Economic Decoupling?

1. Economic Decoupling? • BNCC • February, 26th 2008

2. Table of Contents SECTION 1 Macroeconomic Framework SECTION 2 Is Economic Decoupling a Credible Possibility? SECTION 3 Outlook SECTION 4 Itaú Group SECTION 5 Itaú Europa

3. SECTION 1 Macroeconomic Framework

4. Consistent Growth • Historical growth volatility as been replaced by consistency. • We expect 2007 GDP growth to stand at 5.4%. • Driven by domestic demand. 61% GDP Weight: 14% 19% 18% -12% Source: IBGE, Banco Itaú Europa.

5. Independent Monetary Policy • Prudent monetary policy despite lack of formal independence of the Central Bank. • Loosening cycle since 2005. • Economic growth and high commodity prices (and food) raising inflation concerns: BCB on hold. Real rates in Brazil are among the highest in the world Source: BCB, Banco Itaú Europa.

6. Responsible Fiscal Policy • Prudent and responsible fiscal policy. • Commitment to the target of primary surplus/GDP of 3.8%. • Decreasing nominal deficit reflecting strong tax revenue. • Consistent improvement of the debt profile. Source: BCB, Banco Itaú Europa.

7. Sound External Position • Consistent improvement of the debt profile. • Strong reserve build-up. • Maturity extension and risk management. • Brazil is a net external creditor. Source: BCB, Banco Itaú Europa.

8. SECTION 2 Is Economic Decoupling a Credible Possibility?

9. Lower imports Tighter credit Risk aversion Wealth effect Is Economic Decoupling a Credible Possibility? • No country is insulated from a weaker US economy . • Tighter credit conditions in US will have multiple impacts worldwide and in Brazil. • We believe that Brazil is more protected from the turmoil than most of the countries. Confidence?

10. US: 16% Euro Zone: 21% Argentina:9% China: 7% Diversified Export Profile • Low degree of openness when measured by adding imports and exports to GDP. • Diversified export profile with important weight of other emerging economies. • US represents 16% of total exports and Euro zone 21%. Source: BCB, Banco Itaú Europa.

11. Low Exposure to International Credit Conditions • Tighter credit conditions worldwide postpone investment decisions. • The more dependent a country is on international financing the larger the impact. • The reliance of the Brazilian economy on credit is low. • The reliance of the Brazilian economy on external debt is the lowest among peers. Source: Moody’s, IMF, Banco Itaú Europa.

12. Low Investment Dependence • Falling equity and bond markets worldwide erode the value of savings. • High risk aversion prevent foreign direct and portfolio investment abroad. • Similarly to what happens to credit, Brazil has low saving rates when compared to peers. • Foreign direct investment, in net terms in not consistently positive nor meaningful. • Foreign exchange flows are of quality: trade over financial flows. 2.1% GDP Source: BCB, Banco Itaú Europa.

13. Agents Remain Confident • Confidence is an important determinant of consumption and investment decisions. • Consumer and business confidence has been eroding in US and EU. • Brazilian confidence is rising, which bodes well for the future. Source: Banco Itaú Europa, U. Michigan, Conference Board, European Commission – Directorate General for Economic and Financial Affairs, FGV, CNI.

14. The Most Important Channel of International Contagion is Currency Depreciation • The major risk we see is if an international crisis leads to a sharp deterioration of the value of the currency. • Ceasing the interest rate convergence process for a substantial period would affect directly consumption and investment. • Consumption and investment stand for nearly 80% of GDP . • A weak currency feeds through directly to inflation expectations and could lead the BCB to even hike rates in the current environment of strong domestic demand. • Didn’t happen so far. Uncertainty is likely to diminish in 2008. • In an extreme scenario, a strong slump in exports, i.e. deep double digit, would have an important impact on growth. • Nevertheless, in such an environment all the remaining arguments stand for an outperformance of Brazil over peers. • These situations aren´t our base case scenario.

15. SECTION 3 Outlook

16. Supportive Domestic Environment • We expect economic growth to remain supported by domestic demand. • Lower trade surplus. • Deficit in the current account. • Monetary policy and trade could decelerate growth in the 2H08. • Strong BRL at all times on the back of exports, financial inflows and rising interest rate differentials. Source: Itaú Corretora, Banco Itaú Europa.

17. Inflation is our Main Concern • Our top concern is inflation. • What could push inflation up: oil, food, service (non-tradable), capacity restrictions, BRL depreciation. • What could push inflation down: a strong BRL, Monetary Policy Committee (Copom). Source: BCB, Banco Itaú Europa.

18. Copom on Hold in 2008 • We expect the Copom to be on hold most of the year. • Arguments for rising rates: Potential BRL depreciation if international environment deteriorates further, strong domestic demand, commodity, food and non-tradable prices. • Arguments to be on hold: Strong BRL, high weigh of consumption and investment in the economy, lower trade surplus, FED policy. Source: Itaú Corretora, Banco Itaú Europa.

19. Path to Investment Grade • We expect Brazil to continue the path to investment grade. • By many credit metrics Brazil already compares favourably with investment grade countries. • Current account deficit in 2008 could raise concerns about the country’s external vulnerability. • Debt levels remain high for investment grade standards. • Fiscal discipline – Will the government be successful in implementing a replacement for CPMF tax? • Rating agencies are more prudent given high international uncertainty. • Financial markets decoupling hasn’t been clear at all times. Buy opportunity? Equities since June 2007

20. Economic Forecasts

21. SECTION 4 Itaú Group

22. Itaú Group – A Global Brazilian Financial Institution Itaú Group has an important presence in key financial centers, a strong recognition and a broad range of products. (London) (Tokyo) (NY) (Lisbon) (Shanghai) (Miami) (Hong Kong) Itaú Bank Ltd (Cayman) (Dubai) (Nassau) (Brazil) (Uruguay) (Chile) (Argentina) Sarbanes-Oxley: Itaú Holding is the first foreign bank listed on the NYSE to attain all Section 404 requirements of Sarbanes-Oxley Act, one year prior to the compliance deadline set by the U.S. authorities.

23. Itaú Holding Financeira – Highlights1, 2 Performance leadership is reflected on the high market capitalization and outstanding results. Stockholders’ Equity Total Assets Market Captalization # of Employees Total clients Branches + CSB ATMs US$ 16.4 billion US$ 166 billion US$ 62.6 billion 65,089 24 million 3,528 23,739 Moody’s (Long Term) Fitch Ratings (Long Term) Standard & Poor’s (Long Term) • brAAA (domestic) • BBB- (international, local currency) • BBB- (international, foreign currency) • B- Financial Strenght (international) • Aaa.br (domestic) • Baa3 Foreign Currency Bonds • AAA(bra) (domestic) • BBB (international, local currency) • BBB- (international, foreign currency) 1 As of December 31st, 2007. 2 Considering the Real / US$ = 1,7713.

24. SECTION 5 Itaú Europa

25. Itaú Europa – Strategic Overseas Presence Focus on cross-border businesses between Europe and South America. Local relationships in Europe through commercial teams in Lisbon, Madrid, London, Frankfurt and Paris (new representative office in 2008). Private Banking activities conducted through Banco Itaú Europa Luxembourg and Banco Itaú Europa International (Miami). Syndicated Loans Loans & Guarantees Treasury Products & Derivatives Trade Finance Investment Banking Structured Finance Cash Management South America Domestic Lending South America Moody’s (Long Term) Fitch Ratings (Long Term) Investment Grade Ratings • Baa1 (international) • BBB+ (international)

26. Itaú Europa – Financial Highlights1 Consistent Growth of Assets ROA & ROE • Million 8798 5742 5602 4382 ROE 3761 2034 1876 1553 ROA Material results in face of wholesale nature of business and strong capital base Revenues Diversification – Operating Income (Year 2.007) • Million • Million 1 Financial Highlights for 2007 are preliminar and unaudited.

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