DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION

The credits of the parent company’s deferred income tax and social contribution are as follows:

Due to the expectation of future tax results, as well as in compliance with the conditions set forth by the accounting practices in Brazil and rules of the Securities and Exchange Commission of Brazil (CVM), the parent company recorded deferred IR and CS credit.

The expectation of generation of future taxable income is basically founded on the occurrence of future events, which will be materialized in a closer period.

Deferred income tax and social contribution credits of the parent company and the subsidiaries ALL - América Latina Logística do Brasil S.A., ALL – América Latina Logística Intermodal S.A. and ALL - América Latina Logística Argentina are as follows:

Tax losses, negative bases and consolidated temporary differences are shown as follows:

The expectation of realization of deferred tax credits is as follows:

The indirect subsidiaries ALL Central and ALL Mesopotâmica consolidated part of their corporate reorganization process, and based on the expectation of future taxable results, the subsidiaries meet the conditions set forth by the accounting practices adopted in Brazil for the recognition of the deferred income tax credit at the amount of R$15,713 on December 31, 2006 (in 2005 R$18,097), which were recorded. The tax losses, according to the Argentine tax legislation, prescribe in 5 years, term considered enough by the management for the full recovery of the deferred income tax assets.

Tax losses and negative bases of Logispar Logística e Participações S.A. were fully used with taxable income at the moment of its merger.

In the subsidiaries Brasil Ferrovias and Novoeste Brasil and its subsidiaries, such tax credits were not recognized, in view of the history of losses during the last years and the lack of a realization feasibility study of tax losses, negative bases and temporary differences. These balances of tax losses and negative bases are under review.

The deferred tax assets on December 31, 2006, in the amount of R$99,717, are based on a technical feasibility study approved by the Board of Directors, which presented future taxable income discounted at present value, in accordance with CVM Instruction 371.

Tax losses and social contribution negative bases generated in the parent company and Brazilian subsidiaries do not become time-barred and will be offset with future taxable income, according to the tax legislation criteria.

LONG-TERM INVESTMENTS

(a) Debentures - Parent Company
On June 17 2005, the Company acquired 27,459 registered debentures, nonconvertible into book-entry shares, at unit par value of R$10, of subordinated type, relative to 1st tranche of 2nd issuance, through the private issue of ALL – América Latina Logística do Brasil S.A.

On October 2, 2006, the subsidiary Brasil Ferrovias approved the issuance of 70,000 registered debentures, non-convertible into book-entry shares, at unit par value of R$10, of subordinated type, relative to the Company’s 4th issuance. This is related to a private issuance of the parent company.

On October 2, 2006, the subsidiary Novoeste Brasil approved the issuance of 15,000 registered debentures, non-convertible into book-entry shares, at unit par value of R$10, of subordinated type, relative to the Company’s 1st issuance. This is related to a private issuance of the parent company.

(b) Marketable Securities
The indirect subsidiary Ferrovia Novoeste holds LFT’s (Financial Treasury Bills), with compensatory interest of 100% of CDI linked to banking surety rendering agreement at the fixed amount of R$147,572. Such surety is destined to the guarantee of the amounts of overdue installments related to concession and lease due by Ferrovia Novoeste S.A to RFFSA – in settlement and the Federal Government. On November 28, 2005, they were redeemed and replaced by other 63,100 LFT’s, and on January 19, 2006, other 1,917 LFT’s held in custody with Banco do Brasil S.A. in the amount of R$203,094, respectively, with maturity on December 16, 2009, classified as “long-term investments” in the consolidated balance sheet.

(c) Subscription bonus security
On June 21, 2004, the subsidiary Logispar Logística e Participações S.A. and the indirect subsidiary ALL – América Latina Logística – Argentina S.A., swapped with “GEEMF II Latin, America LLC”, the totality of shares held thereby issued by its subsidiary ALL América Latina Logística S.A. for subscription bonus securities issued by the latter at the amounts of R$17,642 and P$198, respectively, with long-term maturities. The subscription bonus of Logispar Logística e Participações S.A. and ALL Argentina were sold on September 1, 2006 and October 11, 2006, by amounts near to the market value of shares, resulting in gains of R$57,534 and R$3,778, respectively.