**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      DC 20549**

**__________________________________**

**FORM      20-F**

**__________________________________**

**o      REGISTRATION STATEMENT      PURSUANT TO SECTION 12(b) OR 12(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, 2007**

**OR**

**o TRANSITION      REPORT PURSUANT TO      SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**OR**

**o SHELL      COMPANY REPORT PURSUANT TO      SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**Date      of event requiring this shell company report      [     ]**

**For      the transition period from [     ] to      [     ]**

**Commission      file number 333-132289**

**EMBRAER-EMPRESA      BRASILEIRA DE AERONÁUTICA S.A.**

**EMBRAER –      Brazilian Aviation Company Inc.**

**Federative      Republic of Brazil**

**Avenida      Brigadeiro Faria Lima, 2170**

**12227-901      São José dos Campos, São Paulo, Brazil**

----

**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:** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
| Common                shares, without par value                                                                                                                            |   | New                York Stock Exchange*                                      |
| American Depositary Shares (as evidenced by American DepositaryReceipts), each representing four common shares |   | New York Stock Exchange                                       |

**______________**

***      **

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

----

**Securities      for which there is a reporting obligation pursuant to Section 15(d) of the      Act.**

----

**Number      of outstanding shares of each of the issuer’s classes of capital or common stock      as of December 31, 2007:**

----

**Indicate      by check mark if the registrant is a well-known seasoned issuer, as defined      in      Rule 405 of the Securities Act.**

**If      this report is an annual or transition report, indicate by check mark if the      registrant is not required to file reports pursuant to Section 13 or 15(d)      of      the Securities Exchange Act of 1934.**

**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.**

**Indicate      by check mark whether the registrant is a large accelerated filer, an      accelerated filer, or a non-accelerated filer. See definition of “accelerated      filer and large accelerated filer” in Rule 12b-2 of the Exchange      Act.**

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

**If      this is an annual report, indicate by check mark whether the registrant is      a      shell company (as defined in Rule 12b-2 of the Exchange      Act).**

----

**TABLE        OF CONTENTS**

|                                |                                                                         |                                                                           | **Page** |
|-------------------------------------|------------------------------------------------------------------------------|--------------------------------------------------------------------------------|----------|
| **PART                    I**  |                                                                         |
|                                |                                                                         |
| **ITEM                    1.**      | **IDENTITY                    OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS** | **4**                                                                          |
| **ITEM                    2.**      | **OFFER                    STATISTICS AND EXPECTED TIMETABLE**               | **4**                                                                          |
| **ITEM                    3.**      | **KEY                    INFORMATION**                                       | **4**                                                                          |
|                                | **3A.**                                                                      | **Selected                    Financial Data**                                 | **4**    |
|                                | **3B.**                                                                      | **Capitalization                    and Indebtedness**                         | **7**    |
|                                | **3C.**                                                                      | **Reasons                    for the Offer and Use of Proceeds**               | **7**    |
|                                | **3D.**                                                                      | **Risk                    Factors**                                            | **8**    |
| **ITEM                    4.**      | **INFORMATION                    ON THE COMPANY**                            | **18**                                                                         |
|                                | **4A.**                                                                      | **History                    and Development of the Company**                  | **18**   |
|                                | **4B.**                                                                      | **Business                    Overview**                                       | **21**   |
|                                | **4C.**                                                                      | **Organizational                    Structure**                                | **39**   |
|                                | **4D.**                                                                      | **Property,                    Plants and Equipment**                          | **39**   |
| **ITEM                    4A**      | **UNRESOLVED                      STAFF COMMENTS**                           | **41**                                                                         |
| **ITEM                    5.**      | **OPERATING                    AND FINANCIAL REVIEW AND PROSPECTS**          | **41**                                                                         |
|                                | **5A.**                                                                      | **Operating                    Results**                                       | **41**   |
|                                | **5B.**                                                                      | **Liquidity                    and Capital Resources**                         | **56**   |
|                                | **5C.**                                                                      | **Research                    and Development**                                | **60**   |
|                                | **5D.**                                                                      | **Trend                    Information**                                       | **61**   |
|                                | **5E.**                                                                      | **Off-Balance                    Sheet Arrangements**                          | **64**   |
|                                | **5F.**                                                                      | **Tabular                    Disclosure of Contractual Obligations**           | **66**   |
| **ITEM                    6.**      | **DIRECTORS,                    SENIOR MANAGEMENT AND EMPLOYEES**            | **67**                                                                         |
|                                | **6A.**                                                                      | **Directors                    and Senior Management**                         | **67**   |
|                                | **6B.**                                                                      | **Compensation**                                                               | **72**   |
|                                | **6C.**                                                                      | **Board                    Practices**                                         | **73**   |
|                                | **6D.**                                                                      | **Employees**                                                                  | **75**   |
|                                | **6E.**                                                                      | **Share                    Ownership**                                         | **75**   |
| **ITEM                    7.**      | **MAJOR                    SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**     | **76**                                                                         |
|                                | **7A.**                                                                      | **Major                    Shareholders**                                      | **76**   |
|                                | **7B.**                                                                      | **Related                    Party Transactions**                              | **77**   |
|                                | **7C.**                                                                      | **Interests                    of Experts and Counsel**                        | **77**   |
| **ITEM                    8.**      | **FINANCIAL                    INFORMATION**                                 | **78**                                                                         |
|                                | **8A.**                                                                      | **Consolidated                    Statements and Other Financial Information** | **78**   |
|                                | **8B.**                                                                      | **Significant                    Changes**                                     | **83**   |
| **ITEM                    9.**      | **THE                    OFFER AND LISTING**                                 | **83**                                                                         |
|                                | **9A.**                                                                      | **Offer                    and Listing Details**                               | **83**   |
|                                | **9B.**                                                                      | **Plan                    of Distribution**                                    | **85**   |
|                                | **9C.**                                                                      | **Markets**                                                                    | **85**   |
|                                | **9D.**                                                                      | **Selling                    Shareholders**                                    | **88**   |
|                                | **9E.**                                                                      | **Dilution**                                                                   | **88**   |
|                                | **9F.**                                                                      | **Expenses                    of the Issue**                                   | **88**   |
| **ITEM                    10.**     | **ADDITIONAL                    INFORMATION**                                | **88**                                                                         |
|                                | **10A.**                                                                     | **Share                    Capital**                                           | **88**   |
|                                | **10B.**                                                                     | **Memorandum                    and Articles of Association**                  | **88**   |
|                                | **10C.**                                                                     | **Material                    Contracts**                                      | **103**  |
|                                | **10D.**                                                                     | **Exchange                    Controls**                                       | **103**  |
|                                | **10E.**                                                                     | **Taxation**                                                                   | **104**  |
|                                | **10F.**                                                                     | **Dividends                    and Paying Agents**                             | **110**  |
|                                | **10G.**                                                                     | **Statements                    by Experts**                                   | **110**  |
|                                | **10H.**                                                                     | **Documents                    on Display**                                    | **110**  |
|                                | **10I.**                                                                     | **Subsidiary                    Information**                                  | **111**  |

----

| **ITEM 11.**             | **QUANTITATIVE                  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**                                    | **112** |
|-------------------------------|--------------------------------------------------------------------------------------------------------------------|---------|
| **ITEM 12.**             | **DESCRIPTION                  OF SECURITIES OTHER THAN EQUITY SECURITIES**                                        | **115** |
| **PART                  II**  |                                                                                                               |
| **ITEM 13.**             | **DEFAULTS,                  DIVIDEND ARREARAGES AND DELINQUENCIES**                                               | **115** |
| **ITEM 14.**             | **MATERIAL                  MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF                  PROCEEDS** | **115** |
| **ITEM 15.**             | **CONTROLS                  AND PROCEDURES**                                                                       | **119** |
| **ITEM 16A.**            | **AUDIT                  COMMITTEE FINANCIAL EXPERT**                                                              | **120** |
| **ITEM 16B.**            | **CODE                  OF ETHICS**                                                                                | **120** |
| **ITEM 16C.**            | **PRINCIPAL                  ACCOUNTANT FEES AND SERVICES**                                                        | **120** |
| **ITEM 16D.**            | **EXEMPTIONS                  FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES**                                    | **121** |
| **ITEM 16E.**            | **PURCHASES                  OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED                  PURCHASERS**       | **122** |
| **PART                  III** |                                                                                                               |
| **ITEM 17.**             | **FINANCIAL                  STATEMENTS**                                                                          | **123** |
| **ITEM 18.**             | **FINANCIAL                  STATEMENTS**                                                                          | **123** |
| **ITEM 19.**             | **EXHIBITS**                                                                                                       | **123** |

----

**INTRODUCTION**

*real*
*reais*
*real*

**Presentation      of Financial and Other Data **

***Financial      Data***

----

*Comissão      de Valores Mobiliários*

*Novo      Mercado*
*Bolsa      de Valores de São Paulo*

***Other      Data and Backlog***

|  | · | some                    of the financial data reflects the effect of                    rounding; |
|--|--------|---------------------------------------------------------------------------------------------------|

|  | · | aircraft                ranges are indicated in nautical                miles; |
|--|--------|--------------------------------------------------------------------------------|

|  | · | one                nautical mile is equal to approximately 1.15 ordinary or “statute” miles,                or approximately 1.85 kilometers; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | aircraft                speeds are indicated in nautical miles per hour, or knots, or in                Mach,                which is a measure of the speed of                sound; |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the                  term “regional jets” refers to narrow body jet aircraft with 30-60                  passenger seats; |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the                term “mid-capacity jets” refers to jet aircraft with 70-120 passenger                seats. All of our regional and mid-capacity jet aircraft are sold                in the                commercial aviation segment; |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the                term “commercial aircraft,” as it applies to Embraer, refers to our                regional jets and mid-capacity                jets; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the                terms “very light jet” and “light jet” refer to executive jets that carry                from six to eight passengers and up to nine passengers, respectively,                that                are designed for short take-off                distances; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the                term “ultra-large” refers to executive jets that have longer range and                over-sized cabin space and carry, on average, 19 passengers;                and |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the                term “executive jets,” as it applies to Embraer, refers to our aircraft                sold to companies, including fractional ownership companies, charter                companies and air-taxi companies and high net-worth                individuals. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Special      Note Regarding Forward-Looking Statements**

|   | · | general                economic, political and business conditions, both in Brazil and in                our                markets; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes                in competitive conditions and in the general level of demand for                our                products; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|   | · | management’s                expectations and estimates concerning our future financial performance,                financing plans and programs, and the effects of                competition; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                effect of changing priorities or reductions in the Brazilians government                or international government defense budgets on our                revenues; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | continued                successful development and marketing of the EMBRAER 170/190 jet family,                our line of executive jets (including the Phenom 100, Phenom 300                and                Lineage 1000), and our defense                aircraft; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                level of debt; |
|--------|--------|-----------------------------------|

|   | · | anticipated                trends in our industry and of our short- and long-term outlook for                the                30-120 seat commercial airline                market; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                expenditure plans; |
|--------|--------|---------------------------------------|

|   | · | inflation                and fluctuations in exchange rates; |
|--------|--------|--------------------------------------------------------------|

|   | · | our                ability to develop and deliver our products on a timely                basis; |
|--------|--------|--------------------------------------------------------------------------------------------------|

|   | · | availability                of sales financing for our existing and potential                customers; |
|--------|--------|---------------------------------------------------------------------------------------------------------|

|   | · | existing                and future governmental regulation;                and |
|--------|--------|--------------------------------------------------------------------------------|

|   | · | other                risk factors as set forth under “Item 3D. Risk                Factors.” |
|--------|--------|----------------------------------------------------------------------------------------------------------|

----

**PART      I**

| **ITEM                1.** | **IDENTITY                OF DIRECTORS, SENIOR MANAGEMENT AND                ADVISERS** |
|----------------------------|-----------------------------------------------------------------------------------------|

| **ITEM                2.** | **OFFER                STATISTICS AND EXPECTED                TIMETABLE** |
|----------------------------|---------------------------------------------------------------------------|

| **ITEM                3.** | **KEY                INFORMATION** |
|----------------------------|------------------------------------|

| **3A.** | **Selected                Financial Data** |
|---------|--------------------------------------------|

|                                                                                   |   | **At                and for the year ended December 31,**          |       |
|----------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|------------|
|                                                                                   |   | **2003**                                                           |       | **2004** |   | **2005** |   | **2006** |   | **2007** |   |
|                                                                                   |   |                                                               |       |   |   |   |   |   |   |   |   |
|                                                                                   |   | ***(in                US$ thousands, except per share/ADS data)*** |       |
| **Statement                of Income Data**                                            |   |                                                               |       |   |   |   |   |   |   |   |   |
| Net                sales                                                          |   |                                                               | 2,155,938  |   |   | 3,352,143 |   |   | 3,789,495 |   |   | 3,759,519 |   |   | 5,245,172 |   |
| Cost                of sales and services                                         |   |                                                               | (1,374,637 | ) |   | (2,336,737 | ) |   | (2,738,907 | ) |   | (2,806,802 | ) |   | (4,093,504 | ) |
| Gross                profit                                                       |   |                                                               | 781,301    |   |   | 1,015,406 |   |   | 1,050,588 |   |   | 952,717 |   |   | 1,151,668 |   |
| *Operating                expenses*                                                    |   |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                expenses                                                   |   |                                                               | (179,119   | ) |   | (185,086 | ) |   | (159,799 | ) |   | (220,596 | ) |   | (361,306 | ) |
| Research                and development                                           |   |                                                               | (173,216   | ) |   | (44,506 | ) |   | (93,166 | ) |   | (112,743 | ) |   | (259,726 | ) |
| General                and administrative                                         |   |                                                               | (114,743   | ) |   | (139,357 | ) |   | (205,202 | ) |   | (235,505 | ) |   | (234,792 | ) |
| Employee                profit sharing                                            |   |                                                               | (20,399    | ) |   | (61,199 | ) |   | (56,051 | ) |   | (42,719 | ) |   | 3⁄4 |   |
| Other                operating income (expenses), net                             |   |                                                               | (29,060    | ) |   | (41,272 | ) |   | (26,079 | ) |   | 1,677 |   |   | 78,361 |   |
| Total                operating expenses                                                |   |                                                               | (516,537   | ) |   | (471,420 | ) |   | (540,297 | ) |   | (609,886 | ) |   | (777,463 | ) |
|                                                                                   |   |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Income                from operations*                                           |   |                                                               | 264,764    |   |   | 543,986 |   |   | 510,291 |   |   | 342,831 |   |   | 374,205 |   |
| *Non-operating                income (expense)*                                   |   |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income (expenses), net                               |   |                                                               | (140,755   | ) |   | (38,000 | ) |   | (4,117 | ) |   | 105,433 |   |   | 163,378 |   |
| Foreign                exchange loss, net                                         |   |                                                               | (16,500    | ) |   | (12,218 | ) |   | (15,218 | ) |   | (4,098 | ) |   | (37,669 | ) |
| Other                non-operating income (expenses), net                         |   |                                                               | 711        |   |   | (117 | ) |   | 9,050 |   |   | 3⁄4 |   |   | 3⁄4 |   |
| Total                non-operating income (expense)                          |   |                                                               | (156,544   | ) |   | (50,335 | ) |   | (10,285 | ) |   | 101,335 |   |   | 125,709 |   |
|                                                                                   |   |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Income                before income taxes*                                       |   |                                                               | 108,220    |   |   | 493,651 |   |   | 500,006 |   |   | 444,166 |   |   | 499,914 |   |
| Income                tax benefit (expenses)                                      |   |                                                               | 27,990     |   |   | (112,139 | ) |   | (41,569 | ) |   | (44,412 | ) |   | (2,745 | ) |
| *Income                before minority interest and results of affiliates*   |   |                                                               | 136,210    |   |   | 381,512 |   |   | 458,437 |   |   | 399,754 |   |   | 497,169 |   |
| Minority                interest                                                  |   |                                                               | (217       | ) |   | (1,306 | ) |   | (9,622 | ) |   | (9,580 | ) |   | (8,180 | ) |
| Equity                in results of affiliates                                    |   |                                                               | 51         |   |   | — |   |   | (3,096 | ) |   | (34 | ) |   | 316 |   |
| *Net                income*                                                       |   |                                                               | 136,044    |   |   | 380,206 |   |   | 445,719 |   |   | 390,140 |   |   | 489,305 |   |
|                                                                                   |   |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Earnings                per share**                                                  |   |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                share – basic (3)                                |   |                                                               | 0.18       |   |   | 0.50 |   |   | 0.58 |   |   | 0.53 |   |   | 0.66 |   |
| Preferred                share – basic (3)                                  |   |                                                               | 0.20       |   |   | 0.55 |   |   | 0.64 |   |   | 3⁄4 |   |   | 3⁄4 |   |
| ADS                – basic (3)                                              |   |                                                               | 0.79       |   |   | 2.18 |   |   | 2.55 |   |   | 2.11 |   |   | 2.64 |   |
| Common                share – diluted (3)                                   |   |                                                               | 0.18       |   |   | 0.49 |   |   | 0.58 |   |   | 0.53 |   |   | 0.66 |   |
| Preferred                share – diluted (3)                                |   |                                                               | 0.20       |   |   | 0.54 |   |   | 0.63 |   |   | 3⁄4 |   |   | 3⁄4 |   |
| ADS                – diluted (3)                                            |   |                                                               | 0.78       |   |   | 2.17 |   |   | 2.54 |   |   | 2.10 |   |   | 2.64 |   |
| **Dividends                per share**                                                 |   |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                share (1) (2)                (3)                            |   |                                                               | 0.088174   |   |   | 0.239678 |   |   | 0.260803 |   |   | 0.212420 |   |   | 0.17361 |   |
| Preferred                share (1) (2)                (3)                         |   |                                                               | 0.096991   |   |   | 0.263645 |   |   | 0.286880 |   |   | 3⁄4 |   |   | 3⁄4 |   |
| ADS                (1) (2)                (3)                                     |   |                                                               | 0.387964   |   |   | 1.054580 |   |   | 1.147520 |   |   | 0.849680 |   |   | 0.69443 |   |

----

|                                                                                            |   | **At                and for the year ended December 31,**          |      |
|-------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|-----------|
|                                                                                            |   | **2003**                                                           |      | **2004** |   | **2005** |   | **2006** |   | **2007** |   |
|                                                                                            |   |                                                               |      |   |   |   |   |   |   |   |   |
|                                                                                            |   | ***(in                US$ thousands, except per share/ADS data)*** |      |
| **Weighted                averaged number of shares outstanding (in                thousands)** |   |                                                               |      |   |   |   |   |   |   |   |   |
| Common                share – basic (3)                                              |   |                                                               | 242,544   |   |   | 242,544 |   |   | 242,544 |   |   | 739,904 |   |   | 740,142 |   |
| Preferred                share – basic (3)                                           |   |                                                               | 471,228   |   |   | 474,994 |   |   | 479,288 |   |   | 3⁄4 |   |   | 3⁄4 |   |
| Common                share – diluted (3)                                            |   |                                                               | 242,544   |   |   | 242,544 |   |   | 242,544 |   |   | 742,903 |   |   | 741,047 |   |
| Preferred                share – diluted (3)                                         |   |                                                               | 474,840   |   |   | 479,217 |   |   | 482,739 |   |   | 3⁄4 |   |   | 3⁄4 |   |
|                                                                                            |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance                Sheet Data**                                                           |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                and cash equivalents                                                   |   |                                                               | 1,265,820 |   |   | 963,818 |   |   | 1,339,159 |   |   | 1,209,396 |   |   | 1,307,366 |   |
| Temporary                cash investments                                                  |   |                                                               | 4,320     |   |   | 396,958 |   |   | 574,395 |   |   | 555,795 |   |   | 1,185,745 |   |
| Other                current assets                                                        |   |                                                               | 2,076,726 |   |   | 2,514,733 |   |   | 2,701,968 |   |   | 3,026,295 |   |   | 3,156,630 |   |
| Property,                plant and equipment, net                                          |   |                                                               | 402,663   |   |   | 381,265 |   |   | 388,362 |   |   | 412,244 |   |   | 565,979 |   |
| Other                long-term assets                                                      |   |                                                               | 2,331,006 |   |   | 1,825,625 |   |   | 1,928,561 |   |   | 1,894,011 |   |   | 1,850,134 |   |
| Total                assets                                                                     |   |                                                               | 6,080,535 |   |   | 6,082,399 |   |   | 6,932,445 |   |   | 7,097,741 |   |   | 8,065,854 |   |
| Short-term                loans and financing(4)                                           |   |                                                               | 517,014   |   |   | 513,281 |   |   | 475,305 |   |   | 503,047 |   |   | 932,669 |   |
| Other                current liabilities                                                   |   |                                                               | 1,929,181 |   |   | 1,802,820 |   |   | 2,179,131 |   |   | 2,492,142 |   |   | 2,406,724 |   |
| Long-term                loans and financing(5)                                            |   |                                                               | 526,728   |   |   | 825,448 |   |   | 1,078,117 |   |   | 846,104 |   |   | 820,320 |   |
| Other                long-term liabilities                                                 |   |                                                               | 1,925,776 |   |   | 1,565,539 |   |   | 1,532,863 |   |   | 1,318,253 |   |   | 1,587,992 |   |
| Minority                interest                                                           |   |                                                               | 12,611    |   |   | 21,443 |   |   | 46,775 |   |   | 63,914 |   |   | 68,709 |   |
| Shareholders’                equity                                                  |   |                                                               | 1,169,225 |   |   | 1,353,868 |   |   | 1,620,254 |   |   | 1,874,281 |   |   | 2,249,440 |   |
| Total                liabilities and shareholders’ equity                                 |   |                                                               | 6,080,535 |   |   | 6,082,399 |   |   | 6,932,445 |   |   | 7,097,741 |   |   | 8,065,854 |   |

|                                                                       |   | **At                  and for the year ended December 31,**           |    |
|----------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|---------|
|                                                                       |   | **2003**                                                              |    | **2004** |   | **2005** |   | **2006** |   | **2007** |   |
|                                                                       |   | ***(in                  US$ thousands, except per share /ADS data)*** |    |
| **Other                  Financial Data**                                  |   |                                                                  |    |   |   |   |   |   |   |   |   |
|                                                                       |   |                                                                  |    |   |   |   |   |   |   |   |   |
| Net                  cash provided by (used in) operating activities  |   |                                                                  | 239,634 |   |   | (398,846 | ) |   | 346,909 |   |   | 386,933 |   |   | 52,034 |   |
| Net                  cash used in investing activities                |   |                                                                  | (72,667 | ) |   | (59,104 | ) |   | (50,496 | ) |   | (179,518 | ) |   | (255,915 | ) |
| Net                  cash provided by (used in) financing activities  |   |                                                                  | 403,791 |   |   | 105,220 |   |   | 24,916 |   |   | (395,103 | ) |   | 136,995 |   |
| Depreciation                  and amortization                        |   |                                                                  | 58,877  |   |   | 59,685 |   |   | 61,491 |   |   | 63,859 |   |   | 58,798 |   |

|   | (1) | Includes                interest on capital. |
|--------|-----|----------------------------------------------|

|   | (2) | Translated                from nominal *reais*                into U.S. dollars at the commercial selling rates in effect on the                last                date of the month in which distributions were approved. As of April                1,                2006, each ADS represents four common shares and before such date                each ADS                represented four preferred shares. The dividends per ADSs reflect                the                underlying dividends per share multiplied by four. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | As                a result of the merger of former Embraer with and into Embraer approved                on                March 31, 2006, each common share and preferred share of former Embraer                was exchanged for one common share of Embraer and each ADS of former                Embraer was exchanged for one ADS of                Embraer. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Excludes                non-recourse and recourse debt. Includes current portion of long-term                debt. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------|

|   | (5) | Excludes                non-recourse and recourse debt. |
|--------|-----|---------------------------------------------------------|

----

|                                                                 |   | **2003** |                 | **2004** |   | **2005**             |   | **2006** |    | **2007** |   |
|----------------------------------------------------------------------|--------|----------|----------------------|----------|--------|----------------------|--------|----------|---------|----------|--------|
| **Other                Data:**                                       |   |     |                 |     |   |                 |   |     |    |     |   |
| **Aircraft                delivered during period (1):**             |   |     |                 |     |   |                 |   |     |    |     |   |
| **To                the Commercial Aviation Market**                 |   |     |                 |     |   |                 |   |     |    |     |   |
| ERJ                145                                          |   |     | 57                   |     |   | 87                (5 | )      |     | 46      |     |   | 12 |   |   | 7 |   |
| ERJ                135                                          |   |     | 14                   |     |   | 1                (1  | )      |     | 2       |     |   | — |   |   | — |   |
| ERJ                140                                          |   |     | 16                   |     |   | —              |   |     | — |     |   | — |   |   | — |   |
| EMBRAER                170                                      |   |     | —              |     |   | 46                   |   |     | 46(1    | )        |   | 32(2 | ) |   | 11 |   |
| EMBRAER                175                                      |   |     | —              |     |   | —              |   |     | 14      |     |   | 11(1 | ) |   | 34 |   |
| EMBRAER                190                                      |   |     | —              |     |   | —              |   |     | 12      |     |   | 40 |   |   | 68 |   |
| EMBRAER                195                                      |   |     | —              |     |   | —              |   |     | 12      |     |   | 3 |   |   | 10 |   |
| **To                the Defense and Government Market**              |   |     |                 |     |   |                 |   |     |    |     |   |   |   |   |   |   |
| EMB                120 Brasília                            |   |     | —              |     |   | —              |   |     | — |     |   | — |   |   | 1 |   |
| Legacy                                                          |   |     | —              |     |   | —              |   |     | 6       |     |   | — |   |   | 1 |   |
| EMB                145                                          |   |     | 1                    |     |   | 1                    |   |     | 1       |     |   | — |   |   | 1 |   |
| EMBRAER                170                                      |   |     | —              |     |   | —              |   |     | — |     |   | 4(1 | ) |   | — |   |
| EMBRAER                190                                      |   |     | —              |     |   | —              |   |     | — |     |   | 1 |   |   | 2 |   |
|    EMB                145 AEW&C/RS/MP        |   |     | 3                    |     |   | 6                    |   |     | 1       |     |   | — |   |   | — |   |
| EMB                312 Tucano / AL-X/ Super Tucano              |   |     | —              |     |   | 7                    |   |     | 24      |     |   | 14 |   |   | 28 |   |
| **To                the Executive Aviation Market**                  |   |     |                 |     |   |                 |   |     |    |     |   |   |   |   |   |   |
| Legacy                600                                       |   |     | 11                (2 | )        |   | 13                   |   |     | 14      |     |   | 27 |   |   | 35 |   |
| EMB                135                                          |   |     | 2                    |     |   | —              |   |     | — |     |   | — |   |   | — |   |
| **To                the General Aviation Market**                    |   |     |                 |     |   |                 |   |     |    |     |   |   |   |   |   |   |
| Light                Propeller Aircraft                         |   |     | 46                   |     |   | 70                   |   |     | 31      |     |   | 10 |   |   | 20 |   |
| Total                delivered                                  |   |     | 150                  |     |   | 231                  |   |     | 197     |     |   | 154 |   |   | 218 |   |
| **Aircraft                in backlog at the end of period:**         |   |     |                 |     |   |                 |   |     |    |     |   |   |   |   |   |   |
| **In                the Commercial Aviation Market (2)**             |   |     |                 |     |   |                 |   |     |    |     |   |   |   |   |   |   |
| EMB                120 Brasília                            |   |     | —              |     |   | —              |   |     | — |     |   | 1 |   |   | — |   |
| ERJ                145                                          |   |     | 144                  |     |   | 66                   |   |     | 10      |     |   | 53 |   |   | 46 |   |
| ERJ                135                                          |   |     | 17                   |     |   | 17                   |   |     | 15      |     |   | 1 |   |   | — |   |
| ERJ                140                                          |   |     | 20                   |     |   | 20                   |   |     | 20      |     |   | — |   |   | — |   |
| EMBRAER                170                                      |   |     | 120                  |     |   | 112                  |   |     | 104     |     |   | 29 |   |   | 31 |   |
| EMBRAER                175                                           |   |     | —              |     |   | 15                   |   |     | 8       |     |   | 74 |   |   | 70 |   |
| EMBRAER                190                                      |   |     | 110                  |     |   | 155                  |   |     | 178     |     |   | 264 |   |   | 282 |   |
| EMBRAER                195                                      |   |     | 15                   |     |   | 15                   |   |     | 29      |     |   | 43 |   |   | 47 |   |
| **In                the Defense and Government Market**              |   |     |                 |     |   |                 |   |     |    |     |   |   |   |   |   |   |
| EMB                145 AEW&C/RS/MP                          |   |     | 7                    |     |   | 1                    |   |     | — |     |   | — |   |   | — |   |
| EMB                312 Tucano/EMB 314/EP Super                Tucano |   |     | 76                   |     |   | 69                   |   |     | 93      |     |   | 80 |   |   | 104 |   |
| EMB                145                                          |   |     | 1                    |     |   | —              |   |     | — |     |   | — |   |   | 1 |   |
| EMB                135                                          |   |     | —              |     |   | —              |   |     | — |     |   | — |   |   | 2 |   |
| Legacy                600 / Phenom                              |   |     | 5                    |     |   | 5                    |   |     | — |     |   | 1 |   |   | 3 |   |
| EMBRAER                170/ EMBRAER 190                              |   |     | —              |     |   | —              |   |     | 3       |     |   | — |   |   | — |   |
| **In                the Executive Aviation Market**                  |   |     |                 |     |   |                 |   |     |    |     |   |   |   |   |   |   |
| Legacy                600/Phenom/Lineage                        |   |     | 27                   |     |   | 4                    |   |     | 15      |     |   | 384 |   |   | 766 |   |
| **In                the General Aviation Market**                    |   |     |                 |     |   |                 |   |     |    |     |   |   |   |   |   |   |
| Light                Propeller Aircraft                         |   |     | 11                   |     |   | 25                   |   |     | 6       |     |   | — |   |   | — |   |
| Total                backlog (in aircraft)                      |   |     | 553                  |     |   | 504                  |   |     | 481     |     |   | 930 |   |   | 1,352 |   |
| Total                backlog (in millions)                      |   | US$      | 10,591               |     | US$    | 10,097               |   | US$      | 10,383  |     | US$    | 14,806 |   | US$ | 18,827 |   |

**Exchange      Rates**
** **

|   | · | the                commercial rate exchange market,                and |
|--------|--------|------------------------------------------------------------------------|

|   | · | the                floating rate exchange market. |
|--------|--------|---------------------------------------------------|

----

*real*
*real*
*real*
*real*

*reais*

|                                       |   | **Exchange                Rate of*****Reais*****to US$1.00** |   |
|--------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                       |   | **Low**                                                      |   | **High** |   | **Average (1)** |   | **Period-end** |   |
| **Year                ended December 31,** |   |                                                         |   |   |   |   |   |   |   |
| 2003                                       |   |                                                         | 2.8219 |   |   | 3.6623 |   |   | 3.0600 |   |   | 2.8892 |   |
| 2004                .                      |   |                                                         | 2.6544 |   |   | 3.2051 |   |   | 2.9171 |   |   | 2.6544 |   |
| 2005                                       |   |                                                         | 2.1633 |   |   | 2.7621 |   |   | 2.4125 |   |   | 2.3407 |   |
| 2006                                       |   |                                                         | 2.0586 |   |   | 2.3711 |   |   | 2.1771 |   |   | 2.1380 |   |
| 2007                                       |   |                                                         | 1.7325 |   |   | 2.1556 |   |   | 1.9500 |   |   | 1.7713 |   |
| 2008                (though April 30)      |   |                                                         | 1.6575 |   |   | 1.8301 |   |   | 1.7246 |   |   | 1.6872 |   |

|                             |   | **Exchange                Rate of*****Reais*****to US$1.00** |   |
|----------------------------------|--------|--------------------------------------------------------------|--------|
|                             |   | **Low**                                                      |   | **High** |   | **Average(1)** |   | **Period-end** |   |
| **Month                ended**   |   |                                                         |   |   |   |   |   |   |   |
| November                30, 2007 |   |                                                         | 1.7325 |   |   | 1.8501 |   |   | 1.7966 |   |   | 1.7837 |   |
| December                31, 2007 |   |                                                         | 1.7616 |   |   | 1.8233 |   |   | 1.7860 |   |   | 1.7713 |   |
| January                31, 2008  |   |                                                         | 1.7414 |   |   | 1.8301 |   |   | 1.7743 |   |   | 1.7603 |   |
| February                29, 2008 |   |                                                         | 1.6715 |   |   | 1.7681 |   |   | 1.7277 |   |   | 1.6830 |   |
| March                31, 2008    |   |                                                         | 1.6700 |   |   | 1.7491 |   |   | 1.7076 |   |   | 1.7491 |   |
| April                30, 2008    |   |                                                         | 1.6575 |   |   | 1.7534 |   |   | 1.6889 |   |   | 1.6872 |   |

*real*
*real*

| **3B.** | **Capitalization                and Indebtedness** |
|---------|----------------------------------------------------|

| **3C.** | **Reasons                for the Offer and Use of                Proceeds** |
|---------|-----------------------------------------------------------------------------|

----

| **3D.** | **Risk                Factors**** ** |
|---------|-------------------------------------------|

**Risks      Relating to Embraer **

**A      downturn in commercial aviation may reduce our sales and revenue, and,      consequently, our profitability, in any given year.**

**We      depend on key customers and key suppliers, the loss of any of which could harm      our business. **

*Commercial      aircraft*

----

*Defense      aircraft*

*Key      suppliers*

**Our      aircraft sales are subject to cancellation provisions that may reduce our cash      flows.**

|   | · | extended                delays in delivering aircraft or failure to obtain certification                of the                aircraft or otherwise meet performance milestones and other                requirements; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | failure                of a customer to receive financing, when required, with respect to                any                aircraft at the scheduled delivery date, in which case the customer                can                cancel the order for the particular aircraft to be delivered or terminate                the contract with respect to all undelivered aircraft;                or |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | production                rate shortfalls. |
|--------|--------|--------------------------------------------|

----

**Our      aircraft sales are subject to trade-in options and financial and residual value      guarantees that may require us to make significant cash disbursements in the      future.**

** **

----

**Any      decrease in Brazilian government-sponsored customer financing, or increase      in      government-sponsored financing that benefits our competitors, may decrease      the      cost-competitiveness of our aircraft. **

*Programa      de Financiamento às Exportações*

**Brazilian      Government budgetary constraints could reduce amounts available to our customers      under government-sponsored financing programs.**

**We      may face a number of challenges resulting from the development of new products      and the possible pursuit of strategic growth opportunities.**

----

**We      may have to refund cash contributions after the development of the EMBRAER      170/190 jet family, of the Phenom 100, and of the Phenom 300, if certain      milestones for each of these aircraft are not reached. **

**We      face significant international competition, which may adversely affect our      market share. **

**We      may have to make significant payments as a result of unfavorable outcomes of      pending challenges to various taxes and payroll charges. **

----

**Risks      Relating to the Commercial Airline Industry**

**Scope      clause restrictions in airline pilot contracts may limit demand for regional      and      mid-capacity jets in the U.S. market.**

**We      are subject to stringent certification requirements and regulation, which may      prevent or delay our obtaining certification in a timely      manner.**

**Any      catastrophic events involving our aircraft could adversely affect our reputation      and future sales of our aircraft, as well as the market price of the common      shares and the ADSs.**

----

**Risks      Relating to Brazil**

**Brazilian      political and economic conditions have a direct impact on our business and      the      trading price of our common shares and ADSs.**

|   | · | interest                rates; |
|--------|--------|--------------------------------|

|   | · | exchange                controls and restrictions on remittances abroad (such as those that                were                imposed in 1989 and early 1990); |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | currency                fluctuations; |
|--------|--------|---------------------------------------|

|   | · | inflation; |
|--------|--------|------------|

|   | · | liquidity                of domestic capital and lending                markets; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | tax                policies; and |
|--------|--------|----------------------------------|

|   | · | other                political, diplomatic, social and economic developments in or affecting                Brazil. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

**Inflation      and government efforts to combat inflation may contribute significantly to      economic uncertainty in Brazil and to heightened volatility in the Brazilian      securities markets and, consequently, may adversely affect the market value      of      the common shares and ADSs.**

*Índice      Geral de Preços – Mercado*

----

*real*

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

*real*
*real*

*real*

*real*
*real*
*real*

*real*
*reais*
*real*

**Economic      developments and investor perceptions of risk in other countries, including      emerging market countries, may adversely affect the trading price of Brazilian      securities, including our common shares and ADSs.**

----

**Risks      Relating to our Common Shares and ADSs**
** **

**If      holders of ADSs exchange the ADSs for common shares, they risk losing the      ability to remit foreign currency abroad and Brazilian tax      advantages.**

**The      Brazilian government has veto power over change of control, change of name,      trademark or corporate purpose and over the creation or alteration of our      defense programs, and its interests could conflict with the interests of the      holders of our common shares or ADSs.**

**Our      bylaws contain provisions that could discourage our acquisition or prevent      or      delay transactions that you may favor.**

----

**The      absence of a single, controlling shareholder or group of controlling      shareholders may render us susceptible to shareholder disputes or other      unanticipated developments.**

**Our      bylaws contain provisions that limit the voting rights of certain shareholders      including non-Brazilian shareholders.**

**Holders      of ADSs may not be able to exercise their voting rights.**

**The      relative volatility and illiquidity of the Brazilian securities markets may      substantially limit the ability of holders of our common shares or the ADSs      to      sell the common shares underlying ADSs at the price and time they      desire.**

----

**The      sale of a substantial number of common shares, or the belief that this may      occur, could decrease the trading price of the common shares and the ADSs;      holders of our common shares and/or ADSs may not be able to sell their      securities at or above the price they paid for them.**

**Holders      of our ADSs might be unable to exercise preemptive rights with respect to the      common shares.**

**Judgments      of Brazilian courts with respect to our common shares will be payable only      in**
***reais***
**.**

*reais.      *
*reais      *

| **ITEM                4.** | **INFORMATION                ON THE COMPANY** |
|----------------------------|-----------------------------------------------|

| **4A.** | **History                and Development of the                Company** |
|---------|--------------------------------------------------------------------------|

**General**

----

**Corporate      Reorganization**

|  | · | Embraer                (formerly known as Rio Han Empreendimentos e Participações S.A. and                renamed Embraer-Empresa Brasileira de Aeronáutica S.A.) succeeded to all                rights and obligations of former                Embraer, |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | each                common share of former Embraer was exchanged for one common share                of                Embraer, |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------|

|  | · | each                preferred share of former Embraer was exchanged for one common share                of                Embraer, |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------|

|  | · | each                American Depositary Share, or ADS, of former Embraer, each of which                represented four preferred shares of former Embraer, was exchanged                for one                ADS of Embraer, each of which represents four common shares of Embraer,                and |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the                golden share, a special class of common shares of former Embraer                held by                the Federative Republic of Brazil, was exchanged for a special class                of                common shares of Embraer. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Strategic      Alliance and Growth Opportunities**

***Strategic      Alliance with European Aerospace and Defense Group***

----

***Joint      Ventur***
***es      and Acquisitions***

----

**Research      and Development Costs and Capital Expenditures**
** **

*real*

| **4B.** | **Business                Overview** |
|---------|--------------------------------------|

----

**Our      Strengths**

*Leading      Commercial Aircraft Manufacturer with a Global Customer Base*

*Aircraft      Design; Cost and Operating Efficiency. *

*Strategic      Risk-Sharing Partners. *

*Benefits      of Funded Development of Defense Products. *

*Flexibility      of Production to Meet Market Demands*

*Experienced      and Highly Skilled Workforce*

**Business      Strategies**

*Continuing      to Market our Commercial Aircraft*

----

*Strengthening      our Position in the Executive Jet Market.*

*Continue      to Pursue Market Niche Opportunities in the Defense and Government      Market.*

*Continuing      Focus on Customer Satisfaction and Support. *

*Pursuing      Strategic Growth Opportunities and Enhancing Relationships with Significant      World Players in the Aerospace Industry. *

**Commercial      Aviation Business**

***Products***

----

***ERJ      145 Regional Jet Family***

----

***EMBRAER      170/190 Jet Family***

|   | · | *Performance.*All                four jets in the EMBRAER 170/190 jet family have a maximum cruising                speed                of Mach .82. The EMBRAER 170 and the EMBRAER 175 have maximum fully                loaded                ranges of 1,700 and 1,600 nautical miles, respectively, and each                is                available in LR versions, with maximum fully loaded ranges of 2,000                and                1,800 nautical miles, respectively. The EMBRAER 190 and EMBRAER 195                have                maximum fully loaded ranges of 1,700 and 1,500 nautical miles,                respectively, and will be available in LR versions with maximum fully                loaded ranges of 2,300 and 2,100 nautical miles, respectively. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Ground                servicing.*The                under-wing engine design and the existence of four doors, two in                the front                and two in the back, provide for enhanced accessibility and efficiency                of                ground services. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Cabin                and cargo space.*We                have enhanced passenger safety and comfort in the EMBRAER 170/190                jet                family. The aircraft’s “double-bubble” design enables a four-abreast                cabin, a wide aisle, greater interior space and headroom and a larger                baggage compartment than the existing mid-capacity jets of our                competitors, including those mid-capacity jets that are in the development                stage. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***EMB      120 Brasília***

----

***Customers***

***Sales      and Marketing***

***Production,      New Orders and Options***

----

***Competition***

***30-60-seat      category***

|   | · | the                ATR-42, manufactured by ATR G.I.E., a joint project of Italy’s Alenia                Aerospaziale and EADS; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                DHC-8-200 and the DHC-8-300, manufactured by De Havilland,                Bombardier. |
|--------|--------|----------------------------------------------------------------------------------------------------------|

***61-90-seat      and 91-120-seat categories***

* *

|   | · | De                Havilland’s DHC-8-400, a 72-seat turboprop, produced by                Bombardier; |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | · | ATR’s                ATR72, a 72-seat turboprop; |
|--------|--------|--------------------------------------------------------|

|   | · | Bombardier’s                CRJ-700, a 70-seat regional jet, which was first delivered in January                2001, and its CRJ-900 aircraft, which seats 85 passengers and began                deliveries in January 2003; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Bombardier’s                CR-1000, an 100-seat regional jet launched in February 2007, with                first                deliveries scheduled to take place in the second half of                2009; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Airbus’                    A318, a 100-plus-seat jet, which was certified by the EASA in                    December                    2005; and |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Boeing’s                737-600, a 100-plus-seat jet. |
|--|--------|-------------------------------------------------------------|

|  | · | Sukhoi’s                RRJ, a 75- and 95-seat regional jet, which is officially scheduled                to                enter into service at the end of                2008; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | AVIC                I’s ARJ21, a 90- to 105-seat regional jet, which is officially scheduled                to enter into service in 2009; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Bombardier’s                CSeries jet, which seats 110 to 130 passengers, is expected to be                launched                in 2008 and to enter into service by 2013 - the target market for                the                CSeries jet is traditionally dominated by Boeing and Airbus;                and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Mitsubishi                Heavy Industries‘ 75 and 96 seat regional jet, which was launched in March                2008, and is expected to enter into service by                2013. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Defense      and Government Business**

***Products***

**Tucano      Family; AL-X**

*Aeronave      Leve de Ataque*
*Financiadora      de Estudos e Projetos*
*Sistema      de Vigilância da Amazônia*

----

***EMB      145 AEW&C; EMB 145 RS; EMB 145 MP***

***AM-X;      AMX-T***

***Government      Transport Aircraft***

***Other      Projects and Activities***

***Competition***

----

**Executive      Aviation Business**

----

**Aviation      Services **

*** ***

|   | · | field                support; |
|--------|--------|-------------------------------|

|   | · | material                support, which includes spare parts sales and                distribution; |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | product                warranty and repair administration; |
|--------|--------|------------------------------------------------------------|

|   | · | technical                support, which includes engineering support, maintenance engineering                and                technical publications; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | training. |
|--------|--------|-----------|

**Other      Related Businesses**

**Subcontracting      **

----

***General      Aviation Aircraft***

**Aircraft      Operating Lease Activities **

**Markets**

|                                           |   | **Year                    ended December 31,** |    |
|------------------------------------------------|--------|------------------------------------------------|---------|
|                                           |   | **2005**                                       |    | **2006** |   | **2007** |   |
|                                           |   | *(in                    US$ millions)*         |    |
|                                           |   |                                           |    |   |   |   |   |
| **Commercial                    Aviation**     |   |                                           |    |   |   |   |   |
| Americas                    (excluding Brazil) |   |                                           | 2,176.4 |   |   | 1,407.0 |   |   | 2,277.9 |   |
| Europe                                         |   |                                           | 247.9   |   |   | 430.1 |   |   | 485.8 |   |
| Brazil                                         |   |                                           | — |   |   | — |   |   | — |   |

----

|                                              |   | **Year                ended December 31,** |    |
|---------------------------------------------------|--------|--------------------------------------------|---------|
|                                              |   | **2005**                                   |    | **2006** |   | **2007** |   |
|                                              |   | *(in                US$ millions)*         |    |
| Other                                        |   |                                       | 207.7   |   |   | 516.1 |   |   | 612.9 |   |
| Total                                             |   |                                       | 2,632.0 |   |   | 2,353.2 |   |   | 3,376.6 |   |
|                                              |   |                                       |    |   |   |   |   |   |   |   |
| **Executive                Aviation**             |   |                                       |    |   |   |   |   |   |   |   |
| Americas                (excluding Brazil)   |   |                                       | 155.8   |   |   | 304.8 |   |   | 302.2 |   |
| Europe                                       |   |                                       | 100.3   |   |   | 161.3 |   |   | 484.2 |   |
| Brazil                                       |   |                                       | — |   |   | — |   |   | 27.7 |   |
| Other                                        |   |                                       | 22.0    |   |   | 116.0 |   |   | 23.9 |   |
| Total                                        |   |                                       | 278.1   |   |   | 582.1 |   |   | 838.0 |   |
|                                              |   |                                       |    |   |   |   |   |   |   |   |
| **Defense                and Government**         |   |                                       |    |   |   |   |   |   |   |   |
| Americas                (excluding Brazil)   |   |                                       | 33.9    |   |   | 142.1 |   |   | 156.7 |   |
| Europe                                       |   |                                       | 8.3     |   |   | 13.4 |   |   | 29.2 |   |
| Brazil                                       |   |                                       | 230.3   |   |   | 71.2 |   |   | 96.9 |   |
| Other                                        |   |                                       | 151.2   |   |   | — |   |   | 63.6 |   |
| Total                                             |   |                                       | 423.7   |   |   | 226.7 |   |   | 346.4 |   |
|                                              |   |                                       |    |   |   |   |   |   |   |   |
| **Aviation                Services**              |   |                                       |    |   |   |   |   |   |   |   |
| Americas                (excluding Brazil)   |   |                                       | 174.2   |   |   | 180.2 |   |   | 213.9 |   |
| Europe                                       |   |                                       | 196.9   |   |   | 237.0 |   |   | 227.6 |   |
| Brazil                                            |   |                                       | 15.5    |   |   | 50.2 |   |   | 46.4 |   |
| Other                                        |   |                                       | 0.7     |   |   | 12.4 |   |   | 40.3 |   |
| Total                                        |   |                                       | 387.3   |   |   | 479.8 |   |   | 528.2 |   |
|                                              |   |                                       |    |   |   |   |   |   |   |   |
| **Other                Related Businesses**  |   |                                       |    |   |   |   |   |   |   |   |
| Americas                (excluding Brazil)   |   |                                       | 5.1     |   |   | 92.7 |   |   | 69.3 |   |
| Europe                                       |   |                                       | 5.9     |   |   | - |   |   | 6.4 |   |
| Brazil                                       |   |                                       | 57.4    |   |   | 25.0 |   |   | 78.0 |   |
| Other                                        |   |                                       | -       |   |   | - |   |   | 2.3 |   |
| Total                                        |   |                                       | 68.4    |   |   | 117.7 |   |   | 156.0 |   |

**Joint      Ventures**

----

**Suppliers      and Components; Risk-Sharing Arrangements**

***ERJ      145 Regional Jet Family***

*Risk-sharing      partners. *

|   | · | Grupo                Auxiliar Metalúrgico S.A., or Gamesa, a Spanish company owned by Iberdrola                S.A., a European power utility, and Banco Bilbao Vizcaya, a large                Spanish                financial institution, supplies the wings, engine nacelles and main                landing-gear doors; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Sonaca                S.A.—Société Nationale de Constructions Aerospatiales, a Belgian company,                supplies portions of the central and rear fuselages, the service,                main and                baggage doors and engine pylons; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | ENAER—Empresa                Nacional de Aeronáutica, a Chilean company, supplies the vertical fin,                horizontal stabilizers and elevators;                and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | C&D                Aerospace, Inc., a U.S. company, supplies the cabin and cargo compartment                interiors. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|

*Other      major suppliers. *

----

***EMBRAER      170/190 Jet Family***

|   | · | General                Electric, which supplies CF34-8E/l0E turbofan engines and designs,                develops and manufactures the engine                nacelles; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Honeywell,                which supplies the avionics                systems; |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | Liebherr,                which is responsible for designing, developing and manufacturing                the                landing gear assemblies; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Hamilton                Sundstrand, a U.S. company and a wholly owned subsidiary of United                Technologies Corp., which develops and produces the aircraft’s tail core,                auxiliary power unit, electrical systems and the air management                system; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Sonaca,                which is responsible for the aircraft’s wing                slats; |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | Gamesa,                which is responsible for the rear fuselage and the vertical and horizontal                tail surfaces; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | Latecoere,                a French company, which manufactures two of the three fuselage                sections; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | C&D                Aerospace, which designs, develops and manufactures the aircraft                interior;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Grimes                Aerospace Company, a U.S. company and a wholly owned subsidiary of                AlliedSignal Inc., which develops and manufactures the exterior and                cockpit lighting. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Executive      Jets***

----

***Cash      Contributions for the development of the EMBRAER 170/190 jet family and our      Phenom 100 and Phenom 300 aircraft***

**Customer      Service and Product Support**

----

**Aircraft      Financing Arrangements **

*exim*
*exim*

**Intellectual      Property**
** **

----

**Government      Regulation and Aircraft Certification**

*Departamento      de Aviação Civil*
*Centro      Técnico Aeroespacial*
*Agência      Nacional de Aviação Civil*

|   | · | The                ERJ 145 was certified to operate in the United States and Brazil                in the                last quarter of 1996, in Europe in the second quarter of 1997, in                Australia in June 1998 and, for the LR version, in China in November                2000. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                ERJ 145 XR version was certified by the Brazilian aviation authority                in                August 2002 and by the FAA in October 2002. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                ERJ 135 was certified by the Brazilian aviation authority in June                1999, by                the FAA in July 1999 and by the European aviation authority in October                1999. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                ERJ 140 was certified by the Brazilian aviation authority in June                2001 and                by the FAA in July 2001. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                Legacy 600 executive jet was certified by the Brazilian aviation                authority                in December 2001, by the JAA in July 2002 and by the FAA in August                2002. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                EMBRAER 170 was certified by the Brazilian aviation authority, the                FAA,                the JAA, EASA and the authority of Poland in February 2004, and deliveries                of the EMBRAER 170 began in March 2004. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | The                EMBRAER 175 was certified by the Brazilian aviation authority in                December                2004, by EASA in January 2005, by TCCA, the Canadian certification                authority, in July 2005 and by the FAA in August 2006. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                EMBRAER 190 was certified by the Brazilian aviation authority in                August                2005, by the FAA in September 2005 and by EASA in June 2006. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                EMBRAER 195 was certified by the Brazilian aviation authority in                June                2006, by EASA in July 2006 and by the FAA in August                2007. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4C.** | **Organizational                Structure**** ** |
|---------|-------------------------------------------------------|

| **4D.** | **Property,                Plant and Equipment** |
|---------|--------------------------------------------------|

| **Location**                                                                                   |   | **Purpose**                                                                                                  |   | **Approximate****square****footage** |   | **Owned/****Leased** |   | **Lease****Expiration** |
|------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|----------------------|--------|-------------------------|
|                                                                                           |   |                                                                                                         |   |                                 |   |                 |   |                    |
| São                José dos Campos, SP, Brazil                                  |   | Headquarters,                principalmanufacturing                facilityand                support center |   | 5,902,102                            |   | Owned                |   | —                 |
| São                José dos Campos, SP, Brazil(Eugênio                de Mello) |   |  Manufacturing                facility                                                                  |   |  3,658,884                      |   |  Owned          |   |  —           |
| Botucatu,                SP, Brazil                                                       |   | ManufacturingFacility                                                                                        |   | 222,000                              |   | Owned                |   | —                 |
| Harbin,                China                                                              |   | Manufacturing                facility                                                                        |   | 258,067                              |   | Owned(1)             |   | —                 |
| Gavião                Peixoto, SP, Brazil                                            |   | Testing                andmanufacturing                facilities                                            |   | 191,648,512                          |   | (2)                  |   | —                 |
| São                Paulo, SP, Brazil                                                 |   | Administrative                offices                                                                        |   | 5,245                                |   | Leased               |   | 2010                    |
| Ft.                Lauderdale, Florida, U.S.A.                                            |   | Support                center                                                                                |   | 91,500                               |   | Leased               |   | 2020                    |
| Nashville,                Tennessee, U.S.A.                                               |   | Aircraft                maintenance and support center                                                       |   | 316,128                              |   | Leased               |   | 20182028                |
| Alverca,                Portugal(3)                                                       |   | Aircraft                maintenance and support center                                                       |   | 417,000                              |   | Leased               |   | 2035                    |
| Le                Bourget, France                                                         |   | Support                center                                                                                |   | 33,500                               |   | Leased               |   | 2008                    |
| Villepinte,                France                                                         |   | Representative                offices                                                                        |   | 70,202                               |   | Leased               |   | 2014                    |
| Beijing,                China                                                             |   | Representative                offices                                                                        |   | 3,444                                |   | Leased               |   | 2010                    |
| Singapore                                                                                 |   | Representative                offices                                                                        |   | 2,303                                |   | Leased               |   | 2009                    |

----

**Production**

**Environmental      Matters**
** **

----

***OGMA***

**Insurance**
** **

| **ITEM                4A.** | **UNRESOLVED                STAFF COMMENTS** |
|-----------------------------|----------------------------------------------|

| **ITEM                5.** | **OPERATING                AND FINANCIAL REVIEW AND                PROSPECTS** |
|----------------------------|--------------------------------------------------------------------------------|

**5A.**
**Operating      Results**

**Current      Conditions and Future Trends in the Commercial Airline Industry and Executive      Jet Market**

*The      following discussion is based largely upon our current expectations about future      events and trends affecting our business, actual results for our industry and      performance could differ substantially. See “Introduction*
*3⁄4*
*Special      Note Regarding Forward-Looking Statements.” For factors which could affect our      industry in the future and our own future performance, see “Item 3. Risk      Factors.”*

----

***Commercial      Aircraft***

----

| **Market                Segment (Seats)** |   | **2008-2017** |   | **2018-2027** |   | **2008-2027**                 |
|-------------------------------------------|--------|---------------|--------|---------------|--------|-------------------------------|
| **30-60**                                 |   | 275           |   | 825           |   | **1,100**                     |
| **61-90**                                 |   | 1,075         |   | 1,525         |   | **2,600**                     |
| **91-120**                                |   | 1,800         |   | 1,950         |   | **3,750**                     |
| **30-120**                                |   | **3,150**     |   | **4,300**     |   | **7,450                Jets** |

***Executive      Jets***

*Market      Overview*

----

*Our      Executive Jets*

----

*EEOC      - Embraer Executive Operators Conference*

**Brazilian      Economic Environment**

|  | · | increased                volatility in the market price of                securities; |
|--|--------|---------------------------------------------------------------------------------------|

|  | · | significant                decline in corporate earnings                estimates; |
|--|--------|------------------------------------------------------------------------------------|

|  | · | substantial                losses in important industries, including the air transport and insurance                industries; and |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|  | · | significant                erosion of consumer confidence. |
|--|--------|------------------------------------------------------------|

----

*real*
*Certificados      de Depósito Interbancário*

*real*

*real      *

----

*real      *

**Effects      of Inflation and Currency Exchange Fluctuations**

*Real*
*Fundação      Getulio Vargas*
*real*

|                                                                       |   | **2003** |   | **2004** |   | **2005** |   | **2006** |   | **2007** |   |
|----------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|
| Inflation                (General Market  Price                Index) |   |     | 8.7    | %        |   | 12.4     | %      |     | 1.2    | %        |   | 3.8 | % |   | 7.7 | % |
| Exchange                Rate Variation (R$/US$)                            |   |     | 18.2   | %        |   | 8.1      | %      |     | 11.8   | %        |   | 8.7 | % |   | 17.2 | % |

*reais*
*real*
*real*
*real*
*real*
*real*

**Critical      Accounting Estimates **

***Sales      and Other Operating Revenues***
*** ***

----

|   | (i) | the                delivered item has value to the client on a stand-alone basis; |
|--------|-----|-----------------------------------------------------------------------------------|

|   | (ii) | there                is objective and reliable evidence of the fair value of the undelivered                item; and |
|--------|------|-----------------------------------------------------------------------------------------------------------------------|

|   | (iii) | if                the arrangement includes a general right of return relative to the                delivered item, delivery or performance of the undelivered item is                considered probable and substantially in our                control. |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*“Accounting      for Consideration Given by a Vendor to a Customer”*

***Product      Warranties***

***Guarantees      and Trade-In Rights***

----

***Sale      of Residual Interests in Aircraft***

**Overview**

***Operating      Data***

|                                                         |   | **2005** |    | **2006** |   | **2007** |   |
|--------------------------------------------------------------|--------|----------|---------|----------|--------|----------|--------|
| **Commercial                Aviation**                       |   |     |    |     |   |     |   |   |   |   |
| Deliveries                (1)                                |   |     |    |     |   |     |   |   |   |   |
| ERJ                145                                       |   |     | 46      |     |   | 12       |   |   | 7 |   |
| ERJ                135                                       |   |     | 2       |     |   | —  |   |   | — |   |
| ERJ                140                                       |   |     | — |     |   | —  |   |   | — |   |
| EMBRAER                170                                   |   |     | 46      | (1)      |   | 32       | (2)    |   | 11 |   |
| EMBRAER                175                                   |   |     | 14      |     |   | 11       |   |   | 34 |   |
| EMBRAER                190                                   |   |     | 12      |     |   | 40       |   |   | 68 |   |
| EMBRAER                195                                   |   |     | — |     |   | 3        |   |   | 10 |   |
| **Defense                and Government**                (2) |   |     |    |     |   |     |   |   |   |   |
| Deliveries                                                   |   |     | 7       |     |   | 5        | (1)    |   | 4 |   |
| **Executive                Aviation**                        |   |     |    |     |   |     |   |   |   |   |
| Deliveries                (1)                                |   |     | 14      |     |   | 27       |   |   | 35 |   |
| **Other                Operating Information**               |   |     |    |     |   |     |   |   |   |   |
| Total                backlog (in millions) (3)               |   | US$      | 10,383  |     | US$    | 14,806   |   | US$ | 18,827 |   |

| (1) | Deliveries                identified by parentheses are aircraft delivered under operating                leases. |
|-----|-------------------------------------------------------------------------------------------------------------------|

| (2) | Includes                only aircraft delivered to state-owned airlines and for government                transportation. |
|-----|---------------------------------------------------------------------------------------------------------------------------|

| (3) | Since                    December 31, 2007, we have received 50 additional firm orders                    for our                    EMBRAER 170/190 jet family and 11 options for the EMBRAER 170/190                    jet                    family were converted into firm                    orders. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Net      Sales***

*reais*
*reais*

***Cost      of Sales and Services***

|   | · | Material—                Substantially all of materials costs are covered by contracts with                suppliers. Prices under these contracts are generally adjusted based                on an                escalation formula which reflects, in part, inflation in the United                States. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Labor—These                costs are primarily real-denominated. |
|--------|--------|------------------------------------------------------------------------|

|   | · | Depreciation—Property,                plant and equipment is depreciated over useful lives, ranging from                five to                48 years, on a straight-line basis. On average, property, plant and                equipment is depreciated over 16 years. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Recent      Developments**

***Backlog***

***New      Brazilian Airline***

** **

***Embraer      MSJ & Embraer MLJ Executive Jets***

***Results      of Quarter ended March 31, 2008***

----

**Results      of Operations**
** **

**Summary      Financial Data by Business**

|                                                         |   | **Operating                Income**           |     |
|--------------------------------------------------------------|--------|-----------------------------------------------|----------|
|                                                         |   | **Year                ended December 31,**    |     |
|                                                         |   | **2005**                                      |     | **2006** |   | **2007** |   |
|                                                         |   | *(in                US$ millions of dollars)* |     |
| Net                sales:                                    |   |                                          |     |   |   |   |   |   |   |   |
| Commercial                Aviation                           |   |                                          | 2,632.0  |   |   | 2,353.2 |   |   | 3,376.6 |   |
| Executive                Aviation                            |   |                                          | 278.1    |   |   | 582.1 |   |   | 838.0 |   |
| Aviation                Services                             |   |                                          | 387.3    |   |   | 479.8 |   |   | 528.2 |   |
| Defense                and                Government         |   |                                          | 423.7    |   |   | 226.7 |   |   | 346.4 |   |
| Other                related                businesses       |   |                                          | 68.4     |   |   | 117.7 |   |   | 156.0 |   |
|                                                         |   |                                          | 3,789.5  |   |   | 3,759.5 |   |   | 5,245.2 |   |
| Cost                of sales and services:                   |   |                                          |     |   |   |   |   |   |   |   |
| Commercial                Aviation                           |   |                                          | (1,892.4 | ) |   | (1,780.5 | ) |   | (2,737.3 | ) |
| Executive                Aviation                            |   |                                          | (194.0   | ) |   | (399.0 | ) |   | (602.5 | ) |
| Aviation                Services                             |   |                                          | (272.5   | ) |   | (349.6 | ) |   | (393.1 | ) |
| Defense                and                Government         |   |                                          | (322.0   | ) |   | (174.5 | ) |   | (236.8 | ) |
| Other                related                businesses       |   |                                          | (58.0    | ) |   | (103.2 | ) |   | (123.8 | ) |
|                                                         |   |                                          | (2,738.9 | ) |   | (2,806.8 | ) |   | (4,093.5 | ) |
|                                                         |   |                                          |     |   |   |   |   |   |   |   |
| Gross                profit:                                 |   |                                          |     |   |   |   |   |   |   |   |
| Commercial                Aviation                           |   |                                          | 739.6    |   |   | 572.7 |   |   | 639.3 |   |
| Executive                Aviation                            |   |                                          | 84.1     |   |   | 183.1 |   |   | 235.5 |   |
| Aviation                Services                             |   |                                          | 114.8    |   |   | 130.2 |   |   | 135.1 |   |
| Defense                and                Government         |   |                                          | 101.7    |   |   | 52.2 |   |   | 109.6 |   |
| Other                related                businesses       |   |                                          | 10.4     |   |   | 14.5 |   |   | 32.2 |   |
|                                                         |   |                                          | 1,050.6  |   |   | 952.7 |   |   | 1,151.7 |   |
| Operating                expenses:                           |   |                                          |     |   |   |   |   |   |   |   |
| Commercial                Aviation                           |   |                                          | (315.7   | ) |   | (303.4 | ) |   | (299.3 | ) |
| Executive                Aviation                            |   |                                          | (44.5    | ) |   | (130.4 | ) |   | (237.6 | ) |
| Aviation                Services                             |   |                                          | (32.3    | ) |   | (25.6 | ) |   | (80.1 | ) |
| Defense                and                Government         |   |                                          | (50.3    | ) |   | (38.0 | ) |   | (60.5 | ) |
| Other                related                businesses       |   |                                          | -        |   |   | - |   |   | (6.0 | ) |
| Unallocated                corporate                expenses |   |                                          | (97.5    | ) |   | (112.5 | ) |   | (94.0 | ) |
|                                                         |   |                                          | (540.3   | ) |   | (609.9 | ) |   | (777.5 | ) |
|                                                         |   |                                          |     |   |   |   |   |   |   |   |
| Income                from operations                   |   |                                          | 510.3    |   |   | 342.8 |   |   | 374.2 |   |

----

|                                                                     |   | **Year                ended December 31,**                         |     |
|--------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|----------|
|                                                                     |   | **2005**                                                                |     | **2006** |   | **2007** |   |
|                                                                     |   | *(in                US$ millions of dollars, except percentages)*  |     |
|                                                                     |   |                                                                    |     |
| Net                sales                                                 |   |                                                                    | 3,789.5  |   |   | 100.0 | % |   | 3,759.5 |   |   | 100.0 | % |   | 5,245.2 |   |   | 100.0 | % |
| Cost                of sales and services                                |   |                                                                    | (2,738.9 | ) |   | 72.3 |   |   | (2,806.8 | ) |   | 74.7 |   |   | (4,093.5 | ) |   | 78.0 |   |
| Gross                profit                                              |   |                                                                    | 1,050.6  |   |   | 27.7 |   |   | 952.7 |   |   | 25.3 |   |   | 1,151.7 |   |   | 22.0 |   |
| Operating                expense                                         |   |                                                                    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling                expenses                                          |   |                                                                    | (159.8   | ) |   | 4.2 |   |   | (220.6 | ) |   | 5.9 |   |   | (361.3 | ) |   | 6.9 |   |
| Research                and development                                  |   |                                                                    | (93.2    | ) |   | 2.5 |   |   | (112.7 | ) |   | 3.0 |   |   | (259.7 | ) |   | 5.0 |   |
| General                and administrative                                |   |                                                                    | (205.2   | ) |   | 5.4 |   |   | (235.5 | ) |   | 6.3 |   |   | (234.7 | ) |   | 4.5 |   |
| Employee                profit sharing                                   |   |                                                                    | (56.1    | ) |   | 1.5 |   |   | (42.7 | ) |   | 1.1 |   |   | - |   |   | - |   |
| Other                operating income (expenses), net                    |   |                                                                    | (26.1    | ) |   | 0.7 |   |   | 1.7 |   |   | — |   |   | 78.4 |   |   | 1.5 |   |
| Income                from operations                                    |   |                                                                    | 510.3    |   |   | 13.5 |   |   | 342.8 |   |   | 9.1 |   |   | 374.2 |   |   | 7.1 |   |
|                                                                     |   |                                                                    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-operating                income (expense)                            |   |                                                                    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income (expenses), net                           |   |                                                                    | (4.1     | ) |   | 0.1 |   |   | 105.4 |   |   | 2.8 |   |   | 163.4 |   |   | 3.1 |   |
| Foreign                exchange gain (loss), net                         |   |                                                                    | (15.2    | ) |   | 0.4 |   |   | (4.1 | ) |   | 0.1 |   |   | (37.7 | ) |   | 0.7 |   |
| Other                non-operating income, net                           |   |                                                                    | 9.1      |   |   | 0.2 |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Income                before income taxes                                |   |                                                                    | 500.0    |   |   | 13.2 |   |   | 444.2 |   |   | 11.8 |   |   | 499.9 |   |   | 9.5 |   |
| Income                tax expenses                                       |   |                                                                    | (41.6    | ) |   | 1.1 |   |   | (44.4 | ) |   | 1.2 |   |   | (2.7 | ) |   | 0.0 |   |
| Income                before minority interest and results of affiliates |   |                                                                    | 458.4    |   |   | 12.1 |   |   | 399.8 |   |   | 10.6 |   |   | 497.2 |   |   | 9.5 |   |
| Minority                interest                                         |   |                                                                    | (9.6     | ) |   | 0.3 |   |   | (9.6 | ) |   | 0.3 |   |   | (8.2 | ) |   | 0.2 |   |
| Equity                in results of affiliates                      |   |                                                                    | (3.1     | ) |   | 0.1 |   |   | 3⁄4 |   |   | 3⁄4 |   |   | 0.3 |   |   | 0.0 |   |
| Net                income                                                |   | US$                                                                     | 445.7    |   |   | 11.8 | %  | US$ | 390.1 |   |   | 10.4 | %  | US$ | 489.3 |   |   | 9.3 | % |

***2007      Compared with 2006***

*Net      sales*

*lean*
*manufacturing      system*
*** ***

----

*Cost      of sales and services.*
*reais*

*Gross      profit.*
*real      *

*Operating      expenses. *

~~.~~

*Financial      income (expense), net. *

*Foreign      exchange gain (loss), net*

*Income      tax expense. *
* *

*Net      income. *

----

***2006      Compared with 2005***

*Net      sales*

*** ***
*** ***

*Cost      of sales and services.*
*reais*

*Gross      profit.*

*Operating      expenses. *

*real*
*real*
*reais*

----

*Financial      income (expense), net. *

*Foreign      exchange loss net*

*Income      tax expense. *
* *

*Net      income. *

| **5B.** | **Liquidity                and Capital Resources**** ** |
|---------|--------------------------------------------------------------|

**Working      Capital and Net Cash Provided by Operating Activities **

----

**Net      Cash Used in Investing Activities**

**Capital      Expenditures**

**Cash      Provided by (Used in) Financing Activities and Total Debt**

**Credit      Facilities and Lines of Credit**
** **

***Long-term      facilities***

----

*Financiadora      de Estudos e Projetos*

----

***Short-term      facilities***

**Capital      Contributions and Issuances of Capital Stock**

**Recently      Issued Accounting Pronouncements **

*Fair Value Measurements*

*The Fair Value Option for      Financial Assets and Financial Liabilities, including an amendment of FASB      Statements No. 115*

*Business      Combination*

----

*Noncontrolling      Interests in Consolidated Financial Statements - an amendment of ARBNo.** **51*

| **5C.** | **Research                and Development**** ** |
|---------|-------------------------------------------------------|

*real*
*real*
*real*
*real*

----

| **5D.** | **Trend                Information**** ** |
|---------|------------------------------------------------|

| **Commercial Aviation**               |   | **Firm****Orders** |   | **Options** |   | **Deliveries** |   | **Firm Order****Backlog** |   |
|--------------------------------------------|--------|--------------------|--------|-------------|--------|----------------|--------|--------------------------------|--------|
| EMB                120 Brasília  |   |               | 352    |        |   | —        |   |                           | 352    |   |   | — |   |
| ERJ                135                |   |               | 108    |        |   | —        |   |                           | 108    |   |   | — |   |
| ERJ                140                |   |               | 74     |        |   | —        |   |                           | 74     |   |   | — |   |
| ERJ                145                |   |               | 733    |        |   | 75             |   |                           | 690    |   |   | 43 |   |
| EMBRAER                170                 |   |               | 179    |        |   | 114            |   |                           | 139    |   |   | 40 |   |
| EMBRAER                175                 |   |               | 129    |        |   | 148            |   |                           | 74     |   |   | 55 |   |
| EMBRAER                190            |   |               | 431    |        |   | 479            |   |                           | 140    |   |   | 291 |   |
| EMBRAER                195            |   |               | 96     |        |   | 99             |   |                           | 16     |   |   | 80 |   |

| **ERJ                135:**                        |   |                 |    |          |   |                           |   |
|----------------------------------------------------|--------|----------------------|---------|---------------|--------|--------------------------------|--------|
| **Customer**                                       |   | **Firm Orders** |    | **Delivered** |   | **Firm Order****Backlog** |   |
| American                Eagle (USA)                |   |                 | 40      |          |   | 40                             |   |   | — |   |
| British                Midland (UK)                |   |                 | 3       |          |   | 3                              |   |   | — |   |
| City                Airline AB (Sweden)            |   |                 | 2       |          |   | 2                              |   |   | — |   |
| ExpressJet                (USA)                    |   |                 | 30      |          |   | 30                             |   |   | — |   |
| Flandair                (France)                   |   |                 | 3       |          |   | 3                              |   |   | — |   |
| Jet                Magic (Ireland)                 |   |                 | 1       |          |   | 1                              |   |   | — |   |
| Luxair                (Luxembourg)                 |   |                 | 2       |          |   | 2                              |   |   | — |   |
| Pan                Européenne (France)        |   |                 | 1       |          |   | 1                              |   |   | — |   |
| Proteus                (France)                    |   |                 | 3       |          |   | 3                              |   |   | — |   |
| Regional                Airlines (France)          |   |                 | 3       |          |   | 3                              |   |   | — |   |
| Republic                Airways (USA)              |   |                 | 15      |          |   | 15                             |   |   | — |   |
| South                Africa Airlink (South Africa) |   |                 | 5       |          |   | 5                              |   |   | — |   |
| **TOTAL**                                          |   |                 | **108** |          |   | **108**                        |   |   | — |   |

| **ERJ                140:**           |   |                 |   |          |   |                           |   |
|---------------------------------------|--------|----------------------|--------|---------------|--------|--------------------------------|--------|
| **Customer**                          |   | **Firm Orders** |   | **Delivered** |   | **Firm Order****Backlog** |   |
| American                Eagle (USA)   |   |                 | 59     |          |   | 59                             |   |   | — |   |
| Republic                Airways (USA) |   |                 | 15     |          |   | 15                             |   |   | — |   |
| **TOTAL**                             |   |                 | **74** |          |   | **74**                         |   |   | — |   |

----

| **ERJ                145:**                   |   |                 |    |          |   |                           |   |
|-----------------------------------------------|--------|----------------------|---------|---------------|--------|--------------------------------|--------|
| **Customer**                                  |   | **Firm Orders** |    | **Delivered** |   | **Firm Order****Backlog** |   |
| Aerolitoral                (Mexico)           |   |                 | 5       |          |   | 5                              |   |   | — |   |
| Air                Caraibes (Guadalupe)       |   |                 | 2       |          |   | 2                              |   |   | — |   |
| Alitalia                (Italy)               |   |                 | 14      |          |   | 14                             |   |   | — |   |
| American                Eagle (USA)           |   |                 | 118     |          |   | 118                            |   |   | — |   |
| Axon                (Greece)                  |   |                 | 3       |          |   | 3                              |   |   | — |   |
| British                Midland (UK)           |   |                 | 9       |          |   | 9                              |   |   | — |   |
| British                Regional Airlines (UK) |   |                 | 23      |          |   | 23                             |   |   | — |   |
| Brymon                (UK)                    |   |                 | 7       |          |   | 7                              |   |   | — |   |
| China                Southern (China)         |   |                 | 6       |          |   | 6                              |   |   | — |   |
| China                Eastern Jiangsu (China)  |   |                 | 5       |          |   | 5                              |   |   | — |   |
| China                Eastern Wuhan (China)    |   |                 | 5       |          |   | 5                              |   |   | — |   |
| Cirrus                (Germany)               |   |                 | 1       |          |   | 1                              |   |   | — |   |
| ExpressJet                (USA)               |   |                 | 245     |          |   | 245                            |   |   | — |   |
| ERA                (Spain)                    |   |                 | 2       |          |   | 2                              |   |   | — |   |
| Flandre                Air (France)           |   |                 | 5       |          |   | 5                              |   |   | — |   |
| GECAS                (PB Air - Thailand)      |   |                 | 2       |          |   | 2                              |   |   | — |   |
| NHA                Group (China)              |   |                 | 50      |          |   | 7                              |   |   | 43 |   |
| KLM                EXEL (Holland)             |   |                 | 2       |          |   | 2                              |   |   | — |   |
| Lot                Polish (Poland)            |   |                 | 14      |          |   | 14                             |   |   | — |   |
| Luxair                (Luxembourg)            |   |                 | 9       |          |   | 9                              |   |   | — |   |
| Mesa                (USA)                     |   |                 | 36      |          |   | 36                             |   |   | — |   |
| Nigeria                (Nigeria)              |   |                 | 1       |          |   | 1                              |   |   | — |   |
| Portugalia                (Portugal)          |   |                 | 8       |          |   | 8                              |   |   | — |   |
| Proteus                (France)               |   |                 | 8       |          |   | 8                              |   |   | — |   |
| Regional                (France)              |   |                 | 15      |          |   | 15                             |   |   | — |   |
| Republic                Airways (USA)         |   |                 | 60      |          |   | 60                             |   |   | — |   |
| Rheintalflug                (Austria)         |   |                 | 3       |          |   | 3                              |   |   | — |   |
| Rio                Sul (Brazil)               |   |                 | 16      |          |   | 16                             |   |   | — |   |
| Satena                (Colombia)              |   |                 | 3       |          |   | 3                              |   |   | — |   |
| Sichuan                (China)                |   |                 | 5       |          |   | 5                              |   |   | — |   |
| Skyways                (Sweden)               |   |                 | 4       |          |   | 4                              |   |   | — |   |
| Swiss                (Switzerland)            |   |                 | 25      |          |   | 25                             |   |   | — |   |
| Transtates                (USA)               |   |                 | 22      |          |   | 22                             |   |   | — |   |
| **TOTAL**                                     |   |                 | **733** |          |   | **690**                        |   |   | **43** |   |

| **EMBRAER                170:**                      |   |                 |    |          |   |                           |   |
|------------------------------------------------------|--------|----------------------|---------|---------------|--------|--------------------------------|--------|
| **Customer**                                         |   | **Firm Orders** |    | **Delivered** |   | **Firm Order****Backlog** |   |
| Alitalia (Italy)                                |   |                 | 6       |          |   | 6                              |   |   | — |   |
| Cirrus (Germany)                                |   |                 | 1       |          |   | 1                              |   |   | — |   |
| ECC (Ireland)                (1)                |   |                 | 4       |          |   | 4                              |   |   | — |   |
| Egypt                Air                             |   |                 | 12      |          |   | 6                              |   |   | 6 |   |
| Finnair                (Finland)                     |   |                 | 10      |          |   | 10                             |   |   | — |   |
| Gecas                (USA)                           |   |                 | 9       |          |   | 8                              |   |   | 1 |   |
| JAL                (Japan)                           |   |                 | 10      |          |   | —                        |   |   | 10 |   |
| Lot                Polish (Poland)                   |   |                 | 6       |          |   | 6                              |   |   | — |   |
| Regional                (France)                     |   |                 | 7       |          |   | —                        |   |   | 7 |   |
| Republic                Airline (USA)                |   |                 | 48      |          |   | 48                             |   |   | — |   |
| Satena                (Colombia)                     |   |                 | 1       |          |   | 1                              |   |   | — |   |
| Saudi                Arabian Airlines (Saudi Arabia) |   |                 | 15      |          |   | 15                             |   |   | — |   |
| Sirte                Oil (Libya)                     |   |                 | 1       |          |   | 1                              |   |   | — |   |
| South                Africa Airlink (South Africa)   |   |                 | 2       |          |   | —                        |   |   | 2 |   |
| Suzuyo                (Japan)                        |   |                 | 2       |          |   | —                        |   |   | 2 |   |
| TAME                (Ecuador)                        |   |                 | 2       |          |   | 2                              |   |   | — |   |
| US                Airways (USA)                      |   |                 | 28      |          |   | 28                             |   |   | — |   |
| Virgin                Blue (Australia)               |   |                 | 6       |          |   | 3                              |   |   | 3 |   |
| Virgin                Nigeria (Nigeria)              |   |                 | 7       |          |   | —                        |   |   | 7 |   |
| Undisclosed                                          |   |                 | 2       |          |   | —                        |   |   | 2 |   |
| **TOTAL**                                            |   |                 | **179** |          |   | **139**                        |   |   | **40** |   |

----

| **EMBRAER                175:**         |   |                 |    |          |   |                           |   |
|-----------------------------------------|--------|----------------------|---------|---------------|--------|--------------------------------|--------|
| **Customer**                            |   | **Firm Orders** |    | **Delivered** |   | **Firm Order****Backlog** |   |
| Air                Canada (Canada)      |   |                 | 15      |          |   | 15                             |   |   | — |   |
| ECC                (Ireland) (2)        |   |                 | 1       |          |   | 1                              |   |   | — |   |
| Gecas                (USA)              |   |                 | 5       |          |   | 5                              |   |   | — |   |
| Lot                Polish (Poland)      |   |                 | 16      |          |   | 4                              |   |   | 12 |   |
| Northwest                Airlines (USA) |   |                 | 36      |          |   | 17                             |   |   | 19 |   |
| Republic                Airlines (USA)  |   |                 | 54      |          |   | 32                             |   |   | 22 |   |
| Royal                Jordanian (Jordan) |   |                 | 2       |          |   | —                        |   |   | 2 |   |
| **TOTAL**                               |   |                 | **129** |          |   | **74**                         |   |   | **55** |   |

| **EMBRAER                190:**          |   |                 |    |          |   |                           |   |
|------------------------------------------|--------|----------------------|---------|---------------|--------|--------------------------------|--------|
| **Customer**                             |   | **Firm Orders** |    | **Delivered** |   | **Firm Order****Backlog** |   |
| Aero                Republica (Colombia) |   |                 | 5       |          |   | 5                              |   |   | — |   |
| Air                Canada (Canada)       |   |                 | 45      |          |   | 45                             |   |   | — |   |
| Air                Caraibes (Guadalupe)  |   |                 | 1       |          |   | 1                              |   |   | — |   |
| Air                Moldova (Moldova)     |   |                 | 1       |          |   | —                        |   |   | 1 |   |
| Copa                (Panama)             |   |                 | 15      |          |   | 11                             |   |   | 4 |   |
| Finnair                (Finland)         |   |                 | 13      |          |   | 8                              |   |   | 5 |   |
| Gecas                (USA)               |   |                 | 23      |          |   | 11                             |   |   | 12 |   |
| Hainan                (China)            |   |                 | 50      |          |   | —                        |   |   | 50 |   |
| JetBlue                (USA)             |   |                 | 104     |          |   | 33                             |   |   | 71 |   |
| ECC                (Ireland) (3)         |   |                 | 1       |          |   | 1                              |   |   | — |   |
| Jetscape                (USA)            |   |                 | 10      |          |   | —                        |   |   | 10 |   |
| KLM                (Holland)             |   |                 | 10      |          |   | —                        |   |   | 10 |   |
| Lufthansa                (Germany)       |   |                 | 30      |          |   | —                        |   |   | 30 |   |
| M1                Travel (Lebanon)       |   |                 | 8       |          |   | —                        |   |   | 8 |   |
| NAS                Air (Saudi Arabia)    |   |                 | 5       |          |   | —                        |   |   | 5 |   |
| Regional                (France)         |   |                 | 11      |          |   | 6                              |   |   | 5 |   |
| Taca                (El Salvador)        |   |                 | 11      |          |   | —                        |   |   | 11 |   |
| TAME                (Ecuador)            |   |                 | 3       |          |   | 3                              |   |   | — |   |
| US                Airways (USA)          |   |                 | 47      |          |   | 14                             |   |   | 33 |   |
| Virgin                Blue (Australia)   |   |                 | 18      |          |   | 2                              |   |   | 16 |   |
| Virgin                Nigeria (Nigeria)  |   |                 | 3       |          |   | —                        |   |   | 3 |   |
| Undisclosed                              |   |                 | 17      |          |   | —                        |   |   | 17 |   |
| **TOTAL**                                |   |                 | **431** |          |   | **140**                        |   |   | **291** |   |

----

| **EMBRAER                195:**           |   |                 |   |          |   |                           |   |
|-------------------------------------------|--------|----------------------|--------|---------------|--------|--------------------------------|--------|
| **Customer**                              |   | **Firm Orders** |   | **Delivered** |   | **Firm Order****Backlog** |   |
| Alpi                Eagles (Italy)        |   |                 | 10     |          |   | —                        |   |   | 10 |   |
| BRA                (Brazil)               |   |                 | 20     |          |   | —                        |   |   | 20 |   |
| Flybe                (UK)                 |   |                 | 14     |          |   | 10                             |   |   | 4 |   |
| Gecas                (USA)                |   |                 | 8      |          |   | 4                              |   |   | 4 |   |
| Royal                Jordanian (Jordan)   |   |                 | 2      |          |   | 2                              |   |   | — |   |
| Universal                Airlines (Spain) |   |                 | 6      |          |   | —                        |   |   | 6 |   |
| Undisclosed                               |   |                 | 36     |          |   | —                        |   |   | 36 |   |
| **TOTAL**                                 |   |                 | **96** |          |   | **16**                         |   |   | **80** |   |

| **5E.** | **Off-Balance                Sheet Arrangements** |
|---------|---------------------------------------------------|

**Guarantees**

| **Description**                                                                     |   | **At December 31,****2006** |      | **At December 31,****2007** |   |
|-------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|---------------------------------------|--------|
|                                                                                |   | **(in                US$ thousands)** |      |
| Maximum                financial guarantees                                         |   |                                  | 1,741,559 |                                  |   | 1,701,626 |   |
| Maximum                residual value guarantees                                    |   |                                  | 930,002   |                                  |   | 946,366 |   |
| Mutually                exclusive exposure (*)                                      |   |                                  | (433,112  | )                                     |   | (415,460 | ) |
| Provisions                and liabilities recorded                                  |   |                                  | (116,402  | )                                     |   | (24,459 | ) |
|                                                                                |   |                                  |      |                                  |   |   |   |
| Off-balance                sheet exposure                                           |   |                                  | 2,122,047 |                                  |   | 2,208,072 |   |
| Estimated                proceeds from performance guarantees and underlying assets |   |                                  | 2,177,379 |                                  |   | 2,352,682 |   |

----

| (*) | In                    the event both guarantees were issued for the same underlying                    asset, the                    residual value guarantees can only be exercised if the financial                    guarantees have expired without having been triggered and, therefore,                    the                    residual value and financial guarantees have not been combined                    to                    calculate the maximum exposure. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Trade-in      Obligations**

**Financial      and Residual Value Guarantees**

----

** **

| **5F.** | **Tabular                Disclosure of Contractual                Obligations** |
|---------|---------------------------------------------------------------------------------|

| **Contractual Obligations**              |   | **Total** |    | **Less than ****1 year** |   | **1 – 3 years** |   | **3 – 5 years** |    | **More than ****5 years** |   |
|-----------------------------------------------|--------|-----------|---------|-----------------------------------------|--------|--------------------------------------|--------|--------------------------------------|---------|------------------------------------------|--------|
| Loans                and interest             |   | US$       | 2,098.5 |                                    | US$    | 996.2                                |   | US$                                  | 293.7   |                                     | US$    | 224.5 |   | US$ | 584.1 |   |
| Pension                fund                   |   |      | 135.9   |                                    |   | 18.0                                 |   |                                 | 26.2    |                                     |   | 26.2 |   |   | 65.5 |   |
| Capital                lease obligations      |   |      | 17.6    |                                    |   | 4.6                                  |   |                                 | 6.3     |                                     |   | 4.2 |   |   | 2.5 |   |
| Operating                leases               |   |      | 24.5    |                                    |   | 6.3                                  |   |                                 | 7.6     |                                     |   | 1.7 |   |   | 8.9 |   |
| Purchase                obligations           |   |      | 5.7     |                                    |   | 5.3                                  |   |                                 | 0.4     |                                     |   | - |   |   | - |   |
| Non                recourse and recourse debt |   |      | 485.7   |                                    |   | 114.0                                |   |                                 | 25.3    |                                     |   | 197.3 |   |   | 149.1 |   |
| Customer                advances              |   |      | 1,169.5 |                                    |   | 801.6                                |   |                                 | 302.6   |                                     |   | 60.6 |   |   | 4.7 |   |
| Contribution                from supliers     |   |      | 112.2   |                                    |   | -                                    |   |                                 | 110.7   |                                     |   | 1.5 |   |   | - |   |
| Other                long-term liabilities    |   |      | 816.4   |                                    |   | 264.8                                |   |                                 | 337.9   |                                     |   | 133.4 |   |   | 80.3 |   |
| Total                                         |   | US$       | 4,866.0 |                                    | US$    | 2,210.8                              |   | US$                                  | 1,110.7 |                                     | US$    | 649.4 |   | US$ | 895.1 |   |

----

| **ITEM                6.** | **DIRECTORS,                SENIOR MANAGEMENT AND                EMPLOYEES** |
|----------------------------|------------------------------------------------------------------------------|

| **6A.** | **Directors                and Senior Management** |
|---------|----------------------------------------------------|

*      Conselho de Administração*
*      Diretoria*
*Conselho      Fiscal*

**Board      of Directors**

*Novo      Mercado*
*Novo      Mercado*
*Termo      de Anuência dos Administradores*

| **Name**                                         |   | **Age** |   | **Position**                                      |   | **Year First****Elected** |
|--------------------------------------------------|--------|---------|--------|---------------------------------------------------|--------|--------------------------------|
| Maurício Novis                Botelho  |   | 65      |   | Chairman                of the Board of Directors |   | 2000                           |
| Vitor                Sarquis Hallack             |   | 55      |   | Member                of the Board of Directors   |   | 1995                           |
| José                Reinaldo Magalhães |   | 52      |   | Member                of the Board of Directors   |   | 2006                           |
| Wilson                Carlos Duarte Delfino      |   | 61      |   | Member                of the Board of Directors   |   | 2004                           |
| Neimar                Dieguez Barreiro           |   | 63      |   | Member                of the Board of Directors   |   | 2004                           |
| Boris                Tabacof                     |   | 79      |   | Member                of the Board of Directors   |   | 2006                           |
| Eduardo                Salomão Neto         |   | 44      |   | Member                of the Board of Directors   |   | 2006                           |
| Hermann                Wever                     |   | 71      |   | Member                of the Board of Directors   |   | 2006                           |
| Samir                Zraick                 |   | 67      |   | Member                of the Board of Directors   |   | 2006                           |
| Paulo                Cesar de Souza Lucas        |   | 48      |   | Member                of the Board of Directors   |   | 1999                           |
| Claudemir                Marques de Almeida      |   | 55      |   | Member                of the Board of Directors   |   | 2004                           |

----

*Maurício      Novis Botelho. *

*Vitor      Sarquis Hallack*

*José      Reinaldo Magalhães*

*Wilson      Carlos Duarte Delfino*

*Neimar      Dieguez Barreiro.*

*Boris      Tabacof.*

----

*Eduardo      Salomão Neto*

*Hermann      Wever. *

*Samir      Zraick*

*Paulo      Cesar de Souza Lucas. *

*Claudemir      Marques de Almeida.*

**Committees**

|   | · | Executive                Committee: which may have up to four members, but has no executive                power.                The primary purpose of the Executive Committee is to assist the Board                of                Directors in its functions. Members of our Board of Directors, their                alternates, or our executive officers may be nominated for the committee.                The Executive Committee’s responsibilities are to: (i) establish a general                direction for our businesses; (ii) approve and follow-up on our action                plan proposed by the executive officers, including annual and multi-annual                budgets, strategic plans, expansion projects, as well as investment                and                acquisition programs; (iii) set, follow-up on and evaluate the achievement                of planned results to be established for the President and CEO in                accordance with the approved action plan, which will guide his                participation in our results based on current policy; and (iv) assist                the                Board of Directors in specific matters as requested. The current                members                of the Executive Committee are Maurício Novis Botelho, Vitor Sarquis                Hallack, Hermann H. Wever and Maysa Oliveira da                Volta. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Human                Resources Committee: which has four members appointed by our Board                of                Directors. The members of the Human Resources Committee may be members                of                our Board of Directors, their alternates, or our executive officers.                One                of the members will be the Chairman of the Board of Directors, who                will be                responsible for coordinating the activities of the committee. The                Human                Resources Committee will operate until the end of the tenure of out                current Board of Directors or before if so decided by the Board of                Directors. Its purpose is to assist the Board of Directors in the                following duties, according to our bylaws: (i) appoint and remove                executive officers from office and designate their duties as provided                by                the bylaws; (ii) subject to the duties of the executive officers,                establish the functions and responsibilities of our executive officers                and                select the Investor Relations Officer in accordance with CVM regulations;                (iii) approve our compensation and human relations policy, including                compensation criteria, rights and benefits, as well as executive                officers’                individual compensation; and (iv) authorize the transfer of our resources                to employee associations, charity and recreational entities, the                private                security fund and foundation. The current members of the Human Resources                Committee are Maurício Novis Botelho, Boris Tabacof, Wilson Carlos Duarte                Delfino and Eduardo Salomão Neto. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Conselho                Fiscal*:                See “—Conselho Fiscal” below. |
|--------|--------|--------------------------------------------------------------------------------------------------|

**Executive      Officer**
**s**
** **

*Novo      Mercado*
*Novo      Mercado*
*Termo      de Anuência dos Administradores*

| **Name**                                              |   | **Age** |   | **Position**                                                                                               |   | **Year First****Elected** |
|-------------------------------------------------------|--------|---------|--------|------------------------------------------------------------------------------------------------------------|--------|--------------------------------|
| Frederico Pinheiro Fleury Curado  |   | 46      |   | President                and Chief Executive Officer                                                       |   | 2007                           |
| Mauro                Kern Junior                      |   | 47      |   | Executive                Vice- President—Airline Market                                              |   | 2007                           |
| Luis                Carlos Affonso               |   | 47      |   | Executive                Vice-President—Executive                Aviation                            |   | 2006                           |
| Luiz                Carlos Siqueira Aguiar       |   | 45      |   | Executive                Vice-President—Defense                Market and Governments                |   | 2005                           |
| Satoshi                Yokota                    |   | 67      |   | Executive                Vice-President—Strategic                Planning and Technology Development |   | 1997                           |
| Artur                Aparecido V. Coutinho       |   | 59      |   | Executive                Vice-President—Procurement                and Industrial Operations         |   | 2005                           |
| Antonio                Luiz Pizarro Manso             |   | 64      |   | Executive                Vice- President—Finance and Chief Financial Officer                         |   | 1995                           |
| Flávio                Rímoli                |   | 49      |   | Executive                Vice- President—Legal Counsel                                               |   | 2007                           |
| Horácio                Aragonés Forjaz      |   | 56      |   | Executive                Vice- President—Administration and Communication                            |   | 1998                           |
| Antonio                Júlio Franco              |   | 59      |   | Executive                Vice- President—Organizational Development and Personnel                    |   | 2007                           |

----

*Frederico      Pinheiro Fleury Curado*

*Mauro      Kern Junior.*

*Luis      Carlos Affonso*

*Luiz      Carlos Siqueira Aguiar*

*Satoshi      Yokota*

*Artur      Aparecido V. Coutinho*
* *

*Antonio      Luiz Pizarro Manso*

----

*Flávio      Rímoli*

*Horácio      Aragonés Forjaz*

*Antonio      *
*Júlio      Franco.*

| **6B.** | **Compensation** |
|---------|------------------|

*Conselho      Fiscal *
*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*

**Stock      Option **
**Plan**

**Profit      Sharing Plan**

----

| **6C.** | **Board                Practices** |
|---------|------------------------------------|

**Conselho      Fiscal**
** **

*Conselho      Fiscal *
*Conselho      Fiscal*
*Conselho      Fiscal*
** **

----

|   | · | be                responsible for the appointment, retention, compensation and oversight                of                the external auditors (including the resolution of disagreements                between                management and the external auditors regarding financial                reporting); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | be                responsible for establishing procedures for the receipt, retention                and                treatment of complaints regarding accounting, internal accounting                controls                or auditing matters, and procedures for the confidential, anonymous                submission by employees of concerns regarding questionable accounting                or                auditing matters; |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | have                the authority to engage independent counsel and other advisors as                it                determines necessary to carry out its duties;                and |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | receive                  appropriate funding from the company for payment of compensation                  to the                  external auditors, for any advisors and ordinary administrative                  expenses. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*

*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*
*Novo      Mercado*
*Conselho      Fiscal*
*Novo      Mercado*
*Conselho      Fiscal*

*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*

----

| **Name **                                          |   | **Age** |   | **Position**                    |   | **Year First Elected** |
|---------------------------------------------------------|--------|---------|--------|---------------------------------|--------|----------------------------------|
| Rolf Von                Paraski (1)                |   | 56      |   | Effective                member |   | 2006                             |
| Maria                de Jesus Tapia Rodriguez Migliorin |   | 51      |   | Alternate                       |   | 2008                             |
| Ivan                Mendes do Carmo (2)                 |   | 45      |   | Effective                member |   | 2008                             |
| Tarcísio                Luiz Silva Fontenele       |   | 45      |   | Alternate                       |   | 2001                             |
| Taiki                Hirashima (3)                      |   | 67      |   | Effective                member |   | 2004                             |
| Guillermo                Oscar Braunbeck                |   | 35      |   | Alternate                       |   | 2005                             |
| Eduardo                Coutinho Guerra                  |   | 41      |   | Effective                member |   | 2007                             |
| Leandro                Giacomazzo                       |   | 48      |   | Alternate                       |   | 2007                             |
| Alberto                Carlos Monteiro dos Anjos        |   | 45      |   | Effective                member |   | 2003                             |
| Carla                Alessandra Trematore               |   | 32      |   | Alternate                       |   | 2007                             |

----

*Conselho      Fiscal*

*Conselho      Fiscal*

| **6D.** | **Employees** |
|---------|---------------|

|                                                     |   | **At December 31,** |   |
|----------------------------------------------------------|--------|-------------------------------|--------|
|                                                     |   | **2005**                      |   | **2006** |   | **2007** |   |
| Production                Process                        |   |                          | 8,058  |   |   | 9,157 |   |   | 12,392 |   |
| Research                and Development                  |   |                          | 3,279  |   |   | 3,627 |   |   | 3,838 |   |
| Customer                Support                          |   |                          | 2,697  |   |   | 2,808 |   |   | 3,099 |   |
| Administrative                – Production Support |   |                          | 1,045  |   |   | 1,472 |   |   | 2,067 |   |
| Administrative                – Corporate          |   |                          | 1,874  |   |   | 2,201 |   |   | 2,338 |   |
| Total                                                    |   |                          | 16,953 |   |   | 19,265 |   |   | 23,734 |   |

*      Instituto Tecnológico Aeronáutico*
*      Sindicato dos Metalúrgicos*
*Sindicato      dos Engenheiros do Estado de São Paulo*

| **6E.** | **Share                Ownership** |
|---------|------------------------------------|

----

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

| **7A.** | **Major                Shareholders** |
|---------|---------------------------------------|

**Shareholders**

|                                                       |   | **Common                Shares** |        |
|------------------------------------------------------------|--------|----------------------------------|-------------|
|                                                       |   | **Shares**                       |        | **(%)** |   |
| PREVI                (1)                                   |   |                             | 103,082,901 |   |   | 13.90 |   |
| Bozano                Group (2)                            |   |                             | 71,086,764  |   |   | 9.58 |   |
| Janus                Capital Management(3)                 |   |                             | 59,319,140  |   |   | 8.00 |   |
| BNDESPAR                (4)                                |   |                             | 37,412,579  |   |   | 5.04 |   |
| SISTEL                (5)                                  |   |                             | 22,584,824  |   |   | 3.04 |   |
| União                Federal/Brazilian Government (6) |   |                             | 2,349,911   |   |   | 0.32 |   |
| Officers                and directors as a group (7)       |   |                             | 3,382,337   |   |   | 0.46 |   |
| Others                (São Paulo Stock Exchange) (8)  |   |                             | 98,359,183  |   |   | 13.26 |   |
| Others                (NYSE)                               |   |                             | 344,240,796 |   |   | 46.40 |   |
| Total                                                 |   |                             | 741,818,435 |   |   | 100.0 |   |

----

| (1) | Banco                do Brasil Employee Pension Fund, also known as PREVI, was founded                in 1904                as a pension fund for the employees of Banco do Brasil S.A, which                is                controlled by the Brazilian government. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Shares                belonging to the Bozano Group belong to both Cia. Bozano and Bozano                Holdings Ltd., which ware owned and controlled by Julio Bozano. 18,786,088                of the shares owned by Cia. Bozano have been pledged in favor of                Banco                Santander Central Hispano, S.A. in connection with its acquisition                from                Cia. Bozano of substantially all of the capital stock of Banco Meridional                S.A. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Janus                Capital Management is a public                company                headquartered in Denver,                CO,                US.                It was founded in 1969                by                Thomas                H. Bailey.                It provides growth and risk-managed investment                strategies. As of December 31, 2007, Janus managed $206.7 billion                in                assets for more than four million shareholders, clients and institutions                around the globe. Outside the U.S., Janus has offices in London,                Milan,                Tokyo                and Hong                Kong,                Melbourne                and Singapore.                Janus Capital Group consists of Janus Capital Management LLC, Enhanced                Investment Technologies,                LLC (INTECH) and Capital                Group Partners,                Inc. (doing business as Rapid Solutions Group). In addition, Janus                Capital                Group owns 30% of Perkins,                Wolf,                McDonnell                and Company, LLC. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | BNDESPAR                is a wholly owned subsidiary of Banco Nacional de Desenvolvimento                Econômico e Social—BNDES, the government-owned national development bank                of Brazil. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | SISTEL                Social Security Foundation, also known as SISTEL, was founded in                1977 as                part of the Telebrás system, which, prior to its recent privatization,                consisted of the Brazilian government-owned telecommunications companies. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | The                Brazilian government also holds the “golden                share.”. |
|-----|----------------------------------------------------------------------------------------------------|

| (7) | Includes                742.365 shares underlying options which are exercisable until May                2008. |
|-----|----------------------------------------------------------------------------------------------------------------|

| (8) | Includes                611.026 shares underlying options which are exercisable until May                2008. |
|-----|----------------------------------------------------------------------------------------------------------------|

----

| **7B.** | **Related                Party Transactions** |
|---------|-----------------------------------------------|

**Brazilian      Government **

|  | · | a                source for research and development debt financing through technology                development institutions such FINEP and BNDES;                and |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | an                export credit agency (through                BNDES). |
|--|--------|------------------------------------------------------------------------|

*exim*

| **7C.** | **Interests                of Experts and Counsel** |
|---------|-----------------------------------------------------|

----

| **ITEM                8.** | **FINANCIAL                INFORMATION** |
|----------------------------|------------------------------------------|

| **8A.** | **Consolidated                Statements and Other Financial                Information** |
|---------|-------------------------------------------------------------------------------------------|

**Legal      Proceedings**
** **

**Dividends      and Dividend Policy**
** **
** **

***Amounts      Available for Distribution***
*** ***

|   | · | the                legal reserve; |
|--------|--------|-----------------------------------|

|   | · | a                contingency reserve for anticipated losses;                and |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | an                unrealized revenue reserve. |
|--------|--------|-----------------------------------------------|

----

|   | · | the                legal reserve; |
|--------|--------|-----------------------------------|

|   | · | the                investment and working capital                reserve; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | retained                earnings; and |
|--------|--------|---------------------------------------|

|   | · | the                contingency reserve for anticipated                losses, |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | price-level                restatement of balance sheet                accounts; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | the                share of equity earnings of affiliated companies;                and |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | profits                from installment sales to be received after the end of the next succeeding                fiscal year. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | · | in                the deduction of accumulated losses, whenever                necessary; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | in                the distribution of dividends, at any                time; |
|--------|--------|------------------------------------------------------------------------------|

|   | · | in                the redemption, withdrawal, purchase or open market repurchase of                shares,                as authorized by law; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | to                increase our capital, including by means of an issuance of new                shares. |
|--------|--------|---------------------------------------------------------------------------------------------------------|

----

***Mandatory      Distribution***

***Payment      of Dividends***
*** ***

***History      of Dividend Payments and Dividend Policy and Additional Payments on      Shareholders’ Equity***

----

*pro      rata*

|   | · | 50%                of net income (after the deduction of social contribution on net                profits,                but before taking into account the provision for corporate income                tax and                the amounts attributable to shareholders as net interest on equity)                for                the period in respect of which the payment is made;                or |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 50%                of the sum of retained profits and profit reserves as of the beginning                of                the period in respect of which the payment is                made. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **Date of approval**            |   | **Period in which profits were generated** |   | **Total amount of Distribution ** |   |
|-------------------------------------------|--------|---------------------------------------------------------------------|--------|-------------------------------------------------------|--------|
|                                      |   |                                                                |   | (*R$                  in millions*)              |   | (*US$                  in millions*) (3) |   |
| September                  18, 1998 (1)   |   | First                  two quarters of 1998                         |   | 21.3                              |   | 17.9     |   |
| March                  30, 1999 (1)       |   | Remaining                  two quarters of 1998                     |   | 33.9                              |   | 19.7     |   |
| September                  28, 1999 (1)   |   | First                  two quarters of 1999                         |   | 36.8                              |   | 19.1     |   |
| January                  31, 2000 (1)     |   | Remaining                  two quarters of 1999                     |   | 86.7                              |   | 48.1     |   |
| March                  24, 2000 (2)       |   | First                  quarter of 2000                              |   | 19.6                              |   | 11.2     |   |
| June                  16, 2000 (2)        |   | Second                  quarter of 2000                             |   | 19.9                              |   | 11.0     |   |
| July                  6, 2000 (1)         |   | First                  two quarters of 2000                         |   | 79.6                              |   | 44.8     |   |
| September                  22, 2000 (2)   |   | Third                  quarter of 2000                              |   | 27.7                              |   | 15.0     |   |
| December                  15, 2000 (2)    |   | Fourth                  quarter of 2000                             |   | 33.5                              |   | 17.1     |   |
| March                  16, 2001 (1)       |   | Remaining                  two quarters of 2000                     |   | 107.5                             |   | 49.7     |   |
| March                  16, 2001 (2)       |   | First                  quarter of 2001                              |   | 33.8                              |   | 15.7     |   |
| June                  13, 2001 (2)        |   | Second                  quarter of 2001                             |   | 41.4                              |   | 18.0     |   |
| September                  14, 2001 (1)   |   | First                  two quarters of 2001                         |   | 123.1                             |   | 46.1     |   |
| September                  14, 2001 (2)   |   | Third                  quarter of 2001                              |   | 48.4                              |   | 18.1     |   |
| December                  15, 2001 (2)    |   | Fourth                  quarter of 2001                             |   | 57.1                              |   | 24.6     |   |
| March                  19, 2002 (1)       |   | Remaining                  two quarters of 2001                     |   | 100.0                             |   | 43.0     |   |
| March                  19, 2002 (2)       |   | First                  quarter of 2002                              |   | 58.9                              |   | 25.4     |   |
| June                  14, 2002 (2)        |   | Second                  quarter of 2002                             |   | 59.5                              |   | 20.9     |   |
| September                  13, 2002 (2)   |   | Third                  quarter of 2002                              |   | 66.3                              |   | 17.0     |   |
| December                  13, 2002 (2)    |   | Fourth                  quarter of 2002                             |   | 70.0                              |   | 19.8     |   |
| December                  13, 2002 (2)    |   | 1998                  and 1999                                      |   | 72.5                              |   | 20.5     |   |
| June 16,                  2003 (2)   |   | First                  two quarters of 2003                         |   | 76.7                              |   | 26.7     |   |
| December                  12, 2003 (2)    |   | Remaining                  two quarters of 2003                     |   | 118.5                             |   | 41.0     |   |
| March                  12, 2004 (2)       |   | First                  quarter of 2004                              |   | 101.0                             |   | 34.7     |   |
| June                  25, 2004 (2)        |   | Second                  quarter of 2004                             |   | 160.0                             |   | 51.5     |   |
| September                  20, 2004 (2)   |   | Third                  quarter of 2004                              |   | 160.0                             |   | 55.9     |   |
| December                  17, 2004(2)     |   | Fourth                  quarter of 2004                             |   | 164.1                             |   | 61.8     |   |
| March                  11, 200 (2)        |   | First                  quarter of 2005                              |   | 106.5                             |   | 39.9     |   |
| June                  3, 2005 (2)         |   | Second                  quarter of 2005                             |   | 110.8                             |   | 47.1     |   |
| September                  16, 2005 (2)   |   | Third                  quarter of 2005                              |   | 113.5                             |   | 51.0     |   |
| December                  19, 2005 (2)    |   | Fourth                  quarter of 2005                             |   | 112.9                             |   | 48.2     |   |
| June                  12, 2006 (2)        |   | First                  two quarters of 2006                         |   | 114.4                             |   | 52.9     |   |
| June                  12, 2006 (1)        |   | First                  two quarters of 2006                         |   | 35.6                              |   | 16.4     |   |
| September                  15, 2006 (2)   |   | Third                  quarter of 2006                              |   | 92.3                              |   | 42.5     |   |
| December                  8,2006 (2)      |   | Fourth                  quarter of 2006                             |   | 85.0                              |   | 39.8     |   |
| March                  9, 2007 (2)        |   | First                  quarter of 2007                              |   | 43.4                              |   | 21.2     |   |
| June                  11, 2007 (2)        |   | Second                  quarter of 2007                             |   | 50.0                              |   | 26.0     |   |
| September                  14, 2007 (2)   |   | Third                  quarter of 2007                              |   | 149.6                             |   | 81.4     |   |
| December                  7, 2007 (2) (4) |   | Fourth                  quarter of 2007                             |   | 82.8                              |   | 46.7     |   |
| March                  7, 2008 (1) (4)    |   | Full                  year of 2007                                  |   | 123.0                             |   | 70.3     |   |
| March                  7, 2008 (2) (4)    |   | First                  quarter of 2008                              |   | 65.9                              |   | 37.6     |   |

----

|  | (1) | Represents                dividend payments. |
|--|-----|----------------------------------------------|

|  | (2) | Represents                interest on capital. |
|--|-----|------------------------------------------------|

|  | (3) | Translated                from nominal *reais*                into U.S. dollars at the commercial selling rates in effect on the                last                date of the month in which the dividends were                approved. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (4) | Under                U.S. GAAP dividends are only declared when approved by the shareholders.                Our shareholders approved the payment of these dividends and interest                on                capital on April 14, 2008. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

** **

----

| **8B.** | **Significant                Changes** |
|---------|----------------------------------------|

| **ITEM              9.** | **THE                OFFER AND LISTING** |
|--------------------------|------------------------------------------|

| **9A.** | **Offer                and Listing Details** |
|---------|----------------------------------------------|

|                                             |   | **Price in U.S. dollars****per ADS** |   |
|--------------------------------------------------|--------|----------------------------------------------------------|--------|
|                                             |   | **High**                                                 |   | **Low** |   |
| 2003:                                            |   |                                                     |   |   |   |
| Year-end                                         |   |                                                     | 35.45  |   |   | 9.15 |   |
| 2004:                                            |   |                                                     |   |   |   |   |   |
| Year-end                                         |   |                                                     | 36.81  |   |   | 23.28 |   |
| 2005:                                            |   |                                                     |   |   |   |   |   |
| Year-end                                         |   |                                                     | 41.78  |   |   | 28.71 |   |
| 2006:                                            |   |                                                     |   |   |   |   |   |
| First                quarter                     |   |                                                     | 41.63  |   |   | 37.00 |   |
| Second                quarter                    |   |                                                     | 39.04  |   |   | 31.99 |   |
| Third                quarter                     |   |                                                     | 41.78  |   |   | 33.53 |   |
| Fourth                quarter                    |   |                                                     | 43.50  |   |   | 39.59 |   |
| Year-end                                         |   |                                                     | 43.50  |   |   | 31.99 |   |
| 2007                                             |   |                                                     |   |   |   |   |   |
| First                quarter                     |   |                                                     | 46.23  |   |   | 39.01 |   |
| Second                quarter                    |   |                                                     | 51.43  |   |   | 45.85 |   |
| Third                quarter                     |   |                                                     | 51.18  |   |   | 40.32 |   |
| Fourth                quarter                    |   |                                                     | 50.31  |   |   | 42.76 |   |
| Year-end                                         |   |                                                     | 51.43  |   |   | 39.01 |   |
| 2008                                             |   |                                                     |   |   |   |   |   |
| First                quarter                     |   |                                                     | 48.01  |   |   | 39.27 |   |
| Second                quarter (through April 30) |   |                                                     | 43.95  |   |   | 39.98 |   |
| Month                ended:                      |   |                                                     |   |   |   |   |   |
| November                30, 2007                 |   |                                                     | 48.99  |   |   | 42.76 |   |
| December                31, 2007                 |   |                                                     | 48.51  |   |   | 43.80 |   |
| January                31, 2008                  |   |                                                     | 48.01  |   |   | 40.98 |   |
| February                28, 2008                 |   |                                                     | 47.40  |   |   | 42.16 |   |
| March                31, 2008                    |   |                                                     | 43.97  |   |   | 39.27 |   |
| April                30, 2008                    |   |                                                     | 43.95  |   |   | 39.98 |   |

----

*reais*

|                                                 |   | **Nominal *****reais***** per****preferred share** |   |
|------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                 |   | **High**                                                          |   | **Low** |   |
| 2002:                                                |   |                                                              |   |   |   |
| Year-end                                             |   |                                                              | 15.30  |   |   | 11.20 |   |
| 2003:                                                |   |                                                              |   |   |   |   |   |
| Year-end                                        |   |                                                              | 25.70  |   |   | 8.10 |   |
| 2004:                                                |   |                                                              |   |   |   |   |   |
| First                quarter                    |   |                                                              | 26.43  |   |   | 20.30 |   |
| Second                quarter                   |   |                                                              | 23.50  |   |   | 18.30 |   |
| Third                quarter                    |   |                                                              | 22.20  |   |   | 18.20 |   |
| Fourth                quarter                   |   |                                                              | 22.50  |   |   | 17.10 |   |
| Year-end                                        |   |                                                              | 26.43  |   |   | 17.10 |   |
| 2005:                                                |   |                                                              |   |   |   |   |   |
| First                quarter                    |   |                                                              | 23.30  |   |   | 19.80 |   |
| Second                quarter                   |   |                                                              | 20.75  |   |   | 17.90 |   |
| Third                quarter                    |   |                                                              | 22.19  |   |   | 18.50 |   |
| Fourth                quarter                   |   |                                                              | 23.73  |   |   | 20.12 |   |
| Year-end                                             |   |                                                              | 23.73  |   |   | 17.90 |   |
| 2006:                                                |   |                                                              |   |   |   |   |   |
| First                quarter                    |   |                                                              | 23.68  |   |   | 19.86 |   |
| Second                quarter (through June 2)  |   |                                                              | 20.50  |   |   | 18.55 |   |
| Month                ended:                          |   |                                                              |   |   |   |   |   |
| January                31, 2006                 |   |                                                              | 23.68  |   |   | 21.55 |   |
| February                28, 2006                |   |                                                              | 22.51  |   |   | 19.90 |   |
| March                31, 2006                   |   |                                                              | 21.86  |   |   | 19.86 |   |
| April                30, 2006                   |   |                                                              | 20.50  |   |   | 19.20 |   |
| May                31, 2006                     |   |                                                              | 20.17  |   |   | 18.55 |   |
| June                30, 2006 (through June 2)   |   |                                                              | 19.70  |   |   | 19.55 |   |

*reais*
*Novo      Mercado*

|                          |   | **Nominal *****reais***** per****common share** |   |
|-------------------------------|--------|----------------------------------------------------------------|--------|
|                          |   | **   High   **                   |   | **   Low   ** |   |
| 2003:                         |   |                                                           |   |   |   |
| Year-end                      |   |                                                           | 19.30  |   |   | 7.00 |   |
| 2004:                         |   |                                                           |   |   |   |   |   |
| Year-end                      |   |                                                           | 20.30  |   |   | 12.31 |   |
| 2005:                         |   |                                                           |   |   |   |   |   |
| Year-end                      |   |                                                           | 18.50  |   |   | 13.50 |   |
| 2006:                         |   |                                                           |   |   |   |   |   |
| First                quarter  |   |                                                           | 22.90  |   |   | 17.41 |   |
| Second                quarter |   |                                                           | 20.54  |   |   | 18.38 |   |
| Third                quarter  |   |                                                           | 22.51  |   |   | 18.08 |   |
| Fourth                quarter |   |                                                           | 23.50  |   |   | 21.31 |   |
| Year-end                      |   |                                                           | 23.50  |   |   | 17.41 |   |

----

|                                             |   | **Nominal *****reais***** percommon share** |   |
|--------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                             |   | **   High   **               |   | **   Low   ** |   |
|                                             |   |                                                       |   |   |   |
| 2007:                                            |   |                                                       |   |   |   |
| First                quarter                     |   |                                                       | 24.00  |   |   | 20.86 |   |
| Second                quarter                    |   |                                                       | 24.60  |   |   | 23.40 |   |
| Third                quarter                     |   |                                                       | 23.90  |   |   | 19.90 |   |
| Fourth                quarter                    |   |                                                       | 22.74  |   |   | 19.33 |   |
| Year-end                                         |   |                                                       | 24.60  |   |   | 19.33 |   |
| 2008                                             |   |                                                       |   |   |   |   |   |
| First                quarter                     |   |                                                       | 21.03  |   |   | 16.85 |   |
| Second                quarter (through April 30) |   |                                                       | 18.50  |   |   | 17.25 |   |
| Month                ended:                      |   |                                                       |   |   |   |   |   |
| November                30, 2007                 |   |                                                       | 21.49  |   |   | 19.33 |   |
| December                31, 2007                 |   |                                                       | 21.40  |   |   | 19.83 |   |
| January                31, 2008                  |   |                                                       | 21.03  |   |   | 18.03 |   |
| February                28, 2008                 |   |                                                       | 20.00  |   |   | 18.55 |   |
| March                31, 2008                    |   |                                                       | 18.40  |   |   | 16.85 |   |
| April                30, 2008                    |   |                                                       | 18.50  |   |   | 17.25 |   |

| **9B.** | **Plan                of Distribution** |
|---------|-----------------------------------------|

| **9C.** | **Markets**** ** |
|---------|-----------------------|

**Trading      on the São Paulo Stock Exchange**
** **

*Novo      Mercado *
*CBLC—Companhia      Brasileira de Liquidação e Custódia*

----

***Novo      Mercado***
**      Corporate Governance Practices**

*Novo      Mercado*

*Nível*

*Nível*

----

*Novo      Mercado*
*Novo      Mercado*

**Regulation      of Brazilian Securities Markets**
** **

*companhia      aberta*
*companhia      fechada*
*Novo      Mercado*

**Disclosure        Requirements**

|   | · | establish                the concept of a material fact that gives rise to reporting requirements.                Material facts include decisions made by the controlling shareholders,                resolutions of the general meeting of shareholders and of management                of                the company, or any other facts related to the company’s business (whether                occurring within the company or otherwise somehow related thereto)                that                may influence the price of its publicly traded securities, or the                decision                of investors to trade such securities or to exercise any of such                securities’ underlying rights; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | specify                examples of facts that are considered to be material, which include,                among                others, the execution of shareholders’ agreements providing for the                transfer of control, the entry or withdrawal of shareholders that                maintain                any managing, financial, technological or administrative function                with or                contribution to the company, and any corporate restructuring undertaken                among related companies; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | oblige                the investor relations officer, controlling shareholders, other officers,                directors, members of the audit committee and other advisory boards                to                disclose material facts; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | require                simultaneous disclosure of material facts to all markets in which                the                corporation’s securities are admitted for                trading; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | require                the acquirer of a controlling stake in a corporation to publish material                facts, including its intentions as to whether or not to de-list the                corporation’s shares, within one                year; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | establish                rules regarding disclosure requirements in the acquisition and disposal                of                a material stockholding stake; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | restrict                the use of insider information. |
|--------|--------|---------------------------------------------------------|

| **9D.** | **Selling                Shareholders** |
|---------|-----------------------------------------|

| **9E.** | **Dilution** |
|---------|--------------|

| **9F.** | **Expenses                of the Issue** |
|---------|------------------------------------------|

| **ITEM                10.** | **ADDITIONAL                INFORMATION** |
|-----------------------------|-------------------------------------------|

| **10A.** | **Share                Capital** |
|----------|----------------------------------|

| **10B.** | **Memorandum                and Articles of                Association** |
|----------|--------------------------------------------------------------------------|

*Novo      Mercado*

**Corporate      Purpose**

**Description      of Capital Stock**

***General***

----

***Share      Buy-back***

***Common      Shares***
*** ***

*Novo      Mercado*

*Diário      Oficial do Estado de São Paulo*
*ValeParaibano*
*Gazeta      Mercantil*

|   | · | the                right to participate in the distribution of                profits; |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | the                right to participate equally and proportionally in any remaining                residual                assets in the event of liquidation of the                company; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | preemptive                rights in the event of issuance of shares, convertible debentures                or                warrants, except in some specific circumstances under Brazilian law                described in “Item 10D. Exchange Controls—Preemptive                Rights”; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                right to supervise our management in accordance with Article 109                of the                Brazilian Corporate Law; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                right to appraisal rights in the cases specified in the Brazilian                Corporate Law, which are described in “Item 10D. Exchange                Controls—Redemption and Right of                Withdrawal.” |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Golden      Share***
*** ***

***Voting      Rights***
***of Shares***

*Novo      Mercado*

*Limitations      on the Voting Rights of Certain Holders of Common Shares*

|  | · | they                are parties in a voting agreement; |
|--|--------|--------------------------------------------------------|

|  | · | one                of them is, directly or indirectly, a controlling shareholder or                controlling parent company of the other, or the                others; |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | they                are companies directly or indirectly controlled by the same person/entity,                or group of persons/entities, which may or may not be shareholders;                or |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | they                are companies, associations, foundations, cooperatives and trusts,                investment funds or portfolios, universalities of rights or any other                forms of organization or undertaking (a) with the same administrators                or                managers, or further (b) whose administrators or managers are companies                that are directly or indirectly controlled by the same person/entity,                or                group of persons/entities, which may or may not be                shareholders. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Equity Interest of Shareholder****or Group of Shareholders** |   | **Voting Rights as a Percentage****of our Capital Stock** |   |
|----------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|--------|
| 1%                                                                                           |   |                                                                                         | 1%     |   |
| 2%                                                                                           |   |                                                                                         | 2%     |   |
| 3%                                                                                           |   |                                                                                         | 3%     |   |
| 4%                                                                                           |   |                                                                                         | 4%     |   |
| 5%                                                                                           |   |                                                                                         | 5%     |   |
| >                5%                                                                       |   |                                                                                         | 5%     |   |

----

*Limitation      on the Voting Rights of Non-Brazilian Shareholders*

*edital*

|   | · | Brazilian                individuals, whether native or naturalized, resident in Brazil or                abroad; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | legal                private entities organized under the laws of Brazil that have their                administrative head offices in Brazil and (a) do not have a foreign                controlling parent company, unless the parent company meets the                requirements of clause (b) of this item, and (b) are controlled,                directly                or indirectly, by one or more Brazilian individuals, whether native                or                naturalized, resident in Brazil or abroad;                and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | investment                funds or clubs organized under the laws of Brazil that have their                administrative head office in Brazil and whose managers and/or                quotaholders holding the majority of their quotas are persons/entities                referred to above. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **Brazilian Shareholder****Participation****(% of capital stock)** |   | **Non-Brazilian****Shareholder Participation****(% of capital stock)** |   | **Non-Brazilian****Shareholder****Participation****(1)** |   |
|----------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|
| 90%                                                                                    |   |                                                                                       | 10%    |                                                     |   | 10% |   |
| 80%                                                                                    |   |                                                                                       | 20%    |                                                     |   | 20% |   |
| 70%                                                                                    |   |                                                                                       | 30%    |                                                     |   | 30% |   |
| 60%                                                                                    |   |                                                                                       | 40%    |                                                     |   | 40% |   |
| 59%                                                                                    |   |                                                                                       | 41%    |                                                     |   | 39.33% |   |
| 50%                                                                                    |   |                                                                                       | 50%    |                                                     |   | 33.33% |   |
| 40%                                                                                    |   |                                                                                       | 60%    |                                                     |   | 26.67% |   |
| 30%                                                                                    |   |                                                                                       | 70%    |                                                     |   | 20% |   |
| 20%                                                                                    |   |                                                                                       | 80%    |                                                     |   | 13.33% |   |
| 10%                                                                                    |   |                                                                                       | 90%    |                                                     |   | 6.67% |   |

----

***Example      1***

| **Shareholder**                   |   | **% Shares****Attending** |   | **Effective Votes****After 5% Vote****Restriction** |   | **Effective Votes****After****Non-Brazilian****Restriction** |   | **% of Valid Votes** |   | **Vote Ratio****(Votes/Share)** |   |
|-----------------------------------|--------|--------------------------------|--------|--------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|-------------------------------------|--------|--------------------------------------|--------|
| Brazilian                  A      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Brazilian                  B      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Brazilian                  C      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Brazilian                  D      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Brazilian                  E      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Brazilian                  F      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Brazilian                  G      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Brazilian                  H      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Brazilian                  I      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Brazilian                  J      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Brazilian                  K      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Brazilian                  L      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 5 | % |   | 1.00 |   |
| Total                  Brazilians |   |                           | 60     |                                                               |   | 60                                                                |   |                                | 60     |                                 |   | 60 | % |   | 1.00 |   |
| Non-Brazilians1                   |   |                           | 40     |                                                               |   | 40                                                                |   |                                | 40     | 2                               |   | 40 | % |   | 1.00 |   |
| Total                             |   |                           | 100    |                                                               |   | 100                                                               |   |                                | 100    |                                 |   | 100 | % |   | 1.00 |   |

----

----

***Example      2***

| **Shareholder**                   |   | **% Shares****Attending** |   | **Effective Votes****After 5% Vote****Restriction** |   | **Effective Votes****After****Non-Brazilian****Restriction** |   | **% of Valid Votes** |   | **Vote Ratio****(Votes/Share)** |   |
|-----------------------------------|--------|--------------------------------|--------|--------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|-------------------------------------|--------|--------------------------------------|--------|
| Brazilian                  A      |   |                           | 20     |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 8.57 | % |   | 0.25 |   |
| Brazilian                  B      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 8.57 | % |   | 1.00 |   |
| Brazilian                  C      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 8.57 | % |   | 1.00 |   |
| Brazilian                  D      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 8.57 | % |   | 1.00 |   |
| Brazilian                  E      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 8.57 | % |   | 1.00 |   |
| Brazilian                  F      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 8.57 | % |   | 1.00 |   |
| Brazilian                  G      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 8.57 | % |   | 1.00 |   |
| Total                  Brazilians |   |                           | 50     |                                                               |   | 35                                                                |   |                                | 35     |                                 |   | 60 | % |   | 1.00 |   |
| Non-Brazilians1                   |   |                           | 50     |                                                               |   | 50                                                                |   |                                | 23.3   | 2                               |   | 40 | % |   | 0.47 |   |
| Total                             |   |                           | 100    |                                                               |   | 85                                                                |   |                                | 58.3   |                                 |   | 100 | % |   | 0.58 |   |

----

***Example      3***

| **Shareholder**                   |   | **% Shares****Attending** |   | **Effective Votes****After 5% Vote****Restriction** |   | **Effective Votes****After****Non-Brazilian****Restriction** |   | **% of Valid Votes** |   | **Vote Ratio****(Votes/Share)** |   |
|-----------------------------------|--------|--------------------------------|--------|--------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|-------------------------------------|--------|--------------------------------------|--------|
| Brazilian                  A      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 10 | % |   | 1.00 |   |
| Brazilian                  B      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 10 | % |   | 1.00 |   |
| Brazilian                  C      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 10 | % |   | 1.00 |   |
| Brazilian                  D      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 10 | % |   | 1.00 |   |
| Brazilian                  E      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 10 | % |   | 1.00 |   |
| Brazilian                  F      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 10 | % |   | 1.00 |   |
| Total                  Brazilians |   |                           | 30     |                                                               |   | 30                                                                |   |                                | 30     |                                 |   | 60 | % |   | 1.00 |   |
| Non-Brazilian                  A  |   |                           | 30     |                                                               |   | 5                                                                 |   |                                | 2.2    | 2                               |   | 4.4 | % |   | 0.07 |   |
| Non-Brazilians1                   |   |                           | 40     |                                                               |   | 40                                                                |   |                                | 17.82  |                                 |   | 35.6 | % |   | 0.44 |   |
| Total                             |   |                           | 100    |                                                               |   | 75                                                                |   |                                | 50     |                                 |   | 100 | % |   | 0.50 |   |

----

***Example      4***

| **Shareholder**                 |   | **% Shares****Attending** |   | **Effective Votes****After 5% Vote****Restriction** |   | **Effective Votes****After****Non-Brazilian****Restriction** |   | **% of Valid Votes** |   | **Vote Ratio****(Votes/Share)** |   |
|---------------------------------|--------|--------------------------------|--------|--------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|-------------------------------------|--------|--------------------------------------|--------|
| Brazilian                A      |   |                           | 30     |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 12 | % |   | 0.17 |   |
| Brazilian                B      |   |                           | 25     |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 12 | % |   | 0.20 |   |
| Brazilian                C      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 12 | % |   | 1.00 |   |
| Brazilian                D      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 12 | % |   | 1.00 |   |
| Brazilian                E      |   |                           | 5      |                                                               |   | 5                                                                 |   |                                | 5      |                                 |   | 12 | % |   | 1.00 |   |
| Total                Brazilians |   |                           | 70     |                                                               |   | 25                                                                |   |                                | 25     |                                 |   | 60 | % |   | 1.00 |   |
| Non-Brazilians1                 |   |                           | 30     |                                                               |   | 30                                                                |   |                                | 16.7   | 2                               |   | 40 | % |   | 0.56 |   |
| Total                           |   |                           | 100    |                                                               |   | 55                                                                |   |                                | 41.7   |                                 |   | 100 | % |   | 0.42 |   |

----

----

***Shareholders’      Agreement***
* *

***Golden      Share***

|   | · | change                of our name and corporate purpose; |
|--------|--------|----------------------------------------------------------|

|   | · | amendment                and/or application of our logo; |
|--------|--------|----------------------------------------------------------|

|   | · | creation                and/or alteration of military programs (whether or not involving                Brazil); |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | · | development                of third party skills’ in technology for military                programs; |
|--------|--------|-------------------------------------------------------------------------------------------------------------|

|   | · | discontinuance                of the supply of spare parts and replacement parts for military                aircraft; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------|

|   | · | transfer                of our control; |
|--------|--------|-----------------------------------------|

|   | · | any                amendments to the list of corporate actions over which the Golden                Share                carries veto rights, including the right of the Brazilian Government                to                appoint one member and alternate to our Board of Directors and the                right                of our employees to appoint two members and their respective alternates                to                our Board of Directors, and to the rights conferred to the Golden                Share;                and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes                to certain provisions of our bylaws pertaining to voting restrictions,                rights of the Golden Share and the mandatory tender offer requirements                applicable to holders of 35% or more of our outstanding                shares. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Disclosure      of Significant Interest**

*Brazilian      Requirements*

----

*Certain      U.S. Legal Requirements*

***Form      and Transfer***

**Board      of Directors**
** **

----

**Election      of Board of Directors**

**Preemptive      Rights**

----

**Redemption      and Right of Withdrawal**

|   | · | reduce                the mandatory distribution of                dividends; |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | change                our corporate purpose; |
|--------|--------|----------------------------------------------|

|   | · | merge                into or consolidate with another company, subject to the conditions                set                forth in the Brazilian Corporate                Law; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | transfer                all of our shares to another company or receive shares of another                company                in order to make the company whose shares were transferred a wholly                owned                subsidiary of such other company, known as*incorporação de ações*; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | acquire                control of another company at a price which exceeds the limits set                forth                in the Brazilian Corporate Law; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | participate                in a centralized group of companies as defined under the Brazilian                Corporate Law and subject to the conditions set forth therein;                or |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 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 the Brazilian Corporate                Law. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*incorporação      de ações*

*incorporação      de ações*
* *

----

**Mechanism      to Promote Dispersed Ownership of Our Shares**

|  | · | Tender                Offer Price = Value of the Share +                Premium, |
|--|--------|----------------------------------------------------------------------------------|

|  | · | “Tender                  Offer Price” corresponds to the acquisition price for each share issued by                  us in the public offering of shares provided                  hereunder. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | “Value                of the Share” corresponds to the greater                of: |
|--|--------|-----------------------------------------------------------------------------------------------|

|  | (i) | the                highest unit quotation obtained for the shares issued by us during                the                12-month period prior to the tender offer among values recorded on                any                stock exchange on which the shares were                traded; |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | the                highest price paid by the Acquiring Shareholder, during the 36-month                period prior to the tender offer, for a share or tranche of shares                issued                by us; |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | the                amount equivalent to 14.5 times our Consolidated Average EBITDA,                as                defined below, reduced by our net consolidated indebtedness, divided                by                the total number of shares issued by us;                or |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | the                amount equivalent to 0.6 times the amount of our firm backlog orders,                according to the last information disclosed by the latter, reduced                by our                net consolidated indebtedness, divided by the total number of shares                issued by us. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | “Premium”                corresponds to 50% of the Value of the                Share. |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | “Consolidated                EBITDA” is our consolidated operating profit before net financial                expenses, income tax and social contribution, depreciation, depletion                and                amortization, as assessed based on the audited statements for our                most                recent complete fiscal year. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | “Average                Consolidated EBITDA” is the arithmetic average of our consolidated EBITDA                for the two most recent complete fiscal                years. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Arbitration**

*Novo      Mercado*

**Going      Private Process**
** **

*Novo      Mercado*

**Delisting      from the **
***Novo      Mercado***

*Novo      Mercado*
*Novo      Mercado*
*Novo      Mercado*

----

*Novo      Mercado*
*Novo      Mercado*
*Novo      Mercado*

*Novo      Mercado*
*Novo      Mercado*

*Novo      Mercado*
*Novo      Mercado*

*Novo      Mercado*
*Novo      Mercado*
*Novo      Mercado*

*Novo      Mercado*
*Novo      Mercado*

*Novo      Mercado*
*Novo      Mercado*
*Novo      Mercado*

*Novo      Mercado*

**Significant      Differences between our Corporate Governance Practices and NYSE Corporate      Governance Standards**

----

*Majority        of Independent Directors*

*Novo      Mercado*
*Novo      Mercado *
*Novo      Mercado*
*Novo      Mercado*

*Novo      Mercado*
*Novo      Mercado*

*Executive        Sessions*
* *

*Nominating/Corporate        Governance Committee*

----

*Compensation        Committee*

*Audit        Committee*

*Conselho      Fiscal*
*Conselho      Fiscal*

*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*
*Conselho      Fiscal*

*Shareholder        Approval of Equity Compensation Plans*

*Corporate        Governance Guidelines*

*Novo      Mercado*

----

*Code        of Business Conduct and Ethics*

*Internal        Audit Function *

**Sarbanes      Oxley Act of 2002**

| **10C.** | **Material                Contracts**** ** |
|----------|-------------------------------------------------|

**Issuance      of US$400 million 6.375% Guaranteed Notes due 2017**

| **10D.** | **Exchange                Controls** |
|----------|--------------------------------------|

----

| **10E.** | **Taxation** |
|----------|--------------|

----

**Material      Brazilian Tax Consequence**
**s      **

*General*

*Taxation      of Dividends*

*Taxation      of Gains*

*reais*
*reais*

|  | · | are                exempt from income tax when assessed by a Non-Brazilian Holder that                is a                2,689 Holder and is not a Tax Haven Holder; or |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | are                subject to income tax at a rate of 15% in any other case, including                the                gains assessed by a Non-Brazilian Holder that (i) is not a 2,689                Holder;                or (ii) is a 2,689 Holder but a Tax Haven Holder. In these cases,                a                withholding income tax of 0.005% on the sale value shall be applicable                and                can be later offset with the eventual income tax due on the capital                gain. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Taxation      on Interest on Shareholders’ Equity*

|   | · | 50%                of net income (after the deduction of social contribution on net                profits                but before taking into account the provision for corporate income                tax and                the amounts attributable to shareholders as net interest on equity)                related to the period in respect of which the payment is made;                and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 50%                of the sum of retained profits and profit reserves as of the date                of the                beginning of the period in respect of which the payment is                made. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Taxation      on Foreign Exchange Transactions*

----

*Taxation      on Bonds and Securities Transactions*

*Other      Brazilian Taxes*

*Transaction      on Bank Accounts*

*vacatio      legis*

**Material      U.S. Federal Income Tax Consequences **

**Shareholders      are urged to consult their own independent tax advisors concerning the U.S.      federal income tax consequences of the ownership of Embraer common shares and      ADSs in light of their particular situations, as well as any consequences      arising under the laws of any other taxing jurisdiction.**

** **

----

*Distributions      on Embraer Common Shares or ADSs*

*reais*
*reais*
**,**
*reais*
*reais*
*reais*
*reais*

----

*pro      rata*

*Sale,      Exchange or Other Taxable Disposition of Embraer Common Shares or      ADSs*

----

*Passive      Foreign Investment Company Rules*

*pro      rata*

*Information      Reporting and Backup Withholding *

| **10F.** | **Dividends                and Paying Agents** |
|----------|------------------------------------------------|

| **10G.** | **Statements                by Experts** |
|----------|------------------------------------------|

| **10H.** | **Documents                on Display** |
|----------|-----------------------------------------|

----

| **10I.** | **Subsidiary                Information** |
|----------|-------------------------------------------|

----

**ITEM      11. QUANTITATIVE      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK **

**Interest      Rate Risk**

*real*

*reai*
*reais*

|                                             |   | **Weighted                  Average****Interest**** Rate                  2007** |   | **Total****Outstanding****Amount** |    | **2008**      |   | **2009** |        | **2010** |    | **2011**   |   | **2012** |        | **2013** |    | **2014 and                  Thereafter** |   | **Total Fair****Value** |        |
|--------------------------------------------------|--------|---------------------------------------------------------------------------------------|--------|------------------------------------|---------|---------------|--------|----------|-------------|----------|---------|------------|--------|----------|-------------|----------|---------|-----------------------------------------------|--------|------------------------------|-------------|
| **Short                  Term Debt**             |   |                                                                                  |   |                               |    |          |   |     |        |     |    |       |   |     |        |     |    |                                          |   |                         |        |
|                                             |   |                                                                                  |   |                               |    |          |   |     |        |     |    |       |   |     |        |     |    |                                          |   |                         |        |
| U.S.                  dollars (LIBOR indexed)    |   |                                                                                  | 6.20   | %                                  | US$     | 45,424        |   | US$      | 45,424      |     |    | -          |   |     | -           |     |    | -                                             |   |                         | -           |   |   | - |   |   | - |   | US$ | 55,021 |   |
| U.S.                  dollars (fixed rate)       |   |                                                                                  | 6.25   | %                                  |    | 129,718       |   |     | 129,718     |     |    | -          |   |     | -           |     |    | -                                             |   |                         | -           |   |   | - |   |   | - |   |   | 144,198 |   |
| *Reais*                  (TJLP indexed)          |   |                                                                                  | 7.98   | %                                  |    | 717,518       |   |     | 717,518     |     |    | -          |   |     | -           |     |    | -                                             |   |                         | -           |   |   | - |   |   | - |   |   | 717,518 |   |
| *Reais*                  (CDI indexed)           |   |                                                                                  | 13.84  | %                                  |    | 1,021         |   |     | 1,021       |     |    | -          |   |     | -           |     |    | -                                             |   |                         | -           |   |   | - |   |   | - |   |   | 1,021 |   |
| Euro                  (fixed rate)               |   |                                                                                  | 4.07   | %                                  |    | 21,513        |   |     | 21,513      |     |    | -          |   |     | -           |     |    | -                                             |   |                         | -           |   |   | - |   |   | - |   |   | 21,513 |   |
| Euro                  (EURIBOR indexed)          |   |                                                                                  | 5.59   | %                                  |    | 12,060        |   |     | 12,060      |     |    | -          |   |     | -           |     |    | -                                             |   |                         | -           |   |   | - |   |   | - |   |   | 12,437 |   |
| Others                                           |   |                                                                                  | 6,44   | %                                  |    | 5.413         |   |     | 5.413       |     |    |       |   |     |        |     |    |                                          |   |                         |        |   |   | - |   |   |   |   |   | 5.413 |   |
|                                             |   |                                                                                  |   |                               |    |          |   |     |        |     |    |       |   |     |        |     |    |                                          |   |                         |        |   |   |   |   |   |   |   |   |   |   |
|  **Total                  short-term debt** |   |                                                                                  |   |                               | **US$** | **932,668**   |   |     | **932,668** |     |    | **-**      |   |     | **-**       |     |    | **-**                                         |   |                         | **-**       |   |   | **-** |   |   | **-** |   | **US$** | **957,121** |   |
|                                             |   |                                                                                  |   |                               |    |          |   |     |        |     |    |       |   |     |        |     |    |                                          |   |                         |        |   |   |   |   |   |   |   |   |   |   |
| **Long                  Term Debt**              |   |                                                                                  |   |                               |    |          |   |     |        |     |    |       |   |     |        |     |    |                                          |   |                         |        |   |   |   |   |   |   |   |   |   |   |
|                                             |   |                                                                                  |   |                               |    |          |   |     |        |     |    |       |   |     |        |     |    |                                          |   |                         |        |   |   |   |   |   |   |   |   |   |   |
| U.S.                  dollars (LIBOR indexed)    |   |                                                                                  | 6.20   | %                                  | US$     | 199,223       |   |     | -           |     | US$     | 42,544     |   | US$      | 49,143      |     | US$     | 25,744                                        |   | US$                          | 50,747      |   | US$ | 11,578 |   | US$ | 19,467 |   | US$ | 199,688 |   |
| U.S.                  dollars (fixed rate)       |   |                                                                                  | 6.25   | %                                  |    | 549,681       |   |     | -           |     |    | 15,352     |   |     | 50,000      |     |    | -                                             |   |                         | 60,000      |   |   | - |   |   | 424,329 |   |   | 599,225 |   |
| *Reais*                  (TJLP indexed)          |   |                                                                                  | 7.98   | %                                  |    | 62,216        |   |     | -           |     |    | 14,050     |   |     | 12,379      |     |    | 12,238                                        |   |                         | 10,543      |   |   | 10,543 |   |   | 2,465 |   |   | 62,216 |   |
| *Reais*                  (CDI indexed)           |   |                                                                                  | 13.84  | %                                  |    | -             |   |     | -           |     |    | -          |   |     | -           |     |    | -                                             |   |                         | -           |   |   | - |   |   | - |   |   | - |   |
| Euro                  (fixed rate)               |   |                                                                                  | 4.07   | %                                  |    | -             |   |     | -           |     |    | -          |   |     | -           |     |    | -                                             |   |                         | -           |   |   | - |   |   | - |   |   | - |   |
| Euro                  (EURIBOR indexed)          |   |                                                                                  | 5.59   | %                                  |    | 9,201         |   |     | -           |     |    | 3,680      |   |     | 3,680       |     |    | 1,840                                         |   |                         | -           |   |   | - |   |   | - |   |   | 9,094 |   |
| Others                                           |   |                                                                                  | 6,44   | %                                  |    | **-**         |   |     | **-**       |     |    | **-**      |   |     | **-**       |     |    | **-**                                         |   |                         | **-**       |   |   | **-** |   |   | **-** |   |   | **-** |   |
| **Total                  long-term debt**        |   |                                                                                  |   |                               | **US$** | **820,320**   |   |     | **-**       |     | **US$** | **75,625** |   | **US$**  | **115,202** |     | **US$** | **39,822**                                    |   | **US$**                      | **121,290** |   | **US$** | **22,120** |   | **US$** | **446,261** |   | **US$** | **870,223** |   |
|                                             |   |                                                                                  |   |                               |    |          |   |     |        |     |    |       |   |     |        |     |    |                                          |   |                         |        |   |   |   |   |   |   |   |   |   |   |
| **Total                  debt**                  |   |                                                                                  |   |                               | **US$** | **1,752,988** |   | **US$**  | **932,668** |     | **US$** | **75,625** |   | **US$**  | **115,202** |     | **US$** | **39,822**                                    |   | **US$**                      | **121,290** |   | **US$** | **22,120** |   | **US$** | **446,261** |   | **US$** | **1,827,344** |   |

----

*reais*

|                                            |   | **Weighted****Average****Interest****Rate 2007** |   | **Total                    Outstanding****Amount** |    | **2008**      |   | **2009** |        | **2010** |    | **2011**   |   | **2012** |        |   **2013** |    | **2014                    and Thereafter** |   | **Total                    Fair****Value** |        |
|-------------------------------------------------|--------|-------------------------------------------------------|--------|----------------------------------------------------|---------|---------------|--------|----------|-------------|----------|---------|------------|--------|----------|-------------|----------------------|---------|--------------------------------------------|--------|--------------------------------------------|-------------|
| **Short                    Term Debt**          |   |                                                  |   |                                               |    |          |   |     |        |     |    |       |   |     |        |                 |    |                                       |   |                                       |        |
|                                            |   |                                                  |   |                                               |    |          |   |     |        |     |    |       |   |     |        |                 |    |                                       |   |                                       |        |
| U.S.                    dollars (LIBOR indexed) |   |                                                  | 5.61   | %                                                  | US$     | 808           |   | US$      | 808         |     |    | -          |   |     | -           |                 |    | -                                          |   |                                       | -           |   |   |   |   |   | - |   | US$ | 2,274 |   |
| U.S.                    dollars (fixed rate)    |   |                                                  | 6.28   | %                                                  |    | 168,892       |   |     | 168,892     |     |    | -          |   |     | -           |                 |    | -                                          |   |                                       | -           |   |   |   |   |   | - |   |   | 188,489 |   |
| *Reais*                    (TJLP indexed)       |   |                                                  | 7.98   | %                                                  |    | 717,518       |   |     | 717,518     |     |    | -          |   |     | -           |                 |    | -                                          |   |                                       | -           |   |   |   |   |   | - |   |   | 717,518 |   |
| *Reais*                    (CDI indexed)        |   |                                                  | 11.86  | %                                                  |    | 9,464         |   |     | 9,464       |     |    | -          |   |     | -           |                 |    | -                                          |   |                                       | -           |   |   |   |   |   | - |   |   | 9,477 |   |
| Euro                    (fixed rate)            |   |                                                  | 4.07   | %                                                  |    | 21,513        |   |     | 21,513      |     |    | -          |   |     | -           |                 |    | -                                          |   |                                       | -           |   |   |   |   |   | - |   |   | 21,513 |   |
| Euro                    (EURIBOR indexed)       |   |                                                  | 5.59   | %                                                  |    | 12,060        |   |     | 12,060      |     |    | -          |   |     | -           |                 |    | -                                          |   |                                       | -           |   |   |   |   |   | - |   |   | 12,437 |   |
| Others                                          |   |                                                  | 6.44   | %                                                  |    | 5,413         |   |     | 5,413       |     |    | -          |   |     | -           |                 |    | -                                          |   |                                       | -           |   |   |   |   |   | - |   |   | 5,413 |   |
|                                            |   |                                                  |   |                                               |    |          |   |     |        |     |    |       |   |     |        |                 |    |                                       |   |                                       |        |   |   |   |   |   |   |   |   |   |   |
| Total                    short-term debt        |   |                                                  |   |                                               | **US$** | **932,668**   |   |     | **932,668** |     |    | **-**      |   |     | **-**       |                 |    | **-**                                      |   |                                       | **-**       |   |   |   |   |   | **-** |   | **US$** | **957,121** |   |
|                                            |   |                                                  |   |                                               |    |          |   |     |        |     |    |       |   |     |        |                 |    |                                       |   |                                       |        |   |   |   |   |   |   |   |   |   |   |
| **Long                    Term Debt**           |   |                                                  |   |                                               |    |          |   |     |        |     |    |       |   |     |        |                 |    |                                       |   |                                       |        |   |   |   |   |   |   |   |   |   |   |
|                                            |   |                                                  |   |                                               |    |          |   |     |        |     |    |       |   |     |        |                 |    |                                       |   |                                       |        |   |   |   |   |   |   |   |   |   |   |
| U.S.                    dollars (LIBOR indexed) |   |                                                  | 5.61   | %                                                  | US$     | 40,960        |   |     | -           |     |    | -          |   | US$      | 15,094      |                 | US$     | 189                                        |   | US$                                        | 25,189      |   | US$ | 189 |   | US$ | 299 |   | US$ | 39,916 |   |
| U.S.                    dollars (fixed rate)    |   |                                                  | 6.28   | %                                                  |    | 707,944       |   |     | -           |     |    | 57,895     |   |     | 84,049      |                 |    | 25,555                                     |   |                                       | 85,558      |   |   | 11,389 |   |   | 443,497 |   |   | 758,998 |   |
| *Reais*                    (TJLP indexed)       |   |                                                  | 7.98   | %                                                  |    | 62,216        |   |     | -           |     |    | 14,050     |   |     | 12,379      |                 |    | 12,238                                     |   |                                       | 10,543      |   |   | 10,543 |   |   | 2,465 |   |   | 62,216 |   |
| *Reais*                    (CDI indexed)        |   |                                                  | 11.86  | %                                                  |    | -             |   |     | -           |     |    | -          |   |     | -           |                 |    | -                                          |   |                                       | -           |   |   |   |   |   | - |   |   | - |   |
| Euro                    (fixed rate)            |   |                                                  | 4.07   | %                                                  |    | -             |   |     | -           |     |    | -          |   |     | -           |                 |    | -                                          |   |                                       | -           |   |   |   |   |   | - |   |   | - |   |
| Euro                    (EURIBOR indexed)       |   |                                                  | 5.59   | %                                                  |    | 9,201         |   |     | -           |     |    | 3,680      |   |     | 3,680       |                 |    | 1,840                                      |   |                                       | -           |   |   |   |   |   | - |   |   | 9,094 |   |
|                                            |   |                                                  |   |                                               |    |          |   |     |        |     |    |       |   |     |        |                 |    |                                       |   |                                       |        |   |   |   |   |   |   |   |   |   |   |
| Total                    long-term debt         |   |                                                  |   |                                               | **US$** | **820,320**   |   |     | **-**       |     |    | **75,625** |   |     | **115,202** |                 |    | **39,822**                                 |   |                                       | **121,290** |   |   | **22,120** |   |   | **446,261** |   | **US$** | **870,223** |   |
|                                            |   |                                                  |   |                                               |    |          |   |     |        |     |    |       |   |     |        |                 |    |                                       |   |                                       |        |   |   |   |   |   |   |   |   |   |   |
| **Total                    debt**               |   |                                                  |   |                                               | **US$** | **1,752,988** |   | **US$**  | **932,668** |     | **US$** | **75,625** |   | **US$**  | **115,202** |                 | **US$** | **39,822**                                 |   | **US$**                                    | **121,290** |   | **US$** | **22,120** |   | **US$** | **446,261** |   | **US$** | **1,827,344** |   |

**Foreign      Currency Risk**

*reais*

----

|                                                                    |   | **Total**                 |      | **Outstanding                  Amount by Year of Maturity** |   |
|-------------------------------------------------------------------------|--------|---------------------------|-----------|-------------------------------------------------------------|--------|
|                                                                    |   | **Outstanding****Amount** |      | **2008**                                                    |   | **2009** |   | **2010** |   | **2011** |   | **2012** |   | **Thereafter** |   | **Total                  Fair Value** |   |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **ASSETS**                                                              |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Cash                  and cash equivalents***                        |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| In                  *reais*                                             |   | US$                       | 70,993    |                                                        | US$    | 70,993 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   | US$ | 70,993 |   |
| In                  Euro                                                |   |                      | 38,419    |                                                        |   | 38,419 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 38,419 |   |
| In                  Chinese Yuan                                        |   |                      | 44,921    |                                                        |   | 44,921 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 44,921 |   |
| ***Investments                  and temporary cash investments***       |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| In                  *reais*                                             |   |                      | 1,006,488 |                                                        |   | 1,006,488 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 1,006,488 |   |
| ***Trade                  accounts receivable***                        |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| In                  *reais*                                             |   |                      | 72,623    |                                                        |   | 72,623 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 72,623 |   |
| In                  Euro                                                |   |                      | 50,676    |                                                        |   | 50,676 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 50,676 |   |
| ***Deferred                  income tax assets***                       |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| In                  *reais*                                             |   |                      | 223,564   |                                                        |   | 57,118 |   |   | 64,727 |   |   | 27,635 |   |   | 19,397 |   |   | 18,770 |   |   | 35,917 |   |   | 223,564 |   |
| In                  Euro                                                |   |                      | 384       |                                                        |   | 384 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 384 |   |
| In                  Chinese Yuan                                        |   |                      | 1,357     |                                                        |   | 1,357 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   |   |   |
| ***Other                  assets***                                     |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| In                  *reais*                                             |   |                      | 152,720   |                                                        |   | 138,419 |   |   | 14,301 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 152,720 |   |
| In                  Euro                                                |   |                      | 15,529    |                                                        |   | 403 |   |   | 15,126 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 15,529 |   |
| In                  Chinese Yuan                                        |   |                      | 169       |                                                        |   | 169 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 169 |   |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  Assets in*****reais***** **               |   | US$                       | 1,526,388 |                                                        | US$    | 1,345,641 |   | US$ | 79,028 |   | US$ | 27,635 |   | US$ | 19,397 |   | US$ | 18,770 |   | US$ | 35,917 |   | US$ | 1,526,388 |   |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  Assets in Euro**                               |   | US$                       | 105,008   |                                                        | US$    | 89,882 |   | US$ | 15,126 |   |   | - |   |   | - |   |   | - |   |   | - |   | US$ | 105,008 |   |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  Assets in Chinese Yuan**                       |   | US$                       | 46,447    |                                                        | US$    | 46,447 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   | US$ | 46,447 |   |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **LIABILITIES**                                                         |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                   |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| In                  *reais*                                             |   | US$                       | 780,755   |                                                        | US$    | 718,540 |   | US$ | 14,050 |   | US$ | 12,379 |   | US$ | 12,238 |   | US$ | 10,543 |   | US$ | 13,005 |   | US$ | 780,755 |   |
| In                  Euro                                                |   |                      | 42,774    |                                                        |   | 33,573 |   |   | 3,680 |   |   | 3,680 |   |   | 1,841 |   |   | - |   |   | - |   |   | 43,044 |   |
| ***Accounts                  payable to suppliers***                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| In                  *reais*                                             |   |                      | 63,304    |                                                        |   | 63,304 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 63,304 |   |
| In                  Euro                                                |   |                      | 41,879    |                                                        |   | 41,879 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 41,879 |   |
| ***Customer                  advances***                                |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| In                  *reais*                                        |   |                      | 32,208    |                                                        |   | 32,208 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 32,208 |   |
| ***Other                  accounts payable & accrued liabilities*** |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| In                  *reais*                                             |   |                      | 214,195   |                                                        |   | 209,433 |   |   | 4,762 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 214,195 |   |
| In                  Euro                                                |   |                      | 38,684    |                                                        |   | 29,329 |   |   | 9,355 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 38,684 |   |
| ***Taxes                  and payroll charges payable***                |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| In                  *reais*                                             |   |                      | 549,882   |                                                        |   | 211,091 |   |   | 232,111 |   |   | 54,672 |   |   | 18,583 |   |   | 14,791 |   |   | 18,634 |   |   | 549,882 |   |
| In                  Euro                                                |   |                      | 5,845     |                                                        |   | 5,845 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 5,845 |   |
| In                  Chinese Yuan                                        |   |                      | 1,247     |                                                        |   | 1,247 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 1,247 |   |
| ***Accrued                  taxes on income***                          |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| In                  *reais*                                        |   |                      | 4         |                                                        |   | 4 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 4 |   |
| In                  Euro                                                |   |                      | 2,134     |                                                        |   | 2,134 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 2,134 |   |
| In                  Chinese Yuan                                        |   |                      | 768       |                                                        |   | 768 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 768 |   |
| ***Deferred                  income tax liabilities***                  |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| In                  *reais*                                             |   |                      | 1,731     |                                                        |   | 195 |   |   | 246 |   |   | 261 |   |   | 252 |   |   | 255 |   |   | 522 |   |   | 1,731 |   |
| ***Accrued                  dividends***                                |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| In                  *reais*                                        |   |                      | 540       |                                                        |   | 540 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 540 |   |
| ***Contingencies***                                                     |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| In                  *reais*                                             |   |                      | 58,228    |                                                        |   | 22,353 |   |   | 24,579 |   |   | 5,789 |   |   | 1,968 |   |   | 1,566 |   |   | 1,973 |   |   | 58,228 |   |
| In                  Euro                                                |   |                      | 636       |                                                        |   | 106 |   |   | 530 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 636 |   |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  liabilities in*****reais***                    |   | US$                       | 1,700,847 |                                                        | US$    | 1,257,668 |   | US$ | 275,748 |   | US$ | 73,101 |   | US$ | 33,041 |   | US$ | 27,155 |   | US$ | 34,134 |   | US$ | 1,700,847 |   |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  liabilities in Euro**                          |   | US$                       | 131,952   |                                                        | US$    | 112,866 |   | US$ | 13,565 |   | US$ | 3,680 |   | US$ | 1,841 |   |   | - |   |   | - |   | US$ | 131,952 |   |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  liabilities in Chinese Yuan**                  |   | US$                       | 2,015     |                                                        | US$    | 2,015 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   | US$ | 2,015 |   |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  exposure in*****reais***                       |   | US$                       | (174,459  | )                                                           | US$    | 87,973 |   | US$ | (196,720 | ) | US$ | (45,466 | ) | US$ | (13,644 | ) | US$ | (8,385 | ) | US$ | 1,783 |   | US$ | (174,459 | ) |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  exposure in Euro**                             |   | US$                       | (26,944   | )                                                           | US$    | (22,984 | ) | US$ | 1,561 |   | US$ | (3,680 | ) | US$ | (1,841 | ) |   | - |   |   | - |   | US$ | (27,214 | ) |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  exposure in Japanese Yen**                     |   |                      | -         |                                                        |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
|                                                                    |   |                      |      |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  exposure in Chinese Yuan**                     |   | US$                       | 44,342    |                                                        | US$    | 44,342 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   | US$ | 44,342 |   |

----

|                                                                                                                                               |   | **Total**                 |                                                              | **Outstanding                  Amount by Year of Maturity** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|-------------------------------------------------------------------|-------------------------------------------------------------|--------|
|                                                                                                                                               |   | **Outstanding****Amount** |                                                              | **2008**                                                    |   | **2009** |   | **2010** |   | **2011** |   | **2012** |   | **Thereafter** |   | **Total                  Fair****Value** |   |
|                                                                                                                                               |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **DERIVATIVE                  INSTRUMENTS**                                                                                                        |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Cross-currency                  interest rate swap contracts (US$Floating v. US$Fixed)*                                                           |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                               |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notional                  amount                                                                                                                   |   | US$                       | 200,802                                                           |                                                        | US$    | 40,599 |   | US$ | 42,544 |   | US$ | 34,049 |   | US$ | 25,555 |   | US$ | 25,555 |   | US$ | 32,500 |   | US$ | (2,910 | ) |
| Average                  interest paid in US$                                                                                                      |   |                      | 6.01                                                              | %                                                           |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Average                  interest received in US$                                                                                                  |   |                      | Libor                  + 1.2515                                   | %                                                           |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| *Cross-currency                  interest rate swap contracts (US$v. R$)*                                                                          |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                               |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notional                  amount                                                                                                                   |   | US$                       | 4,788                                                             |                                                        | US$    | 4,788 |   |   |   |   |   | - |   |   | - |   |   | - |   |   | - |   | US$ | (7,974 | ) |
| Average                  interest paid in r*eais*                                                                                             |   |                      | 64.95%                  of CDI                                    |                                                        |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Average                  interest received in US$                                                                                                  |   |                      | 5.14                                                              | %                                                           |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| *Dual-currency                  interest rate swap contracts CDI v. the greater than exchange variation                  or                  CDI)* |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                               |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notional                  amount                                                                                                                   |   | US$                       | 2,500                                                             |                                                        | US$    | 2,500 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   | US$ | (34 | ) |
| Average                  interest paid in US$                                                                                                      |   |                      | 100%                  exchange variation (US$-R$) or 75.0% of CDI |                                                        |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Average                  interest received in Japanese Yen                                                                                         |   |                      | 6.30                                                              | %                                                           |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
|                                                                                                                                               |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Not                  Deliverable Forward*                                                                                                         |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Suppliers                                                                                                                                          |   | US$                       | 295                                                               |                                                        |   | 295 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   | US$ | 23 |   |
| Accounts                  Receivable                                                                                                               |   | US$                       | 250,000                                                           |                                                        |   | 250,000 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   | US$ | 8,046 |   |
|                                                                                                                                               |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                  exposure of assets/liabilities**                                                                                            |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                               |   |                      |                                                              |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -                  In                  *reais*                                                                                                     |   | US$                       | (181,747                                                          | )                                                           | US$    | 80,685 |   | US$ | (196,720 | ) | US$ | (45,466 | ) | US$ | (13,644 | ) | US$ | (8,385 | ) | US$ | 1,783 |   |   | - |   |
| -                  In                  Euro                                                                                                        |   | US$                       | (26,944                                                           | )                                                           | US$    | (22,984 | ) | US$ | 1,561 |   | US$ | (3,680 | ) | US$ | (1,841 | ) |   | - |   |   | - |   |   | - |   |
| -                  In                  Chinese Yuan                                                                                                |   | US$                       | 44,432                                                            |                                                        | US$    | 44,432 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |

| **ITEM                12.** | **DESCRIPTION                OF SECURITIES OTHER THAN EQUITY                SECURITIES** |
|-----------------------------|------------------------------------------------------------------------------------------|

**PART      II**

| **ITEM              13.** | **DEFAULTS,                DIVIDEND ARREARAGES AND DELINQUENCIES ** |
|---------------------------|--------------------------------------------------------------------------|

| **ITEM              14.** | **MATERIAL                MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF                PROCEEDS** |
|---------------------------|----------------------------------------------------------------------------------------------------------------|

**Material      Modifications to the Rights of Security Holders**

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*Novo      Mercado*

***Comparison      of Rights of Holders of Former Embraer Common Shares and Embraer Common      Shares***

|                                                         |   | **Rights of Holders of Former Embraer ****Common Shares**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **Rights of Holders of Embraer****Common Shares**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Voting                                                       |   | Each                former Embraer common share entitled its holder to one vote in the                resolutions of a general meeting.  Certain                resolutions and acts of the shareholders and management of former                Embraer                were subject to the veto of the Brazilian                Government, as holder of the Golden Share.                                                                                                                                                                                                                                                                                                                                                |   | Each                of our common shares entitles its holder to one vote in the resolutions                of                a general meeting. In                the resolutions of the general meeting: (1) no shareholder or group                of                shareholders, whether Brazilian or non-Brazilian, including brokers                acting                on behalf of one or more holders of ADSs, may exercise voting rights                representing more than 5% of the number of shares into which the                capital                stock is divided; and (2) non-Brazilian shareholders and groups of                non-Brazilian shareholders may not exercise voting rights representing                more than 2⁄3 of the total of the votes conferred on the entirety of                Brazilian shareholders present. Certain                resolutions and acts of our shareholders and management will be subject                to                the veto of the Brazilian Government, as holder of the Golden                Share. |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Maximum Shareholder                Votes                |   | None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | No                shareholder or group of shareholders, whether Brazilian or non-Brazilian,                may exercise voting rights representing more than 5% of our total                capital                stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Non-Brazilian                Shareholder Voting              |   | Ownership                of former Embraer common shares by non-Brazilians was limited to                40% of                all former Embraer common shares. Non-Brazilian shareholders holding                former Embraer common shares, within the 40% limitation, had full                voting                rights.                                                                                                                                                                                                                                                                                                                                                                                               |   | Non-Brazilian                shareholders and groups of non-Brazilian shareholders may not exercise                voting rights representing more than 2⁄3 of the total of the votes conferred                on the entirety of Brazilian shareholders present at the general                meeting                of our shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Dividends                                                    |   | Shareholders                were entitled to receive, in each fiscal year, a mandatory dividend                corresponding to a percentage equivalent to 25% of the net income                for the                fiscal year, subject to certain adjustments.                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | Shareholders                are entitled to receive, in each fiscal year, a mandatory dividend                corresponding to a percentage equivalent to 25% of the net income                for the                fiscal year, subject to certain adjustments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Number                of Directors; Qualifications           |   | The                Board of Directors consisted of at least nine and no more than 18                directors and their respective alternates, all of whom had to be                shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | The                Board of Directors consists of 11 members and their respective alternates,                all of whom must be shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Term                of Directors                             |   | The                directors were elected at a general meeting for a term of three years,                reelection being permitted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | The                transition Board of Directors has a term of office of three years,                until                the annual general meeting in 2009 that approves the financial statements                for the fiscal year ended December 31, 2008. After such meeting,                the term                of office of the Board of Directors will be for two years, reelection                being allowed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Removal                of Directors and Filling of Vacancies |   | In                the event of impairment or a vacancy in the office of a member of                the                Board of Directors, his alternate assumed office until such impairment                ceased or, in the event of a vacancy,                until the first general meeting subsequent thereto was held, which                general                meeting established a definitive alternate                for the remaining term of office. In case of simultaneous or successive                vacancies in the offices of an effective director and his respective                alternate,                the Board of Directors convened a general meeting to fill such                offices. |   | As                already provided by the Brazilian Corporate Law and, therefore, applicable                to holders of our common shares, whenever the election is conducted                under                the cumulative voting process, the dismissal of any member of the                Board of                Directors at a general meeting will immediately result in the dismissal                of                all the other members, thus requiring a new election; in other cases                of                vacancy, if there is no alternate, the entire Board of Directors                will                stand for election at the next general meeting. Any                vacant offices that have not been filled, due to a tie, will be subject                to                a new voting, under the same process, after adjustment is made to                the                number of votes entitled to each shareholder based on the number                of seats                to be filled.                                               |

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|                                                                  |   | **Rights                of Holders of Former Embraer****Common                Shares**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **Rights                of Holders of Embraer****Common                Shares**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-----------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Election                of Directors                                  |   | In                the election of the directors, the general meeting first established,                by a                majority vote, the number of directors to be elected that were not                otherwise allocated as representatives of a certain person or group.                If                the process of cumulative voting had not been requested, the general                meeting voted by means of a candidates roll previously registered                with the                presiding board, which candidates roll assured the shareholders that                held,                whether individually or in block, 20% or more of the former Embraer                common                shares had the right to appoint two effective directors and their                respective alternates. |   | Unless                a 5% shareholder invokes the cumulative voting provision, the election                of                directors will be conducted under a system of slate voting, whereby                voting                on individual candidates will not be allowed; provided, however,                that any                shareholder who wishes to do so must appoint candidates at least                ten days                prior to the general meeting of shareholders at which the members                of the                Board of Directors will be elected. As                already provided by the Brazilian Corporate Law and, therefore, applicable                to holders of our common shares, shareholders representing at least                5% of                the corporate capital may request the election of directors by cumulative                voting if notice is given to the company no later than 48 hours prior                to                the date for which the general meeting has been called. Each                shareholder will have the right to cumulate their votes for one candidate                and the respective alternate, or to distribute them among several                candidates. The candidate(s) and respective alternate(s) that receive                the                higher number of votes will be declared elected.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Quorum of Shareholders                for a General Meeting |   | The                quorum for convening a general meeting on first call was the presence                of                shareholders representing at least 25% of the voting capital; on                second                call, it was convened with the presence of any number of                shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | The                quorum for convening a general meeting on first call is the presence                of                shareholders representing at least 35% of the capital stock, except                if the                law requires a higher quorum; and on second call is the presence                of                shareholders representing at least 25% of the capital stock; and,                on third                call, the presence of any number of shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Notice                of Shareholders’ Meetings                 |   | The                first call of a general meeting was made 15 days in advance, and                the                second call was eight days in advance of the general                meeting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | A                general meeting is called by the Board of Directors or, as provided                by                law, by shareholders or by the *Conselho                Fiscal*,                the first call being published at least 30 days in advance of the                general                meeting counting from the date of the first publication of the notice;                if                the meeting is not held because of a lack of quorum, a notice of                second                call will be published at least 15 days in advance of the general                meeting;                and, if again the meeting is not held, the third call will be published                at                least eight days in advance of the general meeting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Compulsory                Acquisition of a Majority Shareholder       |   | None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | Any                shareholder or group of shareholders that acquires or becomes the                holder,                for any reason of: (i) 35% or more or the total shares issued by                us; or                (ii) of other rights, including beneficial ownership and trust, over                shares issued by us that represent more than 35% of our capital,                or an                Acquiring Shareholder, will submit to the Brazilian Government, as                holder                of the Golden Share, through the Brazilian Ministry of Finance, a                request                to make a public tender offer for acquisition of all shares issued                by us.                If the request is denied, the Acquiring Shareholder, within a period                of 30                days as of communication of the denial, must sell all of the shares                that                exceed the 35% limit. During the period between the request to make                the                public tender offer and the reply from the Brazilian Government,                the                Acquiring Shareholder may not acquire or sell any shares or convertible                securities issued by us.                   The                price to be paid for each of our common shares in the public tender                offer                must be equal to or greater than the amount obtained by the following                formula:                        “Acquisition                Price” = Value of the Share + 50% Premium “Value                of the Share” = the greater value between: (i) the highest unit                quotation of the shares issued by us during the 12-month period prior                to                conducting the public tender offer recorded on any stock exchange                in which                the shares were traded; (ii) the highest price paid by the Acquiring                Shareholder during the 36-month period prior to the public tender                offer                for a share or tranche of shares issued by us; (iii) the amount                equivalent to 14.5 times our consolidated average EBITDA (determined                in                accordance with the bylaws), reduced by our net consolidated indebtedness,                divided by the total number of shares issued; and (iv) the amount                equivalent to 0.6 times the amount of our firm backlog orders, according                to the last information disclosed by us, reduced by our net consolidated                indebtedness, divided by the total number of shares issued by                us. |

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***Comparison      of Rights of Holders of Former Embraer Preferred Shares and Embraer Common      Shares***

|                                                                   |   | **Rights of Holders of Former Embraer****Preferred Shares**                                                                                                                                                                                                                                                                                                                                                            |   | **Rights of Holders of Embraer****Common Shares**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Voting                                                                 |   | Preferred                shares were not entitled to vote at a general meeting. Preferred                shareholders could attend a general meeting and take part in the                discussion of matters presented at the meeting.                                                                                                                                                                                                             |   | Each                of our common shares entitles its holder to one vote in the resolutions                of                a general meeting.                 In                the resolutions of the general meeting: (1) no shareholder or group                of                shareholders, whether Brazilian or non-Brazilian, including brokers                acting                on behalf of one or more holders of ADSs, may exercise voting rights                representing more than 5% of the number of shares into which the                capital                stock is divided; and (2) the set of non-Brazilian shareholders and                groups                of shareholders may not exercise voting rights representing more                than                two-thirds of the total of the votes conferred on the entirety of                Brazilian shareholders present. Certain                resolutions and acts of our shareholders and management are subject                to the                veto of the Brazilian Government, as holder of the Golden                Share. |
|                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Dividends                                                              |   | Preferred                shares were entitled to the receipt of dividends per share at least                10%                higher than those conferred to each common share. Shareholders were                entitled to receive, in each fiscal year, a mandatory dividend                corresponding to a percentage equivalent to 25% of the net income                for the                fiscal year, subject to certain adjustments. |   | There                is no dividend preference among shareholders. The shareholders will                be                entitled to receive, in each fiscal year, a mandatory dividend                corresponding to a percentage equivalent to 25% of the net income                for the                fiscal year, subject to certain adjustments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Priority in Capital Stock                Reimbursements |   | Preferred                shares were entitled to at least a 10% premium over that received                by                common shares in the event of a reimbursement of capital.                                                                                                                                                                                                                                                                |   | There                is no preference among shareholders in the event of a reimbursement                of                capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

**Use      of Proceeds**

----

| **ITEM                15.** | **CONTROLS                AND PROCEDURES** |
|-----------------------------|--------------------------------------------|

**Disclosure      Controls and Procedures**

**Management’s      Report on Internal Control over Financial Reporting **

**Changes      in Internal Controls**

*Conselho      Fiscal*

----

*Conselho      Fiscal*

**ITEM      16A.**
**AUDIT      COMMITTEE FINANCIAL EXPERT**

*Conselho      Fiscal*
*Conselho      Fiscal *
*Conselho      Fiscal*
*Conselho      Fiscal*

**ITEM      16B.**
**CODE      OF ETHICS**

**ITEM      16C.**
**PRINCIPAL      ACCOUNTANT FEES AND SERVICES**

|                              |   | **2006**                               |        | **2007 - ****Deloitte Touche****Tohmatsu                Auditores Independentes*** |   | **2007 -****Pricewaterhouse****Coopers****Auditores****Independentes**  |   | **2007 - TOTAL** |        |
|-----------------------------------|--------|----------------------------------------|-------------|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|----------------------------|-------------|
|                              |   | (in US$                thousands) |        |
| Audit                Fees         |   |                                   | 1,886       |                                                                                              |   |  169                                                                         |   |                       |  2,172 |   |   |  2,341 |   |
| Audit-Related                Fees |   |                                   |  434   |                                                                                              |   | -                                                                                 |   |                       |  231   |   |   |  231 |   |
| Tax                Fees           |   |                                   |  807   |                                                                                              |   | -                                                                                 |   |                       | -           |   |   | - |   |
| All                Other Fees     |   |                                   |  148   |                                                                                              |   | -                                                                                 |   |                       |  16    |   |   |  16 |   |
| Total                             |   |                                   |  3,275 |                                                                                              |   |  169                                                                         |   |                       |  2,419 |   |   |  2,588 |   |

----

**Audit      Fees **

----

**Audit-Related      Fees **

**Tax      Fees **

**All      Other Fees **

**Pre-Approval      Policies and Procedures**

*de      minimis *
*de      minimis*
*de      minimis*

**ITEM      16D.**
**EXEMPTIONS      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES**

*Conselho      Fiscal*
*Conselho      Fiscal*

----

**ITEM      16E.**
**PURCHASES      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED      PURCHASERS**

|                                    |   | **Total Number of****Shares Purchased****(1)** |      | **Average Price****Paid per Share (2)** |   | **Total Number of****Shares Purchased****as Part of Publicly****Announced****Program (3)** |   | **Maximum****Number of Shares****that May Yet Be****Purchased Under****the Program** |      |
|-----------------------------------------|--------|---------------------------------------------------------------|-----------|-------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|-----------|
| **December                19-20, 2007** |   |                                                          | 70,000    |                                                        | U$     | 11.21                                                                                                                         |   |                                                                                                                    | 70,000    |   |   | 16,730,000 |   |
| **January                2-31, 2008**   |   |                                                          | 7,602,100 |                                                        | U$     | 9.93                                                                                                                          |   |                                                                                                                    | 7,602,100 |   |   | 9,127,900 |   |
| **February                1-29, 2008**  |   |                                                          | 5,604,500 |                                                        | U$     | 11.98                                                                                                                         |   |                                                                                                                    | 5,604,500 |   |   | 3,523,400 |   |
| **March                3-31, 2008**     |   |                                                          | 3,523,400 |                                                        | U$     | 11.44                                                                                                                         |   |                                                                                                                    | 3,523,400 |   |   | - |   |

----

*reais*

----

**PART      III**

| **ITEM                17.** | **FINANCIAL                STATEMENTS** |
|-----------------------------|-----------------------------------------|

| **ITEM                18.** | **FINANCIAL                STATEMENTS** |
|-----------------------------|-----------------------------------------|

| **ITEM                19.** | **EXHIBITS**** ** |
|-----------------------------|------------------------|

| Exhibit |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 1.1     |   | Bylaws                of Embraer (English translation).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 2.1     |   | Form                of Amended and Restated Deposit Agreement among Embraer, Morgan Guaranty                Trust Company of New York, as depositary, and the Holders from time                to                time of American Depositary Shares issued thereunder, including the                Form                of American Depositary Receipts, incorporated herein by reference                to                Exhibit 99(a) to Embraer’s Registration Statement                No. 333-133162.                                |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 2.2     |   | Indenture,                dated as of October 25, 2006, among Embraer Overseas Limited,                Embraer-Empresa Brasileira de Aeronáutica S.A., The Bank of New York, as                Trustee, Registrar, Transfer Agent, and Principal Paying Agent, and                The                Bank of New York (Luxembourg) S.A., as Luxembourg Paying Agent and                Transfer Agent, incorporated herein by reference from Exhibit 4.1                to                Embraer’s Registration Statement No. 333-141629. |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 2.3     |   | The                registrant hereby agrees to furnish to the SEC, upon request, copies                of                certain instruments defining the rights of holders of long-term debt                of                the kind described in Item 2(b)(i) of the Instructions as to Exhibits                in                Form 20-F.                                                                                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.1*    |   | Shareholders’                Agreement executed by Embraer and Liebherr International AG on                May 22, 2000, incorporated herein by reference from Exhibit 10.5                to Embraer’s Registration Statement No. 333-12220.                                                                                                                                                                                                                                                                                   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.2     |   | Protocol                of Merger and Justification of Embraer-Empresa Brasileira de Aeronáutica                S.A. with and into Rio Han Empreendimentos e Participações S.A., dated as                of January 19, 2006, and exhibits thereto, or Merger Agreement (English                translation), incorporated herein by reference from Exhibit 2.1 to                Embraer’s Registration Statement No. 333-132289.                                                                                               |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.3     |   | Lease                Agreement, as amended, between Howard County and Embraer Aircraft                Corporation, dated as of April 21, 1998, incorporated herein by reference                from Exhibit 10.6 to Embraer’s Registration Statement No.                333-12220.                                                                                                                                                                                                                                                              |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.4     |   | Lease                Agreement, as amended, between the Paris Airport and Embraer, dated                as of                January 1, 1999, together with an English translation,                incorporated herein by reference from Exhibit 10.6 to Embraer’s                Registration Statement No. 333-12220.                                                                                                                                                                                                               |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 8.1     |   | List                of Embraer’s subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 11.1    |   | Code                of Ethics and Conduct, incorporated herein by reference from Exhibit                11.1                to Embraer’s Annual Report on Form 20-F for the fiscal year ended December                31, 2003.                                                                                                                                                                                                                                                                                                                 |

----

| 12.1   |   | Rule                13a-14(a)/15d-14(a) Certification of Chief Executive                Officer. |
|--------|--------|--------------------------------------------------------------------------------------------------|
|   |   |                                                                                             |
| 12.2   |   | Rule                13a-14(a)/15d-14(a) Certification of Chief Financial                Officer. |
|   |   |                                                                                             |
| 13.1   |   | Section                1350 Certification of Chief executive officer.                            |
|   |   |                                                                                             |
| 13.2   |   | Section                1350 Certification of Chief Financial                Officer.             |

| * | Embraer                has been granted confidential treatment for portions of this Exhibit.                Accordingly, portions thereof have been omitted and were filed separately                with the SEC. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|                                   | EMBRAER –                EMPRESA BRASILEIRA DE AERONÁUTICA S.A. |
|----------------------------------------|---------------------------------------------------------------------------------|
|                                   |                                                                            |   |   |
| Date:                May 19, 2008 | By:                                                                             | /s/                FREDERICO PINHEIRO FLEURY CURADO |
|                                   |                                                                            | Name: | Frederico                Pinheiro Fleury Curado |
|                                   |                                                                            | Title: | President                and Chief Executive Officer |
|                                   |                                                                            |   |   |
| Date:                May 19, 2008 | By:                                                                             | /s/                ANTONIO                LUIZ PIZARRO MANSO |
|                                   |                                                                            | Name: | Antonio                Luiz Pizarro Manso |
|                                   |                                                                            | Title: | Executive                Vice**-**President Financeand                Chief Financial Officer |

----

**EXHIBIT      INDEX **

| Exhibit Number |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|---------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 1.1                 |   | Bylaws                of Embraer (English translation) .                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 2.1                 |   | Form                of Amended and Restated Deposit Agreement among Embraer, Morgan Guaranty                Trust Company of New York, as depositary, and the Holders from time                to                time of American Depositary Shares issued thereunder, including the                Form                of American Depositary Receipts, incorporated herein by reference                to                Exhibit 99(a) to Embraer’s Registration Statement                No. 333-133162.                                |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 2.4                 |   | Indenture,                dated as of October 25, 2006, among Embraer Overseas Limited,                Embraer-Empresa Brasileira de Aeronáutica S.A., The Bank of New York, as                Trustee, Registrar, Transfer Agent, and Principal Paying Agent, and                The                Bank of New York (Luxembourg) S.A., as Luxembourg Paying Agent and                Transfer Agent, incorporated herein by reference from Exhibit 4.1                to                Embraer’s Registration Statement No. 333-141629. |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 2.5                 |   | The                registrant hereby agrees to furnish to the SEC, upon request, copies                of                certain instruments defining the rights of holders of long-term debt                of                the kind described in Item 2(b)(i) of the Instructions as to Exhibits                in                Form 20-F.                                                                                                                                                                                                      |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.1*                |   | Shareholders’                Agreement executed by Embraer and Liebherr International AG on                May 22, 2000, incorporated herein by reference from Exhibit 10.5                to Embraer’s Registration Statement No. 333-12220.                                                                                                                                                                                                                                                                                   |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.2                 |   | Protocol                of Merger and Justification of Embraer-Empresa Brasileira de Aeronáutica                S.A. with and into Rio Han Empreendimentos e Participações S.A., dated as                of January 19, 2006, and exhibits thereto, or Merger Agreement (English                translation), incorporated herein by reference from Exhibit 2.1 to                Embraer’s Registration Statement No. 333-132289.                                                                                               |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.3                 |   | Lease                Agreement, as amended, between Howard County and Embraer Aircraft                Corporation, dated as of April 21, 1998, incorporated herein by reference                from Exhibit 10.6 to Embraer’s Registration Statement No.                333-12220.                                                                                                                                                                                                                                                              |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.4                 |   | Lease                Agreement, as amended, between the Paris Airport and Embraer, dated                as of                January 1, 1999, together with an English translation,                incorporated herein by reference from Exhibit 10.6 to Embraer’s                Registration Statement No. 333-12220.                                                                                                                                                                                                               |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 8.1                 |   | List                of Embraer’s subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 11.1                |   | Code                of Ethics and Conduct, incorporated herein by reference from Exhibit                11.1                to Embraer’s Annual Report on Form 20-F for the fiscal year ended December                31, 2003.                                                                                                                                                                                                                                                                                                                 |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 12.1                |   | Rule                13a-14(a)/15d-14(a) Certification of Chief Executive                Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 12.2                |   | Rule                13a-14(a)/15d-14(a) Certification of Chief Financial                Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 13.1                |   | Section                1350 Certification of Chief executive officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 13.2                |   | Section                1350 Certification of Chief Financial                Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

| * | Embraer                has been granted confidential treatment for portions of this Exhibit.                Accordingly, portions thereof have been omitted and were filed separately                with the SEC. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Embraer      - Empresa**

**Brasileira      de Aeronáutica S.A.**

**Consolidated      Financial Statements at **

**December      31, 2006 and 2007 **

**and      Report of Independent Registered **

**Public      Accounting Firm**

----

**Index      to Financial Statements**

|                                                                                                                                                         |   | **Page** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
|                                                                                                                                                         |   |     |
| Index                to Financial Statements                                                                                                                 |   | F-2      |
| Reports                of Independent Registered Public Accounting Firms                                                                                     |   | F-3      |
| Consolidated                Balance Sheets at December 31, 2006 and 2007                                                                                     |   | F-7      |
| Consolidated                Statements of Income and Comprehensive Income for the Years ended                December                31, 2005, 2006 and 2007 |   | F-9      |
| Consolidated                Statements of Cash Flows for the Years ended December 31, 2005, 2006                and                2007                      |   | F-10     |
| Consolidated                Statements of Shareholders' Equity for the Years ended December 31,                2005,                2006 and 2007            |   | F-11     |
| Notes                to Consolidated Financial Statements for the Years ended December                31,                2005, 2006 and 2007                 |   | F-12     |

----

**Report      of Independent Registered **

**Public      Accounting Firm**

| 1 | In                our opinion the accompanying consolidated balance sheet and the related                consolidated statement of income and comprehensive income, of changes                in                shareholders' equity and of cash flows present fairly, in all material                respects, the financial position of Embraer - Empresa Brasileira                de                Aeronáutica S.A. and its subsidiaries at December 31, 2007, and the                results of their operations and their cash flows for the year then                ended                in conformity with accounting principles generally accepted in the                United                States of America. Also in our opinion, the Company maintained, in                all                material respects, effective internal control over financial reporting                as                of December 31, 2007, based on criteria established in Internal Control                -                Integrated Framework issued by the Committee of Sponsoring Organizations                of the Treadway Commission (COSO). The Company's management is responsible                for these financial statements, for maintaining effective internal                control                over financial reporting and for its assessment of the effectiveness                of                internal control over financial reporting, included in “Management's                Report on Internal Control over Financial Reporting” appearing under item                15. Our responsibility is to express opinions on these financial                statements and on the Company's internal control over financial reporting                based on our integrated audit. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2 | We                  conducted our audit in accordance with the standards of the Public                  Company                  Accounting Oversight Board (United States). Those standards require                  that                  we plan and perform the audit to obtain reasonable assurance about                  whether                  the financial statements are free of material misstatement and                  whether                  effective internal control over financial reporting was maintained                  in all                  material respects. Our audit of the financial statements included                  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. Our audit                  of                  internal control over financial reporting included obtaining an                  understanding of internal control over financial reporting, assessing                  the                  risk that a material weakness exists, and testing and evaluating                  the                  design and operating effectiveness of internal control based on                  the                  assessed risk. Our audit also included performing such other procedures                  as                  we considered necessary in the circumstances. We believe that our                  audit                  provides a reasonable basis for our                  opinion. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 3 | A                company's internal control over financial reporting is a process                designed                to provide reasonable assurance regarding the reliability of financial                reporting and the preparation of financial statements for external                purposes in accordance with generally accepted accounting principles.                A                company's internal control over financial reporting includes those                policies and procedures that (i) pertain to the maintenance of                records that, in reasonable detail, accurately and fairly reflect                the                transactions and dispositions of the assets of the company;                (ii) provide reasonable assurance that transactions are recorded as                necessary to permit preparation of financial statements in accordance                with                generally accepted accounting principles, and that receipts and                expenditures of the company are being made only in accordance with                authorizations of management and directors of the Company; and                (iii) provide reasonable assurance regarding prevention or timely                detection of unauthorized acquisition, use, or disposition of the                company's assets that could have a material effect on the financial                statements. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4 | Because                of its inherent limitations, internal control over financial reporting                may                not prevent or detect misstatements. Also, projections of any evaluation                of effectiveness to future periods are subject to the risk that controls                may become inadequate because of changes in conditions, or that the                degree                of compliance with the policies or procedures may deteriorate.** ** |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Report      of Independent Registered Public Accounting Firm**

----

----

**Embraer      - Empresa Brasileira de Aeronáutica S.A.**

**Consolidated      Balance Sheets as of December 31, 2006 and 2007**

**In      thousands of U.S. dollars **

----

| ASSETS                                            |   | Notes  |   | 2006   |   | 2007      |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|-----------|--------|
|                                              |   |   |   |   |   |      |   |
| CURRENT                ASSETS                     |   |   |   |   |   |      |   |
| Cash                and cash equivalents          |   |   | 5      |   |   | 1,209,396 |   |   | 1,307,366 |   |
| Temporary                cash investments         |   |   | 6      |   |   | 555,795   |   |   | 1,185,745 |   |
| Trade                accounts receivable, net     |   |   | 7      |   |   | 277,878   |   |   | 354,650 |   |
| Customer                and commercial financing  |   |   | 8      |   |   | 16,215    |   |   | 4,292 |   |
| Collateralized                accounts receivable |   |   | 9      |   |   | 70,980    |   |   | 12,416 |   |
| Inventories                                       |   |   | 10     |   |   | 2,047,244 |   |   | 2,481,065 |   |
| Deferred                income taxes              |   |   | 28     |   |   | 148,275   |   |   | 87,050 |   |
| Guarantee                deposits                 |   |   | 11     |   |   | 318,059   |   |   | - |   |
| Other                assets                       |   |   | 11     |   |   | 147,644   |   |   | 217,157 |   |
| Total                current assets               |   |   |   |   |   | 4,791,486 |   |   | 5,649,741 |   |
|                                              |   |   |   |   |   |      |   |   |   |   |
| NONCURRENT                ASSETS                  |   |   |   |   |   |      |   |   |   |   |
| Inventories                                       |   |   | 10     |   |   | -         |   |   | 10,108 |   |
| Trade                accounts receivable          |   |   | 7      |   |   | 22,109    |   |   | 39,661 |   |
| Customer                and commercial financing  |   |   | 8      |   |   | 552,751   |   |   | 410,382 |   |
| Collateralized                accounts receivable |   |   | 9      |   |   | 748,742   |   |   | 465,273 |   |
| Guarantee                deposits                 |   |   | 11     |   |   | 289,050   |   |   | 469,554 |   |
| Property,                plant and equipment, net |   |   | 13     |   |   | 412,244   |   |   | 565,979 |   |
| Investments                                       |   |   | 12     |   |   | 33,844    |   |   | 42,458 |   |
| Deferred                income taxes              |   |   | 28     |   |   | 90,934    |   |   | 175,925 |   |
| Other                assets                       |   |   | 11     |   |   | 156,581   |   |   | 236,773 |   |
| Total                noncurrent assets            |   |   |   |   |   | 2,306,255 |   |   | 2,416,113 |   |
|                                              |   |   |   |   |   |      |   |   |   |   |
| TOTAL                ASSETS                       |   |   |   |   |   | 7,097,741 |   |   | 8,065,854 |   |

----

**Embraer      - Empresa Brasileira de Aeronáutica S.A.**

**Consolidated      Balance Sheets as of December 31, 2006 and 2007**

**In      thousands of U.S. dollars **

----

| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                                                                                          |   | Notes  |   | 2006   |   | 2007      |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|-----------|--------|
|                                                                                                                                                                                                                                                                         |   |   |   |   |   |      |   |
| CURRENT                LIABILITIES                                                                                                                                                                                                                                           |   |   |   |   |   |      |   |
| Loans                and financing                                                                                                                                                                                                                                           |   |   | 20     |   |   | 503,047   |   |   | 932,668 |   |
| Non-recourse                and recourse debt                                                                                                                                                                                                                                |   |   | 9      |   |   | 388,380   |   |   | 113,965 |   |
| Capital                lease obligations                                                                                                                                                                                                                                     |   |   | 21     |   |   | 2,388     |   |   | 4,413 |   |
| Trade                accounts payable                                                                                                                                                                                                                                        |   |   |   |   |   | 912,753   |   |   | 912,546 |   |
| Advances                from customers                                                                                                                                                                                                                                       |   |   | 16     |   |   | 544,802   |   |   | 801,619 |   |
| Taxes                and payroll charges payable                                                                                                                                                                                                                             |   |   | 17     |   |   | 136,950   |   |   | 98,165 |   |
| Accrued                taxes on income                                                                                                                                                                                                                                       |   |   |   |   |   | 6,848     |   |   | 1,875 |   |
| Contingencies                                                                                                                                                                                                                                                                |   |   | 19     |   |   | 31,175    |   |   | 7,008 |   |
| Interest                on capital and dividends                                                                                                                                                                                                                             |   |   | 25     |   |   | 35,555    |   |   | 540 |   |
| Other                payables and accrued liabilities                                                                                                                                                                                                                        |   |   | 15     |   |   | 433,291   |   |   | 466,593 |   |
| Total                current liabilities                                                                                                                                                                                                                                     |   |   |   |   |   | 2,995,189 |   |   | 3,339,392 |   |
|                                                                                                                                                                                                                                                                         |   |   |   |   |   |      |   |   |   |   |
| NONCURRENT                LIABILITIES                                                                                                                                                                                                                                        |   |   |   |   |   |      |   |   |   |   |
| Loans                and financing                                                                                                                                                                                                                                           |   |   | 20     |   |   | 846,104   |   |   | 820,320 |   |
| Non-recourse                and recourse debt                                                                                                                                                                                                                                |   |   | 9      |   |   | 441,378   |   |   | 371,732 |   |
| Capital                lease obligations                                                                                                                                                                                                                                     |   |   | 21     |   |   | 3,453     |   |   | 12,021 |   |
| Trade                accounts payable                                                                                                                                                                                                                                        |   |   |   |   |   | -         |   |   | 339 |   |
| Advances                from customers                                                                                                                                                                                                                                       |   |   | 16     |   |   | 183,639   |   |   | 367,957 |   |
| Contribution                from suppliers                                                                                                                                                                                                                                   |   |   | 14     |   |   | 92,217    |   |   | 112,201 |   |
| Taxes                and payroll charges payable                                                                                                                                                                                                                             |   |   | 17     |   |   | 455,048   |   |   | 466,794 |   |
| Deferred                income tax                                                                                                                                                                                                                                           |   |   | 28     |   |   | 1,637     |   |   | 5,547 |   |
| Contingencies                                                                                                                                                                                                                                                                |   |   | 19     |   |   | 33,369    |   |   | 52,415 |   |
| Other                payables and accrued liabilities                                                                                                                                                                                                                        |   |   | 15     |   |   | 107,512   |   |   | 198,987 |   |
| Total                noncurrent liabilities                                                                                                                                                                                                                                  |   |   |   |   |   | 2,164,357 |   |   | 2,408,313 |   |
|                                                                                                                                                                                                                                                                         |   |   |   |   |   |      |   |   |   |   |
| MINORITY                INTEREST                                                                                                                                                                                                                                             |   |   |   |   |   | 63,914    |   |   | 68,709 |   |
|                                                                                                                                                                                                                                                                         |   |   |   |   |   |      |   |   |   |   |
| SHAREHOLDERS'                EQUITY                                                                                                                                                                                                                                          |   |   | 24     |   |   |      |   |   |   |   |
| Statutory                capital-                                                                                                                                                                                                                                            |   |   |   |   |   |      |   |   |   |   |
| Common                (at December 31, 2006, 1,000,000,000 shares authorized and 739,903,913                shares issued and outstanding; at December 31, 2007,1,000,000,000                shares                authorized and 740,465,043 shares issued and outstanding) |   |   |   |   |   | 1,434,406 |   |   | 1,438,007 |   |
| Special                common share (R$1 par value, 1 share authorized, issued and outstanding                at                December 31, 2006 and 2007)                                                                                                                  |   |   |   |   |   | -         |   |   | - |   |
| Treasury                shares, at cost - 70,000 shares                                                                                                                                                                                                                      |   |   |   |   |   | -         |   |   | (784 | ) |
| Appropriated                retained earnings                                                                                                                                                                                                                                |   |   |   |   |   | 13,797    |   |   | 53,571 |   |
| Unappropriated                retained earnings                                                                                                                                                                                                                              |   |   |   |   |   | 422,334   |   |   | 743,696 |   |
| Accumulated                other comprehensive income                                                                                                                                                                                                                        |   |   |   |   |   | 3,744     |   |   | 14,950 |   |
| Total                shareholders' equity                                                                                                                                                                                                                                    |   |   |   |   |   | 1,874,281 |   |   | 2,249,440 |   |
|                                                                                                                                                                                                                                                                         |   |   |   |   |   |      |   |   |   |   |
| TOTAL                LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                                                                                    |   |   |   |   |   | 7,097,741 |   |   | 8,065,854 |   |

----

**Embraer      - Empresa Brasileira de Aeronáutica S.A.**

**Consolidated      Statements of Income and Comprehensive Income**

**For      the Years Ended December 31, 2005, 2006 and 2007**

**In      thousands of U.S. dollars, except earnings per share **

----

|                                                                     |   | Notes  |   | 2005   |   | 2006       |   | 2007   |       |
|--------------------------------------------------------------------------|--------|--------|--------|--------|--------|------------|--------|--------|------------|
|                                                                     |   |   |   |   |   |       |   |   |       |
| GROSS                SALES                                               |   |   |   |   |   |       |   |   |       |
| Foreign                market                                            |   |   |   |   |   | 3,508,796  |   |   | 3,682,830  |   |   | 5,176,131 |   |
| Domestic                market                                           |   |   |   |   |   | 312,507    |   |   | 146,063    |   |   | 209,203 |   |
| Sales                deductions                                          |   |   | 3(a    | )      |   | (31,808    | )      |   | (69,374    | ) |   | (140,162 | ) |
| NET                SALES                                                 |   |   |   |   |   | 3,789,495  |   |   | 3,759,519  |   |   | 5,245,172 |   |
| Cost                of sales and services                                |   |   |   |   |   | (2,738,907 | )      |   | (2,806,802 | ) |   | (4,093,504 | ) |
| GROSS                PROFIT                                              |   |   |   |   |   | 1,050,588  |   |   | 952,717    |   |   | 1,151,668 |   |
|                                                                     |   |   |   |   |   |       |   |   |       |   |   |   |   |
| OPERATING                INCOME (EXPENSES)                               |   |   |   |   |   |       |   |   |       |   |   |   |   |
| Selling                                                                  |   |   |   |   |   | (159,799   | )      |   | (220,596   | ) |   | (361,306 | ) |
| Research                and development                                  |   |   |   |   |   | (93,166    | )      |   | (112,743   | ) |   | (259,726 | ) |
| General                and administrative                                |   |   |   |   |   | (205,202   | )      |   | (235,505   | ) |   | (234,792 | ) |
| Employee                profit sharing                                   |   |   | 3(p    | )      |   | (56,051    | )      |   | (42,719    | ) |   | - |   |
| Other                operating income (expenses), net                    |   |   | 29     |   |   | (26,079    | )      |   | 1,677      |   |   | 78,361 |   |
| INCOME                FROM OPERATIONS                                    |   |   |   |   |   | 510,291    |   |   | 342,831    |   |   | 374,205 |   |
|                                                                     |   |   |   |   |   |       |   |   |       |   |   |   |   |
| Interest                income (expenses), net                           |   |   | 22     |   |   | (4,117     | )      |   | 105,433    |   |   | 163,378 |   |
| Foreign                exchange loss, net                                |   |   | 30     |   |   | (15,218    | )      |   | (4,098     | ) |   | (37,669 | ) |
| Other                non-operating income (expenses), net                |   |   |   |   |   | 9,050      |   |   | -          |   |   | - |   |
| INCOME                BEFORE INCOME TAXES                                |   |   |   |   |   | 500,006    |   |   | 444,166    |   |   | 499,914 |   |
| Income                tax expense                                        |   |   | 28     |   |   | (41,569    | )      |   | (44,412    | ) |   | (2,745 | ) |
|                                                                     |   |   |   |   |   |       |   |   |       |   |   |   |   |
| INCOME                BEFORE MINORITY INTEREST AND RESULTS OF AFFILIATES |   |   |   |   |   | 458,437    |   |   | 399,754    |   |   | 497,169 |   |
| Minority                interest                                         |   |   |   |   |   | (9,622     | )      |   | (9,580     | ) |   | (8,180 | ) |
| Equity                in earnings (losses) of affiliates                 |   |   |   |   |   | (3,096     | )      |   | (34        | ) |   | 316 |   |
| NET                INCOME                                                |   |   |   |   |   | 445,719    |   |   | 390,140    |   |   | 489,305 |   |
|                                                                     |   |   |   |   |   |       |   |   |       |   |   |   |   |
| Other                comprehensive income (loss)                         |   |   |   |   |   | (4,632     | )      |   | 9,287      |   |   | 11,206 |   |
| COMPREHENSIVE                INCOME                                      |   |   |   |   |   | 441,087    |   |   | 399,427    |   |   | 500,511 |   |
|                                                                     |   |   |   |   |   |       |   |   |       |   |   |   |   |
| EARNINGS                PER SHARE                                        |   |   | 26     |   |   |       |   |   |       |   |   |   |   |
| Basic-                                                                   |   |   |   |   |   |       |   |   |       |   |   |   |   |
| Preferred                                                                |   |   |   |   |   | 0.6369     |   |   |       |   |   |   |   |
| Common                                                                   |   |   |   |   |   | 0.5790     |   |   | 0.5273     |   |   | 0.6611 |   |
| Diluted-                                                                 |   |   |   |   |   |       |   |   |       |   |   |   |   |
| Preferred                                                                |   |   |   |   |   | 0.6338     |   |   |       |   |   |   |   |
| Common                                                                   |   |   |   |   |   | 0.5762     |   |   | 0.5252     |   |   | 0.6603 |   |
|                                                                     |   |   |   |   |   |       |   |   |       |   |   |   |   |
| WEIGHTED                AVERAGE NUMBER OF SHARES (in thousands)          |   |   |   |   |   |       |   |   |       |   |   |   |   |
| Basic-                                                                   |   |   |   |   |   |       |   |   |       |   |   |   |   |
| Preferred                                                                |   |   |   |   |   | 479,288    |   |   |       |   |   |   |   |
| Common                                                                   |   |   |   |   |   | 242,544    |   |   | 739,904    |   |   | 740,142 |   |
| Diluted-                                                                 |   |   |   |   |   |       |   |   |       |   |   |   |   |
| Preferred                                                                |   |   |   |   |   | 482,739    |   |   |       |   |   |   |   |
| Common                                                                   |   |   |   |   |   | 242,544    |   |   | 742,903    |   |   | 741,047 |   |

----

**Embraer      - Empresa Brasileira de Aeronáutica S.A.**

**Consolidated      Statements of Cash Flows**

**Years      Ended December 31, 2005, 2006 and 2007**

**In      thousands of U.S. dollars **

----

|                                                                                                     |   | 2005   |       | 2006   |   | 2007       |   |
|----------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
|                                                                                                     |   |   |       |   |   |       |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES                                                      |   |   |       |   |   |       |   |
| Net                income                                                                                |   |   | 445,719    |   |   | 390,140    |   |   | 489,305 |   |
| Adjustments                to reconcile net income to net cash from operating                activities: |   |   |       |   |   |       |   |   |   |   |
| Depreciation                                                                                             |   |   | 61,491     |   |   | 63,859     |   |   | 58,798 |   |
| Allowance                for doubtful accounts                                                           |   |   | 1,749      |   |   | 4,171      |   |   | 1,491 |   |
| Allowance                (reversal) for inventory obsolescence                                           |   |   | 10,880     |   |   | 10,584     |   |   | (9,944 | ) |
| Loss                on property, plant and equipment disposals                                           |   |   | 750        |   |   | 885        |   |   | 670 |   |
| Accrued                interest                                                                          |   |   | 5,123      |   |   | 551        |   |   | 4,491 |   |
| Minority                interest                                                                         |   |   | 9,622      |   |   | 9,580      |   |   | 8,180 |   |
| Foreign                exchange loss, net                                                                |   |   | 15,218     |   |   | 4,098      |   |   | 37,669 |   |
| Deferred                income taxes                                                                     |   |   | (42,270    | )      |   | (1,295     | )      |   | (30,798 | ) |
| Equity                in earnings (losses) of affiliates                                                 |   |   | 3,096      |   |   | 34         |   |   | (316 | ) |
| Other                                                                                                    |   |   | (154       | )      |   | (1,546     | )      |   | 1,595 |   |
| Changes                in assets and liabilities:                                                        |   |   |       |   |   |       |   |   |   |   |
| Temporary                cash investments                                                                |   |   | (179,676   | )      |   | 18,600     |   |   | (629,546 | ) |
| Trade                accounts receivable and customer and commercial financing, net                      |   |   | (227,949   | )      |   | 155,284    |   |   | (274,921 | ) |
| Collateralized                accounts receivable                                                        |   |   | (14,180    | )      |   | 34,498     |   |   | 342,033 |   |
| Inventories                                                                                              |   |   | (79,832    | )      |   | (577,285   | )      |   | (433,985 | ) |
| Other                assets                                                                              |   |   | (119,194   | )      |   | 34,373     |   |   | 91,880 |   |
| Trade                accounts payable                                                                    |   |   | 172,591    |   |   | 181,639    |   |   | (6,296 | ) |
| Other                payables and accrued liabilities                                                    |   |   | 41,555     |   |   | (24,663    | )      |   | (22,258 | ) |
| Accrued                taxes on income                                                                   |   |   | 24,305     |   |   | (32,321    | )      |   | (4,973 | ) |
| Contribution                from suppliers                                                               |   |   | (42,185    | )      |   | (5,635     | )      |   | 19,984 |   |
| Taxes                and payroll charges payable                                                         |   |   | 124,756    |   |   | (35,105    | )      |   | (27,039 | ) |
| Advances                from customers                                                                   |   |   | 103,819    |   |   | 145,460    |   |   | 441,135 |   |
| Contingencies                                                                                            |   |   | 31,676     |   |   | 11,027     |   |   | (5,121 | ) |
| Net                cash provided by operating activities                                                 |   |   | 346,910    |   |   | 386,933    |   |   | 52,034 |   |
|                                                                                                     |   |   |       |   |   |       |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES                                                      |   |   |       |   |   |       |   |   |   |   |
| Proceeds                from sale of property, plant and equipment                                       |   |   | 557        |   |   | 697        |   |   | 4,087 |   |
| Court-mandated                escrow deposits, net of withdrawals                                        |   |   | (164       | )      |   | (88,554    | )      |   | (37,108 | ) |
| Additions                to property, plant and equipment                                                |   |   | (51,766    | )      |   | (90,761    | )      |   | (208,947 | ) |
| Acquisition                of investments                                                                |   |   | -          |   |   | (808       | )      |   | - |   |
| Write                down of investments                                                                 |   |   | 1,699      |   |   | -          |   |   | - |   |
| Other                                                                                                    |   |   | (822       | )      |   | (92        | )      |   | (13,947 | )  |
| Net                cash used in investing activities                                                     |   |   | (50,496    | )      |   | (179,518   | )      |   | (255,915 | ) |
|                                                                                                     |   |   |       |   |   |       |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES                                                      |   |   |       |   |   |       |   |   |   |   |
| Proceeds                from borrowings                                                                  |   |   | 1,523,261  |   |   | 1,258,249  |   |   | 1,771,987 |   |
| Repayment                of borrowings                                                                   |   |   | (1,308,817 | )      |   | (1,497,751 | )      |   | (1,471,971 | ) |
| Payments                of capital lease obligations                                                     |   |   | (2,687     | )      |   | (2,946     | )      |   | (2,363 | ) |
| Proceeds                from issuance of shares                                                          |   |   | 12,104     |   |   | 5,116      |   |   | 3,601 |   |
| Dividends                and/or interest on capital paid                                                 |   |   | (198,945   | )      |   | (157,771   | )      |   | (163,475 | ) |
| Acquisition                of own shares for treasury                                                    |   |   | -          |   |   | -          |   |   | (784 | ) |
| Net                cash provided by (used in) financing activities                                       |   |   | 24,916     |   |   | (395,103   | )      |   | 136,995 |   |
|                                                                                                     |   |   |       |   |   |       |   |   |   |   |
| Effect                of exchange rate changes on cash and cash equivalents                              |   |   | 54,012     |   |   | 57,924     |   |   | 164,856 |   |
|                                                                                                     |   |   |       |   |   |       |   |   |   |   |
| Increase                (decrease) in cash and cash equivalents                                          |   |   | 375,341    |   |   | (129,763   | )      |   | 97,970 |   |
|                                                                                                     |   |   |       |   |   |       |   |   |   |   |
| Cash                and cash equivalents, at beginning of year                                           |   |   | 963,818    |   |   | 1,339,159  |   |   | 1,209,396 |   |
|                                                                                                     |   |   |       |   |   |       |   |   |   |   |
| Cash                and cash equivalents, at end of year                                                 |   |   | 1,339,159  |   |   | 1,209,396  |   |   | 1,307,366 |   |
|                                                                                                     |   |   |       |   |   |       |   |   |   |   |
| SUPPLEMENTAL                DISCLOSURE OF CASH FLOW INFORMATION (Note 37)                                |   |   |       |   |   |       |   |   |   |   |

----

**Embraer      - Empresa Brasileira de Aeronáutica S.A.**

**Consolidated      Statements of Shareholders' Equity for the **

**Years      ended December 31, 2005, 2006 and 2007**

**In      thousands of U.S. dollars **

----

|                                                                                          |   | Capital              |         |   |   |                 |   |   |        |                                                                                                     |   | Accumulated    |   |     |   |
|-----------------------------------------------------------------------------------------------|--------|----------------------|--------------|--------|--------|----------------------|--------|--------|-------------|----------------------------------------------------------------------------------------------------------|--------|----------------|--------|----------|--------|
|                                                                                          |   | Preferred            |         | Common |   | Additional           |   |   |        | Appropriated                                                                                             |   | Unappropriated |   | other    |   |   |   |
|                                                                                          |   | Number of  |         |   |   | Number of  |   |   |        | paid-in capital                                                                                     |   | Treasury       |   | retained |   | retained |   | comprehensive |   |   |   |
|                                                                                          |   | shares               |         | Amount |   | shares               |   | Amount |        |         earnings         |   | shares         |   | earnings |   | earnings |   | (loss) income |   | Total |   |
|                                                                                          |   |                 |         |   |   |                 |   |   |        |                                                                                                     |   |           |   |     |   |   |   |   |   |   |   |
| BALANCE                  AT DECEMBER 31, 2004                                                 |   |                 | 475,797,420  |   |   | 756,138              |   |   | 242,544,448 |                                                                                                     |   | 240,201        |   |     | 8,353  |   |   | - |   |   | 111,443 |   |   | 234,849 |   |   | 2,884 |   |   | 1,353,868 |   |
|                                                                                          |   |                 |         |   |   |                 |   |   |        |                                                                                                     |   |           |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital                  increase                                                             |   |                 | 3,490,189    |   |   | 12,104               |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 12,104 |   |
| Capitalization                  of reserves                                                   |   |                 | -            |   |   | 114,385              |   |   | -           |                                                                                                     |   | 58,196         |   |     | -      |   |   | - |   |   | - |   |   | (172,581 | ) |   | - |   |   | - |   |
| Net                  income                                                                   |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | 445,719 |   |   | - |   |   | 445,719 |   |
| Legal                  reserve                                                                |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | 15,268 |   |   | (15,268 | ) |   | - |   |   | - |   |
| Dividends                  / interest on capital                                              |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | (186,837 | ) |   | - |   |   | (186,837 | ) |
| Expired                  dividends                                                            |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | 32 |   |   | - |   |   | 32 |   |
| Cumulative                  translation adjustment                                            |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | - |   |   | (4,632 | ) |   | (4,632 | ) |
|                                                                                          |   |                 |         |   |   |                 |   |   |        |                                                                                                     |   |           |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE                  AT DECEMBER 31, 2005                                                 |   |                 | 479,287,609  |   |   | 882,627              |   |   | 242,544,448 |                                                                                                     |   | 298,397        |   |     | 8,353  |   |   | - |   |   | 126,711 |   |   | 305,914 |   |   | (1,748 | ) |   | 1,620,254 |   |
|                                                                                          |   |                 |         |   |   |                 |   |   |        |                                                                                                     |   |           |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital                  increase                                                             |   |                 | -            |   |   | -                    |   |   | 1,292,094   |                                                                                                     |   | 5,116          |   |     | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 5,116 |   |
| Restructuring                  adjustments                                                    |   |                 | -            |   |   | -                    |   |   | 16,779,763  |                                                                                                     |   | 248,266        |   |     | (8,353 | ) |   | - |   |   | (126,711 | ) |   | (109,407 | ) |   | (3,795 | ) |   | - |   |
| Conversion                  of preferred shares into common shares                            |   |                 | (479,287,609 | )      |   | (882,627             | )      |   | 479,287,609 |                                                                                                     |   | 882,627        |   |     | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Net                  income                                                                   |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | 390,140 |   |   | - |   |   | 390,140 |   |
| Legal                  reserve                                                                |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | 13,797 |   |   | (13,797 | ) |   | - |   |   | - |   |
| Dividends                  / interest on capital                                              |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | (150,516 | ) |   | - |   |   | (150,516 | ) |
| Cumulative                  translation adjustment                                            |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | - |   |   | 8,533 |   |   | 8,533 |   |
| Post-retirement                  benefits – Adoption SFAS 158 (net of tax of $476) |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | - |   |   | 754 |   |   | 754 |   |
|                                                                                     |   |                 |         |   |   |                 |   |   |        |                                                                                                     |   |           |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE                  AT DECEMBER 31, 2006                                                 |   |                 | -            |   |   | -                    |   |   | 739,903,914 |                                                                                                     |   | 1,434,406      |   |     | -      |   |   | - |   |   | 13,797 |   |   | 422,334 |   |   | 3,744 |   |   | 1,874,281 |   |
|                                                                                          |   |                 |         |   |   |                 |   |   |        |                                                                                                     |   |           |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital                  increase – stock options exercised                        |   |                 | -            |   |   | -                    |   |   | 561,130     |                                                                                                     |   | 3,601          |   |     | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 3,601 |   |
| Net                  income                                                                   |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | 489,305 |   |   | - |   |   | 489,305 |   |
| Legal                  reserve                                                                |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | 16,741 |   |   | (16,741 | ) |   | - |   |   | - |   |
| Treasury                  shares acquired                                                     |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | (784 | ) |   | - |   |   | - |   |   | - |   |   | (784 | ) |
| Dividends                  / interest on capital                                              |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | (128,496 | ) |   | - |   |   | (128,496 | ) |
| Expired                  dividends                                                            |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | 36 |   |   | - |   |   | 36 |   |
| Cumulative                  translation adjustment                                            |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | 291 |   |   | 10,472 |   |   | 10,763 |   |
| Transfer                  between reserves                                                    |   |                 | -            |   |   |                 |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | 23,033 |   |   | (23,033 | ) |   |   |   |   | - |   |
| Post-retirement                  benefits (net of tax of $455)                                |   |                 | -            |   |   | -                    |   |   | -           |                                                                                                     |   | -              |   |     | -      |   |   | - |   |   | - |   |   | - |   |   | 734 |   |   | 734 |   |
|                                                                                          |   |                 |         |   |   |                 |   |   |        |                                                                                                     |   |           |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE                  AT DECEMBER 31, 2007                                                 |   |                 | -            |   |   | -                    |   |   | 740,465,044 |                                                                                                     |   | 1,438,007      |   |     | -      |   |   | (784 | ) |   | 53,571 |   |   | 743,696 |   |   | 14,950 |   |   | 2,249,440 |   |

----

**Embraer        - Empresa Brasileira de Aeronáutica S.A.**

**Notes          to Consolidated Financial Statements**

**Years          Ended December 31, 2005, 2006 and 2007**

**In          thousands of U.S. dollars, unless otherwise stated**

----

| **1** | **The                Company and its Operations** |
|-------|---------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **2** | **Presentation                and Consolidation of****F****inancial****S****tatements** |
|-------|-----------------------------------------------------------------------------------------|

| **(a)** | **Presentation** |
|---------|------------------|

| (i) | 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 accounting principles applied                by the                Company in its statutory financial statements prepared in accordance                with                accounting practices adopted in Brazil (“BR                GAAP”). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | A                substantial portion of the Company's sales is destined to export                markets                and a substantial level of financing, manufacturing and other costs                is                denominated in U.S. dollars (US$). The Company presents its financial                statements in accordance with Financial Accounting Standards Board                (“FASB”) Statement of Financial Accounting Standards (“SFAS”)                52 - “*Foreign                Currency Translation*”                (“SFAS 52”). The Company's Board of Directors and management have                historically considered that the U.S. dollar has been, and remains                in                their opinion, the currency in which the Company principally operates.                Accordingly, the Company's management has concluded that its functional                currency is currently the U.S.                dollar. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii) | For                US GAAP purposes, the Company has elected the U.S. dollar as its                reporting                currency, as it believes such presentation is more meaningful to                readers.                Translation gains and losses are recorded in Foreign exchange loss,                net in                the statement of income. |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iv) | For                subsidiaries whose functional currency is a currency other than the                U.S.                dollar, asset and liability accounts are translated into the Company's                reporting currency using exchange rates in effect at the date of                the                balance sheet, and income and expense items are translated using                weighted                average exchange rates. Resulting translation adjustments are reported                in                a separate component of shareholders' equity, in Cumulative Translation                Adjustment. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **(b)** | **Consolidation** |
|---------|-------------------|

*Consolidation      of Variable Interest Entities*

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **(c)** | **Acquisition** |
|---------|-----------------|

*Business      Combinations*

| **(d)** | **Restatement                of prior years financial                statements** |
|---------|-----------------------------------------------------------------------------------|

| Gross                profit – Year ended |   | As                Reported |      | Adjustments |   | As                Restated |   |
|------------------------------------------------|--------|----------------------------|-----------|-------------|--------|----------------------------|--------|
| December                31, 2005               |   |                       | 1,158,091 |        |   | (107,503                   | )      |   | 1,050,588 |   |
| December                31, 2006               |   |                       | 1,071,169 |        |   | (118,452                   | )      |   | 952,717 |   |

| Income                from operations – Year ended |   | As                Reported |    | Adjustments |   | As                Restated |   |
|----------------------------------------------------------|--------|----------------------------|---------|-------------|--------|----------------------------|--------|
| December                31, 2005                         |   |                       | 507,846 |        |   | 2,445                      |   |   | 510,291 |   |
| December                31, 2006                         |   |                       | 307,739 |        |   | 35,092                     |   |   | 342,831 |   |

| **3** | **Summary                of Significant Accounting                Policies** |
|-------|------------------------------------------------------------------------------|

| **(a)** | **Revenue                recognition** |
|---------|----------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

*Accounting      for Consideration Given by a Vendor to a Customer*

| **(b)** | **Cost                of sales and services** |
|---------|-----------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

*Accounting      for Contingencies*

| **(c)** | **Cash                  and cash equivalents** |
|---------|------------------------------------------------|

| **(d)** | **Temporary                  cash investments** |
|---------|-------------------------------------------------|

----

**Embraer        - Empresa Brasileira de Aeronáutica S.A.**

**Notes          to Consolidated Financial Statements**

**Years          Ended December 31, 2005, 2006 and 2007**

**In          thousands of U.S. dollars, unless otherwise stated**

----

| **(e)** | **Allowance                for doubtful accounts** |
|---------|----------------------------------------------------|

| **(f)** | **Inventories** |
|---------|-----------------|

| **(g)** | **Spare                part exchange pools** |
|---------|----------------------------------------------|

| **(h)** | **Customer                and commercial financing** |
|---------|------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **(i)** | **Collateralized                accounts receivable and non-recourse and recourse                debt** |
|---------|---------------------------------------------------------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **(j)** | **Property,                plant and equipment** |
|---------|--------------------------------------------------|

*Capitalization      of Interest Costs*

*Accounting      for Leases*

*Accounting      for the Costs of Computer Software Developed or Obtained for Internal      Use*

| **(k)** | **Marketing                and advertising expenses** |
|---------|-------------------------------------------------------|

| **(l)** | **Investments** |
|---------|-----------------|

*Accounting      for Certain Investments in Debt and Equity Securities*

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **(m)** | **Product                warranties** |
|---------|---------------------------------------|

| **(n)** | **Contingencies                and guarantees** |
|---------|-------------------------------------------------|

*Guarantor's      Accounting and Disclosure Requirements for Guarantees, Including Indirect      Guarantees of the Indebtedness of Others*

| **(o)** | **Post-retirement                benefits** |
|---------|---------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

*Employers'      Accounting for Pensions*
*Employers'      Accounting for Postretirement Benefits Other Than Pensions*

*Employers'      Accounting for Defined Benefit Pension and Other Postretirement Plans*
*an      amendment of FASB Statements 87, 88, 106 and 132(R*

| **(p)** | **Employee                profit sharing plan** |
|---------|-------------------------------------------------|

|  | . | Production                employees - US$28,694 (40.4%), to Cost of sales and                services; |
|--|---|--------------------------------------------------------------------------------------------------------|

|  | . | Sales                employees - US$14,217 (20.0%), to Selling                expenses; |
|--|---|-----------------------------------------------------------------------------------------|

|  | . | Administrative                employees - US$7,215 (10.2%), to General and administrative expenses;                and |
|--|---|------------------------------------------------------------------------------------------------------------------------|

|  | . | Research                and development employees - US$20,913 (29.4%), to Research and development                expenses. |
|--|---|-----------------------------------------------------------------------------------------------------------------------------|

| **(q)** | **Research                and development** |
|---------|---------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **(r)** | **Stock                compensation** |
|---------|---------------------------------------|

*Share-Based      Payment*

*Accounting      for Stock Issued to Employees*
*Accounting      for Stock-based Compensation*

| **(s)** | **Income                taxes** |
|---------|---------------------------------|

| Federal                income tax rate      |   |   | 25 | % |
|---------------------------------------------|--------|--------|----|---|
| Social                contribution tax rate |   |   | 9  | % |
| Combined                tax rate            |   |   | 34 | % |

*Accounting      for Income Taxes*

*Accounting      for Uncertainty in Income Taxes”,*

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **(t)** | **Derivative                financial instruments** |
|---------|-----------------------------------------------------|

*Accounting      for Derivative Instruments and Hedging Activities*

| **(u)** | **Comprehensive                income** |
|---------|-----------------------------------------|

*Reporting      Comprehensive Income*

| **(v)** | **Compensated                absences** |
|---------|-----------------------------------------|

| **(x)** | **Use                of estimates** |
|---------|-------------------------------------|

| **4** | **Recently                Issued Accounting Pronouncements – Not Yet                Adopted** |
|-------|-----------------------------------------------------------------------------------------------------|

*Fair      Value Measurements*

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

*The      Fair Value Option for Financial Assets and Financial Liabilities, including      an      amendment of FASB Statements 115*

*Business      Combinations*
*Business      Combinations*

*Noncontrolling      Interests in Consolidated Financial Statements - an amendment of ARB      51*

| **5** | **Cash                and Cash Equivalents** |
|-------|----------------------------------------------|

|                                                          |   | 2006   |      | 2007   |   |
|---------------------------------------------------------------|--------|--------|-----------|--------|--------|
|                                                          |   |   |      |   |   |
| Cash                equivalents                               |   |   |      |   |   |
| Denominated                in US$                (i)          |   |   | 751,331   |   |   | 1,122,927 |   |
| Denominated                in R$                (ii)          |   |   | 333,211   |   |   | 59,021 |   |
| Denominated                in other                currencies |   |   | 10,445    |   |   | 12,807 |   |
| Cash                and bank balances                         |   |   |      |   |   |   |   |
| Denominated                in other                currencies |   |   | 79,737    |   |   | 72,770 |   |
| Denominated                in US$                             |   |   | 24,441    |   |   | 27,869 |   |
| Denominated                in R$                              |   |   | 10,231    |   |   | 11,972 |   |
|                                                          |   |   | 1,209,396 |   |   | 1,307,366 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|  | (i) | Represents                time deposits, money market funds and overnight funds deposited overseas                by consolidated subsidiaries. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (ii) | Mainly                represented by money market funds with several financial institutions.                These funds are exclusively for the benefit of the Company and managed                by                third parties who charge a monthly commission fee. The funds are                comprised                of investments that have daily liquidity and are marked-to-market                on a                daily basis with changes in fair value reflected in results of operations.                The target returns are specified with each financial institution                based on                a percentage of the CDI (Brazilian Interbank Deposit                Rate). |
|--|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **6** | **T****emporary                  Cash Investments** |
|-------|-----------------------------------------------------|

|                                        |   | 2006   |    | 2007   |   |
|---------------------------------------------|--------|--------|---------|--------|--------|
|                                        |   |   |    |   |   |
| Temporary                  cash investments |   |   | 555,795 |   |   | 1,185,745 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **7** | **T****rade****A****ccounts****R****eceivable** |
|-------|-------------------------------------------------|

|                                                  |   | 2006   |    | 2007   |   |
|-------------------------------------------------------|--------|--------|---------|--------|--------|
|                                                  |   |   |    |   |   |
| Aviation                Services                      |   |   | 159,939 |   |   | 206,049 |   |
| Defense                and Government                 |   |   |    |   |   |   |   |
| -                Brazilian Air Force                  |   |   | 87,268  |   |   | 68,910 |   |
| -                Other                                |   |   | 26,103  |   |   | 23,526 |   |
| Commercial                Aviation                    |   |   | -       |   |   | 34,717 |   |
| Others                                                |   |   | 56,094  |   |   | 92,017 |   |
|                                                  |   |   | 329,404 |   |   | 425,219 |   |
| Less                - allowance for doubtful accounts |   |   | (29,417 | )      |   | (30,908 | ) |
|                                                  |   |   | 299,987 |   |   | 394,311 |   |
|                                                  |   |   |    |   |   |   |   |
| Less                - current portion                 |   |   | 277,878 |   |   | 354,650 |   |
| Long-term                portion                      |   |   | 22,109  |   |   | 39,661 |   |

|                               |   | 2005   |   | 2006   |   | 2007   |   |
|------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                               |   |   |   |   |   |   |   |
| Beginning                  balance |   |   | 23,497 |   |   | 25,246 |   |   | 29,417 |   |
| Additions                          |   |   | 2,109  |   |   | 5,674  |   |   | 6,433 |   |
| Write-offs                         |   |   | (360   | )      |   | (1,503 | )      |   | (4,942 | ) |
| Ending                  balance    |   |   | 25,246 |   |   | 29,417 |   |   | 30,908 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                                   |   | Net                Sales (%) |   |
|----------------------------------------|--------|------------------------------|--------|
|                                   |   | 2005                         |   | 2006 |   | 2007 |   |
| Commercial                Aviation     |   |                         |   |   |   |   |   |
| Air                Canada              |   |                         | 11.4   |   |   | 11.5 |   |   | 13.1 |   |
| Republic/                Chautauqua    |   |                         | 17.5   |   |   | - |   |   | 12.6 |   |
| Jet                Blue                |   |                         | -      |   |   | 11.1 |   |   | - |   |
| Continental/                ExpressJet |   |                         | 11.7   |   |   | - |   |   | - |   |
| American                Eagle          |   |                         | 10.3   |   |   | - |   |   | - |   |

| **8** | **C****ustomer                and****C****ommercial****F****inancing** |
|-------|------------------------------------------------------------------------|

|                                                                                                                                |   | 2006   |    | 2007   |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|
|                                                                                                                                |   |   |    |   |   |
| Operating                lease equipment, at cost, less accumulated depreciation of US$48,268                (2006- US$36,081), (i) |   |   | 351,573 |   |   | 377,838 |   |
| Notes                receivable (ii)                                                                                                |   |   | 217,393 |   |   | 36,836 |   |
|                                                                                                                                |   |   | 568,966 |   |   | 414,674 |   |
| Less                – Current portion                                                                                         |   |   | 16,215  |   |   | 4,292 |   |
| Long-term                portion                                                                                                    |   |   | 552,751 |   |   | 410,382 |   |

|  | (i) | Rental                income for leased aircraft amounted to US$26,202, US$34,785 and US$44,172                for 2005, 2006 and 2007, respectively.  Minimum future rentals on                non-cancelable operating leases for each of the five succeeding years                are                as follows at December 31, 2007: |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2008 |   |   | 37,357 |   |
|------|--------|--------|--------|--------|
| 2009 |   |   | 31,957 |   |
| 2010 |   |   | 21,533 |   |
| 2011 |   |   | 9,480  |   |
| 2012 |   |   | 2,444  |   |

|  | (ii) | Notes                receivable represent sales financing, indexed at average interest                rates of                4.6% per annum with maturities through 2021. In December 2007, the                Company                consummated an agreement to securitize receivables with a book value                of                US$193,882 Pursuant to SFAS 140 “*Accounting                for transfer and servicing of financial assets and extinguishments                of                liabilities, a replacement of FASB Statement 125”* the                receivables were not derecognized from the balance sheet. The receivables                were reclassified to Collateralized accounts receivables. |
|--|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| 2008       |   |   | 4,292  |   |
|------------|--------|--------|--------|--------|
| 2009       |   |   | 2,711  |   |
| 2010       |   |   | 2,837  |   |
| 2011       |   |   | 2,970  |   |
| 2012       |   |   | 3,109  |   |
| 2013       |   |   | 3,254  |   |
| Thereafter |   |   | 17,663 |   |
| Total      |   |   | 36,836 |   |

| **9** | **Collateralized                Accounts Receivable and Non-Recourse and Recourse                Debt** |
|-------|---------------------------------------------------------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                                                     |   | 2006   |     | 2007   |   |
|----------------------------------------------------------|--------|--------|----------|--------|--------|
|                                                     |   |   |     |   |   |
| Estimated                residual value of leased assets |   |   | 587,238  |   |   | 473,115 |   |
| Minimum                payments receivable               |   |   | 773,015  |   |   | 465,064 |   |
| Unearned                income                           |   |   | (540,531 | )      |   | (460,490 | ) |
| Investments                in sales-type lease           |   |   | 819,722  |   |   | 477,689 |   |
| Less                - current portion                    |   |   | 70,980   |   |   | 12,416 |   |
| Long-term                portion                         |   |   | 748,742  |   |   | 465,273 |   |

| 2008       |   |   | 23,305  |   |
|------------|--------|--------|---------|--------|
| 2009       |   |   | 23,315  |   |
| 2010       |   |   | 23,316  |   |
| 2011       |   |   | 23,794  |   |
| 2012       |   |   | 26,181  |   |
| 2013       |   |   | 22,986  |   |
| Thereafter |   |   | 322,167 |   |
|       |   |   | 465,064 |   |

| **10** | **I****nventories** |
|--------|---------------------|

|                                 |   | 2006   |      | 2007   |   |
|--------------------------------------|--------|--------|-----------|--------|--------|
|                                 |   |   |      |   |   |
| Finished                goods        |   |   | 289,212   |   |   | 354,296 |   |
| Work-in-process                (i)   |   |   | 744,284   |   |   | 965,326 |   |
| Raw                materials         |   |   | 825,235   |   |   | 897,681 |   |
| Inventory                in transit  |   |   | 171,289   |   |   | 240,217 |   |
| Advances                to suppliers |   |   | 17,224    |   |   | 33,653 |   |
|                                 |   |   | 2,047,244 |   |   | 2,491,173 |   |

|  | (i) | Includes                US$73,939 related to six pre-production series aircraft (2006 - US$141,743                related to eight aircraft) of the EMBRAER 170/190 family and one                Legacy,                which were in construction or in use under the certification campaign. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                                        |   | 2005   |    | 2006   |   | 2007    |   |
|---------------------------------------------|--------|--------|---------|--------|--------|---------|--------|
|                                        |   |   |    |   |   |    |   |
| Beginning                balance            |   |   | 104,843 |   |   | 112,048 |   |   | 123,766 |   |
| Additions                                   |   |   | 25,122  |   |   | 16,659  |   |   | 6,974 |   |
| Write-off                                   |   |   | (14,242 | )      |   | (6,075  | )      |   | (16,919 | ) |
| Foreign                exchange (gain) loss |   |   | (3,675  | )      |   | 1,134   |   |   | 2,834 |   |
| Ending                balance               |   |   | 112,048 |   |   | 123,766 |   |   | 116,655 |   |

| **11** | **Guarantee                Deposits and Other Assets** |
|--------|--------------------------------------------------------|

|                                                        |   | 2006   |    | 2007   |   |
|-------------------------------------------------------------|--------|--------|---------|--------|--------|
|                                                        |   |   |    |   |   |
| Guarantee                deposits (i)                       |   |   | 590,720 |   |   | 457,239 |   |
| Court-mandated                escrow deposits (ii)          |   |   | 108,870 |   |   | 145,978 |   |
| Taxes                recoverable (iii)                      |   |   | 54,283  |   |   | 99,997 |   |
| Spare                part exchange pools (Note 3(g))        |   |   | 29,889  |   |   | 60,558 |   |
| Credits                with suppliers (iv)                  |   |   | 17,492  |   |   | 28,585 |   |
| Restricted                cash from sales-type leases       |   |   | 9,717   |   |   | 23,942 |   |
| Prepaid                insurance                            |   |   | 14,479  |   |   | 12,714 |   |
| Advances                to employees                        |   |   | 9,321   |   |   | 12,393 |   |
| Compulsory                loans and bank guarantee deposits |   |   | 16,322  |   |   | 12,229 |   |
| Commission                advances                          |   |   | 5,361   |   |   | 10,489 |   |
| Prepaid                expenses                             |   |   | 15,395  |   |   | 9,762 |   |
| Unrealized                gains on derivatives (Note 32)    |   |   | 4,122   |   |   | 8,069 |   |
| Other                                                       |   |   | 35,363  |   |   | 41,529 |   |
|                                                        |   |   | 911,334 |   |   | 923,484 |   |
| Less-                Current portion                        |   |   | 465,703 |   |   | 217,157 |   |
| Long-term                portion                            |   |   | 445,631 |   |   | 706,327 |   |

----

**Embraer              - Empresa Brasileira de Aeronáutica S.A.**

**Notes                to Consolidated Financial Statements**

**Years                Ended December 31, 2005, 2006 and 2007**

**In                thousands of U.S. dollars, unless otherwise stated**

----

|  | (i) | Guarantee                              deposits comprise,                              principally,: |
|--|-----|------------------------------------------------------------------------------------------------------|

|   | (a) | US$287,509                refers to collateral for financing arrangements and residual value                guarantees of certain aircraft sold (Note 35) (2006 - US$272,661).                In the                event the guarantor of the debt (an unrelated third party) is required                to                pay the creditors under such financing arrangement or the residual                value                guarantee, the guarantor has the right to withdraw the escrow account.                The                deposited amounts will be released when the financing contracts mature                (between 2013 and 2021) if no default by the buyers of the aircraft                occurs                or the aircraft market price is above the residual value guarantee.                The                interest earned on the escrow funds is added to the balance in escrow                and                is recorded as Interest income by the Company. In order to enhance                returns                on such guarantee deposits, in 2004, the Company bought structured                notes                in the face amount of US$123,400 with the depositary bank which generated                interest of US$7,581 in 2007 (2006 - US$7,581), which was added to                the                principal amount. This yield enhancement was obtained through a credit                default swap transaction which provides the right of early redemption                of                the note in case of a credit event by the Company. Upon such credit                event,                notes may be redeemed by the holder at the greater of the note's                market                value or its original face amount, which would result in the loss                of all                interest accrued on such note to date. The interest accrued as of                December                31, 2007 totals US$22,835. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | US$169,730                (2006 – US$318,059) remunerated deposited with third party financial                institutions as a pledge under a specific sale financing                structure. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (ii) | Court-mandated                escrow deposits relate to amounts deposited in connection with pending                legal actions, primarily taxes and contributions which are being                contested                through the courts (Notes 17 and 19). |
|--|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (iii) | Taxes                recoverable refer mainly to PIS (Social Integration Program), COFINS                (Contribution for Social Security) and ICMS (Value-added State Tax)                credits recoverable on purchases of production                inputs. |
|--|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (iv) | Credits                with suppliers represent rework performed by the Company, reimbursable                by                the suppliers. |
|--|------|-----------------------------------------------------------------------------------------------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **12** | **I****nvestments** |
|--------|---------------------|

|                                                  |   | 2006   |   | 2007   |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|
|                                                  |   |   |   |   |   |
| Held-to-maturity                securities - NTNs (i) |   |   | 32,840 |   |   | 40,847 |   |
| Other                                                 |   |   | 1,004  |   |   | 1,611 |   |
|                                                  |   |   | 33,844 |   |   | 42,458 |   |

|  | (i) | NTNs                refers to Brazilian Federal Government National Treasury Notes acquired                by                the Company from customers, related to the equalization of interest                rates                to be paid under the Export Financing Program - PROEX between the                11th                and 15th                year after the sale of the related aircraft, recorded at present                value.                The interest earned is added to the balance and recorded as interest                income, as the Company has the intent to hold these securities until                maturity. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **13** | **P****roperty,                Plant and Equipment, Net** |
|--------|-----------------------------------------------------------|

|                                        |   | Estimated        |                                      | 2006   |   | 2007         |   |
|---------------------------------------------|--------|------------------|-------------------------------------------|--------|--------|--------------|--------|
|                                        |   | useful life |                                      |   |   | Accumulated  |   |   |   |   |   | Accumulated |   |   |   |
|                                        |   | (years)          |                                      | Cost   |   | depreciation |   | Net |   | Cost |   | depreciation |   | Net |   |
|                                        |   |             |                                      |   |   |         |   |   |   |   |   |   |   |   |   |
| Land                                        |   |             | -                                         |   |   | 2,483        |   |   | - |   |   | 2,483 |   |   | 3,372 |   |   | - |   |   | 3,372 |   |
| Buildings                  and improvements |   |             | 10                  to 48                 |   |   | 234,407      |   |   | 71,312 |   |   | 163,095 |   |   | 268,696 |   |   | 82,168 |   |   | 186,528 |   |
| Machinery                  and equipment    |   |             | 5                  to                  17 |   |   | 290,377      |   |   | 223,713 |   |   | 66,664 |   |   | 364,049 |   |   | 244,147 |   |   | 119,902 |   |
| Tooling                                     |   |             | 10                                        |   |   | 148,781      |   |   | 66,699 |   |   | 82,083 |   |   | 224,475 |   |   | 81,406 |   |   | 143,069 |   |
| Installations                               |   |             | 10                  to 31                 |   |   | 84,552       |   |   | 62,552 |   |   | 22,000 |   |   | 93,027 |   |   | 67,237 |   |   | 25,790 |   |
| Software                                    |   |             | 5                                         |   |   | 84,355       |   |   | 67,580 |   |   | 16,775 |   |   | 98,969 |   |   | 78,517 |   |   | 20,452 |   |
| Computers                  and peripherals  |   |             | 5                                         |   |   | 49,418       |   |   | 41,178 |   |   | 8,240 |   |   | 55,517 |   |   | 44,291 |   |   | 11,226 |   |
| Furniture                  and fixtures     |   |             | 5                  to                  10 |   |   | 28,233       |   |   | 19,435 |   |   | 8,798 |   |   | 33,234 |   |   | 21,133 |   |   | 12,101 |   |
| Aircraft                  (i)               |   |             | 5                  to                  20 |   |   | 18,650       |   |   | 10,799 |   |   | 7,851 |   |   | 15,753 |   |   | 11,579 |   |   | 4,174 |   |
| Vehicles                                    |   |             | 5                  to                  14 |   |   | 10,556       |   |   | 8,234 |   |   | 2,322 |   |   | 12,236 |   |   | 9,084 |   |   | 3,152 |   |
| Construction                  in progress   |   |             | -                                         |   |   | 20,132       |   |   | - |   |   | 20,132 |   |   | 30,212 |   |   | - |   |   | 30,212 |   |
| Capital                  Lease              |   |             | 5                                         |   |   | 45,560       |   |   | 42,550 |   |   | 3,010 |   |   | 47,094 |   |   | 44,215 |   |   | 2,879 |   |
| Other                                       |   |             | 5                                         |   |   | 16,703       |   |   | 7,911 |   |   | 8,791 |   |   | 4,118 |   |   | 996 |   |   | 3,122 |   |
|                                        |   |             |                                      |   |   | 1,034,207    |   |   | 621,963 |   |   | 412,244 |   |   | 1,250,752 |   |   | 684,773 |   |   | 565,979 |   |

|  | (i) | These                aircraft are used for demonstration and internal                purposes. |
|--|-----|------------------------------------------------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **14** | **Contribution                from Suppliers** |
|--------|------------------------------------------------|

| **15** | **O****ther                Payables and Accrued                Liabilities** |
|--------|------------------------------------------------------------------------------|

|                                                              |   | 2006   |    | 2007   |   |
|-------------------------------------------------------------------|--------|--------|---------|--------|--------|
|                                                              |   |   |    |   |   |
| Accrued                payroll and related charges                |   |   | 90,335  |   |   | 140,079 |   |
| Unearned                income (i)                                |   |   | 83,541  |   |   | 113,723 |   |
| Product                warranties (ii)                            |   |   | 97,354  |   |   | 104,923 |   |
| Other                creditors                                    |   |   | 54,357  |   |   | 79,523 |   |
| Accrued                employee profit sharing (Note 3p)          |   |   | 29,097  |   |   | 61,943 |   |
| Deferred                income (iii)                              |   |   | 51,060  |   |   | 47,561 |   |
| Provision                related to financial guarantee (Note 35) |   |   | 32,402  |   |   | 24,459 |   |
| Product                improvement accruals (ii)                  |   |   | 43,509  |   |   | 21,440 |   |
| Accrued                materials                                  |   |   | 8,739   |   |   | 15,136 |   |
| Unrealized                losses on derivatives (Note 32)         |   |   | 15,236  |   |   | 10,918 |   |
| Security                deposit                                   |   |   | 5,730   |   |   | 5,618 |   |
| Insurance                                                         |   |   | 4,857   |   |   | 4,408 |   |
| Financial                credits                                  |   |   | 4,828   |   |   | 4,019 |   |
| Post-retirement                benefits (Note 23)                 |   |   | 4,963   |   |   | 2,022 |   |
| Other                                                             |   |   | 14,795  |   |   | 29,808 |   |
|                                                              |   |   | 540,803 |   |   | 665,580 |   |
| Less-current                portion                               |   |   | 433,291 |   |   | 466,593 |   |
| Long-term                portion                                  |   |   | 107,512 |   |   | 198,987 |   |

|  | (i) | Represent                unearned income from sales of spare parts, services related to technical                assistance and training of mechanics and crews. This amount will                be                recognized when the product or service is provided to the customer. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (ii) | Includes                warranty and contractual obligations to implement improvements to                aircraft                sold (Note 35). |
|--|------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (iii) | Refers                to certain aircraft sales that, due to contractual obligations are                accounted for as operating leases. |
|--|-------|--------------------------------------------------------------------------------------------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **16** | **A****dvances                from Customers** |
|--------|------------------------------------------------|

|                                  |   | 2006   |    | 2007   |   |
|---------------------------------------|--------|--------|---------|--------|--------|
|                                  |   |   |    |   |   |
| Denominated                in US$     |   |   | 706,270 |   |   | 1,137,368 |   |
| Denominated                in R$      |   |   | 22,171  |   |   | 32,208 |   |
|                                  |   |   | 728,441 |   |   | 1,169,576 |   |
| Less                - current portion |   |   | 544,802 |   |   | 801,619 |   |
| Long-term                portion      |   |   | 183,639 |   |   | 367,957 |   |

| **17** | **Taxes                and Payroll Charges                Payable** |
|--------|---------------------------------------------------------------------|

|                                                                                                        |   | 2006   |    | 2007   |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|
|                                                                                                        |   |   |    |   |   |
|                                                                                                        |   |   |    |   |   |
| Disputed                taxes and social charges (i)                                                        |   |   | 532,520 |   |   | 485,243 |   |
| Current                taxes (other than taxes on income)                                                   |   |   | 43,464  |   |   | 56,980 |   |
| Refinanced                INSS (social security contribution on rural worker's                compensation) |   |   | 16,014  |   |   | 22,736 |   |
|                                                                                                        |   |   | 591,998 |   |   | 564,959 |   |
| Less-current                portion                                                                         |   |   | 136,950 |   |   | 98,165 |   |
| Long-term                portion                                                                            |   |   | 455,048 |   |   | 466,794 |   |

|  | (i) | The                Company is challenging through legal proceedings the merit and                constitutionality of several taxes and has obtained writs of mandamus                or                injunctions to avoid payment of such taxes. Pending a final decision                on                such cases, the Company records its obligation and accrues interest                based                on the SELIC rate (Central Bank overnight rate). The SELIC rate was                11.25                % as at December 31, 2007 (2006 –14.13%). |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|  | . | The                Company is challenging changes in the method of calculating PIS and                COFINS                taxes and the application of such changes to certain periods. As                a result                of favorable unappealable decisions of the Supreme Court of Justice                on                September 6, 2007 and October 5, 2007, respectively, the Company                reversed                US$194,681 of which US$163,592 related to the COFINS tax and US$31,089                to                the PIS tax. The reversal is recorded as follows: (i) US$104,777                in Other                operating income (expenses), net (Note 29) and (ii) US$89,904 in                Interest                income (expenses), net. The remaining balance relates to PIS and                COFINS                taxes of US$47,491 for which the Company has a corresponding escrow                deposit which is being challenged in the lower                courts. |
|--|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | . | The                Company is required to pay to the government an SAT levy (Workers                Compensation Insurance) at a rate of 3% of wages. In December 1998,                the                Company obtained a preliminary injunction to reduce the tax rate                from 3%                to 1% and the difference has been accrued. The amount accrued was                US$84,758 as of December 31, 2007 (2006 -                US$61,648). |
|--|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | . | In                April 1999, the Company obtained a writ of mandamus that authorized                the                offset of INSS (Social Security Contribution) due against future                payments                of INSS, following a rate increase from 10% to 20%, which the Company                challenged as being unconstitutional. The amount of US$32,418 was                accrued                as of December 31, 2007 (2006 -                US$25,587). |
|--|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | . | The                Company is claiming the right to offset IPI (Federal Excise Tax)                credits                on the acquisition of non-taxable or zero-rated raw material inputs                against income and social contribution taxes. The amount of taxes                accrued                but not paid related to this claim as of December 31, 2007 was US$49,724                (2006 - US$43,992). |
|--|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | . | The                Company is challenging the payment of the Social Contribution tax                on                export sales revenue and has obtained a favorable decision from the                Supreme Court to avoid the payments until a final decision. The amount                of                taxes accrued but not paid related to this claim was US$236,614 as                of                December 31, 2007 (2006 -                US$178,179). |
|--|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **18** | **Liabilities                Associated With Unrecognized Tax                Benefits** |
|--------|-----------------------------------------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **19** | **C****ontingencies** |
|--------|-----------------------|

|                                |   | **2006**                             |   | **2007**       |   |
|-------------------------------------|--------|--------------------------------------|--------|----------------|--------|
|                                |   | **Court-mandatedescrow****deposits** |   | **Provisions** |   | **Court-mandatedescrow****deposits** |   | **Provisions** |   |
|                                |   | (Note                11)             |   |           |   | (Note                11) |   |   |   |
| Labor                related (i)    |   |                                 | -      |           |   | 32,244 |   |   | - |   |   | 27,273 |   |
| Tax                related (ii)     |   |                                 | 5,593  |           |   | 21,667 |   |   | 7,064 |   |   | 25,689 |   |
| Civil                related        |   |                                 | -      |           |   | 2,582 |   |   | - |   |   | 6,461 |   |
| Other                               |   |                                 | -      |           |   | 8,051 |   |   | - |   |   | - |   |
|                                |   |                                 | 5,593  |           |   | 64,544 |   |   | 7,064 |   |   | 59,423 |   |
| Less-current                portion |   |                                 | -      |           |   | 31,175 |   |   | - |   |   | 7,008 |   |
| Long-term                portion    |   |                                 | 5,593  |           |   | 33,369 |   |   | 7,064 |   |   | 52,415 |   |

|  | (i) | The                labor lawsuits relate to claims brought by trade unions on behalf                of                employees or by individuals, in which former employees are individually                claiming overtime, productivity premiums, reinstatement, allowances                and                retroactive salary increases and                adjustments. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Plano      Collor” *
*“Plano      Verão” (*
*)*

|  | (ii) | This                provision relates primarily to income tax and social contribution                contingencies arising from tax assessments which are being challenged                and                for which a final decision is                pending. |
|--|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                   |   | **Labor****contingencies** |    | **Tax****contingencies** |   | **Civil****disputes** |   | **Other** |   |
|----------------------------------------|--------|----------------------------|---------|--------------------------|--------|-----------------------|--------|-----------|--------|
|                                   |   |                       |    |                     |   |                  |   |      |   |
| At                December 31, 2005    |   |                       | 24,561  |                     |   | 26,681                |   |      | 2,274  |   |   | - |   |
| Additions                              |   |                       | 6,201   |                     |   | -                     |   |      | 92     |   |   | - |   |
| Interest                               |   |                       | 610     |                     |   | 1,160                 |   |      | -      |   |   | - |   |
| Transfer                               |   |                       | -       |                     |   | (8,051                | )      |      | -      |   |   | 8,051 |   |
| Payments                /reversals     |   |                       | (2,063  | )                        |   | (614                  | )      |      | -      |   |   | - |   |
| Translation                adjustments |   |                       | 2,935   |                     |   | 2,491                 |   |      | 216    |   |   | - |   |
| At                December 31, 2006    |   |                       | 32,244  |                     |   | 21,667                |   |      | 2,582  |   |   | 8,051 |   |
| Additions                              |   |                       | 3,955   |                     |   | 2,883                 |   |      | 3,297  |   |   | - |   |
| Interest                               |   |                       | 3,977   |                     |   | 1,267                 |   |      | 47     |   |   | - |   |
| Payments                /reversals     |   |                       | (17,971 | )                        |   | (4,640                | )      |      | -      |   |   | (8,051 | ) |
| Translation                adjustments |   |                       | 5,068   |                     |   | 4,512                 |   |      | 535    |   |   | - |   |
| At                December 31, 2007    |   |                       | 27,273  |                     |   | 25,689                |   |      | 6,461  |   |   | - |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **20** | **Loans                and Financing** |
|--------|----------------------------------------|

|                                                  |   | Final    |   |     |   |                                         |   |
|-------------------------------------------------------|--------|----------|--------|----------|--------|----------------------------------------------|--------|
| Description                                           |   | Maturity |   | Currency |   | Annual interest rate - % |   | 2006 |   | 2007 |   |
|                                                  |   |     |   |     |   |                                         |   |   |   |   |   |
| **Foreign                Currency**                   |   |     |   |     |   |                                         |   |   |   |   |   |
| Working                capital                        |   |     | 2017   |     |   | U.S.                dollar                   |   |   | 5.08%                to 6.37% |   |   | 536,906 |   |   | 543,043 |   |
|                                                  |   |     | 2012   |     |   | Euro                                         |   |   | Euribor                plus 0.45% to 1.12% |   |   |   |   |   |   |   |
|                                                  |   |     |   |     |   |                                         |   |   | 4.70%                a 5.90% |   |   | 33,915 |   |   | 42,774 |   |
|                                                  |   |     | 2008   |     |   | Sterling                                     |   |   | 6.30% |   |   | - |   |   | 1,306 |   |
|                                                  |   |     | 2008   |     |   | Chinese Yuan                            |   |   | 6.48% |   |   | - |   |   | 4,107 |   |
|                                                  |   |     |   |     |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Project                development                    |   |     | 2016   |     |   | U.S.                dollar                   |   |   | LIBOR                plus 0.87% to 1.75% |   |   | 182,353 |   |   | 160,693 |   |
|                                                  |   |     |   |     |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Materials                acquisition                  |   |     | 2010   |     |   | U.S.                dollar                   |   |   | 4.12%                to 6.84%; |   |   |   |   |   |   |   |
|                                                  |   |     |   |     |   |                                         |   |   | LIBOR                plus 1.10% |   |   | 229,049 |   |   | 123,790 |   |
|                                                  |   |     |   |     |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Export                financing                       |   |     | 2010   |     |   | U.S.                dollar                   |   |   | 7.81% |   |   | 50,824 |   |   | 55,852 |   |
|                                                  |   |     |   |     |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Property                and equipment                 |   |     | 2035   |     |   | U.S.                dollar                   |   |   | 3.53%                to 5.75% |   |   | 10,626 |   |   | 26,874 |   |
| Advances                on foreign exchange contracts |   |     | 2008   |     |   | U.S.                dollar                   |   |   | 5.44%                to 6.03% |   |   | 7,265 |   |   | 13,794 |   |
|                                                  |   |     |   |     |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Subtotal                                              |   |     |   |     |   |                                         |   |   |   |   |   | 1,050,938 |   |   | 972,233 |   |
|                                                  |   |     |   |     |   |                                         |   |   |   |   |   |   |   |   |   |   |
| **Brazilian                Reais**                    |   |     |   |     |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Export                financing                       |   |     | 2010   |     |   | Reais                                        |   |   | TJLP                plus 2.09% to 2.15% |   |   | 257,360 |   |   | 715,797 |   |
|                                                  |   |     |   |     |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Project                development                    |   |     | 2015   |     |   | Reais                                        |   |   | TJLP                plus 5.00% |   |   | 34,526 |   |   | 63,937 |   |
|                                                  |   |     |   |     |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Working                capital                        |   |     | 2008   |     |   | Reais                                        |   |   | 13.84% |   |   | 6,327 |   |   | 1,021 |   |
|                                                  |   |     |   |     |   |                                         |   |   |   |   |   |   |   |   |   |   |
| Subtotal                                              |   |     |   |     |   |                                         |   |   |   |   |   | 298,213 |   |   | 780,755 |   |
| Total                debt                             |   |     |   |     |   |                                         |   |   |   |   |   | 1,349,151 |   |   | 1,752,988 |   |
| Less-current                portion                   |   |     |   |     |   |                                         |   |   |   |   |   | 503,047 |   |   | 932,668 |   |
| Long-term                portion                      |   |     |   |     |   |                                         |   |   |   |   |   | 846,104 |   |   | 820,320 |   |

|  | . | LIBOR                means London Interbank Offered Rate, fixed semiannually or annually,                varying in accordance whith the Loan                Agreement, and was 4.60% to 4.22% p.a. at December 31, 2007 (2006                –                5.36% to 5.29% p.a.). |
|--|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | . | Euribor                means Euro Interbank Offered Rate fixed semiannually, was 4.71% p.a.                at                December 31, 2007 (2006 –                3.83%                p.a.). |
|--|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | . | The                annualized TJLP (Government nominal Long-term Interest Rate), fixed                quarterly, was 6.25% p.a. at December                31, 2007 (2006 - 6.85% p.a.). |
|--|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | . | CDI                means the Brazilian Interbank Deposit Rate, compounded daily, was                11.12%                p.a. at December 31, 2007 (2006                –                13.17% p.a.). |
|--|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                           |   | 2006   |   | 2007   |   |
|--------------------------------|--------|--------|--------|--------|--------|
|                           |   |   |   |   |   |
| Brazilian                Reais |   |   | 2.1380 |   |   | 1.7713 |   |
| Euro                           |   |   | 0.7581 |   |   | 0.6790 |   |
| Chinese                Yuan    |   |   | -      |   |   | 7.3041 |   |

**,      **

| 2009       |   |   | 75,625  |   |
|------------|--------|--------|---------|--------|
| 2010       |   |   | 115,202 |   |
| 2011       |   |   | 39,822  |   |
| 2012       |   |   | 121,290 |   |
| 2013       |   |   | 22,120  |   |
| Thereafter |   |   | 446,261 |   |
|       |   |   | 820,320 |   |

|                           |   | 2006   |   | 2007   |   |
|--------------------------------|--------|--------|--------|--------|--------|
|                           |   |   |   |   |   |
| U.S.                dollars    |   |   | 6.63   | %      |   | 6.24 | % |
| Brazilian                Reais |   |   | 9.12   | %      |   | 7.99 | % |
| Chinese                Yuan    |   |   |   |   |   | 6.48 | % |
| Euro                           |   |   | 3.84   | %      |   | 5.13 | % |
| Sterling                       |   |   |   |   |   | 6.30 | % |

----

**Embraer        - Empresa Brasileira de Aeronáutica S.A.**

**Notes          to Consolidated Financial Statements**

**Years          Ended December 31, 2005, 2006 and 2007**

**In          thousands of U.S. dollars, unless otherwise stated**

----

**Restrictive      covenants**

| **21** | **Operating                and Capital Lease                Obligations** |
|--------|---------------------------------------------------------------------------|

| 2008       |   |   | 6,310  |   |
|------------|--------|--------|--------|--------|
| 2009       |   |   | 4,652  |   |
| 2010       |   |   | 2,952  |   |
| 2011       |   |   | 847    |   |
| 2012       |   |   | 832    |   |
| Thereafter |   |   | 8,874  |   |
|       |   |   | 24,467 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| 2008                                     |   |   | 4,556  |   |
|------------------------------------------|--------|--------|--------|--------|
| 2009                                     |   |   | 3,525  |   |
| 2010                                     |   |   | 2,743  |   |
| 2011                                     |   |   | 2,263  |   |
| 2012                                     |   |   | 1,984  |   |
| Thereafter                               |   |   | 2,510  |   |
| Total                                    |   |   | 17,581 |   |
| Less-Implicit                interest    |   |   | (1,147 | )      |
| Capital                lease obligations |   |   | 16,434 |   |
| Less-current                portion      |   |   | 4,413  |   |
| Long-term                portion         |   |   | 12,021 |   |

| **22** | **Interest                Income (Expense), Net** |
|--------|---------------------------------------------------|

|                                                                                                                                          |   | Year ended at December 31, |     |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|----------|
|                                                                                                                                          |   | 2005                                           |     | 2006 |   | 2007 |   |
|                                                                                                                                          |   |                                           |     |   |   |   |   |
| Interest                expense:                                                                                                              |   |                                           |     |   |   |   |   |
| Interest                and commissions on loans                                                                                              |   |                                           | (73,145  | ) |   | (87,623 | ) |   | (112,648 | ) |
| Interest                on taxes and payroll charges under litigation (Notes 17 and 19) and                on                refinanced taxes |   |                                           | (63,174  | ) |   | (40,921 | ) |   | 46,771 |   |
| CPMF                (Tax on Bank Account Transactions)                                                                                        |   |                                           | (17,197  | ) |   | (23,625 | ) |   | (23,658 | ) |
| Structured                financing costs                                                                                                     |   |                                           | (12,481  | ) |   | (4,707 | ) |   | (6,390 | ) |
| Other                                                                                                                                         |   |                                           | (6,933   | ) |   | (4,770 | ) |   | (10,108 | ) |
|                                                                                                                                          |   |                                           | (172,930 | ) |   | (161,647 | ) |   | (106,033 | ) |
|                                                                                                                                          |   |                                           |     |   |   |   |   |   |   |   |
| Interest                income:                                                                                                               |   |                                           |     |   |   |   |   |   |   |   |
| Temporary                cash investments and cash and cash equivalents                                                                       |   |                                           | 109,659  |   |   | 161,956 |   |   | 165,735 |   |
| Interest                on NTN, collateralized accounts receivable and guarantee deposits                (Notes                9, 11 and 12)  |   |                                           | 35,977   |   |   | 58,339 |   |   | 47,909 |   |
| Gain                on early repayment of loans                                                                                               |   |                                           | 36,417   |   |   | 46,970 |   |   | - |   |
| Other                                                                                                                                         |   |                                           | 8,792    |   |   | 2,470 |   |   | 15,314 |   |
|                                                                                                                                          |   |                                           | 190,845  |   |   | 269,735 |   |   | 228,958 |   |
|                                                                                                                                          |   |                                           |     |   |   |   |   |   |   |   |
| Gain                (loss) on derivatives                                                                                                     |   |                                           | (6,434   | ) |   | 7,634 |   |   | 38,533 |   |
| Indexation                charges and foreign exchange gains (losses), net                                                                    |   |                                           | (15,598  | ) |   | (10,289 | ) |   | 1,920 |   |
| Interest                income (expenses), net                                                                                                |   |                                           | (4,117   | ) |   | 105,433 |   |   | 163,378 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **23** | **Post-Retirement                Benefits** |
|--------|---------------------------------------------|

**Defined      Contribution Pension Plan**

**Defined      Benefit Plan**

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                                                    |   | Pension benefits |   | Other post-retirementbenefits |   |
|---------------------------------------------------------|--------|-----------------------|--------|------------------------------------|--------|
|                                                    |   | 2006                  |   | 2007                               |   | 2006 |   | 2007 |   |
|                                                    |   |                  |   |                               |   |   |   |   |   |
| Benefit                  obligation - beginning of year |   |                  | 8,607  |                               |   | - |   |   | 8,868 |   |   | 6,957 |   |
| Amendments                                              |   |                  | -      |                               |   | - |   |   | (2,628 | ) |   | (3,701 | ) |
| Service                  cost                           |   |                  | -      |                               |   | - |   |   | 801 |   |   | 700 |   |
| Interest                  cost                          |   |                  | 103    |                               |   | - |   |   | 420 |   |   | 383 |   |
| Actuarial                  (gain) loss                  |   |                  | 835    |                               |   | - |   |   | (367 | ) |   | (178 | ) |
| Participant                  contributions              |   |                  | -      |                               |   | - |   |   | 18 |   |   | - |   |
| Benefits                  paid to participants          |   |                  | (5     | )                                  |   | - |   |   | (155 | ) |   | (239 | ) |
| Settlement                                              |   |                  | (9,540 | )                                  |   | - |   |   | - |   |   | - |   |
| Benefit                  obligations - end of year      |   |                  | -      |                               |   | - |   |   | 6,957 |   |   | 3,922 |   |

|                                                         |   | Pension benefits |   | Other post-retirementbenefits |   |
|--------------------------------------------------------------|--------|-----------------------|--------|------------------------------------|--------|
|                                                         |   | 2006                  |   | 2007                               |   | 2006 |   | 2007 |   |
|                                                         |   |                  |   |                               |   |   |   |   |   |
| Fair                value of plan assets - beginning of year |   |                  | 8,775  |                               |   | - |   |   | 1,965 |   |   | 1,994 |   |
| Employer                contributions                        |   |                  | 598    |                               |   | - |   |   | - |   |   | - |   |
| Actual                return on plan assets                  |   |                  | 173    |                               |   | - |   |   | 166 |   |   | 145 |   |
| Participant                contributions                     |   |                  | -      |                               |   | - |   |   | 18 |   |   | - |   |
| Benefits                paid to participants                 |   |                  | (5     | )                                  |   | - |   |   | (155 | ) |   | (240 | ) |
| Settlements                                                  |   |                  | (9,540 | )                                  |   | - |   |   | - |   |   | - |   |
| Other                                                        |   |                  | (1     | )                                  |   | - |   |   | - |   |   | - |   |
| Fair                value of plan assets - end of year       |   |                  | -      |                               |   | - |   |   | 1,994 |   |   | 1,899 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                         |   | Pension benefits |   | Other post-retirementbenefits |   |
|------------------------------|--------|-----------------------|--------|------------------------------------|--------|
|                         |   | 2006                  |   | 2007                               |   | 2006 |   | 2007 |   |
|                         |   |                  |   |                               |   |   |   |   |   |
| Funded                status |   |                  | -      |                               |   | - |   |   | (4,963 | ) |   | (2,022 | ) |
| Accrued                cost  |   |                  | -      |                               |   | - |   |   | (4,963 | ) |   | (2,022 | ) |

|                                          |   | Pension benefits (%) |   | Other post-retirementbenefits (%) |   |
|-----------------------------------------------|--------|--------------------------------|--------|---------------------------------------------|--------|
|                                          |   | 2006                           |   | 2007                                        |   | 2006 |   | 2007 |   |
|                                          |   |                           |   |                                        |   |   |   |   |   |
| Average                discount rate          |   |                           | 4.73   |                                        |   | - |   |   | 5.75 |   |   | 5.75 |   |
| Expected                return on plan assets |   |                           | 6.00   |                                        |   | - |   |   | 7.75 |   |   | 7.75 |   |
| Rate                of compensation increase  |   |                           | -      |                                        |   | - |   |   | 5.50 |   |   | 5.50 |   |

|                        |   | Other                post- |   |
|-----------------------------|--------|----------------------------|--------|
|                        |   | retirementbenefits         |   |
| 2008                        |   |                       | 240    |   |
| 2009                        |   |                       | 230    |   |
| 2010                        |   |                       | 244    |   |
| 2011                        |   |                       | 253    |   |
| 2012                        |   |                       | 252    |   |
| Through                2017 |   |                       | 1,381  |   |
|                        |   |                       | 2,600  |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                                               |   | Pension                benefits |   | Other                post-retirementbenefits |   |
|----------------------------------------------------|--------|---------------------------------|--------|----------------------------------------------|--------|
|                                               |   | 2005                            |   | 2006                                         |   | 2007 |   | 2005 |   | 2006 |   | 2007 |   |
|                                               |   |                            |   |                                         |   |   |   |   |   |   |   |   |   |
| Service                cost                        |   |                            | -      |                                         |   | - |   |   | - |   |   | 836 |   |   | 801 |   |   | 700 |   |
| Interest                cost                       |   |                            | 435    |                                         |   | 103 |   |   | - |   |   | 436 |   |   | 420 |   |   | 383 |   |
| Expected                return on plan assets      |   |                            | (541   | )                                            |   | (129 | ) |   | - |   |   | (149 | ) |   | (144 | ) |   | (145 | ) |
| Amortization                of prior service cost  |   |                            | -      |                                         |   | - |   |   | - |   |   | (45 | ) |   | (169 | ) |   | (257 | ) |
| Amortization                of loss                |   |                            | -      |                                         |   | 36 |   |   | - |   |   | 100 |   |   | 103 |   |   | 78 |   |
| Net                periodic benefit cost (benefit) |   |                            | (106   | )                                            |   | 10 |   |   | - |   |   | 1,178 |   |   | 1,011 |   |   | 759 |   |
| Curtailment                credit                  |   |                            | -      |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | (2,510 | ) |
| Net                cost (benefit)                  |   |                            | (106   | )                                            |   | 10 |   |   | - |   |   | 1,178 |   |   | 1,011 |   |   | (1,751 | ) |

|                                                                   |   | One percentage point |   |
|------------------------------------------------------------------------|--------|--------------------------------|--------|
|                                                                   |   | Increase                       |   | Decrease |   |
|                                                                   |   |                           |   |   |   |
| Effect                on total of service and interest cost components |   |                           | 70     |   |   | (56 | ) |
| Effect                on the post-retirement benefit obligation   |   |                           | 500    |   |   | (424 | ) |

| **24** | **Shareholders'                Equity** |
|--------|-----------------------------------------|

----

**Embraer        - Empresa Brasileira de Aeronáutica S.A.**

**Notes          to Consolidated Financial Statements**

**Years          Ended December 31, 2005, 2006 and 2007**

**In          thousands of U.S. dollars, unless otherwise stated**

----

**Brazilian      Government Golden share**

|  | (i) | change                of the Company's name or its corporate objective; |
|--|-----|-------------------------------------------------------------------------|

|  | (ii) | alteration                and/or application of the Company's                logo; |
|--|------|------------------------------------------------------------------------------------|

|  | (iii) | creation                and/or modification of any military programs whether or not the Federal                Republic of Brazil is involved; |
|--|-------|------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (iv) | training                third parties in technology for military                programs; |
|--|------|-------------------------------------------------------------------------------------------|

|  | (v) | interruption                of the supply of maintenance and spare parts for military                aircraft; |
|--|-----|----------------------------------------------------------------------------------------------------------------|

|  | (vi) | transfer                of the Company ́s stock control, and |
|--|------|------------------------------------------------------------------|

|  | (vii) | any                changes in (1) the provisions of the above-mentioned article or of                article                4, the main clause of art. 11, arts 12, 15 and 16, sub-item III of                art.                19, paragraphs 1 and 2 of art. 28, sub-item X of art. 34, sub-item                XII of                art. 40 or Chapter VII, or (2) the rights attributed by the bylaws                to the                special class share. |
|--|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Purchase      of shares for treasury**

**2006      Corporate Restructuring**

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

**Appropriated      retained earnings**

**Unappropriated      retained earnings**

|  | . | Research                and development for the EMBRAER 170/190 family of aircraft and a                new                family of executive jets; and |
|--|---|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | . | New                technologies, processes and management models to improve the Company's                results, competencies and productivity, and investments in                subsidiaries. |
|--|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **25** | **D****ividends** |
|--------|-------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

**.**

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                                                    |   |   |    | Dividends                per share       |   |
|---------------------------------------------------------|--------|--------|---------|------------------------------------------|--------|
|                                                    |   |   |    | (in                US dollars and Reais) |   |
|                                                    |   |   |    | Common                                   |   | Preferred |   |
| Date                of declaration                      |   | US$    |    | R$                                       |   | US$ |   | R$ |   | US$ |   | R$ |   |
|                                                    |   |   |    |                                     |   |   |   |   |   |
| **2005:**                                               |   |   |    |                                     |   |   |   |   |   |   |   |   |   |
| March                11, 2005 - interest on capital     |   |   | 39,959  |                                     |   | 106,542 |   |   | 0.0521 |   |   | 0.1389 |   |   | 0.0573 |   |   | 0.1528 |   |
| June                3, 2005 - interest on capital       |   |   | 47,156  |                                     |   | 110,836 |   |   | 0.0615 |   |   | 0.1445 |   |   | 0.0676 |   |   | 0.1590 |   |
| September                16, 2005 - interest on capital |   |   | 51,097  |                                     |   | 113,551 |   |   | 0.0665 |   |   | 0.1478 |   |   | 0.0731 |   |   | 0.1625 |   |
| December                19, 2005 - interest on capital  |   |   | 48,247  |                                     |   | 112,932 |   |   | 0.0627 |   |   | 0.1469 |   |   | 0.0690 |   |   | 0.1616 |   |
| Total                distribution in 2005               |   |   | 186,459 |                                     |   | 443,861 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **2006:**                                               |   |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| June                12, 2006 - interest on capital      |   |   | 51,868  |                                     |   | 114,440 |   |   | 0.0702 |   |   | 0.1549 |   |   | - |   |   | - |   |
| September                15, 2006 - interest on capital |   |   | 42,370  |                                     |   | 92,337 |   |   | 0.0574 |   |   | 0.1250 |   |   | - |   |   | - |   |
| September                15, 2006 – dividends     |   |   | 16,318  |                                     |   | 35,561 |   |   | 0.0221 |   |   | 0.0481 |   |   | - |   |   | - |   |
| December                15, 2006 - interest on capital  |   |   | 39,960  |                                     |   | 84,993 |   |   | 0.0537 |   |   | 0.1149 |   |   | - |   |   | - |   |
| Total                distribution in 2006               |   |   | 150,516 |                                     |   | 327,331 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **2007:**                                               |   |   |    |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March                09, 2007 - interest on capital     |   |   | 21,168  |                                     |   | 43,403 |   |   | 0.0286 |   |   | 0.0587 |   |   | - |   |   | - |   |
| June                11, 2007 - interest on capital      |   |   | 25,958  |                                     |   | 50,000 |   |   | 0.0351 |   |   | 0.0676 |   |   | - |   |   | - |   |
| September                14, 2007 - interest on capital |   |   | 81,370  |                                     |   | 149,632 |   |   | 0.1099 |   |   | 0.2022 |   |   | - |   |   | - |   |
|                                                    |   |   |    |                                     |   |   |   |   |   |   |   |   |   |   | - |   |   | - |   |
| Total                distribution in 2007               |   |   | 128,496 |                                     |   | 243,035 |   |   |   |   |   |   |   |   |   |   |   |   |   |

| **26** | **Earnings                per Share** |
|--------|---------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                                                                                |   | 2005   |    | 2006      |   | 2007    |   |
|-------------------------------------------------------------------------------------|--------|--------|---------|-----------|--------|---------|--------|
|                                                                                |   | Common |    | Preferred |   | Total   |   | Common |   | Common |   |
|                                                                                |   |   |    |      |   |    |   |   |   |   |   |
| Basic                numerator:                                                     |   |   |    |      |   |    |   |   |   |   |   |
| Actual                dividends declared/paid                                       |   |   | 58,870  |      |   | 127,965 |   |   | 186,835 |   |   | 150,516 |   |   | 128,496 |   |
| Basic                allocated undistributed earnings                               |   |   | 81,572  |      |   | 177,312 |   |   | 258,884 |   |   | 239,624 |   |   | 360,809 |   |
| Net                income available to common and preferred shareholders            |   |   | 140,442 |      |   | 305,277 |   |   | 445,719 |   |   | 390,140 |   |   | 489,305 |   |
| Basic                denominator:                                                   |   |   |    |      |   |    |   |   |   |   |   |   |   |   |   |   |
| Weighted                average number of shares (thousands)                        |   |   | 242,544 |      |   | 479,288 |   |   |   |   |   | 739,904 |   |   | 740,142 |   |
|                                                                                |   |   |    |      |   |    |   |   |   |   |   |   |   |   |   |   |
| Basic                earnings per share –                US$                  |   |   | 0.5790  |      |   | 0.6369  |   |   |   |   |   | 0.5273 |   |   | 0.6611 |   |
|                                                                                |   |   |    |      |   |    |   |   |   |   |   |   |   |   |   |   |
| Diluted                numerator:                                                   |   |   |    |      |   |    |   |   |   |   |   |   |   |   |   |   |
| Actual                dividends declared/paid                                       |   |   | 58,581  |      |   | 128,254 |   |   | 186,835 |   |   | 150,516 |   |   | 128,496 |   |
| Diluted                allocated undistributed earnings                             |   |   | 81,172  |      |   | 177,712 |   |   | 258,884 |   |   | 239,624 |   |   | 360,809 |   |
|                                                                                |   |   | 139,753 |      |   | 305,966 |   |   | 445,719 |   |   | 390,140 |   |   | 489,305 |   |
|                                                                                |   |   |    |      |   |    |   |   |   |   |   |   |   |   |   |   |
| Allocated                net income available for common and preferred shareholders |   |   | 139,753 |      |   | 305,966 |   |   | 445,719 |   |   | 390,140 |   |   | 489,305 |   |
| Diluted                net income available to common and preferred shareholders    |   |   | 139,753 |      |   | 305,966 |   |   | 445,719 |   |   | 390,140 |   |   | 489,305 |   |
| Diluted                denominator:                                                 |   |   |    |      |   |    |   |   |   |   |   |   |   |   |   |   |
| Weighted                average number of shares outstanding (thousands)            |   |   | 242,544 |      |   | 479,288 |   |   |   |   |   | 739,904 |   |   | 740,142 |   |
| Dilutive                effects of stock options                                    |   |   | -       |      |   | 3,451   |   |   |   |   |   | 2,999 |   |   | 905 |   |
| Diluted                weighted average shares                                      |   |   | 242,544 |      |   | 482,739 |   |   |   |   |   | 742,903 |   |   | 741,047 |   |
|                                                                                |   |   |    |      |   |    |   |   |   |   |   |   |   |   |   |   |
| Diluted                earnings per share –                US$                |   |   | 0.5762  |      |   | 0.6338  |   |   |   |   |   | 0.5250 |   |   | 0.6603 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **27** | **Stock                Compensation** |
|--------|---------------------------------------|

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                                            |   | 2005                                     |   | 2006                                   |   | 2007                                     |   |
|-------------------------------------------------|--------|------------------------------------------|--------|----------------------------------------|--------|------------------------------------------|--------|
|                                            |   | Thousands of                options |   | Weightedaverageexerciseprice (R$) |   | Thousands of                options |   | Weightedaverageexerciseprice (R$) |   | Thousandsof options |   | Weightedaverageexerciseprice (R$) |   |
|                                            |   |                                     |   |                                   |   |                                     |   |   |   |   |   |   |   |
| Outstanding                at beginning of year |   |                                     | 7,639  |                                   |   | 12.37                                    |   |   | 3,761 |   |   | 15.14 |   |   | 2,225 |   |   | 18.30 |   |
| Exercised                                       |   |                                     | (3,490 | )                                      |   | 8.29                                     |   |   | (1,292 | ) |   | 8.61 |   |   | (561 | ) |   | 12.07 |   |
| Canceled                or expired              |   |                                     | (388   | )                                      |   | 22.00                                    |   |   | (243 | ) |   | 20.87 |   |   | (311 | ) |   | 13.84 |   |
| Outstanding                at end of year       |   |                                     | 3,761  |                                   |   | 15.14                                    |   |   | 2,225 |   |   | 18.30 |   |   | 1,353 |   |   | 22.00 |   |
| Exercisable                at end of year       |   |                                     | 3,167  |                                   |   | 13.85                                    |   |   | 2,225 |   |   | 18.30 |   |   | 1,353 |   |   | 22.00 |   |

*Black-Scholes      *

| Exercise                price (R$) |   | Number ofoutstandingstock                options |   | Optionsexercisable |   | Weightedaverageremainingcontractual                life (years) |   |
|-----------------------------------------|--------|-------------------------------------------------------|--------|--------------------|--------|----------------------------------------------------------------------|--------|
|                                    |   |                                                  |   |               |   |                                                                 |   |
| 14.99                                   |   |                                                  | 168    |               |   | 168                                                                  |   |   | 0.1 |   |
| 23.00                                   |   |                                                  | 1,185  |               |   | 1,185                                                                |   |   | 0.3 |   |
|                                    |   |                                                  | 1,353  |               |   | 1,353                                                                |   |   |   |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| Grant                dates |   | Vesting date |                    | Expiration date  |   | Weightedaverageexerciseprice (R$) |   | Number ofoutstandingstock options(thousands) |   |
|----------------------------|--------|-------------------|-------------------------|----------------------------|--------|----------------------------------------|--------|--------------------------------------------------------|--------|
|                       |   |              |                    |                       |   |                                   |   |                                                   |   |
| May                2001    |   |              | May                2004 |                       |   | May                2008                |   |                                                   | 22.00  |   |   | 394 |   |
| May                2001    |   |              | May                2005 |                       |   | May                2008                |   |                                                   | 22.00  |   |   | 411 |   |
| May                2001    |   |              | May                2006 |                       |   | May                2008                |   |                                                   | 22.00  |   |   | 548 |   |
| Total                      |   |              |                    |                       |   |                                   |   |                                                   |   |   |   | 1,353 |   |

| **28** | **Income                Taxes** |
|--------|---------------------------------|

|                                  |   | For the year ended December 31, |    |
|---------------------------------------|--------|----------------------------------------------------------|---------|
|                                  |   | 2005                                                     |    | 2006 |   | 2007 |   |
|                                  |   |                                                     |    |   |   |   |   |
| Current                -              |   |                                                     | (83,839 | ) |   | (45,707 | ) |   | (33,543 | ) |
| Deferred-                             |   |                                                     |    |   |   |   |   |   |   |   |
| Temporary                differences  |   |                                                     | 40,844  |   |   | 189 |   |   | 14,504 |   |
| Tax                loss carryforwards |   |                                                     | 1,426   |   |   | 1,106 |   |   | 16,294 |   |
| Total                deferred         |   |                                                     | 42,270  |   |   | 1,295 |   |   | 30,798 |   |
| Income                tax expense     |   |                                                     | (41,569 | ) |   | (44,412 | ) |   | (2,745 | ) |

|                                                                   |   | For the year ended December 31, |    |
|------------------------------------------------------------------------|--------|----------------------------------------------------------|---------|
|                                                                   |   | 2005                                                     |    | 2006 |   | 2007 |   |
|                                                                   |   |                                                     |    |   |   |   |   |
| Income                before taxes as reported                         |   |                                                     | 500,006 |   |   | 444,166 |   |   | 499,914 |   |
| Combined                statutory income tax rate                      |   |                                                     | 34      | % |   | 34 | % |   | 34 | % |
| Tax                expense at statutory income tax rate                |   |                                                     | 170,002 |   |   | 151,016 |   |   | 169,971 |   |
|                                                                   |   |                                                     |    |   |   |   |   |   |   |   |
| Translation                effects (including SFAS 109 paragraph 9(f)) |   |                                                     | (40,591 | ) |   | (36,880 | ) |   | (57,130 | ) |
| Benefit                from distribution of interest on capital        |   |                                                     | (63,524 | ) |   | (45,627 | ) |   | (59,573 | ) |
| Research                and development tax incentives                 |   |                                                     | -       |   |   | (16,943 | ) |   | (31,159 | ) |
| Tax                incentives                                          |   |                                                     | (1,221  | ) |   | - |   |   | (1,406 | ) |
| Change                in deferred tax valuation allowance              |   |                                                     | (9,292  | ) |   | 491 |   |   | (231 | ) |
| Equity                in earnings (loss) of affiliates                 |   |                                                     | (1,053  | ) |   | (12 | ) |   | 107 |   |
| Nondeductible                expenses, net                             |   |                                                     | 1,882   |   |   | 6,397 |   |   | 3,293 |   |
| Differences                in foreign jurisdiction tax rates           |   |                                                     | (4,996  | ) |   | (11,197 | ) |   | (19,224 | ) |
| Other                                                                  |   |                                                     | (9,638  | ) |   | (2,833 | ) |   | (1,903 | ) |
|                                                                   |   |                                                     |    |   |   |   |   |   |   |   |
| Income                tax expense as reported                          |   |                                                     | 41,569  |   |   | 44,412 |   |   | 2,745 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                                                                                               |   | 2006   |     | 2007   |   |
|----------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|
| Deferred                tax assets                                                                 |   |   |     |   |   |
| Temporary                differences:                                                              |   |   |     |   |   |
| Deferred                deductibility of research and development and other                charges |   |   | 162,587  |   |   | 245,650 |   |
| Accrued                expenses temporarily not tax deductible                                     |   |   | 65,630   |   |   | 94,824 |   |
| Accrued                taxes other than taxes on income                                            |   |   | 95,450   |   |   | 82,840 |   |
| Accrual                for product warranties and improvements                                     |   |   | 46,538   |   |   | 43,840 |   |
| Differences                in tax basis of inventory                                               |   |   | 35,637   |   |   | 35,166 |   |
| Differences                in tax basis of property, plant and equipment                           |   |   | 9,634    |   |   | 11,035 |   |
| Accrued                post-retirement benefits                                                    |   |   | 1,943    |   |   | 932 |   |
| Other                                                                                              |   |   | 34,579   |   |   | 29,281 |   |
| Tax                loss carryforwards (i)                                                          |   |   | 8,897    |   |   | 24,960 |   |
| Valuation                allowance (ii)                                                            |   |   | (3,726   | )      |   | (3,495 | ) |
| Total                deferred tax assets                                                           |   |   | 457,169  |   |   | 565,033 |   |
|                                                                                               |   |   |     |   |   |   |   |
| Deferred                tax liabilities                                                            |   |   |     |   |   |   |   |
| Temporary                differences:                                                              |   |   |     |   |   |   |   |
| Deferred                deductibility of research and development and other                charges |   |   | (195,878 | )      |   | (270,317 | ) |
| Differences                in tax basis of property, plant and equipment                           |   |   | (14,390  | )      |   | (17,227 | ) |
| Other                                                                                              |   |   | (9,329   | )      |   | (20,061 | ) |
| Total                deferred tax liabilities                                                      |   |   | (219,597 | )      |   | (307,605 | ) |
| Net                deferred tax asset                                                              |   |   | 237,572  |   |   | 257,428 |   |

----

**Embraer        - Empresa Brasileira de Aeronáutica S.A.**

**Notes          to Consolidated Financial Statements**

**Years          Ended December 31, 2005, 2006 and 2007**

**In          thousands of U.S. dollars, unless otherwise stated**

----

|  | (i) | Tax                loss carryforwards are derived                from: |
|--|-----|------------------------------------------------------------------------|

|                                 |   | 2006   |   | 2007   |   |
|--------------------------------------|--------|--------|--------|--------|--------|
|                                 |   |   |   |   |   |
| Brazilian                entities    |   |   | 3,371  |   |   | 21,526 |   |
| Foreign                jurisdictions |   |   | 5,526  |   |   | 3,434 |   |
| Total                                |   |   | 8,897  |   |   | 24,960 |   |

|  | (ii) | The                valuation allowance relates to tax loss carryforwards of foreign                subsidiaries, which cannot be offset against taxable income in Brazil. |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (iii) | Changes                in the valuation allowances are as                follows: |
|--|-------|-----------------------------------------------------------------------------------|

|                             |   | 2005   |   | 2006   |   | 2007   |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                             |   |   |   |   |   |   |   |
| Beginning                balance |   |   | 7,420  |   |   | 3,234  |   |   | 3,726 |   |
| Additions                        |   |   | 1,765  |   |   | 681    |   |   | 881 |   |
| Reversals                        |   |   | (5,951 | )      |   | (189   | )      |   | - |   |
| Write                off         |   |   | -      |   |   | -      |   |   | (1,112 | ) |
| Ending                balance    |   |   | 3,234  |   |   | 3,726  |   |   | 3,495 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **29** | **Other                Operating Income (Expenses),                Net** |
|--------|--------------------------------------------------------------------------|

|                                                                     |   | For the year endedDecember 31, |    |
|--------------------------------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                                     |   | 2005                                               |    | 2006 |   | 2007 |   |
|                                                                     |   |                                               |    |   |   |   |   |
| Provision                for contingencies and disputed taxes (i)        |   |                                               | (17,183 | ) |   | 3,775 |   |   | 94,535 |   |
| Employee                education, training and professional development |   |                                               | (4,064  | ) |   | (6,771 | ) |   | (11,845 | ) |
| Contractual                fines                                         |   |                                               | 7,340   |   |   | 12,709 |   |   | (9,689 | ) |
| Product                modifications                                     |   |                                               | (253    | ) |   | (1,622 | ) |   | (3,406 | ) |
| Sales-type                lease gain (loss), net                         |   |                                               | (10,232 | ) |   | (12,590 | ) |   | 1,408 |   |
| Other                                                                    |   |                                               | (1,687  | ) |   | 6,176 |   |   | 7,358 |   |
|                                                                     |   |                                               | (26,079 | ) |   | 1,677 |   |   | 78,361 |   |

|  | (i) | In                2007 mainly includes the reversal of US$104,777 of PIS/COFINS provisions                following a favorable judicial decision (Note                17). |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **30** | **Foreign                Exchange Gain (Loss), Net** |
|--------|------------------------------------------------------|

|                                                |   | For the year endedDecember 31, |    |
|-----------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                |   | 2005                                               |    | 2006 |   | 2007 |   |
|                                                |   |                                               |    |   |   |   |   |
| Assets                                              |   |                                               |    |   |   |   |   |
| Cash                and cash equivalents            |   |                                               | 54,715  |   |   | 23,812 |   |   | 163,503 |   |
| Tax                recoverable and deferred         |   |                                               | 4,024   |   |   | 3,149 |   |   | 70,725 |   |
| Trade                accounts receivable            |   |                                               | (1,704  | ) |   | (700 | ) |   | 15,199 |   |
| Other                assets                         |   |                                               | 3,213   |   |   | 7,929 |   |   | 27,595 |   |
| Exchange                gain on assets              |   |                                               | 60,248  |   |   | 34,190 |   |   | 277,022 |   |
|                                                |   |                                               |    |   |   |   |   |   |   |   |
| Liabilities                                         |   |                                               |    |   |   |   |   |   |
| Taxes                                               |   |                                               | (30,739 | ) |   | (12,274 | ) | (156,443) |
| Loans                                               |   |                                               | -       |   |   | (7,101 | ) | (93,809) |
| Provisions                                          |   |                                               | (11,018 | ) |   | (3,887 | ) | (22,857) |
| Trade                accounts payable               |   |                                               | (32,671 | ) |   | (8,086 | ) | (8,345) |
| Other                liabilities                    |   |                                               | (1,038  | ) |   | (6,940 | ) | (33,237) |
| Foreign                exchange loss on liabilities |   |                                               | (75,466 | ) |   | (38,288 | ) | (314,691) |
| Foreign                exchange loss, net           |   |                                               | (15,218 | ) |   | (4,098 | ) | (37,669) |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **31** | **Related-Party                Transactions** |
|--------|-----------------------------------------------|

**Brazilian      Government**

|                                          |   | December 31, 2007 |   |
|-----------------------------------------------|--------|-----------------------------|--------|
|                                          |   | Brazilian                   |   | Banco do |   |   |   |   |   |
|                                          |   | Air Force              |   | Brasil S.A. |   | BNDES |   | Total |   |
|                                          |   |                        |   |   |   |   |   |   |   |
| **Assets**                                    |   |                        |   |   |   |   |   |   |   |
| Cash                and cash equivalents      |   |                        | -      |   |   | 174,394 |   |   | - |   |   | 174,394 |   |
| Trade                accounts receivable      |   |                        | 68,910 |   |   | - |   |   | - |   |   | 68,910 |   |
| Other                assets                   |   |                        | -      |   |   | 179,079 |   |   | 1,312 |   |   | 180,391 |   |
|                                          |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities**                               |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Loans                and financing            |   |                        | -      |   |   | 12,134 |   |   | 728,231 |   |   | 740,365 |   |
| Recourse                and non-recourse debt |   |                        | -      |   |   | 271,363 |   |   | 20,144 |   |   | 291,507 |   |
| Advances                from customers        |   |                        | 63,208 |   |   | - |   |   | - |   |   | 63,208 |   |
|                                          |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| **Results                of operations**      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Net                sales                      |   |                        | 96,912 |   |   | - |   |   | - |   |   | 96,912 |   |
| Interest                income                |   |                        | -      |   |   | 32,137 |   |   | - |   |   | 32,137 |   |
| Interest                expense               |   |                        | -      |   |   | 18,229 |   |   | 44,968 |   |   | 63,197 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                                          |   | December 31, 2006 |   |
|-----------------------------------------------|--------|-----------------------------|--------|
|                                          |   | Brazilian                   |   | Banco do |   |   |   |   |   |
|                                          |   | Air Force              |   | Brasil S.A. |   | BNDES |   | Total |   |
|                                          |   |                        |   |   |   |   |   |   |   |
| **Assets**                                    |   |                        |   |   |   |   |   |   |   |
| Cash                and cash equivalents      |   |                        | -      |   |   | 78,747 |   |   | - |   |   | 78,747 |   |
| Trade                accounts receivable      |   |                        | 87,268 |   |   | - |   |   | - |   |   | 87,268 |   |
| Other                assets                   |   |                        | -      |   |   | 327,776 |   |   | 1,809 |   |   | 329,585 |   |
|                                          |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities**                               |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Loans                and financing            |   |                        | -      |   |   | 66,745 |   |   | 292,318 |   |   | 359,063 |   |
| Recourse                and non-recourse debt |   |                        | -      |   |   | 318,577 |   |   | 511,181 |   |   | 829,758 |   |
| Advances                from customers        |   |                        | 17,450 |   |   | - |   |   | - |   |   | 17,450 |   |
|                                          |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| **Results                of operations**      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Net                sales                      |   |                        | 70,806 |   |   | - |   |   | - |   |   | 70,806 |   |
| Interest                income                |   |                        | -      |   |   | - |   |   | - |   |   | - |   |
| Interest                expense               |   |                        | -      |   |   | 19,954 |   |   | 18,075 |   |   | 38,029 |   |

|                                                  |   | December                31, 2005 |    |
|-------------------------------------------------------|--------|----------------------------------|---------|
|                                                  |   | Brazilian                        |    | Banco                do |   |   |   |   |   |
|                                                  |   | Air                Force         |    | Brasil                S.A. |   | BNDES |   | Total |   |
|                                                  |   |                             |    |   |   |   |   |   |   |
| **Assets**                                            |   |                             |    |   |   |   |   |   |   |
| Cash                and cash equivalents              |   |                             | -       |   |   | 203,587 |   |   | - |   |   | 203,587 |   |
| Trade                accounts receivable              |   |                             | 120,910 |   |   | - |   |   | - |   |   | 120,910 |   |
| Other                assets                           |   |                             | -       |   |   | 260,764 |   |   | 63,725 |   |   | 324,489 |   |
|                                                  |   |                             |    |   |   |   |   |   |   |   |   |   |   |
| **Liabilities**                                       |   |                             |    |   |   |   |   |   |   |   |   |   |   |
| Loans                and financing                    |   |                             | -       |   |   | 119,783 |   |   | 209,293 |   |   | 329,076 |   |
| Recourse                and non-recourse debt         |   |                             | -       |   |   | 260,844 |   |   | 558,409 |   |   | 819,253 |   |
| Advances                from customers                |   |                             | 18,881  |   |   | - |   |   | - |   |   | 18,881 |   |
| Other                payables and accrued liabilities |   |                             | 524     |   |   | - |   |   | - |   |   | 524 |   |
|                                                  |   |                             |    |   |   |   |   |   |   |   |   |   |   |
| **Results                of operations**              |   |                             |    |   |   |   |   |   |   |   |   |   |   |
| Net                sales                              |   |                             | 237,342 |   |   | - |   |   | - |   |   | 237,342 |   |
| Interest                income                        |   |                             | -       |   |   | 27,364 |   |   | - |   |   | 27,364 |   |
| Interest                expense                       |   |                             | -       |   |   | 16,503 |   |   | 3,431 |   |   | 19,934 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **32** | **Financial                Instruments and Risk                Management** |
|--------|-----------------------------------------------------------------------------|

*-*

**Interest      rate risk **

*.*
*-*

**Foreign      exchange rate risk **

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

**Derivative      financial instruments**

| 2007                               |   |
|------------------------------------|--------|
|                               |   |   |   |   |   |   |   | Agreed |   | Gain/(loss) |   |
|                               |   |   |   | Notional |   | Maturity |   | average |   | Fair |   |
| Underlying transactions       |   | Type |   |  amount  |   |                  date   |   |                  rate   |   |  value  |   |
|                               |   |   |   |   |   |   |   |   |   |   |   |
| Import                financing    |   |   | Swap                ( interest + US$ into R$ + CDI +Fixed interest rate) |   |   | 4,788 |   |   | 2008 |   |   | 64.95%                of CDI |   |   | (7,974 | ) |
| Project                development |   |   | Swap                (variable interest into fixed interest - US$) |   |   | 200,802 |   |   | 2008                to 2016 |   |   | 6.01 | % |   | (2,910 | ) |
| Export                financing    |   |   | Swap                (CDI into dual currency - the greater than exchange variation or                CDI) |   |   | 2,500 |   |   | 2008 |   |   | 100%                exchange variation (US$ - R$) or 75.0% of CDI |   |   | (34 | ) |
| Total                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (10,918 | ) |

| 2007                               |   |
|------------------------------------|--------|
|                               |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |   |   |   |   |   |   |   |   | Gain / (loss) |   |
| Underlying transactions       |   | Type |   | OriginalCurrency |   | Negotiatedcurrency |   | Nationalamount |   |  Fairvalue  |   |
|                               |   |   |   |   |   |   |   |   |   |   |   |
| Suppliers                          |   |   | NDF |   |   | Sterling |   |   | Reais |   |   | 295 |   |   | 23 |   |
| Accounts                receivable |   |   | NDF |   |   | US                Dollar |   |   | Reais |   |   | 250,000 |   |   | 8,046 |   |
| TOTAL                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 8,069 |   |

| 2006                                              |   |
|---------------------------------------------------|--------|
|                                              |   |   |   |   |   |   |   | Agreed |   | Gain/(loss) |   |
|                                              |   |   |   | Notional |   | Maturity |   | average |   | Fair |   |
| Underlying transactions                      |   | Type |   |  amount  |   |                  date   |   |                  rate   |   |  value  |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |
| Import                financing                   |   |   | Swap                ( interest + US$ into R$ + CDI +Fixed interest rate) |   |   | 16,434 |   |   | 2007                to 2008 |   |   | 58.61%                of CDI |   |   | (15,236 | ) |
| Working                capital / Import financing |   |   | Swap                (variable interest into fixed interest - US$) |   |   | 239,371 |   |   | 2007                to 2016 |   |   | 7.36 | % |   | 2,937 |   |
| Working                capital                    |   |   | Swap                (CDI into dual currency - the greater than exchange variation or                CDI) |   |   | 6,289 |   |   | 2007 |   |   | 100%                exchange variation (US$-R$) or 75% CDI |   |   | 7 |   |
| Total                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (12,292 | ) |

| 2006                               |   |
|------------------------------------|--------|
|                               |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |   |   |   |   |   |   |   |   | Gain / (loss) |   |
| Underlying transactions       |   | Type |   | OriginalCurrency |   | Negotiatedcurrency |   | Nationalamount |   |  Fairvalue  |   |
|                               |   |   |   |   |   |   |   |   |   |   |   |
| Suppliers                          |   |   | NDF |   |   | Sterling |   |   | Reais |   |   | 7,402 |   |   | 409 |   |
| Accounts                receivable |   |   | NDF |   |   | US                Dollar |   |   | Reais |   |   | 100,000 |   |   | 769 |   |
| TOTAL                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,178 |   |

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

| **33** | **Concentration                of Credit Risk** |
|--------|-------------------------------------------------|

| **34** | **F****air                Value of Financial                Instruments** |
|--------|---------------------------------------------------------------------------|

----

**Embraer        - Empresa Brasileira de Aeronáutica S.A.**

**Notes          to Consolidated Financial Statements**

**Years          Ended December 31, 2005, 2006 and 2007**

**In          thousands of U.S. dollars, unless otherwise stated**

----

|                                          |   | 2006     |      | 2007   |   |
|-----------------------------------------------|--------|----------|-----------|--------|--------|
|                                          |   | Carrying |      | Fair   |   | Carrying |   | Fair |   |
|                                          |   | amounts  |      | Value  |   | amounts |   | value |   |
|                                          |   |     |      |   |   |   |   |   |   |
| Financial                assets               |   |     |      |   |   |   |   |   |   |   |   |   |   |
| Cash                and cash equivalents      |   |     | 1,209,396 |   |   | 1,209,396 |   |   | 1,307,366 |   |   | 1,307,366 |   |
| Temporary                cash investments     |   |     | 555,795   |   |   | 555,795 |   |   | 1,185,745 |   |   | 1,185,745 |   |
| Trade                accounts receivable, net |   |     | 299,987   |   |   | 299,987 |   |   | 394,311 |   |   | 394,311 |   |
| Guarantee                deposits (Note 11)   |   |     | 607,109   |   |   | 607,109 |   |   | 469,554 |   |   | 469,554 |   |
| Held-to-maturity                securities    |   |     | 32,840    |   |   | 31,785 |   |   | 40,847 |   |   | 40,571 |   |
| Derivatives                                   |   |     | 4,122     |   |   | 4,122 |   |   | 8,069 |   |   | 8,069 |   |
|                                          |   |     |      |   |   |   |   |   |   |   |   |   |   |
| Financial                liabilities          |   |     |      |   |   |   |   |   |   |   |   |   |   |
| Loans                and financing            |   |     | 1,349,151 |   |   | 1,416,832 |   |   | 1,752,988 |   |   | 1,827,344 |   |
| Trade                accounts payable         |   |     | 912,753   |   |   | 912,753 |   |   | 912,885 |   |   | 912,885 |   |
| Derivatives                                   |   |     | 15,236    |   |   | 15,236 |   |   | 10,918 |   |   | 10,918 |   |

| **35** | **Off-Balance                Sheet Arrangements** |
|--------|---------------------------------------------------|

**Guarantees**

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

|                                                                                |   | 2006   |      | 2007   |   |
|-------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|
|                                                                                |   |   |      |   |   |
| Maximum                financial guarantees                                         |   |   | 1,741,559 |   |   | 1,701,626 |   |
| Maximum                residual value guarantees                                    |   |   | 930,002   |   |   | 946,366 |   |
| Mutually                exclusive exposure (*)                                      |   |   | (433,112  | )      |   | (415,460 | ) |
| Provisions                and liabilities recorded                                  |   |   | (116,402  | )      |   | (24,459 | ) |
|                                                                                |   |   |      |   |   |   |   |
| Off-balance                sheet exposure                                           |   |   | 2,122,047 |   |   | 2,208,072 |   |
| Estimated                proceeds from performance guarantees and underlying assets |   |   | 2,177,379 |   |   | 2,352,682 |   |

|  | (*) | In                the event both guarantees were issued for the same underlying asset,                the                residual value guarantees can only be exercised if the financial                guarantees have expired without having been triggered and, therefore,                the                residual value and financial guarantees have not been combined to                calculate the maximum exposure. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Embraer        - Empresa Brasileira de Aeronáutica S.A.**

**Notes          to Consolidated Financial Statements**

**Years          Ended December 31, 2005, 2006 and 2007**

**In          thousands of U.S. dollars, unless otherwise stated**

----

**Aircraft      Trade-In Options**

**Product      Warranties**

|                                      |   | Productwarranties        |    | Productimprovementaccruals |   | FIN-45                guaranteeliability |   |
|-------------------------------------------|--------|--------------------------|---------|----------------------------|--------|------------------------------------------|--------|
|                                      |   | (Note                15) |    | (Note                15)   |   | (Note                15)                 |   |
| At                December 31, 2005       |   |                     | 90,904  |                       |   | 40,350                                   |   |   | 28,573 |   |
| Additions                                 |   |                     | 34,431  |                       |   | 13,330                                   |   |   | 459 |   |
| Payments                /reversals        |   |                     | (27,981 | )                          |   | (10,171                                  | )      |   | (2,063 | ) |
| At                December  31, 2006 |   |                     | 97,354  |                       |   | 43,509                                   |   |   | 26,969 |   |
| Additions                                 |   |                     | 49,304  |                       |   | 16,861                                   |   |   | 300 |   |
| Payments                /reversals        |   |                     | (41,735 | )                          |   | (38,930                                  | )      |   | (2,810 | ) |
| At                December  31, 2007 |   |                     | 104,923 |                       |   | 21,440                                   |   |   | 24,459 |   |

----

**Embraer        - Empresa Brasileira de Aeronáutica S.A.**

**Notes          to Consolidated Financial Statements**

**Years          Ended December 31, 2005, 2006 and 2007**

**In          thousands of U.S. dollars, unless otherwise stated**

----

| **36** | **Segment                Information** |
|--------|----------------------------------------|

**Commercial      aviation segment**

**Executive      aviation**

**Aviation      Services **

**Defense      and government segment**

----

**Embraer          - Empresa Brasileira de Aeronáutica S.A.**

**Notes            to Consolidated Financial Statements**

**Years            Ended December 31, 2005, 2006 and 2007**

**In            thousands of U.S. dollars, unless otherwise stated**

----

**Others**

|  Net                  sales by geographic area  |   | 2005   |      | 2006   |   | 2007      |   |
|-----------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
|                                                      |   |   |      |   |   |      |   |
| Americas                  (excluding Brazil)-             |   |   |           |   |   |           |   |   |  |   |
| Commercial                  Aviation                      |   |   | 2,176,369 |   |   | 1,407,041 |   |   | 2,277,933 |   |
| Executive                  Aviation                       |   |   | 155,764   |   |   | 304,756   |   |   | 302,181 |   |
| Aviation                  Services                        |   |   | 174,212   |   |   | 180,217   |   |   | 213,939 |   |
| Defense                  and Government                   |   |   | 33,927    |   |   | 142,099   |   |   | 156,662 |   |
| Others                                                    |   |   | 5,099     |   |   | 92,691    |   |   | 69,343 |   |
|                                                      |   |   | 2,545,370 |   |   | 2,126,804 |   |   | 3,020,058 |   |
|                                                      |   |   |           |   |   |           |   |   |  |   |
| Brazil-                                                   |   |   |           |   |   |      |   |   |  |   |
| Executive                  Aviation                       |   |   | -         |   |   | -         |   |   | 27,700 |   |
| Aviation                  Services                        |   |   | 15,491    |   |   | 50,203    |   |   | 46,432 |   |
| Defense                  and Government                   |   |   | 230,286   |   |   | 71,203    |   |   | 96,912 |   |
| Others                                                    |   |   | 57,282    |   |   | 24,988    |   |   | 77,960 |   |
|                                                      |   |   | 303,059   |   |   | 146,394   |   |   | 249,004 |   |
| Europe-                                                   |   |   |           |   |   |           |   |   |  |   |
| Commercial                  Aviation                      |   |   | 247,976   |   |   | 430,080   |   |   | 485,844 |   |
| Executive                  Aviation                       |   |   | 100,253   |   |   | 161,314   |   |   | 484,198 |   |
| Aviation                  Services                        |   |   | 196,949   |   |   | 237,002   |   |   | 227,569 |   |
| Defense                  and Government                   |   |   | 8,347     |   |   | 13,405    |   |   | 29,228 |   |
| Others                                                    |   |   | 5,913     |   |   | -         |   |   | 6,380 |   |
|                                                      |   |   | 559,438   |   |   | 841,801   |   |   | 1,233,219 |   |
| Others-                                                   |   |   |           |   |   |           |   |   |  |   |
| Commercial                  Aviation                      |   |   | 207,652   |   |   | 516,098   |   |   | 612,858 |   |
| Executive                  Aviation                       |   |   | 22,036    |   |   | 116,010   |   |   | 23,877 |   |
| Aviation                  Services                        |   |   | 703       |   |   | 12,412    |   |   | 40,312 |   |
| Defense                  and Government                   |   |   | 151,237   |   |   | -         |   |   | 63,635 |   |
| Others                                                    |   |   | -         |   |   | -         |   |   | 2,209 |   |
|                                                      |   |   | 381,628   |   |   | 644,520   |   |   | 742,891 |   |
| Total                                                     |   |   | 3,789,495 |   |   | 3,759,519 |   |   | 5,245,172 |   |

----

**Embraer            - Empresa Brasileira de Aeronáutica S.A.**

**Notes              to Consolidated Financial Statements**

**Years              Ended December 31, 2005, 2006 and 2007**

**In              thousands of U.S. dollars, unless otherwise stated**

----

| Operating                income               |   | 2005   |       | 2006   |   | 2007       |   |
|-----------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
|                                          |   |   |       |   |   |       |   |
| Net                sales-                     |   |   |       |   |   |       |   |   |   |   |
| Commercial                Aviation            |   |   | 2,631,997  |   |   | 2,353,219  |   |   | 3,376,635 |   |
| Executive                Aviation             |   |   | 278,054    |   |   | 582,080    |   |   | 837,955 |   |
| Aviation                Services              |   |   | 387,355    |   |   | 479,834    |   |   | 528,252 |   |
| Defense                and Government         |   |   | 423,796    |   |   | 226,707    |   |   | 346,437 |   |
| Others                                        |   |   | 68,293     |   |   | 117,679    |   |   | 155,893 |   |
|                                          |   |   | 3,789,495  |   |   | 3,759,519  |   |   | 5,245,172 |   |
| Cost                of sales and services-    |   |   |       |   |   |       |   |   |   |   |
| Commercial                Aviation            |   |   | (1,892,401 | )      |   | (1,780,509 | )      |   | (2,737,260 | ) |
| Executive                Aviation             |   |   | (193,995   | )      |   | (398,964   | )      |   | (602,516 | ) |
| Aviation                Services              |   |   | (272,509   | )      |   | (349,638   | )      |   | (393,078 | ) |
| Defense                and Government         |   |   | (322,013   | )      |   | (174,479   | )      |   | (236,835 | ) |
| Others                                        |   |   | (57,989    | )      |   | (103,212   | )      |   | (123,815 | ) |
|                                          |   |   | (2,738,907 | )      |   | (2,806,802 | )      |   | (4,093,504 | ) |
| Gross                profit-                  |   |   |       |   |   |       |   |   |   |   |
| Commercial                Aviation            |   |   | 739,596    |   |   | 572,710    |   |   | 639,375 |   |
| Executive                Aviation             |   |   | 84,058     |   |   | 183,116    |   |   | 235,439 |   |
| Aviation                Services              |   |   | 114,845    |   |   | 130,196    |   |   | 135,174 |   |
| Defense                and Government         |   |   | 101,784    |   |   | 52,228     |   |   | 109,602 |   |
| Others                                        |   |   | 10,305     |   |   | 14,467     |   |   | 32,078 |   |
|                                          |   |   | 1,050,588  |   |   | 952,717    |   |   | 1,151,668 |   |
|                                          |   |   |       |   |   |       |   |   |   |   |
| Operating                expenses-            |   |   |       |   |   |       |   |   |   |   |
| Commercial                Aviation            |   |   | (315,711   | )      |   | (303,404   | )      |   | (299,281 | ) |
| Executive                Aviation             |   |   | (44,474    | )      |   | (130,390   | )      |   | (237,614 | ) |
| Aviation                Services              |   |   | (32,339    | )      |   | (25,602    | )      |   | (80,068 | ) |
| Defense                and Government         |   |   | (50,267    | )      |   | (37,988    | )      |   | (60,492 | ) |
| Others                                        |   |   | -          |   |   | -          |   |   | (5,998 | ) |
| Unallocated                corporate expenses |   |   | (97,505    | )      |   | (112,502   | )      |   | (94,010 | ) |
|                                          |   |   | (540,297   | )      |   | (609,886   | )      |   | (777,463 | ) |
|                                          |   |   |       |   |   |       |   |   |   |   |
| Income                from operations         |   |   | 510,291    |   |   | 342,831    |   |   | 374,205 |   |

----

**Embraer        - Empresa Brasileira de Aeronáutica S.A.**

**Notes          to Consolidated Financial Statements**

**Years          Ended December 31, 2005, 2006 and 2007**

**In          thousands of U.S. dollars, unless otherwise stated**

----

| Property,                plant and equipment, net |   | 2006   |    | 2007   |   |
|---------------------------------------------------|--------|--------|---------|--------|--------|
|                                              |   |   |    |   |   |
| Commercial                Aviation                |   |   | 117,655 |   |   | 165,781 |   |
| Executive                Aviation                 |   |   | 18,726  |   |   | 48,816 |   |
| Aviation                Services                  |   |   | 42,733  |   |   | 56,520 |   |
| Defense                and Government             |   |   | 50,791  |   |   | 14,442 |   |
| Others                                            |   |   | 23,899  |   |   | 38,515 |   |
| Unallocated                                       |   |   | 158,440 |   |   | 241,905 |   |
| Total                                             |   |   | 412,244 |   |   | 565,979 |   |

| Trade                accounts receivable, net |   | 2006   |    | 2007   |   |
|-----------------------------------------------|--------|--------|---------|--------|--------|
|                                          |   |   |    |   |   |
| Commercial                Aviation            |   |   | -       |   |   | 34,717 |   |
| Aviation                Services              |   |   | 145,935 |   |   | 190,947 |   |
| Defense                and Government         |   |   | 113,371 |   |   | 92,437 |   |
| Others                                        |   |   | 40,681  |   |   | 76,210 |   |
| Total                                         |   |   | 299,987 |   |   | 394,311 |   |

| Advances                from customers |   | 2006   |    | 2007   |   |
|----------------------------------------|--------|--------|---------|--------|--------|
|                                   |   |   |    |   |   |
| Commercial                Aviation     |   |   | 403,706 |   |   | 608,082 |   |
| Executive                Aviation      |   |   | 195,746 |   |   | 439,495 |   |
| Aviation                Services       |   |   | 12,239  |   |   | 35,684 |   |
| Defense                and Government  |   |   | 106,021 |   |   | 66,342 |   |
| Others                                 |   |   | 10,729  |   |   | 19,973 |   |
| Total                                  |   |   | 728,441 |   |   | 1,169,576 |   |

| **37** | **Supplemental                Disclosure of Cash Flow                Information** |
|--------|------------------------------------------------------------------------------------|

|                                                                 |   | 2005   |   | 2006   |   | 2007   |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Cash                paid during the year for                         |   |   |   |   |   |   |   |   |   |   |
| Interest                                                             |   |   | 65,964 |   |   | 99,611 |   |   | 78,297 |   |
| Income                taxes                                          |   |   | 21,698 |   |   | 89,899 |   |   | 14,278 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |
| Non-cash                financing and investing transactions         |   |   |   |   |   |   |   |   |   |   |
| Dividends                payable                                     |   |   | 42,811 |   |   | 35,555 |   |   | - |   |
| Loans                and financing (OGMA acquisition)                |   |   | 31,730 |   |   | -      |   |   | - |   |
| Property,                plant and equipment, net (OGMA acquisition) |   |   | 10,286 |   |   | -      |   |   | - |   |
| Assets                acquired under capital leases                  |   |   | 3,754  |   |   | 3,918  |   |   | 11,265 |   |

----