•	The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. Brazilian political and economic conditions have a direct impact on Ultrapar business and the market price of the shares.
•	Proposed changes in Brazilian labor and labor union law could impact company-labor relations.
•	Inflation, and certain governmental measures to combat inflation, may contribute significantly to economic uncertainty in Brazil.
•	Fluctuations in the value of the Brazilian currency against the value of the U.S. dollar may result in uncertainty in the Brazilian economy and the Brazilian securities market, which may adversely affect the Company financial condition and results of operations and, consequently, the market value of the shares and ADSs.
•	Restrictions on the movement of capital out of Brazil may hinder investors ability to receive dividends and the proceeds of any sale of the shares.
•	Developments in other emerging markets may adversely affect the results of Ultrapar operations and the market price of the shares and ADSs.
•	United States investors may not be able to obtain jurisdiction over or enforce judgements against us.

•	The ADSs generally do not give investors voting rights.
•	The shares and ADSs do not entitle investors to a fixed or minimum dividend.
•	Investors might be unable to exercise preemptive rights with respect to the preferred shares.
•	If investors exchange the ADSs for preferred shares, they risk losing certain foreign currency remittance and Brazilian tax advantages.
•	The relative volatility and illiquidity of the Brazilian securities markets may adversely affect investors.
•	Controls and restrictions on the remittance of foreign currency could negatively affect Ultrapar’s capacity to make dividend payments to foreign investors.
•	Ultrapar share price may be affected by shares eligible for future sale.
•	If the Company was treated as a Passive Foreign Investment Company (PFIC), U.S. Holders of ADSs would be subject to disadvantageous rules under the U.S. tax laws.

•	Ultragaz, the Company’s LPG distribution subsidiary, currently depends upon Petrobras for its supply of LPG.
•	Currently Ultrapar has no formal contract with Petrobras to supply LPG.
•	LPG refinery prices charged by Petrobras can fluctuate according to the international markets and may affect Ultrapar revenues and operating margin.
•	LPG competes with alternative sources of energy.
•	The acquisition of Shell Gás LPG Brasil (“Shell Gás”) is subject to Brazilian regulations and other anti-trust rules.
•	Ethylene, the principal raw material used in Ultrapar petrochemical operations, comes from limited supply sources.
•	The Brazilian petrochemical industry is very closely influenced by the performance of the international petrochemical industry and its cyclical behavior.
•	The price of ethylene is subject to fluctuations in international oil prices.
•	The reduction in import tariffs on petrochemical products can reduce the Company competitiveness in relation to imported products.
•	Ultrapar insurance coverage may be insufficient to cover losses that it might incur.
•	The Company may be adversely affected by the imposition and enforcement of more stringent environmental laws and regulations.
•	The production of petrochemicals and chemicals is inherently hazardous.
•	Ultrapar is currently controlled by its senior management, which substantially limits the ability of non-management shareholders to control the direction of its business.
•	The Company status as a holding company may limit its ability to pay dividends on the shares.

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RISK MANAGEMENT
Ultrapar’s risk management is conducted through control policies, specific strategies and the setting of exposure limits, so as to minimize or avoid losses in the event of unexpected circumstances arising in the market or in the company’s operations.

Operational Risk
Accidents or the breakdown of equipment may cause a partial interruption to production and a consequent loss of sales and revenue. To manage this risk, the company maintains a program of preventative maintenance, organizing and apportioning tasks among the various teams in the production units. The industrial units also have a crisis management plan in place, to ensure a permanent state of readiness and a quick, efficient response to accidents or any other disruptive situations that might occur.

Furthermore, the company has insurance policies that cover damage to assets and other contingencies relating to the transport and storage of LPG, chemical products and petrochemicals. At Ultracargo, there are insurance policies in place which cover damage to transported merchandise as a result of vehicle accidents. All Ultrapar’s companies maintain civil liability insurance against damage and/or losses caused to third parties as a result of operational accidents.

Environmental Risk
Ultrapar‘s companies are subject to federal, state and municipal laws and regulations governing protection of the environment. All the company’s installations and operations conform to these requirements. In addition, they also operate in accordance with specific environmental quality control standards. Oxiteno, for example, holds ISO 14001 certification, first obtained in 1996. Oxiteno and Ultracargo are signatories to the Responsible Action Program sponsored by Abiquim – the Brazilian Chemical Industry Association – which specifically applies to chemical companies and their partners, to ensure that recommendations with regard to safety, the environment and product management, among others, are complied with.

Ultragaz is in the process of implementing an Environmental Risk Management System, with a view to obtaining international certification for this system, in accordance with ISO 14001 requirements.

Interest Rate Risk
Of Ultrapar’s total debt as at December 31, 2003, 30% was contracted in local currency (the Brazilian real) and subject to variable interest rates, either based on the TJLP (Long Term Interest Rate) or the IGP-M (General Market Price Index). This risk is partially offset by the level of interest-bearing deposits held, which are remunerated at the CDI (Interbank Deposit Certificate) rate. As well as the exposure resulting from its existing loans, the company is subject to interest rate volatility on any future issue of debt.

Ultrapar’s sound financial position, and its capacity to generate cash, allows it to obtain loans at very competitive rates. In January 2004, for example, Ultragaz issued a Eurobond with a term of 18 months, at a cost of 3.625% p.a., or exactly the same as the sovereign rate, for the same period.

Exchange Rate Risk
Of Ultrapar’s total debt as at December 31, 2003, 70% was denominated either in US dollars or in a basket of currencies. To manage the associated risks, the company uses foreignexchange swap contracts. The company does not carry out derivative market operations for speculative purposes.

In addition to this, the prices of certain raw materials and inputs used in production, such as LPG and ethylene, are either fixed in the international market or indexed to it, and so are subject to fluctuations in the dollar. Of the net sales in 2003, practically 10% was derived from exports, and therefore denominated in dollars. Furthermore, a large proportion of Oxiteno’s revenue in the domestic market is based on reference prices established in the international market, and so dollar based, thus mitigating some of the impact of exchange-rate risk on the company’s results.

Risk of Customer Default
Ultrapar uses credit analysis and carries out credit checks before accepting new customers, to reduce the level of risk in its receivables portfolio.

•	strategy for marketing and operational expansion;
•	capital expenditures forecasts; and
•	development of additional sources of revenue.

•	general economic and business conditions, including the crude oil prices and other commodities, refining margins and prevailing foreign exchange rates;
•	competition;
•	ability to produce and deliver products on a timely basis;
•	ability to anticipate trends in the liquefied petroleum gas, or LPG industry, including changes in capacity and industry price movements;
•	changes in official regulations;
•	receipt of official authorizations and licenses;
•	political, economic and social events in Brazil;
•	approval of Brazilian anti-trust authorities of the Shell Gás acquisition;
•	access to sources of financing and Ultrapar level of debt;
•	other factors contained under item Risk Factors (above).

Last update on December 10, 2004.

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