generally will depend upon the status of the partner and
upon the activities of the partnership. Partners of partnerships holding
preferred shares or ADSs should consult their own tax advisors.

     This summary is based upon tax laws of Brazil and the United States as in
effect on the date of this annual report, 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 advisor 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.

     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

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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.

     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

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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
(i.e., a place that does not impose income tax or where the maximum income tax
rate is lower than 20% and where the law imposes restrictions on disclosure of
the shareholding composition or the ownership of the investment), 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% as of December 31, 2002. During
2004, the rate will be 0.08%. The CPMF tax is scheduled to expire on December
31, 2004. The Brazilian Congress is discussing a permanent extension of the tax.
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. 4,494 of December 3, 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, the
current rate of IOF tax on such conversions is 0%, 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,
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 U.S. 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,

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and, in either case, will not be eligible for the dividends received deduction
allowed to corporations under the Code. However, pursuant to recently enacted
legislation, dividends in respect of our preferred shares or ADSs paid to
certain U.S. holders (including individuals) may qualify for preferential rates
of U.S. federal income tax. 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
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). In general, special rules will apply to the
calculation of foreign tax credits in respect of dividend income that is subject
to preferential rates of U.S. federal income tax pursuant to recently enacted
legislation. 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 U.S. 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

                                       82
<PAGE>

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.

     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. However, because the determination of whether our preferred shares or
ADSs constitute shares of a PFIC will be determined on an annual basis, is based
upon the composition of our income and assets (including entities in which we
hold at least a 25% interest), and the nature of our activities, from time to
time, and because there are uncertainties in the application of relevant rules,
there can be no assurance that our preferred shares or ADSs will not be
considered shares of a PFIC for any taxable year. U.S. holders should consult
their own tax advisors regarding the application of the PFIC rules to our
preferred shares or ADSs and the availability and advisability of making an
election to avoid the adverse tax consequences of the PFIC rules should we be
considered a PFIC for any taxable year.

     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 backup withholding tax 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 U.S. 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 U.S. 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.

                                       83
<PAGE>

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 Commission. These materials, including this annual report and the
accompanying exhibits, may be inspected and copied at the Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. 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 electronically financial statements and other periodic reports
with the CVM. The CVM website is www.cvm.gov.br.

     Copies of our annual reports on Form 20--F and accompanying documents and
our by-laws will be available for inspection at our headquarters or our website
at www.vcp.com.br. The information on our website is not part of this annual
report.

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 use cross-currency interest rate swap contracts 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 also invest in instruments
linked to exchange variations.

     We also use cross-currency 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 assets or liabilities and in our statement of income in
"Foreign exchange losses, net" in 2002, 2001 and 2000.

     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 the 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

                                       84
<PAGE>

was U.S.$7 million. As of December 31, 2002, our exposure was a negative U.S.$39
million, indicating we were overhedged. 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 Brazilian market. We succeeded in lengthening the average maturity
of our debt over time. 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 decreased from 44% at December 31, 2001 to 30% at
December 31, 2002.

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, 2002 included borrowings denominated mainly in
U.S. dollars. Our net foreign currency exposure (U.S. dollar-denominated debts
less our cross-currency interest rate swap contracts in our U.S.
dollar-denominated assets) was a negative U.S.$39 million (assets were higher
than liabilities) at December 31, 2002 compared to negative U.S.$1 million at
December 31, 2001. As of December 31, 2002, approximately 88% 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 cross-currency
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 the
counterparties and ourselves 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, 2002 and 2001, the notional amounts of
our outstanding foreign currency swap contracts were U.S.$255 million and
U.S.$253 million, respectively, and their fair values were U.S.$93 million and
U.S.$32 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 cross-currency 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, 2002. The amounts have been translated into U.S. dollars based on the
exchange rate prevailing on December 31, 2002, as determined by the Central Bank
(R$3.5333 for U.S.$1.00).

                                       85
<PAGE>
<TABLE>
<CAPTION>

                                                                                As of December 31, 2002
                                                                                ------------------------
                                                                      Expected Maturity Date
                                                                      -----------------------
                                                                                            After              Fair
                                                                  2003     2004     2005     2005    Total   Value(1)
                                                                 ------   ------   ------   ------   -----   --------
                                                                                  (U.S.$ in millions)
<S>                                                             <C>       <C>      <C>      <C>      <C>     <C>
Short-term debt:
     Reais..................................................          9       --       --       --       9         9
     U.S. dollars...........................................        306       --       --       --     306       298
                                                                   ----     ----     ----     ----    ----      -----
         Total short-term debt..............................        315       --       --       --     315       307
Long-term debt:
     Reais..................................................         --       20       19       68     107       107
     U.S. dollars...........................................         --      247      327       43     617       591
                                                                   ----     ----     ----     ----   -----     -----
         Total long-term debt...............................         --      267      346      111     724       698
Total.......................................................        315      267      346      111   1,039     1,005
                                                                   ====     ====     ====     ====   =====     =====
</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 5--Operating and Financial Review and Prospects--Liquidity and Capital
Resources--Capital Expenditures." 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, 2002, the carrying value of our U.S. dollar-denominated
short-term debt was U.S.$66 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 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 fluctuations in exchange rate reflected 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:

                                       86
<PAGE>

                                                       As of December 31,
                                                ----------------------------
Floating rate debt:                                   2002            2001
                                                ---------------  ------------
     o   Denominated in U.S. dollars.........          74%             37%
     o   Denominated in reais................          11%              9%
             Subtotal........................          85%             46%

Fixed rate debt:
     o   Denominated in U.S. dollars.........          15%             54%
     o   Denominated in reais................          --              --
             Subtotal........................          15%             54%
                  Total......................         100%            100%

     Our cross-currency 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 helps us to mitigate 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 10% at December 31, 2001, and during 2001 averaged 9.50% per year. On
December 31, 2002, the TJLP was fixed at 11%, and during 2002 averaged 9.875%
per year. On March 27, 2003, the TJLP was fixed at 12% for the three-month
period starting April 1, 2003.

     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, 2002.

                                       87
<PAGE>

<TABLE>
<CAPTION>
                                                                          As of December 31, 2002
                                                                         --------------------------
                                                       Expected Maturity Date
                                                      -------------------------
                                                                             After               Fair     Average Annual
                                                   2003     2004     2005    2005     Total    Value(1)    Interest Rate
                                                  ------   ------   ------  ------    -----    --------   ---------------
                                                                   (U.S.$ in millions)
<S>                                              <C>       <C>     <C>       <C>      <C>      <C>        <C>
Assets:
                                                                                                              105% of
                                                                                                             Brazilian
Cash and cash equivalents denominated in                                                                     Interest
     reais.....................................       25                                 25        25     Interbank Rate
Cash and cash equivalents denominated in U.S.
     dollars...................................       65                                 65        65     13.7% per year


                                                                                                              104% of
                                                                                                             Brazilian
Held-to-maturity investments denominated in                                                                  Interest
     reais.....................................        6       10        8               24        24     Interbank Rate
Held-to-maturity investments denominated in
     U.S. dollars..............................       25       70       96     105      296       222     12.2% per year
                                                    ----     -----    -----   -----    -----    -----
Total cash, cash equivalents and
     held-to-maturity investments..............      121       80      104     105      410       336
                                                    ====     =====    =====   =====    =====    =====
Liabilities:
Short-term debt:
     Floating rate, denominated in U.S.                                                                    LIBOR + 2.7%
     dollars...................................      149                                149       149        per year

Fixed rate, denominated in U.S. dollars........      157                                157       149      5.7% per year


                                                                                                               TJLP
                                                                                                            (Long-Term
                                                                                                             Rate from
                                                                                                            BNDES at 11%
                                                                                                             per year at
                                                                                                            December 31,
                                                                                                            2002) plus 3%
     Floating rate, denominated in reais.......        9                                  9         9          per year
                                                     ---                                ---       ---
         Total short-term debt.................      315                                315       307
                                                     ===                                ===       ===
Long-term debt:
     Floating rate, denominated in U.S.                                                                    LIBOR + 2.7%
     dollars...................................               247      327      43      617       591        per year


                                                                                                               TJLP
                                                                                                            (Long-Term
                                                                                                             Rate from
                                                                                                            BNDES at 11%
                                                                                                             per year at
                                                                                                            December 31,
                                                                                                            2002) plus 3%
     Floating rate, denominated in reais.......                20       19      68      107       107          per year
                                                             ----    -----  ------    -----      ----
         Total long-term debt..................               267      346     111      724       698
                                                             ----    -----  ------    -----      ----
Total debt.....................................      315      267      346     111   1,039     1,005
                                                    ====     ====    =====  ======   ======    ======
</TABLE>
-------------
(1)  The methodology used to determine the fair value included in the table
     above is described in Note 13 to our consolidated financial statements.

                                       88
<PAGE>

Cross-Currency 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
cross-currency interest rate swap contracts or Brazilian public bonds. See Note
13 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, 2002, 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. See Note 12 to our
consolidated financial statements.

     The table below provides information about our cross-currency interest rate
swap contracts:

<TABLE>
<CAPTION>
                                                                     As of December 31, 2002
                                   -----------------------------------------------------------------------------------------
                                      Expected Maturity Date
                                   --------------------------
                                                                       Fair Value of
                                                                           Assets
                                                       After           (Liabilities)  Average Paying            Average
                                    2003   2004  2005   2005    Total       (1)         Rate in Reais        Receiving Rate
                                   ------ ------ ----- ------  ------  -------------- ---------------        ---------------
                                                   (U.S.$ in millions)
<S>                                <C>     <C>   <C>    <C>     <C>     <C>           <C>                 <C>
Cross-currency interest rate swap
    contracts notional amount
                                                                                      100% of Brazilian
                                                                                          Interbank
         Reais to U.S. dollars.....   41                214     255         120         Interest Rate       13.3% per year
                                                                                                          106% of Brazilian
                                                                                                          Interbank Interest
         U.S. dollars to reais.....    9     8     83           100          (2)        11.3% per year           Rate
</TABLE>
-------------
(1)  The methodology used to determine the fair value included in the table
     above is described in Note 13 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. CONTROLS AND PROCEDURES

     Our chief executive officer and our chief financial officer, after
evaluating the effectiveness of our disclosure controls and procedures (as
defined in the U.S. Securities Exchange Act of 1934 under Rule 13a-14(c)) within
90 days of the date of this annual report, have concluded that, as of that date,
our disclosure controls and

                                       89
<PAGE>

procedures were effective to ensure that material information relating to us was
made known to them by others within our company, particularly during the period
in which this annual report and accounts were being prepared.

     There were no significant changes in our internal controls or in other
factors that could significantly affect these controls and procedures subsequent
to the date our chief executive officer and our chief financial officer
completed their evaluation, nor were there any significant deficiencies or
material weaknesses in our internal controls and procedures requiring corrective
actions.

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-2

             Consolidated Balance Sheets as of December 31, 2002 and 2001...................  F-3

             Consolidated Statements of Income for the years ended December 31, 2002, 2001
             and 2000.......................................................................  F-5

             Consolidated Statements of Cash Flows for the years ended December 31, 2002,
             2001 and 2000..................................................................  F-7

             Consolidated Statements of Changes in Shareholders' Equity for the years ended
             December 31, 2002, 2001 and 2000...............................................  F-8

             Notes to Consolidated Financial Statements.....................................  F-10
</TABLE>

     All schedules for which provision is made in the applicable accounting
regulations of the 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. (incorporated herein by reference
          to our annual report on Form F-20 for the year ended December 31,
          2001).

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. (incorporated herein by reference to our
          registration statement on Form F-6 (No. 333-84964))

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.
          (incorporated herein by reference to our

                                       91
<PAGE>

          registration statement on Form F-1 (No. 333-11766))

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. (incorporated herein by reference to our annual report on
          Form F-20 for the year ended December 31, 2001).

3.2       First Amendment and Ratification to the Shareholders' Agreement of
          Aracruz Celulose S.A. dated June 30, 1989. (incorporated herein by
          reference to our annual report on Form F-20 for the year ended
          December 31, 2001).

3.3       Terms of Adhesion to the Shareholders' Agreement of Aracruz Celulose
          S.A., dated November 1, 2001. (incorporated herein by reference to our
          annual report on Form F-20 for the year ended December 31, 2001).

4.1       Financing Agreement, dated January 31, 1992, between Banco Nacional de
          Desenvolvimento Economico e Social--BNDES and Industria de Papel Simao
          S.A. (incorporated herein by reference to our registration statement
          on Form F-1 (No. 333-11766))

4.2       Financing Agreement, dated August 13, 1997, between Banco Nacional de
          Desenvolvimento Economico e Social--BNDES and Industria de Papel Simao
          S.A. (incorporated herein by reference to our registration statement
          on Form F-1 (No. 333-11766))

4.3       Financing Agreement, dated February 26, 1996, between Banco Nacional
          de Desenvolvimento Economico e Social--BNDES and Industria de Papel
          Simao S.A. (incorporated herein by reference to our registration
          statement on Form F-1 (No. 333-11766))

4.4       Financing Agreement, dated February 10, 1998, between Banco Nacional
          de Desenvolvimento Economico e Social--BNDES and Celpav Celulose e
          Papel Ltda. (incorporated herein by reference to our registration
          statement on Form F-1 (No. 333-11766))

4.5+      Pulp Supply Agreement, dated January 1, 1999, between Kimberly-Clark
          International and Votorantim International North America.
          (incorporated herein by reference to our registration statement on
          Form F-1 (No. 333-11766))

4.6+      Technology Transfer Agreement, dated September 1, 1989, between
          Kanzaki Paper Mfg. Co., Ltd. and Industrias de Papel Simao S.A.
          (incorporated herein by reference to our registration statement on
          Form F-1 (No. 333-11766))

4.7+      Second Amendment Agreement to Technology Transfer Agreement, dated
          October 4, 1999, between New Oji Paper Co., Ltd. and Industrias de
          Papel Simao S.A. (incorporated herein by reference to our registration
          statement on Form F-1 (No. 333-11766))

4.8+      Second Addendum to the Industrial Technology License Agreement, dated
          as of October 4, 1999, between the Registrant and Oji Paper Co., Ltd.
          (incorporated herein by reference to our registration statement on
          Form F-1 (No. 333-11766))

4.9       Agreement, dated December 29, 1999, between the Registrant and Maspha
          Comercial Ltda. (incorporated herein by reference to our registration
          statement on Form F-1 (No. 333-11766))

4.10      Loan Agreement, dated October 29, 2001, among POBT Bank and Trust
          Limited, Newark Financial Inc. and VCP. (incorporated herein by
          reference to our annual report on Form F-20 for the year ended
          December 31, 2001).

4.11      Loan Agreement, dated October 26, 2001, among Banco Bradesco S.A.,
          Grand Cayman, Newark Financial Inc. and VCP. (incorporated herein by
          reference to our annual report on Form F-20 for the year ended
          December 31, 2001).

4.12      Loan Agreement, dated October 26, 2001, among Unibanco-Uniao de Bancos
          Brasileiros S.A., Nassau Branch, Newark Financial Inc. and VCP.
          (incorporated herein by reference to our annual report on Form F-20
          for the year ended December 31, 2001).

4.13      Loan Agreement, dated October 19, 2001, among Banco BBA-Creditanstalt
          S.A.--Nassau branch,

                                       91
<PAGE>

          Newark Financial Inc. and VCP. (incorporated herein by reference to
          our annual report on Form F-20 for the year ended December 31, 2001).

4.14      Offshore Export Prepayment Agreement No. G-5261/01, dated October 29,
          2001, between ABN Amro Bank N.V. and Newark Financial Inc.
          (incorporated herein by reference to our annual report on Form F-20
          for the year ended December 31, 2001).

4.15      Term Loan Facility Letter, dated October 24, 2001, between Dresdner
          Bank Lateinamerika AG and Newark Financial Inc. (incorporated herein
          by reference to our annual report on Form F-20 for the year ended
          December 31, 2001). 4.16 Promissory Note, dated October 29, 2001,
          between Banco ABC Brasil S.A., Cayman Islands branch, and Newark
          Financial Inc. (incorporated herein by reference to our annual report
          on Form F-20 for the year ended December 31, 2001).

4.17      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. (incorporated herein by reference
          to our annual report on Form F-20 for the year ended December 31,
          2001).

4.18      First Supplemental Indenture dated as of June 27, 2002 to the
          Indenture dated as of June 27, 1997 among Voto-Votorantim Overseas
          Trading Operations N.V., as issuer, Votorantim Participacoes S.A.,
          Votorantim Celulose e Papel S.A. and Cimento Rio Branco S.A., as
          guarantors, and JPMorgan Chase Bank, as trustee.

4.19      Credit Agreement, dated as of May 23, 2002 in the amont of U.S.$380
          million, among Newark Financial Inc., VCP Exportadora e Participacoes
          S.A., Votorantim Celulose e Papel S.A., VCP Trading N.V., VCP North
          America Inc., certain lenders, ABN Amro Bank N.V. and The Bank of New
          York.

4.20      Credit Agreement, dated as of September 23, 2002 in the amont of
          U.S.$203 million, between St. Helen Holding III Ltd. and ABN Amro Bank
          N.V.

6.1       See Note 2(k) to our financial statements for information explaining
          how earnings per share information was calculated.

8.1       See Note 2(c) to our financial statements for information regarding
          our subsidiaries.

12.1      Certifications by the Chief Financial Officer and Chief Executive
          Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002.

-----------
+    Portions of the exhibit have been omitted pursuant to a request for
     confidential treatment filed separately with the Commission.




                                       92
<PAGE>


                                   SIGNATURES

          The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

                                     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: June 30, 2003



<PAGE>


                                  CERTIFICATION

          I, Valdir Roque, certify that:

1.   I have reviewed this annual report on Form 20-F of Votorantim Celulose e
     Papel S.A.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     (a)  Designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     (b)  Evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  Presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     (a)  All significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     (b)  Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  June 30, 2003

By:      /s/ Valdir Roque
     -------------------------------
Name:  Valdir Roque
Title:  Chief Financial Officer

<PAGE>


                                  CERTIFICATION

          I, Raul Calfat, certify that:

1.   I have reviewed this annual report on Form 20-F of Votorantim Celulose e
     Papel S.A.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     (a)  Designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     (b)  Evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  Presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     (a)  All significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     (b)  Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  June 30, 2003

By:      /s/ Raul Calfat
     -------------------------------
Name:  Raul Calfat
Title:  Chief Executive Officer


<PAGE>





Votorantim Celulose e Papel S.A.
Consolidated Financial Statements
As At December 31, 2002 and 2001,
and For the Three Years
Ended December 31, 2002, and
Report of Independent Accountants





Index to Consolidated Financial Statements                                  Page
                                                                        --------

Report of Independent Accountant                                           F - 2
Consolidated Balance Sheet                                                 F - 3
Consolidated Statement of Income                                           F - 5
Consolidated Statement of Cash Flows                                       F - 7
Statement of Changes in Shareholders' Equity                               F - 8
Notes to the Consolidated Financial Statements                             F- 10

<PAGE>


Report of Independent Accountants



January 31, 2003


To the Board of Directors and Shareholders
Votorantim Celulose e Papel S.A.




In our opinion, the accompanying balance sheet and the related statements of
income, of changes in shareholders' equity and of cash flows, present fairly, in
all material respects, the financial position of Votorantim Celulose e Papel
S.A. (the "Company") at December 31, 2002, and the results of its operations and
its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America. 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 audit. We
conducted our audit 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 audit provides a reasonable basis for our opinion.


The consolidated financial statements of the Company as of December 31, 2001,
and for the years ended December 31, 2001 and 2000 were audited by other
accountants whose report, dated January 28, 2002, expressed an unqualified
opinion on those statements.


/s/ PricewaterhouseCoopers

PricewaterhouseCoopers
Auditores Independentes


                                      F-2

<PAGE>


Votorantim Celulose e Papel S.A.

Consolidated Balance Sheet at December 31
Expressed in millions of U.S. dollars, except number of shares
--------------------------------------------------------------------------------




Assets                                                         2002        2001
                                                          ----------   ---------

Current assets
    Cash and cash equivalents                                    90         172
    Held-to-maturity investments                                 31          87
    Trade accounts receivable, net                              136         171
    Inventories                                                  55          60
    Deferred income tax                                                       3
    Recoverable taxes                                            17           9
    Other                                                         9           6
                                                          ----------   ---------

                                                                338         508
                                                          ----------   ---------

Investment in affiliates                                        218         216
Goodwill                                                         19         155
Property, plant and equipment, net                              907       1,100

Other assets

    Held-to-maturity investments                                289         277
    Unrealized gains from cross currency interest

       rate swaps                                                93          41
    Deferred income tax                                          16
    Other                                                        38          24
                                                          ----------   ---------

                                                                436         342
                                                          ----------   ---------

                                                              1,918       2,321
                                                          ==========   =========


                                      F - 3


<PAGE>


Votorantim Celulose e Papel S.A.

Consolidated Balance Sheet at December 31
Expressed in millions of U.S. dollars, except number of shares       (continued)
--------------------------------------------------------------------------------



Liabilities and shareholders' equity                             2002     2001
                                                               -------   ------

Current liabilities
    Trade payables                                                 54       57
    Short-term debt                                                66       69
    Current portion of long-term debt                             249      389
    Payroll, profit sharing and related charges                     9       12
    Income taxes                                                    6        3
    Dividends payable                                                       40
    Other                                                          16       14
                                                               -------   ------

                                                                  400      584
                                                               -------   ------

Long-term liabilities
    Long-term debt                                                724      584
    Deferred income tax                                                     34
    Accrued liabilities for legal proceedings                      27       12
                                                               -------   ------

                                                                  751      630
                                                               -------   ------
Commitments and contingencies (Note 14)

Shareholders' equity
    Preferred shares, no par value,
       56,000,000,000 shares authorized, 17,182,209,232
       shares issued at December 31, 2002 and 2001                553      553
    Common shares, no par value, 28,000,000,000 shares
       authorized, 21,140,490,321 shares issued at
              December 31, 2001 and 2001                          767      767
    Additional paid-in capital                                     24       23
    Treasury shares, at cost, 2002 - 144,300,000
       shares; 2001 - 235,400,000                                  (4)      (6)
    Net unrealized loss on available-for-sale securities
       of investee                                                 (1)
    Accumulated other comprehensive deficit
       Appropriated retained earnings                              31       27
       Unappropriated retained earnings                           584      518
       Cumulative translation adjustment                       (1,187)    (775)
                                                               -------   ------

                                                                  767    1,107
                                                               -------   ------

                                                                1,918    2,321
                                                               =======   ======


The accompanying notes are an integral part of the consolidated financial
statements.

                                      F - 4


<PAGE>


Votorantim Celulose e Papel S.A.

Consolidated Statement of Income
Expressed in millions of U.S. dollars, except number of shares
--------------------------------------------------------------------------------



                                                        2002      2001    2000
                                                      -------- --------- -------

Net operating revenue


    Domestic sales (net of sales taxes:
        2002 - US$ 109; 2001 - US$ 99 and
        2000 - US$ 92)                                  410       443     537
    Export sales (including related party sales:
        2002 - US$ 119;

        2001 - US$ 194 and 2000 - US$ 196)              199       211     237
                                                      -------- --------- -------

                                                        609       654     774
                                                      -------- --------- -------

Operating costs and expenses
  Cost of sales                                         329       344     371
  Selling and marketing                                  58        56      58
  General and administrative                             30        32      33
  Other operating expenses (income), net                 15         5      (2)
                                                      ------- ---------- -------

                                                        432       437     460
                                                      -------- --------- -------

Operating profit                                        177       217     314
                                                      -------- --------- -------

Non-operating income (expense)
  Financial income                                       73        71      94
  Financial expense                                     (59)      (39)    (65)
  Foreign exchange loss, net                            (11)       (8)    (14)
                                                      -------- --------- -------

                                                          3        24      15
                                                      -------- --------- -------

Income before taxes on income and cumulative effect
  of accounting change and equity in affiliates         180       241      329
                                                      -------- --------- -------

    Current income tax expense                          (24)      (40)     (56)
    Deferred income tax benefit (expense)                34       (19)     (24)
                                                      -------- --------- -------

Income before cumulative effect of accounting
  change and equity in affiliates                       190       182      249

    Equity loss of investee                            (121)
    Cumulative effect of accounting change,
      net of tax (Note 2(o))                                       10
                                                      -------- --------- -------

Net income                                               69       192      249
                                                      ======== ========= =======


                                      F - 5


<PAGE>


Votorantim Celulose e Papel S.A.

Condensed Consolidated Interim Statement of Income
Expressed in millions of U.S. dollars, except number of shares       (continued)
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                2002        2001         2000
                                                          ----------- ----------- ------------

<S>                                                       <C>         <C>         <C>
Net income applicable to preferred  shares                        32          90          116
Net income applicable to common  shares                           37         102          133
                                                          ----------- ----------- ------------

Net income                                                        69         192          249
                                                          =========== =========== ============

Basic earnings per 500 shares - in U.S. dollars
    Preferred                                                   0.96        2.65         3.45
    Common                                                      0.87        2.41         3.13

Basic earnings per 1000 shares - in U.S. dollars
    Preferred                                                   1.91        5.31         6.89
    Common                                                      1.74        4.83         6.27

Weighted average number of shares outstanding (thousand)
    Preferred                                             17,021,387  16,946,809   16,867,058
    Common                                                21,140,490  21,140,490   21,140,490
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.

                                      F - 6


<PAGE>


Votorantim Celulose e Papel S.A.

Consolidated Statements of Cash Flow
Expressed in millions of U.S. dollars, except number of shares
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                2002     2001    2000
                                                              ------- -------- -------

Cash flows from operating activities
<S>                                                           <C>     <C>      <C>
    Net income                                                    69      192     249
    Adjustments to reconcile net income to cash provided by
     operating activities
       Unrealized foreign exchange losses, net                    11        8      14
       Equity loss in investees, net of dividends                (15)

           Goodwill impairment in investee                       136
       Deferred income tax                                       (34)      19      24
       Depreciation and depletion                                 51       52      63
       Cumulative effect of accounting change, net of tax                 (10)
       Loss on disposal of property, plant and equipment          17        4       2
       (Increase) decrease in assets and liabilities
           Trade accounts receivable                              28      (35)     (8)
           Inventories                                           (16)      (8)    (11)
           Other assets                                          (43)     (10)     29
           Liabilities                                           (19)      22      19

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

Net cash provided by operating activities                        185      234     381
                                                              ------- -------- -------

Cash flows from investing activities

    Maturities (purchases) of held-to-maturity investments        49     (325)    155
    Acquisition of equity investees                                      (370)

     Dividends received                                            8

    Acquisition of property, plant and equipment                (317)    (309)   (125)
    Proceeds from disposals of property, plant and equipment                2       5
    Repayment of loans to related parties                                          66

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

Net cash (used in) provided by investing activities             (260)  (1,002)    101
                                                              ------- -------- -------

Cash flows from financing activities
    Short-term debt                                              (13)      13      (4)
    Long-term debt
       Issuances                                                 991      787     187
       Repayments                                               (910)    (238)   (329)

    Proceeds from sales of treasury shares                         2               26
    Dividends paid                                               (34)     (37)    (23)

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

Net cash provided by (used in) financing activities               36      525    (143)
                                                              ------- -------- -------

Effect of exchange rate changes on cash and cash equivalents     (43)     (74)    (26)
                                                              ------- -------- -------

Net increase (decrease) in cash and cash equivalents             (82)    (317)    313
                                                              ------- -------- -------

Cash and cash equivalents at beginning of year                   172      489     176
                                                              ------- -------- -------

Cash and cash equivalents at end of year                          90      172     489
                                                              ======= ======== =======
</TABLE>




The accompanying notes are an integral part of the consolidated financial
statements

                                      F - 7


<PAGE>


Votorantim Celulose e Papel S.A.

Consolidated Statements of Changes in Shareholders' Equity
Expressed in millions of U.S. dollars, except number of shares
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   2002   2001   2000
                                                                  ------ ------ ------

<S>                                                               <C>    <C>    <C>
Preferred stock
    At beginning and end of year                                    553    553    553
                                                                  ------ ------ ------

Common stock
    At beginning and end of year                                    767    767    767
                                                                  ------ ------ ------

Additional paid-in-capital
    At beginning of year                                             23     23      5
    Gain on sale of treasury stock                                    1            18
                                                                  ------ ------ ------

    At end of year                                                   24     23     23
                                                                  ------ ------ ------

Treasury stock

    At beginning of year                                             (6)    (6)   (14)
    Preferred stock acquired (2000 - 235,400,000)                                  (6)
    Preferred stock sold (2002 - 91,100,000; 2000 - 1,137,582,405)    2            14

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

    At end of year                                                   (4)    (6)    (6)
                                                                  ------ ------ ------


Net unrealized loss on available-for-sale securities of
  equity investee

    Transferred from appropriated retained earnings                  (1)
                                                                  ------ ------ ------


Appropriated retained earnings
    At beginning of year                                             27     19      9
    Transferred to available for sale reserve                        (1)
    Transferred from unappropriated retained earnings                 5      8     10

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

    At end of year                                                   31     27     19
                                                                  ------ ------ ------

Unappropriated retained earnings
    At beginning of year                                            518    374    188
    Net income                                                       69    192    249
    Transferred to appropriated retained earnings                    (3)    (8)   (10)
    Dividends
       Preferred                                                           (19)   (23)
       Common                                                              (21)   (30)
                                                                  ------ ------ ------

    At end of year                                                  584    518    374
                                                                  ------ ------ ------
</TABLE>


                                      F - 8


<PAGE>


Votorantim Celulose e Papel S.A.

Consolidated Statement of Changes in Shareholder's Equity
Expressed in millions of U.S. dollars, except number of shares       (continued)
--------------------------------------------------------------------------------

                                                            2002    2001   2000
                                                          ------- ------- ------

Accumulated other comprehensive loss - Cumulative
  translation adjustments
  At beginning of year                                      (775)   (596)  (489)
  Loss for the year                                         (412)   (179)  (107)
                                                          ------- ------- ------

  At end of year                                          (1,187)   (775)  (596)
                                                          ------- ------- ------

Shareholders' equity at end of year                          767   1,107  1,134
                                                          ======= ======= ======

Comprehensive income (loss)
  Net income                                                  69     192    249
  Loss in equity investee on available-for-sale securities    (1)
  Translation adjustments                                   (412)   (179)  (107)
                                                          ------- ------- ------

Comprehensive income (loss)                                 (344)     13    142
                                                          ======= ======= ======




The accompanying notes are an integral part of the consolidated financial
statements.

                                      F - 9

<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


1.   Operations

     Votorantim Celulose e Papel S.A. (the "Company", "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.

     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.

     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 - 10


<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


2.   Significant Accounting Policies

(a)  Basis of presentation

     The financial statements have been prepared in accordance with accounting
     principles generally accepted in the United States of America ("US GAAP"),
     which differ in certain respects from the accounting principles applied by
     the Company in its financial statements prepared in accordance with
     accounting principles generally accepted in Brazil as filed with the
     Comissao de Valores Mobiliarios (Brazilian Securities Commission or "CVM"),
     or for other statutory purposes in Brazil.

(b)  Translation of financial statements

     We transact the majority of our business in Brazilian Reais (R$) and,
     therefore, have adopted the Brazilian Real as the functional currency and
     have selected the United States dollar as our reporting currency. The U.S.
     dollar amounts for all years presented have been translated from Reais
     amounts in accordance with the criteria set forth in Statement of Financial
     Accounting Standards ("SFAS") 52, "Foreign Currency Translation". Assets
     and liabilities are translated from the functional currency to the
     reporting currency using the official exchange rates reported by the
     Brazilian Central Bank at the balance sheet date (December 31, 2002 - US$
     1.00 : R$ 3.5333; December 31, 2001 - US$ 1.00 : R$ 2.3204; December 31,
     2000 - US$ 1.00 : R$ 1.9554).

     Revenue, expenses and gains and losses are translated from the functional
     currency to the reporting currency using the monthly weighted-average
     exchange rates for the year. Capital accounts are recorded at historical
     exchange rates. Translation gains and losses are recorded in the Cumulative
     Translation Adjustment account ("CTA") in shareholders' equity.


     In 2002, we incorporated VCP Overseas Holding KFT, a wholly owned
     subsidiary located in Hungary. In 2001, we incorporated Newark Financial
     Inc., a wholly owned subsidiary located in the British Virgin Islands. Both
     foreign subsidiaries transact the majority of their activities in U.S.
     dollars and accordingly, have elected such currency as their functional
     currency.



                                     F - 11

<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


(c)  Principles of consolidation


     Our consolidated financial statements include the accounts of VCP and our
     directly and indirectly controlled subsidiaries: VCP Exportacoes e
     Participacoes S.A., VCP Florestal Ltda, St. Helen Holding III B.V., Normus
     Emprendimentos e Participacoes Ltda, Newark Financial Inc. and VCP Overseas
     Holding KFT, 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 (Note 3) and our 50 percent owned equity investee,
     Voto - Votorantim Overseas Trading Operations N.V. ("Voto") are accounted
     for on the equity method.


(d)  Cash and cash equivalents

     We consider all highly liquid investments with a maturity of three months
     or less when purchased to be cash equivalents.

(e)  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 statement of income.

(f)  Inventories

     Inventories, including timber, are stated at average acquisition or
     production cost, which is lower than market.


                                     F - 12


<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


(g)  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. 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. Previously, costs were deferred based on a formula
     which reflected the accumulation of costs over a 21-year cycle which
     included three harvests.


     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 and have been performed following the criteria in
     SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets".

(h)  Income taxes


     We account for income taxes in accordance with SFAS 109 , "Accounting for
     Income Taxes".



                                     F - 13

<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


(i)  Revenues and expenses


     We recognize revenue and associated costs of sales at the time our products
     are delivered to our customers or when title and associated risks pass to
     our customers. Revenue is recorded net of sales returns of US$ 7 in each of
     2002, 2001 and 2000. 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 US$1 in each of 2002, 2001 and 2000. 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 US$ 29, US$ 27 and US$ 28 in 2002, 2001 and 2000,
     respectively.

(j)  Comprehensive income (loss)


     We report comprehensive income (loss) in accordance with SFAS 130,
     "Reporting 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 - 14

<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


(k)  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 paid to
     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.


(l)  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 reported amounts of assets, liabilities, revenues and expenses
     for the years. Such estimates include the selection of useful lives of
     property, plant and equipment, provisions for impairments and for
     contingent liabilities, and other similar evaluations. Actual results could
     differ from our estimates.


(m)  Employee benefits and other related matters

     In March 2000 we launched a defined contribution plan which provides
     pension and post-retirement benefits (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.


                                     F - 15

<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


(n)  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.

(o)  Accounting for Derivative Instruments and Hedging Activities


     As of January 1, 2001, we adopted SFAS 133, "Accounting for Derivative
     Instruments and Hedging Activities", and its amendments.

     As a result of the adoption of SFAS 133, we recognize our cross currency
     interest rate swap agreements on the balance sheet at fair value and
     adjustments to fair value are recorded through income. Prior to adoption of
     SFAS 133, we recognized our cross currency interest rate swap contracts on
     the balance sheet at contract value and adjustments to contract value were
     recorded through income. We recorded 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 US$ 10, net of applicable tax
     expense of US$ 4, which resulted in a gain in the consolidated statement of
     income for the year ended December 31, 2001.


(p)  Reclassifications

     Certain reclassifications have been made to the financial information as of
     December 31, 2001, and for the years ended December 31, 2001 and 2000, in
     order to make it consistent with the presentation of the information as of
     and for the year ended December 31, 2002. There was no effect on net income
     and comprehensive income for 2001 as a result of the reclassifications.


                                     F - 16

<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


3    Recently Issued Accounting Pronouncements


     The Financial Accounting Standards Board ("FASB"), recently issued a number
     of Statements of Financial Accounting Standards ("SFAS"); management
     estimates that once adopted these statements will not have a material
     impact on the financial position and results of operations of the Company.


  .  SFAS No. 143 - "Accounting for Asset Retirement Obligations", requires
     entities to record the fair value of a liability for an asset retirement
     obligation in the period in which it is incurred and a corresponding
     increase in the carrying amount of the related long-lived asset.
     Subsequently, the asset retirement cost should be allocated to expense
     using a systematic and rational method. SFAS 143 is effective for fiscal
     years beginning after September 15, 2002.


  .  SFAS No. 145 - "Extinguishment of Debt", addresses financial accounting and
     reporting for extinguishment of debt. SFAS 145 is effective for fiscal
     years beginning after May 15, 2002.

  .  SFAS No. 146 - "Accounting for Costs Associated with Exit or Disposal
     Activities", establishes the financial accounting and reporting for costs
     associated with exit or disposal activities. SFAS 146 is effective for
     fiscal years initiated after December 31, 2002.



                                     F - 17


<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


4    Acquisition of Investee


     On October 3, 2001, Newark Financial Inc., signed a Share Purchase and Sale
     Agreement to acquire 127,506,457 common shares of Aracruz , representing
     28.00% of the voting share capital and 12.35% of equity share capital of
     Aracruz, for US$ 370. The transfer of the shares occurred on November 1,
     2001 when we became a member of the controlling group of Aracruz, together
     with the Lorentzen and Safra Group, (each member owning 28% of the voting
     shares and with three seats on the board of directors), and BNDES
     Participacoes S.A. (with 12.5% of the voting shares and one seat on the
     board of directors). This transaction is subject to final approval by the
     Brazilian anti-trust authorities and we believe such approval will be
     provided. The excess of the cost of our investment in Aracruz over our
     portion of the underlying fair value of the net assets amounted to US$ 155.


     Aracruz's summarized financial position at December 31 is as follows:

                                                                2002       2001
                                                             --------   --------

Currents assets                                                  524        641
Property, plant, and equipment, investments in affiliated
    company and other assets                                   2,174      2,137
Current liabilities                                              239        425
Long-term debt (long-term portion)                               611        537

Total equity                                                   1,761      1,738

Dividends received from Aracruz during 2002, totaled US$ 8.


                                     F - 18

<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------



     SFAS No. 142, "Goodwill and Other Intangible Assets", requires that
     goodwill as well as other intangible assets with indefinite lives no longer
     be amortized but be tested annually for impairment. Consistent with SFAS
     No. 142 and Accounting Principles Board Opinion No. 18, "The Equity Method
     of Accounting for Investment in Common Stock", the Company reduced the
     carrying value of its investments in Aracruz to quoted market value at
     December 31, 2002.

     A goodwill impairment provision was determined based on the market price of
     US$ 18.56 for the Aracruz ADRs on December 31, 2002, of US$ 136 (gross of
     deferred income tax effects of US$ 46) was charged directly to income
     ("Equity loss of investee"). The deferred tax effect is included in
     "Deferred income tax benefit".



5    Income Taxes


     Income taxes in Brazil include federal income tax and social contribution.
     The composite statutory tax rate was 34% for 2002 , 2001 and 2000.


(a)  Income tax reconciliation


     The statutory rate applied to income before taxes is reconciled to income
     tax expense as follows:


                                                       2002     2001      2000
                                                     -------  -------   -------


     Income before income taxes                         180      241       329

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

     Income tax expense at statutory tax rate            61       82       112
     Reconciliation of statutory to effective rate

         Effect of REFIS election (below)               (25)     (23)
         Deferred tax on impairment in Aracruz          (46)
         Interest attributed to capital                                    (19)
         Goodwill tax amortization                                         (11)
         Other                                                              (2)

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


     Income tax expense (benefit)                       (10)      59        80

                                                     =======  =======   =======


                                     F - 19

<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------



     Consistent with our enrollment in the Program of Tax Recovery (REFIS), we
     may elect annually for each year between 2001 and 2005 to calculate and pay
     our income taxes either based on the provisions of REFIS (tax determined
     based on a percentage of net sales for the year plus adjusted financial
     income and other income). Both basis are determined on the companies'
     statutory records. For 2002 and 2001 Votorantim Celulose e Papel S. A.
     (parent company) elected to calculate and pay income taxes based on the
     provisions of REFIS, whereas its subsidiaries are assessed based on
     adjusted pretax income.


(b)  Analysis of deferred tax balances

                                                                 2002      2001
                                                              --------  --------

     Deferred tax assets

         Tax loss carryforwards (primarily, VCP Exportadora e       17
                  Participacoes S.A.)
         Preoperating costs capitalized for tax and other                     2
         Tax effects on impairment of investee (Note 4)             46

         Other provisions                                            4        1

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


     Total deferred tax assets                                      67        3

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

     Deferred tax liabilities

         Cross currency interest swap contracts                    (36)      (3)
         Property, plant and equipment                             (15)     (31)

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


                                                                   (51)     (34)

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


     Net deferred tax assets (liabilities)                          16      (31)

                                                               ========  =======


                                     F - 20

<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


6    Held-to-maturity Investments

                                                                           2002
                                   ---------------------------------------------


                                                           Gross
                                             Book     unrealized      Estimated
                                            Value  gains (losses)    fair value

                                          -------- -------------- --------------
     In reais

       Debentures                              24              3             24
     In U.S. dollars
       Time deposits                            8                             8
       Brazilian Public Bonds                 288            (37)           214

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


     Total                                    320            (34)           246

                                          ======== ============== ==============


                                                                           2001
                                          --------------------------------------


                                                           Gross
                                             Book     unrealized      Estimated
                                            Value          gains     fair value

                                         --------  ------------- ---------------
     In reais

       Bank Certificate of Deposits           55              1              55
       Debentures                             39              5              39

     In U.S. dollars

       Brazilian Public Bonds                270             12             274

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


     Total                                   364             18             368
                                        ========  ============= ===============



                                                                           2002


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


                                                        Book          Estimated
     Maturity periods                                  Value         fair value

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


     Due in less than one year                            31                 25
     Due in one to three years                           185                147
     Due after five years                                104                 74

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


                                                         320                246

                                                    =========   ================

                                     F - 21


<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


7    Trade Accounts Receivable

                                                                2002      2001
                                                              -------   -------

     Export receivables, denominated in U.S. dollars              67        77
     Domestic receivables                                         74        98
     Allowance for doubtful accounts                              (5)       (4)
                                                              -------   -------

                                                                 136       171
                                                              =======   =======

     As at and for the years ended December 31, 2002, 2001 and 2000, except for
     our related party Votorantrade N.V. (Note 12), no other single customer or
     group represented more than 10% of our consolidated trade accounts
     receivable balance or consolidated sales.


8    Inventories

                                                                2002      2001
                                                              -------   -------


     Finished products                                            24        21
     Work in process                                               4         5
     Raw materials and supplies                                   24        30
     Imports in transit and other                                  3         4
                                                              -------   -------

                                                                  55        60
                                                              =======   =======


                                     F - 22


<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


9    Property, Plant and Equipment

                                                                2002       2001
                                                             --------   --------


     Land                                                         30         44
     Buildings                                                    74         97
     Machinery, equipment and installations                      664        766
     Forests                                                     113        210
     Other                                                        96         62
     Construction in progress                                    122        229

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

                                                               1,099      1,408
     Accumulated depreciation and depletion                     (192)      (308)
                                                             --------   --------

                                                                 907      1,100
                                                             ========   ========


     Interest capitalized on construction in progress in each of the periods
     was: 2002 - US$ 41; 2001 - US$ 11 and 2000 - US$ 5.



10   Short-term Debt


     Short-term debt represents commitments under recourse provisions to honor
     export receivables transferred to banks accounted for as secured borrowings
     (ACEs), bearing an annual average interest rate of approximately 5.7% at
     December 31, 2002 (2001 - 6.1 %). Historically, we have not incurred
     significant losses in connection with such recourse provisions.


                                     F - 23


<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


11   Long-term Debt

                                         Interest rate at
                                         December

                                         31 2002 - % p.a.    2002     2001

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

     In U.S. dollars

         Syndicated bank loan                 LIBOR + 1.95         380      353
         Bank loan                            LIBOR + 5.00         200
         Export credits (pre-payment)         LIBOR + 1.64         151      151
         Export credits (ACCs)                5.73                 113      145
         Import credits                       4.20                  13       18
         International Finance Corporation                                    1


     Related party
         Voto loan                                                          200
         Votorantrade N.V. loan                                              11

     In reais
         Banco Nacional de Desenvolvimento
            Economico e Social ("BNDES")      TJLP + 3.0 a 3.5     116       94
                                                                 ------   ------

                                                                   973      973
                                                                 ------   ------

     Less: current portion                                        (249)    (389)
                                                                 ------   ------

     Long-term portion                                             724      584
                                                                 ======   ======


     Note: The LIBOR (London Interbank Offered Rate) at December 31, 2002 was
           1.44% per annum.

           The TJLP (Taxa de Juros de Longo Prazo), a long-term interest rate
           reset quarterly by the Brazilian Central Bank, at December 31, 2002
           was 11% per annum.


                                     F - 24


<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


(a)  Voto loan


     In December 1996, Voto received a US$300 bridge loan from ING Barings, of
     which US$ 150 was advanced to us at that time. In June 1997, Voto issued
     US$ 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 ("SAIV"), members of the Votorantim Group
     (collectively the "Guarantors"). The bridge loan was paid in full with the
     proceeds of this issue and an additional US$ 50 was transferred to us. Voto
     charged us an interest rate on the US$ 200 intercompany loan identical to
     that which it pays to the holders of the Voto Notes. The remaining balance
     of US$ 200 of the Voto Notes was transferred to SAIV.


     In connection with our guarantee of the Voto Notes we are subject to
     covenants, primarily relating to the maintenance of a certain level of net
     borrowing (debt less our cash equivalents and held-to-maturity
     investments).


     Voto has no operations and its only significant liability is the 8.5% US$
     400 Notes and its only significant asset is the 8.5% US$ 400 loan
     receivable from us and SAIV. Current assets and current liabilities were
     less than US$ 1 at December 31, 2002 and 2001. Shareholders' equity and was
     net income were less than US$ 1 at December 31, 2002, 2001 and 2000 and for
     the years then ended.

     Under the Voto Notes indenture, each holder of the notes could 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 could 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 could procure any other person to
     purchase the notes that are subject to its repurchase.

     In June 2002, our wholly-owned subsidiary St. Helen Holding III B.V.,
     located in Curacao, exercised the call option and purchased the US$ 200
     notes. Funds used for the acquisition of these notes were raised through a
     bank loan, maturing in 2005. The discount obtained by St. Helen Holding III
     of US$ 1 on the purchase of the Voto Notes has been deferred to be
     recognized over the term of the loan. The remaining balance of US$200 was
     repurchased by a wholly owned subsidiary of SAIV.



                                     F - 25

<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


(b)  Syndicated bank loan


     In October 2001, Newark Financial Inc. obtained a bridge loan of US$ 370 to
     finance the acquisition of our interest in Aracruz. On May 23, 2002, VCP
     Trading N.V. and VCP North America Inc., two wholly owned subsidiaries of
     Newark Financial Inc., entered into a US$ 380 credit agreement with a
     syndicate of banks. All of the proceeds from the credit agreement were
     advanced to Newark Financial Inc. (US$ 304 by VCP Trading and US$ 76
     million by VCP North America). Newark Financial Inc. used the proceeds from
     these advances to pay in full the bridge loan and to make certain payments
     in connection with the credit agreement. The obligations of VCP Trading
     N.V. and VCP North America Inc. under the credit agreement are guaranteed
     directly or indirectly by Newark Financial Inc., VCP Exportadora e
     Participacoes S.A. and us. The loans under the credit agreement are secured
     by liens on certain collateral, including receivables from customers for
     the sales of certain products arising under agreements entered among Newark
     Financial Inc, VCP Trading N.V. and VCP North America Inc.


     As a guarantor under the credit agreement, we are subject to a number of
     material covenants including, among others: limitations on our ability to
     incur debt; limitations on the existence of liens on our properties;
     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 maintenance of certain financial
     ratios.

(c)  Other guarantees

     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 liens on certain of our
     properties. The carrying amount of our assets securing these loans was
     approximately US$ 241 at December 31, 2002.


                                     F - 26

<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


(d)  Long-term debt maturities

     At December 31, 2002, long-term debt maturities are as follows:

     2004                                                                 267
     2005                                                                 346
     2006                                                                  62
     2007                                                                  19
     2008                                                                  19
     Thereafter                                                            11
                                                                      --------

                                                                          724
                                                                      ========


12.  Related Parties

     Balances and transactions with related parties are as follows:

<TABLE>
<CAPTION>
                                                 Nature and business
                                                 purpose of transactions                     2002            2001
                                                 -------------------------------- ---------------- ---------------

<S>                                              <C>                                          <C>             <C>

Cash, cash equivalents and held-to-              Surplus cash funds invested
  maturity investments                           with Group financial
    Votorantim Group company                     institutions
      Banco Votorantim S.A.                                                                   320             354
      Votorantim Financas S.A.                                                                 18              38
      Draft II Participacoes S.A.                                                               6              14


Trade accounts receivable                        Sales to trading company
  Votorantim Group company
    Votorantrade N.V.                                                                          60              69


Unrealized gains from cross currency             Arising from swap contract
  interest rate swaps                            transactions in which the

    Votorantim Group company                     Group financial institution
      Banco Votorantim S.A.                      acts as counter-party                         86              41

Long-term loans from related parties             Loans from related parties
  Votorantim Group company

    Voto                                                                                                      200
    Votorantrade N.V.                                                                                          11
  Parent of a significant shareholder - BNDES                                                 116              94

</TABLE>

The above cash equivalent, held-to-maturity investments and loans earn interest
at market rates.

                                     F - 27


<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------



     Revenue, income and expenses from transactions
     with related parties were as follows:            2002      2001       2000
                                                   --------  --------   --------

     Export sales revenue                              119       194        196
     Financial income                                  248        71         76
     Financial expenses                                                      24


     Export sales revenue primarily relates to sales made to Votorantrade N.V.;
     financial income arises from loans made to related parties and investments
     made in Banco Votorantim S.A.; and financial expenses represent charges on
     intercompany loans from related parties.



13   Financial Instruments and Derivatives


     We primarily use cross currency interest rate swap contracts and Brazilian
     Public bonds indexed to the 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.


                                     F - 28


<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------



     The fair values of our cross currency interest rate swap contracts were
     estimated based on quoted market prices of comparable contracts. At
     December 31, 2002 and 2001 the notional amounts of our outstanding cross
     currency interest rate swap contracts were US$ 255 and US$ 253,
     respectively and their fair values were US$ 93 and US$ 32, respectively. In
     2000, we recognized these swap contracts on the balance sheet at contract
     value and adjustments to contract value were recorded through income. In
     2001, upon the adoption of SFAS 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.


     The carrying amounts and fair values of our financial instruments at
     December 31 were as follows:

                                                      2002                 2001
                                      --------------------- --------------------
                                        Carrying      Fair    Carrying     Fair
                                          amount     value      amount    value
                                      ----------- --------- ----------- --------


     Cash and cash equivalents                90        90         172      173
     Held-to-maturity investments            320       246         364      368
     Unrealized gains from cross
         currency interest rate swaps         93       118          41       41
     Short-term debt                          66        57          69       69
     Long-term debt                          973       948         973      972



                                     F - 29

<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


14   Commitments and Contingencies

     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' ) 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:

                                               2002                       2001
                          --------------------------  -------------------------

                             Deposits    Provisions      Deposits    Provisions
                          ------------  ------------  ------------  ------------

     Tax-related                   10            19             2             4
     Civil-related                                5                           4
     Labor-related                  2             3             2             4
                          ------------  ------------  ------------  ------------

                                   12            27             4            12
                          ============  ============  ============  ============

     The activity in our provision account for 2002, 2001 and 2000 was as
     follows:

                                               2002       2001       2000
                                            --------  ---------   --------

     At beginning of year                        12         13         17
     Translation adjustment                      (4)        (2)        (1)
     Provisions for new legal proceedings        19          2
     Amounts paid to settle litigation                      (1)        (3)
                                            --------  ---------   --------

     At end of year                              27         12         13
                                            ========  =========   ========


(a)  Tax-related

     In 1996, we filed a judicial claim to assure our right to the deductibility
     of inflation-indexed (an uplift of 70%) depreciation arising from a
     government economic stabilization program in January 1989. We obtained a
     favorable decision enabling the partial deduction of up to 43% of this
     uplift. Based on advice from our legal counsel, we accrued US$ 3 relating
     to this claim.


                                     F - 30


<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------



     In 1999, we filed a lawsuit challenging the 1% increase in the COFINS tax
     rate (from 2% to 3%), a tax on revenues. Although we have obtain a legal
     injunction, based on advice from our legal counsel and reflecting rulings
     by the Federal Supreme Court during 2002, we accrued US$ 7 relating to this
     claim.

     During 2002, we filed a lawsuit challenging the inclusion of the ICMS
     (Value-added SalesTax) in the computation basis for the COFINS tax,
     relating the period from 1996 to 2002, as well as our deductibility of
     recoverable ICMS originated from raw material used for tax exempt paper
     products. We accrued and deposited US$ 8 relating to this claim.

(b)  Other unprovided possible losses


     VCP is party to a substantial number of other legal proceedings in the
     normal course of its business involving possible risk of loss, in addition
     to the lawsuits and administrative proceedings discussed above.

     Management does not believe that such legal proceedings will, individually
     or in the aggregate, have a material adverse effect on our business,
     results of operations or financial condition, and therefore, no provisions
     have been recorded based on management's assessment of the probability of
     loss.

     These possible losses, at December 31, are as follows:

                                                         2002       2001
                                                     ---------   --------

     Tax-related                                            9          2
     Civil-related                                          5
     Labor-related                                          5
                                                     ---------   --------

     Total                                                 19          2
                                                     =========   ========


                                     F - 31

<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------



(c)  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. Under the terms
     of the sale, we have indemnified the purchaser against certain losses in
     excess of amounts recorded limited to R$ 22 million (approximately US$ 6
     million) until 2005. No amounts have been paid under this indemnification
     and we believe such amounts ultimately paid, if any, will not be
     significant.


(d)  Commitments

     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.


     In addition to the credit agreement with a syndicate of banks (Note 11) we
     are the guarantor of an equipment loan made to Votocel Filmes Flexiveis
     Ltda. (a Votorantim company) which presents a balance of US $8 at December
     31, 2002.


     At December 31, 2002 and 2001, VCP has loans totaling US$ 200 that are
     guaranteed by other companies of the Votorantim Group.


     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 delivered 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, 2002, customer
     guarantees provided by us totaled US$ 38 (US$ 61 at December 31, 2001). Our
     guarantees are usually secured by the personal guarantee of the customer's
     owner.

     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.
     Lease payments, equal to 30% of the market value of the timber 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 US$ 1 in each of 2002, 2001 and 2000.



                                     F - 32

<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------



     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 approximately 51% of our current annual pulp production.
     The contracts expire from 2002 to 2005.


     We have commitments for capital expenditures amounted to US$ 110 at
     December 31, 2002.

     We have long-term "Take-or-Pay" contracts with suppliers of chemical
     products for periods from 10 to 15 years. The contractual obligations in
     connection with such contracts are US$ 38 per year.


15   Segment 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 the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


                                                2002         2001      2000
                                            --------------------------------

Revenue
    Revenue from external customers
       Pulp                                        129        143       207
       Paper                                       480        511       567
                                              ---------  ---------   -------

Total revenue from external customers              609        654       774

Intersegment sales of pulp to paper

    segment                                        158        183       228

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

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

Total revenue before intersegment sales
       eliminations                                767        837     1,002

                                              =========  =========  ========



Depreciation and depletion expense
                                              =========  =========  ========
    Pulp                                            46         48        58
    Paper                                           19         21        23
                                              ---------  ---------  --------


Total depreciation and depletion
    expense allocated to segments per
    accounting principles generally
    accepted in Brazil                              65         69        81

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


Reconciling items to US GAAP


       Pulp                                        (10)       (12)      (13)
       Paper                                        (4)        (5)       (5)
                                              ---------  ---------  --------

Total depreciation and depletion

    expense - US GAAP                               51         52        63

                                              =========  =========  ========


                                     F - 34


<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


     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 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:

                                                      2002       2001     2000
                                                   --------   --------  -------

     Segment operating profit
        Pulp                                            88        115      212
        Paper                                           82         72       62
                                                   --------   --------  -------


        Total segment operating profit per
          accounting principles generally
          accepted in Brazil                           170        187      274

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

     Reconciling items to US GAAP


        Difference in depreciation and
           amortization expense

             Pulp                                        10        12       13
             Paper                                        4         5        5

        Start-up costs
          Pulp                                           (4)       (3)      (1)
          Paper                                          (2)       (1)      (2)
        Other adjustments

          Pulp                                           (1)        4       14
          Paper                                          (2)       13       11

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

        Total pulp                                       93       128      238
        Total paper                                      84        89       76
                                                    --------  --------  -------


     Total operating profit - US GAAP                   177       217      314
        Financial income                                 73        71       94
        Financial expenses                              (59)      (39)     (65)
        Foreign exchange losses, net                    (11)       (8)     (14)

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

     Income before income tax and equity income
        of investees and cumulative effect of
          accounting change                             180       241      329
                                                    ========  ========  =======


                                     F - 35


<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


                                                      2002      2001     2000
                                                   --------   -------  -------

     Segment assets
       Pulp                                            576       683      585
       Paper                                           284       385      362
                                                   --------   -------  -------


       Total segment assets per accounting
          principles generally accepted in Brazil      860     1,068      947
     Reconciling items to US GAAP

       Pulp                                             29        22       34
       Paper                                            18        10       16
                                                   --------   -------  -------

     Total pulp                                        605       705      619
     Total paper                                       302       395      378
                                                   --------   -------  -------


     Total property, plant and equipment - US GAAP     907     1,100      997

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


     Corporate assets - US GAAP
       Cash and cash equivalents                        90       172      489
       Held-to-maturity investments                    320       364       17
       Trade accounts receivable                       136       171      159
       Equity investees (pulp)                         237       371
       Other corporate assets                          228       143      128

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


     Total assets - US GAAP                          1,918     2,321    1,790

                                                   ========   =======  =======

     Capital expenditures
       Pulp                                            229       217       72
       Paper                                            71        81       48
                                                   -------   -------  -------


     Total segment capital expenditures
        per accounting principles generally
        accepted in Brazil                             300       298      120

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


     Reconciling items to US GAAP


       Capitalized interest
          Pulp                                          14         8        4
          Paper                                          2         3        1
                                                   --------   -------  -------

       Total capitalized interest                       16        11        5
                                                   --------   -------  -------

       Total pulp                                      243       225       76
       Total paper                                      73        84       49
                                                   --------   -------  -------


     Total capital expenditures - US GAAP              316       309      125

                                                   ========   =======  =======


                                     F - 36

<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


(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
     N.V. and related parties (also a member of the Votorantim Group) to the
     final customers.


                                            2002           2001           2000
                                   -------------- -------------- --------------

                                    Paper   Pulp   Paper   Pulp   Paper   Pulp
                                   ------- ------ ------- ------ ------- ------

North America                          40     38      37     47      18     51
Europe                                 28     44      26     45      37     77
Middle East and Asia                    6     14       4     15       5     19
Africa                                  5              2
South America, other than Brazil       24             35             30
                                   ------- ------ ------- ------ ------- ------

                                      103     96     104    107      90    147
                                   ======= ====== ======= ====== ======= ======


16   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. 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 - 37


<PAGE>

     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


     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
     statement 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, 2002, we had
     unappropriated retained earnings of R$ 949 million (R$ 777 million in 2001)
     in our statutory books, equivalent, at the exchange rate at December 31,
     2002, to US$ 269 (US$ 335 in 2001). As required by Brazilian Corporate Law,
     the statutory books present retained earnings net of a provision for a
     dividend which has not yet been declared by the shareholders, equivalent to
     US$ 27. This provision has not been deducted from shareholders' equity
     reported under US GAAP.


     Dividends paid per thousand shares in U.S. dollars were as follows:

                                         2002         2001         2000
                                   -----------  -----------   ----------

     Preferred                           0.91         1.02         0.65
     Common                              0.83         0.93         0.59

     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 - 38


<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------


17   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 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 US$ 4 at December 31, 2002 and US$ 1 at December 31,
     2001.



18   Supplemental Cash Flow Information

                                                 2002         2001         2000
                                            ----------  -----------   ----------


     Cash Paid during the year for
       Income tax paid                             19           34           39
       Interest paid                               54           38           57
     Non-cash transactions
       Trade payable - Fixed assets                 4           10



                                     F - 39


<PAGE>


     Votorantim Celulose e Papel S.A.

     Notes to the Consolidated Financial Statements
     Expressed in millions of U.S. dollars, unless otherwise stated
     ---------------------------------------------------------------------------



19   Financial Income and Financial Expense


                                                     2002       2001       2000
                                                  --------   --------   --------

     Financial income

       Interest income on cash equivalents             39         41         43
       Held-to-maturity investments

          Realized gains                                5                    17
          Unrealized gains                             16         16         12

       Interest income on credit sales                  1          1          2
       Other                                           12         13         20

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

                                                       73         71         94
                                                  ========   ========   ========
     Financial expenses

       Interest and charges on real debt                6          6         11
       Interest and charges on U.S. dollar debt        50         30         49
       Other                                            3          3          5

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


                                                       59         39         65

                                                  ========   ========   ========


20   Defined Contribution Plan


     In March 2000 we began co-sponsoring a multi-employer 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 the employee's
     contribution limited to 1.5% of the employee's compensation. For employees
     above that income level we will match 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 US$ 1 in 2002 and 2001.




                                      * * *

                                     F - 40