Securities registered pursuant to Section 12(g) of the Act:

None

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

None

The total number of issued shares of each class of stock of BRASKEMBraskem S.A. as of December 31, 20052007 was: 120,860,099149,810,870 Common Shares, no par value per share, 240,855,683298,818,675 Preferred Shares, Class A, no par value per share, and 803,066 Preferred Shares, Class B, no par value per share.

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

Yes            x             No           ¨

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.

Yes            ¨             Nox

         

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes            x             No           ¨

Indicate by check mark 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. (Check one):

Large Accelerated Filer                          Accelerated Filer                        Non-accelerated Filer           

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

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

Item 17  ¨             Item 18        x

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).

Yes            ¨             No           x

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INTRODUCTION

All references herein to the ““real,” “reais”“reais” or “R$” are to the Brazilianreal, the official currency of Brazil. All references to “U.S. dollars,” “dollars” or “US$” are to U.S. dollars.

All references herein (1) to “we,” “us” or “our company” are references to Braskem S.A. and, its consolidated subsidiaries and jointly controlled entities, and (2) to “Braskem” are references solely to Braskem S.A.

On June 22, 2006,27, 2008, the exchange rate forreaisinto U.S. dollars was R$2.2391.6077 to US$1.00, based on the selling rate as reported by the Central Bank of Brazil (Banco Central do Brasil), or the Central Bank. The selling rate was R$1.7713 to US$1.00 at December 31, 2007, R$2.138 to US$1.00 at December 31, 2006 and the commercial selling rate was R$2.341 to US$1.00 at December 31, 2005, and the commercial selling rate was R$2.654 to US$1.00 at December 31, 2004 and R$2.889 to US$1.00 at December 31, 2003, in each case, as reported by the Central Bank. Thereal/U.S. dollar exchange rate fluctuates widely, and the selling rate at June 22, 200627, 2008 may not be indicative of future exchange rates. See “Item 3. Key Information—Exchange Rates” for information regarding exchange rates for the Brazilian currency since January 1, 2001.2003.

Solely for the convenience of the reader, we have translated some amounts included in “Summary—Summary financial and other information,” “Capitalization,” “Selected financial and other information”“Item 3. Key Information—Selected Financial Information” and elsewhere in this annual report fromreaisinto U.S. dollars using the selling rate as reported by the Central Bank at December 31, 20052007 of R$2.3411.7713 to US$1.00. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or at any other exchange rate. Such translations should not be construed as representations that therealamounts represent or have been or could be converted into U.S. dollars as of that or any other date.

Financial Statements

Braskem Financial Statements

We maintain our books and records inreais.

Our consolidated financial statements at December 31, 20052007 and 20042006 and for each of the three years ended December 31, 2005, 2004 and 20032007 have been audited, as stated in the report appearing herein, and are included in this annual report.

We prepare our consolidated financial statements in accordance with accounting practices adopted in Brazil, or Brazilian GAAP, which are based on:

Brazilian GAAP differs in certain respects from accounting principles generally accepted in the United States, or U.S. GAAP. For a discussion of certain differences relating to these financial statements, see note 31 to our audited consolidated financial statements included elsewhere in this annual report.

Consistent with Brazilian GAAP, our audited consolidated financial statements at December 31, 20052007 and 20042006 and for the three years ended December 31, 2005, 2004 and 20032007 have been prepared in accordance with Brazilian Securities CommissionCVM Instruction No. 247/96, as amended, by Brazilian Securities Commission Instruction Nos.

269/97, 285/98 and 319/99, which we refer to collectively asor Instruction 247. Instruction 247 requires our company to proportionally consolidate jointly controlled companies that are not our subsidiaries but which we jointly control with one or more other shareholders.

Our consolidated financial statements reflect reclassifications in 2004 and 20032005 of the following items to provide a better comparison among 2005, 20042006 and 2003:2005:

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For U.S. GAAP purposes the effects of proportional consolidation for those companies that are not jointly controlled by all voting shareholders were eliminated.

Copesul Financial Statements

We have included separate consolidated financial statementsresults of Copesul—Companhia Petroquímica do Sul, or Copesul, in our consolidated financial statements. As a result of the Ipiranga Transaction described under “Item 4. Information on the Company—Ipiranga Transaction,” we have fully consolidated Copesul’s results in our consolidated financial statements and included Copesul’s results as a separate segment as from April 1, 2007.

     Copesul and Ipiranga Química S.A., or Ipiranga Química, maintain their books and records inreais and prepare their consolidated financial statements in accordance with Brazilian GAAP.

Copesul Financial Statements

     Prior to April 1, 2007, Copesul’s consolidated financial statements were proportionally consolidated into the Braskem’s consolidated financial statements under Brazilian GAAP, as described above under “—Braskem Financial Statements.” As a result of the Ipiranga Transaction and our obtaining effective management control over the 29.5% of the share capital of Copesul then owned by Ipiranga Petroquímica, we have fully consolidated the results of Copesul and its subsidiaries into our financial statements as from April 1, 2007. As a result of the completion of the first phase of the Petrobras Transaction, the minority interest in Copesul represents only 0.8% of the total share capital of Copesul.

     We have included separate consolidated financial statements of Copesul in this annual report because Copesul constitutesconstituted a “significant” jointly controlled company, accounting for 49.5%85.0% of our income from continuing operations before income taxes in 2005.the three months ended March 31, 2007 and 96.6% in 2006. Copesul maintains its books and records inreais and prepares its financial statements in accordance with Brazilian GAAP.

     Copesul’s consolidated financial statements at December 31, 20052007 and 20042006 and for each of the years ended

December 31, 2005, 20042007, 2006 and 20032005 included in this annual report have been audited, as stated in the report appearing herein. Copesul’s consolidated financial statements are proportionally consolidated intoat March 31, 2008 and for each of the Braskem’s consolidated financial statements under Brazilian GAAP, as described above under “—Braskem Financial Statements.”three month periods ended March 31, 2008 and 2007 included in this annual report have not been audited.

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Share Splits

Share Splits

On October 20, 2003, we authorized the split of all of our issued common shares, class A preferred shares and class B preferred shares into 20 shares for each issued share. This 20-for-one share split was effective on October 21, 2003. As a result of this share split, the ratio of our class A preferred shares to American Depository Shares, or ADSs, changed from 50 class A preferred shares per ADS to 1,000 class A preferred shares per ADS.

On March 31, 2005, we authorized the reverse split of all of our issued common shares, class A preferred shares and class B preferred shares into one share for each 250 issued shares. This reverse share split became effective on May 16, 2005. In connection with this reverse share split, we authorized a change in the ratio of our ADSs. Upon the effectiveness of our reverse share split and the ratio change, the ratio of our class A preferred shares to ADSs changed from 1,000 class A preferred shares per ADS to two class A preferred shares per ADS.

All references to numbers of shares and dividend amounts in this annual report have been adjusted to give effect to the 20-for-one share split and the one-for-250 reverse share split.

Market Share and Other Information

We make statements in this annual report about our market share in the petrochemical industry in Brazil and our production capacity relative to that of other petrochemical producers in Brazil and Latin America. We have made these statements on the basis of information obtained from third-party sources that we believe are reliable. We have calculated our Brazilian market shares with respect to specific products by dividing our domestic net sales volumes of these products by the total Brazilian domestic consumption of these products estimated by the Brazilian Association of Chemical Industry and Derivative Products (Associação Brasileira de Indústrias Químicas e de Produtos Derivados). We derive information regarding the production capacity of other companies in the Brazilian petrochemical industry and the estimated total Brazilian domestic consumption of petrochemical products principally from reports published by the Brazilian Association of Chemical Industry and Derivative Products. Although we have no reason to believe that any of this information is inaccurate in any material respect, neither we nor the initial purchasers have independently verified the production capacity, market share, market size or similar data provided by third parties or derived from industry or general publications. We derive information regarding the size of the chemical distribution industry and our market share in this industry principally from reports published by the Brazilian Chemical and Petrochemical Distributors Association (Associação Brasileira dos Distribuidores de Produtos Químicos e Petroquímicos).

Production Capacity and Sales Volume

As used in this annual report:

Rounding

We have made rounding adjustments to reach some of the figures included in this annual report. As a result, numerical figures shown as totals in some tables may not be arithmetic aggregations of the figures that precede them.

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CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements. Some of the matters discussed concerning our business operations and financial performance include forward-looking statements within the meaning of the Securities Act or the U.S. Securities Exchange Act of 1934, or the Exchange Act.

Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and similar expressions are forward-looking statements. Although we believe that these forward-looking statements are based upon reasonable assumptions, these statements are subject to several risks and uncertainties and are made in light of information currently available to us.

Our forward-looking statements may be influenced by factors, including the following:

Our forward-looking statements are not guarantees of future performance, and our actual results or other developments may differ materially from the expectations expressed in the forward-looking statements. As for forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainty of estimates, forecasts and projections. Because of these uncertainties, potential investors should not rely on these forward-looking statements.

We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

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PART I

ITEM 1. IDENTITY OF DIRECTOR, SENIOR MANAGEMENT AND ADVISER

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

Selected Financial Information

The following selected financial data hashave been derived from our consolidated and combined financial statements.

The selected financial data at December 31, 20052007 and 20042006 and for the three years ended December 31, 20052007 have been derived from our consolidated financial statements included in this annual report. The selected financial data at December 31, 2003, 20022005, 2004 and 20012003 and for the years ended December 31, 20022004 and 2001 has2003 have been derived from our audited consolidated and combined financial statements that are not included in this annual report.

     Prior to the Ipiranga Transaction, we owned 29.5% of the voting and total share capital of Copesul, and we were required, under Brazilian GAAP, to account for our interests in Copesul in our consolidated financial statements using the proportional consolidation method, including for the first three months of 2007. As a result of the Ipiranga Transaction and our obtaining effective management control over the 29.5% of the share capital of Copesul then owned by Ipiranga Petroquímica, we have fully consolidated the results of Copesul and its subsidiaries into our financial statements as from April 1, 2007. In addition, as a result of the Ipiranga Transaction, we have consolidated the results of Ipiranga Química and Ipiranga Petroquímica in our consolidated financial statements as from April 1, 2007.

Our consolidated and combined financial statements are prepared in accordance with Brazilian GAAP, which differs in certain respects from U.S. GAAP. For a discussion of certain differences relating to these financial statements, see note 31 to our audited consolidated financial statements included in this annual report.

5

This financial information should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements in this annual report.Table of Contents

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		At and for the year ended December 31,
		2005(1)				2005				2004				2003(2)				2002(2)(3)				2001(2)(3)
		(in millions of US$, except financial ratios)				(in millions ofreais, except financial ratios)
Number of shares outstanding at year end, excluding treasury shares (in thousands):
Common shares							120,860				120,860				102,432				98,087				51,735
Class A preferred shares							240,860				240,373				170,379				168,491				86,371
Class B preferred shares							803				842				916				916				916
Net income (loss) per share at year end			0.74				1.73				1.90				0.79				(5.15	)			(3.05	)
Net income (loss) per ADS at year end			1.48				3.46				3.80				1.57				(10.31	)			(6.11	)
Dividends declared per share:
Common shares			0.38				0.90				0.56				—				—				0.43
Class A preferred shares			0.38				0.90				0.56				—				0.13				0.52
Class B preferred shares			0.24				0.56				0.56				—				0.13				0.52
Dividends declared per ADS			0.77				1.80				1.12				—				—				1.04
U.S. GAAP:
Net sales		US$	5,129.3			R$	12,007.8			R$	11,644.1			R$	9,454.8			R$	7,071.8			R$	4,236.0
Gross profit			1,003.4				2,349.0				2,704.1				1,792.3				1,151.0				717.6
Operating Income			483.2				1,131.2				1,816.9				1,316.9				1,573.3				527.7
Net income (loss) for the year			314.9				737.1				887.8				378.1				(1,144.0	)			(471.0	)
Basic earnings (loss) per share (weighted average):
Common shares			0.87				2.04				2.77				1.41				(11.93	)			(6.68	)
Class A preferred shares			0.87				2.04				2.83				1.37				—				—
Class B preferred shares			0.27				0.63				0.56				0.44				—				—
Basic earnings (loss) per ADS (weighted average)			1.74				4.08				5.66				2.74				—				—
Diluted earnings (loss) per share (weighted average):
Common shares			0.83				1.94				2.54				1.41				(11.93	)			(6.68	)
Class A preferred shares			0.83				1.94				2.54				1.37				—				—
Class B preferred shares			0.27				0.63				0.56				0.44				—				—
Diluted earnings (loss) per ADS (weighted average)			1.66				3.88				5.08				2.40				—				—
Balance Sheet Data Brazilian GAAP:
Cash, cash equivalents and other investments		US$	974.6			R$	2,281.5			R$	1,815.6			R$	1,221.2			R$	821.0			R$	513.2
Short-term trade accounts receivable			637.9				1,493.3				1,630.6				1,241.0				959.0				484.1
Short-term inventories			669.6				1,567.5				1,562.4				1,092.3				889.1				667.8
Property, plant and equipment, net			2,547.7				5,964.2				5,457.6				5,090.9				5,296.7				4,429.7
Total assets			6,659.9				15,590.8				15,050.4				14,005.6				13,898.2				9,555.3
Short-term loans and financing (including current portion of long-term debt)			382.3				895.0				1,785.9				2,764.1				2,746.1				1,966.4
Short-term debentures			4.0				9.3				5.0				353.4				32.1				26.2
Short-term related party debt			1.3				3.1				—				5.5				8.2				88.7
Long-term loans and financing			1,220.6				2,857.5				3,059.6				3,628.0				3,891.6				3,101.7
Long-term debentures			683.2				1,599.3				1,167.9				1,143.0				1,190.2				473.6
Long-term related party debt			1.3				3.0				115.8				177.6				189.3				626.7
Minority interest			51.8				121.2				203.1				554.4				433.1				738.0
Share capital			1,453.7				3,403.0				3,403.0				1,887.4				1,845.4				1,201.6
Shareholders’ equity			1,937.5				4,535.8				4,183.7				2,112.6				1,821.8				1,729.0
U.S. GAAP
Total assets		US$	5,886.0			R$	13,779.2			R$	12,821.0			R$	11,058.2			R$	10,531.7			R$	7,803.0
Shareholders’ equity			1,308.7				3,063.6				2,588.9				7.8				(415.2	)			291.4
Other Financial Information Brazilian GAAP:
Cash Flow Data:
Net cash provided by (used in):
Operating activities		US$	734.5			R$	1,719.4			R$	1,916.0			R$	596.9			R$	790.0			R$	1,453.9
Investing activities			(447.7	)			(1,048.0	)			(1,014.4	)			(469.4	)			(646.7	)			(862.2	)
Financing activities			(140.8	)			(329.7	)			166.0				379.1				(237.2	)			(404.9	)
Other Information:
Capital expenditures:
Property, plant and equipment		US$	333.5			R$	780.7			R$	442.2			R$	223.7			R$	419.9			R$	318.0
Investments in other companies			14.5				34.0				23.6				71.7				13.1				1,172.3

		At and for the Year Ended December 31,
		2005		2004		2003		2002		2001
Operating Data(5):
Ethylene:
Domestic sales volume (in thousands of tons)		1,169.8		1,098.9		1,047.3		994.8		1,064.8
Average domestic price per ton (in R$)		2,204		2,095		1,655		1,292		1,135
Propylene:
Domestic sales volume (in thousands of tons)		497.5		446.8		403.4		415.2		421.1
Average domestic price per ton (in R$)		2,132		1,833		1,477		1,106		829
Polyethylene(6):
Domestic sales volume (in thousands of tons)		502.3		498.7		446.1		491.7		199.3
Average domestic price per ton (in R$)		3,072		2,987		2,567		2,007		2,114
Polypropylene(6):
Domestic sales volume (in thousands of tons)		419.9		418.5		374.9		395.1		140.4
Average domestic price per ton (in R$)		3,344		3,155		2,689		1,931		1,969
PolyvinylchlorideC(7):
Domestic sales volume (in thousands of tons)		378.9		394.4		342.4		350.1		125.9
Average domestic price per ton (in R$)		2,747		3,042		2,390		2,034		1,612
Number of employees (at period end)		3,262		2,996		2,868		2,817		1,424

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Exchange Rates

Prior to March 14, 2005, there were two principal foreign exchange markets in Brazil:

Most trade and financial foreign-exchange transactions were carried out on the commercial rate exchange market. The floating rate exchange market generally applied to transactions to which the commercial market rate did not apply.

On March 4, 2005, the National Monetary Council (Conselho(Conselho Monetário Nacional)Nacional) enacted Resolution No. 3,265, as well as additional regulations, that consolidated the two foreign exchange markets into a single foreign exchange market, effective as of March 14, 2005, in order to make foreign exchange transactions more straight-forwardstraightforward and efficient. Consequently, all foreign exchange transactions in Brazil are now carried out in this single foreign exchange market through authorized financial institutions. We cannot predict the impact of the enactment of any new regulations on the foreign exchange market.

Foreign exchange rates continue to be freely negotiated, but may be influenced from time to time by Central Bank intervention. From March 1995 through January 1999, the Central Bank allowed the gradual devaluationdepreciation of therealagainst the U.S. dollar. In January 1999, the Central Bank allowed thereal/U.S. dollar exchange rate to float freely. Since then, thereal/U.S. dollar exchange rate has been established mainly by the Brazilian interbank market and has fluctuated considerably. From December 31, 2000 through December 31, 2002, therealdepreciated by 44.6%80.6% against the U.S. dollar. From December 31, 2002 through December 31, 2005,2007, therealappreciated by 50.1%49.9% against the U.S. dollar. At June 22, 2006,27, 2008, the selling rate for U.S. dollars was R$2.2391.6077 per US$1.00. In the past, the Central Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to allow therealto float freely or will intervene in the exchange rate market through a currency band system or otherwise, or that the exchange market will not be volatile as a result of political or economic instability or other factors. We also cannot predict whether therealwill depreciate or appreciate in value in relation to the U.S. dollar in the future.

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The following table shows the commercial selling rate or selling rate, as applicable, for U.S. dollars for the periods and dates indicated. The information in the “Average” column represents the average of the exchange rates on the last day of each month during the periods presented.

Source:Central Bank

Risk Factors

Risks Relating to Our Company and the Petrochemical Industry

The cyclical nature of the petrochemical industry may reduce our net sales revenue and gross margin.

     The Brazilian petrochemical industry, including the markets in which we compete, is cyclical and sensitive to changes in supply and demand that are, in turn, affected by political and economic conditions in Brazil and elsewhere. This cyclicality may reduce our net sales revenue and gross margin. In particular:

• downturns in general business and economic activity may cause demand for our products to decline;
  
  
• when demand falls, we may face competitive pressures to lower our prices; and
  
  
• if we decide to expand our plants or construct new plants, we may do so based on an estimate of future demand that never materializes or materializes at levels lower than we predicted.

     The global petrochemical industry is also cyclical. Historically, the international petrochemical markets have experienced alternating periods of limited supply, which have caused prices and profit margins to increase, followed by expansion of production capacity, which has resulted in oversupply and reduced prices and profit margins. The Brazilian petrochemical industry has become increasingly integrated with the global petrochemical industry for a number of reasons, including increased demand for, and consumption of, petrochemical products in Brazil and the ongoing integration of regional and world markets for commodities. We establish the prices for the products we sell in Brazil with reference to international market prices. Our net sales revenue and gross margin are increasingly linked to global industry conditions that we cannot control.

We face competition from producers of polyolefins, vinyls and other petrochemical products.

     We face competition in Brazil from Brazilian and international producers of polyethylene, polypropylene, vinyls and other petrochemical products. In addition, we generally set the prices for our second generation products with reference to the prices charged for these products by foreign producers in international markets. We anticipate that we may experience increasingly intense competition from other producers of polyolefins and vinyls products, both in Brazil and in selected foreign markets in which we sell these products. Many of our foreign competitors are substantially larger and have substantially greater financial, manufacturing, technological and marketing resources than our company.

9

Risks Relating to Brazil

Brazilian political and economic conditions, and the Brazilian government’s economic and other policies, may negatively affect demand for our products as well as our net sales revenue and overall financial performance.

The Brazilian economy has been characterized by frequent and occasionally extensive intervention by the Brazilian government and unstable economic cycles. The Brazilian government has often changed monetary, taxation, credit, tariff and other policies to influence the course of Brazil’s economy. The Brazilian government’s actions to control inflation and implement other policies have at times involved wage and price controls, blocking access to bank accounts, imposing capital controls and limiting imports into Brazil.

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Our results of operations and financial condition may be adversely affected by factors such as:

A presidential election will be held in Brazil in October 2006.     The President of Brazil has considerable power to determine governmental policies and actions that relate to the Brazilian economy and, consequently, affect the operations and financial performance of businesses, such as our company. The run-up to the presidential election may result in changes in existing governmental policies, and the post-election administration—even if PresidentMr. Luiz Inácio Lula da Silva is reelected—may seek to implement new policies.was reelected in October 2006 for a four-year presidential term commencing on January 1, 2007. We cannot predict what policies will be adopted by the Brazilian government and whether these policies will negatively affect the economy or our business or financial performance.

The Brazilian government’s actions to combat inflation may contribute significantly to economic uncertainty in Brazil and reduce demand for our products.

Historically, Brazil has experienced high rates of inflation. Inflation, as well as government efforts to combat inflation, had significant negative effects on the Brazilian economy, particularly prior to 1995. The inflation rate, as measured by the General Price Index—Internal Availability (ÍndiceGeral de Preços—Disponibilidade Interna), reached 2,708% in 1993. Although inflation rates have been substantially lower since 1994 than in previous periods, inflationary pressures persist. Inflation rates were 10.4% in 2001, 26.4% in 2002, 7.7% in 2003, 12.1% in 2004, and 1.2% in 2005, 3.8% in 2006, 7.9% in 2007 and 2.1% in the three months ended March 31, 2008, as measured by the General Price Index—Internal Availability. The Brazilian government’s measures to control inflation have often included maintaining a tight monetary policy with high interest rates, thereby restricting availability of credit and reducing economic growth. Inflation, actions to combat inflation and public speculation about possible additional actions also contributed materially to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets.

Brazil may experience high levels of inflation in future periods. Increasing prices for petroleum, the depreciation of therealand future governmental measures seeking to maintain the value of therealin relation to the U.S. dollar may trigger increases in inflation in Brazil. Periods of higher inflation may slow the rate of

growth of the Brazilian economy, which would lead to reduced demand for our products in Brazil and decreased net sales revenue. Inflation is also is likely to increase some of our costs and expenses, which we may not be able to pass on to our customers and, as a result, may reduce our profit margins and net income. In addition, high inflation generally leads to higher domestic interest rates, and, as a result, the costs of servicing ourreal-denominateddenominated debt may increase, causing our net income to be reduced. Inflation and its effect on domestic interest rates can, in addition, lead to reduced liquidity in the domestic capital and lending markets, which could adversely affect our ability to refinance our indebtedness in those markets. Any decline in our net sales revenue or net income and any deterioration in our financial condition would also likely lead to a decline in the market price of our class A preferred shares and the ADSs.ADS.

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Fluctuations in interest rates could raise the cost of servicing our debt and negatively affect our overall financial performance.

Our financial expenses are affected by changes in the interest rates that apply to our floating rate debt. At December 31, 2005,2007, we had, among other debt obligations, R$1,320.9467.8 million of loans and financing and debentures that were subject to the TJLP (Taxa de Juros de Longo Prazo), or TJLP, a long-term interest rate, R$893.11,271.7 million of loans and financing and debentures that were subject to the CDI (Certificado Depositário Interbancário), or CDI, rate, an interbank rate, and R$638.43,070.7 million of loans and financing that were subject to LIBOR. The TJLP includes an inflation factor and is determined quarterly by the Central Bank. In particular, the TJLP and the CDI rate have fluctuated significantly in the past in response to the expansion or contraction of the Brazilian economy, inflation, Brazilian government policies and other factors. For example, in 20052007 the CDI rate increaseddeclined from 17.75%13.17% per annum at December 31, 20042006 to 19.75%11.18% per annum at its peak in July 2005, followed by a decline to 18.00% at December 31, 2005.2007. See “Item 11. Quantitative and Qualitative Disclosures Aboutabout Market Risk.” A significant increase in any of these interest rates could adversely affect our financial expenses and negatively affect our overall financial performance.

Fluctuations in the real/U.S. dollar exchange rate could increase inflation in Brazil, raise the cost of servicing our foreign currency-denominated debt and negatively affect our overall financial performance.

The exchange rate between therealand the U.S. dollar and the relative rates of depreciation and appreciation of therealhave affected our results of operations and may continue to do so.

The Brazilian currency has been devalued often during the last four decades. Throughout this period, the Brazilian government has implemented various economic plans and various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system. From time to time, there have been significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and other currencies. For example, therealappreciated in value against the U.S. dollar by 22.3%18.2% in 2003, 8.9%8.1% in 2004, 11.8% in 2005, 8.7% in 2006 and 13.4%17.2% in 2005.2007.

DevaluationDepreciation of therealrelative to the U.S. dollar also could result in additional inflationary pressures in Brazil by generally increasing the price of imported products and services and requiring recessionary government policies to curb demand. In addition, a devaluationdepreciation of therealcould weaken investor confidence in Brazil and reduce the market price of our class A preferred shares and the ADSs. On the other hand, further appreciation of therealagainst the U.S. dollar may lead to a deterioration of the country’s current account and the balance of payments and may dampen export-driven growth.

We had total foreign currency-denominated debt obligations in an aggregate principal amount of R$2,746.65,878.4 million (US$1,173.33,318.7 million) at December 31, 2005,2007, representing 51.2%70.1% of our indebtedness, excluding related party debt, on a consolidated basis. At December 31, 2005,2007, we had US$548.5551.8 million in U.S. dollar-denominated cash equivalents and other investments. At December 31, 2005, we did not have any foreign currency derivative instruments. A significant devaluationdepreciation of therealin relation to the U.S. dollar or other currencies could reduce our ability to meet debt service requirements of our foreign currency-denominated obligations, particularly as our net sales revenue is primarily denominated inreais.

In addition, any significant devaluationdepreciation of therealwill increase our financial expenses as a result of foreign exchange losses that we must record. For example, the 34.3% devaluationdepreciation of therealin 2002 substantially increased our financial expenses and was a significant factor in our net loss for that year.

The prices of naphtha, our most important raw material, and of some of our other raw materials are denominated in or linked to the U.S. dollar. In 2005, 71.7%Naphtha accounted, directly and indirectly, for 76.3% of our direct and indirect consolidated cost of sales and services rendered represented the cost of naphtha.in 2007. When therealdepreciates against the U.S. dollar, the cost inreaisof our U.S. dollar-linked raw materials increases, and our operating income inreaisdecreases to the extent that we are unable to pass on these cost increases to our customers.

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Brazilian government exchange control policies could increase the cost of servicing our foreign currency-denominated debt and impair our liquidity.

The purchase and sale of foreign currency in Brazil is subject to governmental control. In 1990, the Central Bank centralized certain payments of principal on external obligations. Many factors could cause the Brazilian government to institute more restrictive exchange control policies, including the extent of Brazil’s foreign currency reserves, the availability of sufficient foreign exchange on the date a payment is due, the size of Brazil’s debt service burden relative to the economy as a whole, Brazil’s policy towards the International Monetary Fund and political constraints to which Brazil may be subject. A more restrictive policy could increase the cost of servicing, (andand thereby reduce our ability to pay)pay, our foreign currency-denominated debt obligations and other liabilities. Our foreign-currency denominated debt represented 51.2%70.1% of our indebtedness on a consolidated basis at December 31, 2005.2007. If we fail to make payments under any of these obligations, we will be in default under those obligations, which could reduce our liquidity as well as the market price of our class A preferred shares and the ADSs.

Changes in tax laws may result in increases in certain direct and indirect taxes, which could reduce our gross margin and negatively affect our overall financial performance.

The Brazilian government implements from time to time changes to tax regimes that may increase our and our customers’ tax burdens. These changes include modifications in the rate of assessments and, on occasion, enactment of temporary taxes, the proceeds of which are earmarked for designated governmental purposes. In April 2003, the Brazilian government presented a tax reform proposal, which was mainly designed to simplify tax assessments, to avoid internal disputes within and between the Brazilian states, and to redistribute tax revenues. Certain elements of this proposal were adopted, while other elements have been stalled and are unlikely to be enacted. We cannot predict the changes to Brazilian tax law that may be proposed and enacted in the future. However, future changes in Brazilian tax law may result in increases in our overall tax burden, which could reduce our gross margin and negatively affect our overall financial performance.

Risks Relating to Our Company and the Petrochemical Industry

The cyclical nature of the petrochemical industry may reduce our net sales revenue and gross margin.

The Brazilian petrochemical industry, including the markets in which we compete, is cyclical and sensitive to changes in supply and demand that are, in turn, affected by political and economic conditions in Brazil and elsewhere. This cyclicality may reduce our net sales revenue and gross margin. In particular:

The global petrochemical industry is also cyclical. Historically, the international petrochemical markets have experienced alternating periods of limited supply, which have caused prices and profit margins to increase,

followed by expansion of production capacity, which has resulted in oversupply and reduced prices and profit margins. The Brazilian petrochemical industry has become increasingly integrated with the global petrochemical industry for a number of reasons, including increased demand for, and consumption of, petrochemical products in Brazil and the ongoing integration of regional and world markets for commodities. We establish the prices for the products we sell in Brazil with reference to international market prices. Our net sales revenue and gross margin are increasingly linked to global industry conditions that we cannot control.

We face competition from producers of polyolefins, vinyls and other petrochemical products.

We face competition in Brazil from Brazilian and international producers of polyethylene, polypropylene, vinyls and other petrochemical products. In addition, we generally set the prices for our second generation products with reference to the prices charged for these products by foreign producers in international markets. We anticipate that we may experience increasingly intense competition from other producers of polyolefins and vinyls products, both in Brazil and in selected foreign markets in which we sell these products. Many of our foreign competitors are substantially larger and have substantially greater financial, manufacturing, technological and marketing resources than our company.

We face significant competition in the polyethylene market. Rio Polímeros S.A., or Rio Polímeros, a Brazilian petrochemical company, commenced operations of a major petrochemical plant in Brazil in 2005. The maximum annual capacity of this plant is 520,000 tons of ethylene, 75,000 tons of propylene and 540,000 tons of polyethylene. This plant is in the process of ramping up its production towards its annual capacity. In addition, Solvay Indupa do Brasil S.A., or Solvay, expanded its annual polyvinylchloride, or PVC, production capacity in Brazil by 35,000 tons in December 2005. Actions by our competitors, including any future increases in their capacity, may make it increasingly difficult for us to maintain our domestic market share in our thermoplastic products (i.e., polyethylene, polypropylene and PVC).

Higher naphtha costs would increase our cost of sales and services rendered and may reduce our gross margin and negatively affect our overall financial performance.

Naphtha, a crude oil derivative, is the principal raw material of our Basic Petrochemicals Unit and, indirectly, of our other business units. In 2005, naphtha accounted, directly and indirectly, for approximately 70% of our consolidated cost of sales and services rendered. The price of naphtha supplied by Petróleo Brasileiro S.A.—Petrobras, or Petrobras, is linked to the Amsterdam-Rotterdam-Antwerp market price of naphtha and to thereal/U.S. dollar exchange rate. The price of naphtha that we purchase from other international suppliers is also linked to the Amsterdam-Rotterdam-Antwerp market price. The Amsterdam-Rotterdam-Antwerp market price of naphtha fluctuates primarily based on changes in the U.S. dollar-based price of crude oil in the international markets.

During 2005, the price of naphtha in U.S. dollars increased by 28.8%, from US$387.05 per ton in December 2004 to US$498.35 per ton in December 2005. The U.S. dollar price of naphtha was volatile during 2005, increasing substantially through March, declining in April and May, increasing through September, declining through November and increasing again in December. The U.S. dollar price of naphtha remained volatile in the first five months of 2006, increasing sharply in January and April 2006, increasing moderately in May 2006 and decreasing moderately in February 2006. The price of naphtha may continue its upward trend or thereal may devalue significantly in the future. Any increase in naphtha costs would reduce our gross margin and negatively affect our overall financial performance to the extent that we are unable to pass on these increased costs to our customers and could result in reduced sales volumes of our products.

We do not hedge against changes in naphtha prices, so that we are exposed to fluctuations in the price of our primary raw material.

We currently do not hedge our exposure to fluctuations in naphtha prices, which are linked to thereal/U.S. dollar exchange rate. Although we attempt to pass on increases in naphtha prices through higher prices for our

products, in periods of high volatility in the U.S. dollar price of naphtha or thereal/U.S. dollar exchange rate, there is usually a lag between the time that the U.S. dollar price of naphtha increases or the U.S. dollar appreciates and the time that we may effectively pass on those increased costs inreais to our customers in Brazil. As a result, if the U.S. dollar price of naphtha increases precipitously or thereal depreciates precipitously against theU.S. dollar in the future, we may not immediately be able to pass on all of the corresponding increases in our naphtha costs to our customers in Brazil, which would likely reduce our gross margin and net income.

We depend on Petrobras to supply us with the substantial portion of our naphtha requirements.

Petrobras currently is the only Brazilian supplier of naphtha and supplied 69.2% of the naphtha consumed by our company in 2005. Petrobras produces most of the naphtha it sells to us and imports the balance. Our production volume and net sales revenue would likely decrease and our overall financial performance would likely be negatively affected in the event of:

In addition, although regulatory changes have ended Petrobras’ monopoly in the Brazilian naphtha market and have allowed us to import naphtha, any reversal in the continuing deregulation of the oil and gas industry in Brazil could increase our production costs.

Our Polyolefins and Vinyls Units depend on our Basic Petrochemicals Unit and Copesul to supply them with their ethylene and propylene requirements.

Our Basic Petrochemicals Unit is the only supplier of ethylene to our Vinyls Unit, and our Basic Petrochemicals Unit and Copesul are the only suppliers of ethylene and propylene to our Polyolefins Unit. Because the cost of storing ethylene and propylene is substantial and there is inadequate infrastructure in Brazil to permit the importation of large quantities of these products, our production volumes of, and net sales revenue from, vinyls and polyolefins products would decrease, and our overall financial performance would be negatively affected, in the event of:

In addition, any significant expansion of the production capacity of our Polyolefins Unit in the petrochemical complex located in Triunfo in the State of Rio Grande do sul, which we refer to as the Southern Complex, will depend on our ability to obtain additional ethylene and propylene from Copesul.

Any downgrade in the ratings of our company or our debt securities would likely result in increased interest and other financial expenses related to our borrowings and debt securities and could reduce our liquidity.

Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or Standard and Poor’s, and Fitch, Inc., or Fitch, maintain ratings of our company and our debt securities. Currently, Standard and

Poor’s and Fitch maintain ratings of our company on a local and a global basis. Standard and Poor’s maintains a rating of our company on a local basis of “br AA/Stable Outlook” and Fitch maintains a national rating for our company of “AA- (bra)/Stable Outlook.” On a global basis, Standard and Poor’s maintains a local currency rating for our company of “BB” and a foreign currency rating for our company of “BB,” while Fitch maintains a local currency rating for our company of “BB+/Stable Outlook” and a foreign currency rating for our company of “BB/Positive Outlook.” Any decision by these or other rating agencies to downgrade the ratings of our company or of our debt securities in the future would likely result in increased interest and other financial expenses relating to our borrowings and debt securities and could significantly reduce our ability to obtain such financing on satisfactory terms or in amounts required by us and our liquidity.

Some of our shareholders may have the ability to determine the outcome of corporate actions or decisions, which could affect the holders of our class A preferred shares and the ADSs.

As of June 22, 2006, a group of companies controlled by the Odebrecht family, or the Odebrecht Group, through Odebrecht S.A., or Odebrecht, its wholly-owned subsidiary, ODBPAR Investimentos S.A., or ODBPAR Investments, their subsidiary, Nordeste Química S.A.—Norquisa, or Norquisa, and our subsidiary, Braskem Participações S.A., own 74.6% of our voting share capital. The Odebrecht Group’s designees currently constitute a majority of the members of our board of directors. Petrobras Química S.A., or Petroquisa, a subsidiary of Petrobras, has veto and other rights under a shareholders agreement as described under “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders—Shareholders Agreements.” As a result, the Odebrecht Group and Petroquisa may have the ability to determine the outcome of major corporate actions or decisions requiring the approval of our shareholders or our board of directors, which could affect the holders of our class A preferred shares and the ADSs.

We may face conflicts of interest in transactions with related parties.

We maintain trade accounts receivable and current and long-term payables with some of our affiliates and other related parties, including Petrobras (which is our sole domestic supplier of naphtha), and Copesul in the Southern Complex (which supplies us with ethylene and propylene). As of June 22, 2006, Petrobras, through Petroquisa, is the indirect holder of 9.8% of our voting share capital and 8.3% of our total share capital. These accounts receivable and accounts payable balances result mainly from purchases and sales of goods, which are at prices and on terms equivalent to the average terms and prices of transactions that we enter into with third parties. We also engage in financial and other transactions with some of our shareholders. These and other commercial and financial transactions between us and our affiliates could result in conflicting interests.

We may make significant acquisitions which, if not successfully integrated with our company, may adversely affect our operating results.

We may make significant acquisitions in the future to continue our growth. Acquisitions involve risks, including the following:

If we are unable to integrate or manage acquired businesses successfully, we may not realize anticipated cost savings, revenue growth and levels of integration, which may result in reduced profitability or operating losses.

Future adjustments in tariffs on imports that compete with our products could cause us to lower our prices.

We take into account, when setting the domestic prices for our products, tariff rates imposed by the Brazilian government on imports of similar products and the products of our customers. We currently benefit from tariffs that allow us to charge domestic prices for our polyolefins and vinyls products that include a factor based on the tariffs levied on comparable imports of those products. However, the Brazilian government has in the past used import and export tariffs to effect economic policies, with the consequence that tariffs can vary considerably, especially tariffs on petrochemical products. For example, in 2004 the Brazilian government lowered the tariffs applicable to most of the thermoplastic products that we produce by 1.5%. Future adjustments of tariffs could cause us to lower our domestic prices, which would likely result in lower net sales revenue and could negatively affect our overall financial performance.

Our business is subject to stringent environmental regulations, and imposition of new regulations could require significant capital expenditures and increase our operating costs.

Our company, like other Brazilian petrochemical producers, is subject to stringent Brazilian federal, state and local environmental laws and regulations concerning human health, the handling and disposal of solid and hazardous wastes and discharges of pollutants into the air and water. Petrochemical producers are sometimes subject to unfavorable market perceptions as a result of the environmental impact of their business, which can have an adverse effect on their results of operations. As environmental laws become more stringent in Brazil and worldwide, the amount and timing of future expenditures required for us to remain compliant could increase substantially and could decrease the availability of funds for other capital expenditures and other purposes.

We manufacture products that are subject to the risk of fire, explosions and other hazards.

Our operations are subject to hazards, such as fires, explosions and other accidents, associated with the manufacture of petrochemicals and the storage and transportation of feedstocks and petrochemical products. These hazards can cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage. A sufficiently large accident at one of our plants or storage facilities could force us to suspend our operations temporarily and result in significant remediation costs and lost net sales revenue. Although we maintain insurance coverage for losses due to fire damage and for losses of income resulting from shutdowns due to fire, explosion or electrical damage, those insurance proceeds may not be available on a timely basis and may be insufficient to cover all losses.

Unfavorable outcomes in pending litigation may reduce our liquidity and negatively affect our financial performance and financial condition.

We are involved in numerous tax, civil and labor disputes involving significant monetary claims. If unfavorable decisions are rendered in one or more of these lawsuits, we could be required to pay substantial amounts, which could materially adversely affect our financial condition and results of operations. For some of these lawsuits, we have not established any provision on our balance sheet or have established provisions only for part of the amounts in question, based on our judgments or opinions of our legal counsel as to the likelihood of winning these lawsuits.

The lawsuits for which we have not established provisions or have established only partial provisions include the following:

date that a final decision is published. However, as Brazilian law allows rescission actions to relate back to, and to take effect from, the date of the initial decision, we believe that it is reasonably possible that we will be required to pay this tax from the date of the original decision, in which case our total estimated exposure at December 31, 2005, including interest, would be R$651.7 million. This amount does not include approximately R$175.0 million in penalties at December 31, 2005 that we believe we would not be required to pay because we relied upon a judicial decision in not paying the Social Contribution on Net Income. We believe that there is a possibility that we will be required to pay related interest and a remote possibility that we will be required to pay fines as a result of this tax litigation. We have not established a provision for these lawsuits.

In addition, we and some of our subsidiaries believe that our chances of success are remote in a series of lawsuits in which we challenged the constitutionality of an increase in the federal Contribution for Social Security Financing (Contribuição para Financiamento da Seguridade Social—COFINS), or COFINS, tax rate. For a description of the legal bases of these suits, see “Item 8. Financial Information—Legal Proceedings—Tax Proceedings.” We had established total provisions of R$316.1 million at December 31, 2005 for all of our lawsuits relating to the Social Integration Program (Programa de Integração Social), or PIS, and COFINS, including separate lawsuits challenging the basis of calculation of PIS and COFINS. Because we have deposited only R$39.1 million of this amount with the courts, we would be required, in the event we and our subsidiaries receive final, unfavorable decisions, to pay the remaining amounts for which we have not made deposits.

We are also parties to a number of lawsuits seeking tax credits that we believe the Brazilian tax authorities have disallowed or limited in violation of the Brazilian Constitution and/or applicable law. In some cases in which we have received favorable lower court decisions, we have used these credits to offset other tax obligations and have established provisions in an equivalent amount until a final decision is rendered (adjusting these provisions based on theSistema Especial de Liquidação e de Custódia, or SELIC, interest rate). These provisions totaled R$1,332.6 million at December 31, 2005. If we ultimately lose any of these lawsuits, we would be required to pay the tax obligations we had previously offset with those credits, which could materially reduce our liquidity. We believe that losses related to some of these lawsuits are reasonably possible.

For more information about our legal proceedings, see “Item 8. Financial Information—Legal Proceedings.”

Risks Relating to Our Class A Preferred Shares and the ADSs

Our class A preferred shares and the ADSs have limited voting rights.

Under the Brazilian Corporation Law and our by-laws, holders of our class A preferred shares and, consequently, the ADSs are not entitled to vote at meetings of our shareholders, except in very limited circumstances. These limited circumstances directly relate to key rights of the holders of class A preferred shares, such as modifying basic terms of our class A preferred shares or creating a new class of preferred shares with superior rights. Holders of preferred shares without voting rights are entitled to elect one member and his or her respective alternate to our board of directors and our fiscal council. Holders of our class A preferred shares and the ADSs are not entitled to vote to approve corporate transactions, including mergers or consolidations of our company with other companies.

Holders of the ADSs may find it difficult to exercise even their limited voting rights at our shareholders’ meetings.

Holders may exercise the limited voting rights with respect to our class A preferred shares represented by the ADSs only in accordance with the deposit agreement relating to the ADSs. There are practical limitations upon the ability of ADS holders to exercise their voting rights due to the additional steps involved in communicating with ADS holders. For example, we are required to publish a notice of our shareholders’ meetings in certain newspapers in Brazil. To the extent that holders of our class A preferred shares are entitled to vote at a shareholders’ meeting, they will be able to exercise their voting rights by attending the meeting in person or voting by proxy. By contrast, holders of the ADSs will receive notice of a shareholders’ meeting by mail from the depositary following our notice to the ADR depository requesting the ADR depository to do so. To exercise their voting rights, ADS holders must instruct the depositary on a timely basis. This noticed voting process will take longer for ADS holders than for holders of class A preferred shares. If it fails to receive timely voting instructions for all or part of the ADSs, the depositary will assume that the holders of those ADSs are instructing it to give a discretionary proxy to a person designated by us to vote their ADSs, except in limited circumstances.

In the limited circumstances in which holders of the ADSs have voting rights, they may not receive the voting materials in time to instruct the depositary to vote our class A preferred shares underlying their ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions of the holders of the ADSs or for the manner of carrying out those voting instructions. Accordingly, holders of the ADSs may not be able to exercise voting rights, and they will have no recourse if the class A preferred shares underlying their ADSs are not voted as requested.

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Exchange controls and restrictions on remittances abroad may adversely affect holders of the ADSs and the underlying class A preferred shares.

The Brazilian government may impose temporary restrictions on the conversion of Brazilian currency into foreign currencies and on the remittance to foreign investors of proceeds of their investments in Brazil. Brazilian law permits the government to impose these restrictions whenever there is a serious imbalance in Brazil’s balance of payments or there are reasons to foresee a serious imbalance. The Brazilian government imposed remittance restrictions for approximately six months in 1990.

These restrictions could hinder or prevent the Brazilian custodian of the class A preferred shares underlying the ADSs or holders who have exchanged the ADSs for the underlying class A preferred shares from converting dividends, distributions or the proceeds from any sale of such shares into U.S. dollars and remitting such U.S. dollars abroad. In such an event, the Brazilian custodian for our class A preferred shares will hold thereais that it cannot convert for the account of holders of the ADSs who have not been paid. Neither the custodian nor the depositary will be required to invest thereais or be liable for any interest.

Holders of the ADSs may face difficulties in protecting their interests because we are subject to different corporate rules and regulations as a Brazilian company and our shareholders may have fewer and less well-defined rights.

Holders of the ADSs are not direct shareholders of our company and are unable to enforce the rights of shareholders under our by-laws and the Brazilian Corporation Law.

Our corporate affairs are governed by our by-laws and the Brazilian Corporation Law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States, such as the State of Delaware or New York, or elsewhere outside Brazil. Even if a holder of ADSs surrenders its ADSs and becomes a direct shareholder, its rights as a holder of our class A preferred shares underlying the ADSs under the Brazilian Corporation Law to protect its interests relative to actions by our board of directors may be fewer and less well-defined than under the laws of those other jurisdictions.

Although insider trading and price manipulation are crimes under Brazilian law, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or the markets in some other jurisdictions. In addition, rules and policies against self-dealing or for preserving shareholder interests may be less well-defined and enforced in Brazil than in the United States and certain other countries, which may put holders of our class A preferred shares and the ADSs at a potential disadvantage. Corporate disclosures also may be less complete or informative than for a public company in the United States or in certain other countries.

Holders of the ADSs may face difficulties in serving process on or enforcing judgments against us and other persons.

We are a corporation (sociedade anônima) organized under the laws of Brazil, and all of our directors and executive officers and our independent public accountants reside or are based in Brazil. Most of our assets and those of these other persons are located in Brazil. As a result, it may not be possible for holders of the ADSs to effect service of process upon us or these other persons within the United States or other jurisdictions outside Brazil or to enforce against us or these other persons judgments obtained in the United States or other jurisdictions outside Brazil. Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain conditions are met, holders may face greater difficulties in protecting their interests in the case of actions by us or our directors or executive officers than would shareholders of a U.S. corporation.

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Actual or anticipated sales of a substantial number of class A preferred shares could decrease the market prices of our class A preferred shares and the ADSs.

Sales of a substantial number of our class A preferred shares could negatively affect the market prices of our class A preferred shares and the ADSs. If, in the future, substantial sales of shares are made by the Odebrecht Group,ODBPAR Investimentos S.A., or ODBPAR Investments, Petroquisa or other existing or future holders of class A preferred shares, the market price of our class A preferred shares and, by extension, the ADSs may decrease significantly. As a result, holders of the ADSs may not be able to sell the ADSs at or above the price they paid for them.

Holders of the ADSs may be unable to exercise preemptive rights with respect to our class A preferred shares underlying the ADSs.

Holders of the ADSs will be unable to exercise the preemptive rights relating to our class A preferred shares underlying ADSs unless a registration statement under the Securities Act is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares relating to these preemptive rights or to take any other action to make preemptive rights available to holders of the ADSs, and we may not file any such registration statement. If we do not file a registration statement or if we and the depositary decide not to make preemptive rights available to holders of the ADSs, those holders may receive only the net proceeds from the sale of their preemptive rights by the depositary, or if they are not sold, their preemptive rights will be allowed to lapse.

Holders of the ADSs could be subject to Brazilian income tax on capital gains from sales of ADSs.

Historically, any capital gain realized on a sale or other disposition of ADSs between non-Brazilian holders outside Brazil was not subject to Brazilian income tax. However, Brazilian law provides that, commencing on February 1, 2004, “the acquiror, individual or legal entity resident or domiciled in Brazil, or the acquiror’s attorney-in-fact, when such acquirer is resident or domiciled abroad, shall be responsible for the retention and payment of the income tax applicable to capital gains … earned by the individual or legal entity resident or domiciled abroad who disposes of property located in Brazil.” The Brazilian tax authorities have recently issued a normative instruction confirming that they intend to assess income tax on capital gains earned by non-Brazilian residents whose assets are located in Brazil. In our view, ADSs representing class A preferred shares, which are issued by the depositary outside Brazil, will not be deemed to be “property located in Brazil” for purposes of this law. However, we cannot assure holders of our ADSs whether Brazilian tax authorities will attempt to tax any capital gains arising from the sale or other disposition of ADSs, even when the transaction is consummated outside Brazil between non-Brazilian residents.

The relative volatility and liquidity of the Brazilian securities markets may decrease the liquidity and market price of our class A preferred shares and the ADSs.

The Brazilian securities markets are substantially smaller, less liquid and more volatile than major securities markets in the United States. The São Paulo Stock Exchange (Bolsa de Valores de São Paulo), which is the principal Brazilian stock exchange, had a market capitalization of US$482.1 billion1.4 trillion (or R$1,128.5 billion)2.5 trillion) at December 31, 20052007 and an average daily trading volume of US$666.6 million2.5 billion for 2005.2007. In comparison, theThe New York Stock Exchange had a market capitalization of US$21.227.1 trillion at December 31, 20052007 and an average daily trading volume of US$56.1119.2 billion for 2005.2007. There is also significantly greater concentration in the Brazilian securities markets. The ten largest companies in terms of market capitalization represented approximately 52%56% of the aggregate market capitalization of the São Paulo Stock Exchange at December 31, 2005.2007. The ten most widely traded stocks in terms of trading volume accounted for approximately 51%48% of all shares traded on The São Paulo Stock Exchange in 2005.2007. These market characteristics may substantially limit the ability of holders of the ADSs to sell class A preferred shares underlying ADSs at a price and at a time when they wish to do so and, as a result, could negatively impact the market price of the ADSs themselves.

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Developments in other emerging markets may decrease the market price of our class A preferred shares and the ADSs.

The market price of our class A preferred shares and the ADSs may decrease due to declines in the international financial markets and world economic conditions. Although economic conditions are different in each country, investors’ reaction to developments in one country can affect the securities markets and the securities of issuers in other countries, including Brazil. Brazilian securities markets are, to varying degrees, influenced by economic and market conditions in other emerging market countries, especially those in Latin America. Any return to economic turmoil in Argentina or adverse economic developments in other emerging markets may adversely affect investor confidence in securities issued by Brazilian companies, causing their market price and liquidity to suffer. Any such developments could immediately affect our ability to raise capital when needed and the market price of our class A preferred shares and the ADSs.

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ITEM 4. INFORMATION ON THE COMPANY

We are the leading petrochemical company in Latin America, based on average annual production capacity in 2005.2007. We are also one of the threethird largest Brazilian-owned private sector industrial companies,company, based on net sales revenue.revenue in 2006 (the most recent year for which comparative information is currently available). We recorded net income of R$625.8547.6 million in 20052007 on net sales revenue of R$13,075.117,679.4 million, in each case under Brazilian GAAP. We produce a diversified portfolio of petrochemical products and have a strategic focus on polyethylene, polypropylene and PVC. We have integrated first and second generation petrochemical production facilities, with 1419 plants in Brazil, followingincluding plants that we have acquired in the Politeno acquisition described below.Ipiranga Transaction.

Our registered office is at Rua Eteno, 1561, CEP 42810-000, Camaçari, Bahia, Brazil, and our telephone number at this address is 55-71-3632-5102.55-71-632-5102. Our principal executive office is at Avenida das Nações Unidas, 4777, São Paulo, SP, CEP 05477-000, Brazil, and our telephone number at this address is 55-11-3443-9000.55-11-3576-9999.

History and Development of Our Company

We were founded in 1972 as Petroquímica do Nordeste Copene Ltda. to plan, execute and coordinate the activities of the Northeastern Complex. The construction of the Northeastern Complex formed part of a development policy of the Brazilian government implemented in the early 1970’s to diversify the geographical distribution of industrial assets and to promote economic growth across different regions of Brazil. On June 18, 1974, we were incorporated as a corporation ((sociedade anônima)nima) under the laws of Brazil (with Brazilian company registry No. 29300006939) and were renamed Copene Petroquímica do Nordeste S.A.

Prior to August 1995, Petroquisa, the petrochemical subsidiary of Petrobras, owned 36.2% of our total share capital, representing 48.2% of our voting share capital. At that time, Nordeste Química S.A.—Norquisa, or Norquisa, owned 17.3% of our total share capital, representing 47.6% of our voting share capital, and the remainder of our share capital was owned by various Brazilian private sector groups, pension funds, banks and our employees.

Privatization of Our Company

In August 1995, as part of the Brazilian government’s privatization program, Petroquisa sold 14.8% of our total share capital, representing 32.8% of our voting share capital, through an auction. Norquisa acquired 5.5% of our total share capital, representing 10.8% of our voting share capital, in this auction, and the remaining shares were acquired by various Brazilian pension funds. At the time of this auction, Norquisa was controlled by several second generation producers in the Northeastern Complex. As a result of this auction, Norquisa became our controlling shareholder.

AuctionConsolidation of Banco Econômico’s Petrochemical Assets

On July 25,In 2001, the Central Bank, as liquidator of Banco Econômico S.A., a Brazilian financial institution that collapsed in 1995, or Banco Econômico, conducted an auction of the petrochemical assets that had been owned by Banco Econômico. This auction was part of a broader initiative of the Brazilian government to restructure the Brazilian petrochemical sector.

In order to increase its investment in the Brazilian petrochemical industry, the Odebrecht Group participated in this auction through Conepar—Companhia Nordeste de Participações do Nova Camaçari Participações S.A., or Nova Camaçari, a holding company which acquired the petrochemical assets being auctioned. In addition, Nova Camaçari acquired additional petrochemical assets from the Odebrecht Group,and a group of Companiescompanies controlled by the Mariani family, or the Mariani Group, acquired control of Norquisa through purchases of shares of Norquisa and other entities which were entitledthe contribution to sell assets to Nova Camaçari under the terms of various shareholder agreements.

Immediately following these transactions, we acquired Nova Camaçari from the Odebrecht Group in order to expand the scope of our operations and become a vertically integrated producer of petrochemical products. Following these transactions, we owned indirectly (1) Conepar—Companhia Nordeste de Participações, which,company of:

in turn, held

• 66.7% of the voting share capital of Polialden Petroquímica S.A., or Polialden, and Polialden;
  
  
• 35.0% of the voting share capital of Politeno Indústria e Comércio S.A., or Politeno,Politeno; and (2) 
  
  
• Proppet S.A., or Proppet. In connection with these transaction, the Odebrecht Group purchased shares of Norquisa from one of Norquisa’s other shareholders in order to increase its percentage ownership of Norquisa. Following these transactions, the Odebrecht Group owned 39.7% of the voting share capital of Norquisa and, together with the Mariani Group, held a combined 55.8% of the voting share capital of Norquisa. In order to streamline our corporate structure, in September 2001, weProppet, which was merged Proppet into our company.
  company in 2001.

Acquisition of OPP Química, Nitrocarbono and Interest in Copesul

In order to continue to implement our strategy of vertically integrating our operations and to further expand the scope of our operations, on August 16, 2002, we acquired from the Odebrecht Group and Pronor Petroquímica S.A., or Pronor, a member of the Mariani Group:

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Upon completing these transactions, we changed our corporate name to Braskem S.A.

In connection with these transactions, 2003:

• we issued shares representing 43.7% of our voting and total share capital to the Odebrecht Group and issued shares representing 3.6% of our voting and total share capital to Pronor. In October and December 2002, we acquired all of OPP Química’s total share capital that we did not own.

  In February 2003, we commencedconducted a public exchange offer for the remaining voting share capital of Nitrocarbono not owned by our company. On February 13, 2003, immediatelycompany and, following our exchangethe completion of the shares tendered in this exchange offer, for 128,973 of our class A preferred shares, we owned 93.8% of the total share capital of Nitrocarbono, including 99.99% of its voting share capital. On March 31, 2003, we merged with Nitrocarbono. In connection with this merger, we issued 5,415 of our class A preferred shares to the holders of shares of Nitrocarbono other than our company.

  On March 31, 2003, Nitrocarbono;
  
  

• we merged with OPP Química. As a consequence of our merger with OPP Química, mica;
  
  
• we acquired ownership of the share capital of Trikem previously owned by OPP Química.

  On June 30, 2003, we entered into an agreement under which we assumed debt of Copene Participações S.A. (formerly Conepar—Companhia Nordeste de Participações) owed to Polialden in the amount of R$30.2 million as well as debt of Copene Participações S.A. owed to the Brazilian National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econômico e Social, or BNDES) in the amount of R$38.9 million. In return, we received the shares of Polialden and Politeno owned by Copene Participações S.A. As a result, all of our equity interests in Polialden and Politeno were, and continue to be, held directly by our company, and Copene Participações S.A. no longer owns material assets or conducts any material operations.

  Acquisition of Common Shares of Trikem and Polialden Held by Mitsubishi and Sojitz

  In order to acquire the remaining outstanding common shares of PolialdenPolialden; and
  
  

• we acquired substantially all of the remaining outstanding common shares of Trikem, on July 14, 2003, we entered into (1) a share purchase and sale agreement with Odebrecht and Mitsubishi Chemical Corporation, or Mitsubishi, and (2) a memorandum of understanding with Odebrecht and Sojitz Corporation (formerly known as Nissho Iwai Corporation), or Sojitz.

  Under the share purchase and sale agreement, Mitsubishi agreed to sell to us all of the share capital of Trikem and Polialden it owned, consisting of 16.7% of Polialden’s voting share capital and 13.4% of Trikem’s voting share capital for R$44.2 million. We paid a portion of the purchase price in cash, and we were obligated to pay the remaining US$13.5 million to Mitsubishi on July 31, 2007, or earlier if before that date we met certain financial tests. We prepaid the remainder of the purchase price on July 29, 2005. Under this agreement, we are required to make an additional payment to Mitsubishi in an amount that is contingent upon the outcome of pending litigation filed against Polialden by certain of its preferred shareholders. We assumed the defense of this litigation as a result of our merger with Polialden on May 31, 2006. The amount of the additional payment that we are obligated to pay to Mitsubishi is (1) R$21.6 million if we prevail in this litigation or if a definitive settlement is reached, or (2) R$5.4 million if we lose this litigation. In either event, we will convert the amount of this additional payment (as adjusted for inflation at the Indice Geral de Perços—Mercado, or IGP-M, rate from July 31, 2003 until the date that this litigation is finally adjudicated or settled) into U.S. dollars on the final adjudication or settlement date. We are required to make this additional payment, plus interest from the date of this agreement at an annual rate of LIBOR plus 3.0%, within 60 days after the date on which this litigation is finally adjudicated or settled. Odebrecht has guaranteed our obligation to pay Mitsubishi the additional payment in connection with the Polialden shareholders’ rights litigation.

  Under the memorandum of understanding with Odebrecht and Sojitz, we agreed to purchase all of the share capital of Trikem and Polialden that Sojitz owned, consisting of 16.7% of Polialden’s voting share capital and 10.1% of Trikem’s voting share capital, in exchange for 4,345,162 of our common shares. As a result of this transaction, which closed on July 31, 2003, and after giving effect to the purchase from Mitsubishi described above, we increased our direct and indirect ownership of Trikem’s voting share capital to 87.9% and increased our ownership of Polialden’s voting share capital to 100%.

  Merger of Trikem into Braskem

  On November 3, 2003, we commencedconducted a public exchange offer for the remaining voting share capital of Trikem not owned by our company. On December 4, 2003, immediately following our exchange of the

        In 2004:

• we merged with Trikem; and
  
  
• we acquired additional shares tendered in this exchange offer for 1,753,080 of our class A preferred shares, we owned, directly and indirectly, 53.8% of Trikem’s total share capital, including 99.9% of its voting share capital.

  At an extraordinary shareholders’ meeting on January 15, 2004, our shareholders approved our merger with Trikem, an amendment to our by-laws to permit the conversion of our class A preferred shares into common shares upon the approval of the majority of our voting share capital, and the conversion of 487,793 of our class A preferred shares into 487,793 of our common shares in order to maintain the required minimum ratio of our common shares to preferred shares in accordance with the Brazilian Corporation Law after completion of our merger with Trikem. In connection with this merger, we issued 592 of our class A preferred shares in exchange for 514,366 of Trikem’s common shares and 32,544,069 of our class A preferred shares in exchange for 28,260,456,441 of Trikem’s preferred shares.

  Exchange of Polialden, Shares for Our Class A Preferred Shares

  On December 15, 2004, we exchanged 2,020,201 of our class A preferred shares which were held in our treasury for 47,846,610 preferred shares issued by Polialden held by certain of the shareholders of Polialden. The shareholders of Polialden participating in this exchange were parties to suits brought against Polialden claiming, among other things, that certain dividends were owed to these shareholders. In connection with the exchange of shares, these claims were relinquished by the Polialden shareholders participating in the exchange. As a result of this exchange, we increasedincreasing our interest in the total share capital of Polialden from 56.3% to 63.7%.

Developments Since January 1, 2005

Formation of Paulínia

     Petroquímica Paulínia S.A., or Paulínia, was incorporated on September 16, 2005. On that date, we acquired 60.0% of the total and voting share capital of Paulínia. Paulínia is a joint venture between our company and Petroquisa for the construction and operation of a polypropylene plant located in Paulínia, in the State of São Paulo.

Politeno Acquisition

On April 6, 2006, we purchased all of the common and preferred shares of Politeno that were owned by SPQ Investimentos e Participações Ltda., or SPQ, a subsidiary of Suzano, Petroquímica S.A., or Suzano,

Sumitomo Chemical Company Limited, or Sumitomo, and Itochu Corporation, or Itochu. We refer to this transaction as the Politeno acquisition. As a result ofAcquistion. Following the Politeno acquisition,Acquisition, we now ownowned 100% of the voting share capital and 96.2% of the total share capital of Politeno.

Merger of Polialden into Braskem

At an extraordinary shareholders’ meeting onin May 31, 2006, our shareholders approved our merger with Polialden and the conversion of 2,632,043 of our class A preferred shares into 2,632,043 of our common shares in order to maintain the required minimum ratio of our common shares to preferred shares in accordance with the Brazilian Corporation Law after the completion of our merger with Polialden. In connection with this merger, we issued 7,878,825 of our class A preferred shares in exchange for 264,886,083 of Polialden’s preferred shares.

Current Corporate StructureIpiranga Transaction

     On March 18, 2007, we entered into an investment agreement with Ultrapar and Petrobras, which we refer to as the Ipiranga Investment Agreement. On the same date, Ultrapar and the controlling shareholders of RPI, Companhia Brasileira de Petróleo Ipiranga, or CBPI, and Distribuidora de Produtos de Petróleo Ipiranga S.A., or DPPI, entered into a share purchase and sale agreement, which refer to as the Purchase Agreement, with our company and Petrobras as intervening parties. We refer to the Ipiranga Investment Agreement and the Purchase Agreement together as the Ipiranga Transaction Agreement, and we refer to the transactions contemplated by the Ipiranga Transaction Agreement and the related transactions described below as, collectively, the Ipiranga Transaction.

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     Under the Ipiranga Investment Agreement, Ultrapar, as a commission agent acting on behalf of Braskem and Petrobras, acquired 100% of the share capital of Ipiranga Química. As of March 18, 2007, Ipiranga Química owned 86.9% of the voting share capital and 92.4% of the total share capital of Ipiranga Petroquímica. Ipiranga Petroquímica, in turn, owned 29.5% of the share capital of Copesul. In February 2008, Ultrapar transferred 60.0% of the share capital of Ipiranga Química to our company and 40.0% of the share capital of Ipiranga Química to Petrobras, as required by the Ipiranga Investment Agreement. In addition, under the Ipiranga Investment Agreement, Ultrapar is obligated to transfer 33.3% of the share capital of RPI to our company and 33.3% of the share capital of RPI to Petrobras. Following this transfer, we will jointly and equally control RPI with Petrobras and Ultrapar. The total purchase price to our company of the shares of Ipiranga Química that we have acquired and the shares of RPI that we will acquire from Ultrapar in the Ipiranga Transaction was R$1,489.1 million.

     Under the Ipiranga Investment Agreement, Braskem paid Ultrapar R$651.9 million in April 2007, R$156.7 million in October 2007, R$47.0 million in November 2007 and R$633.5 million in February 2008 for the shares of Ipiranga Química that we have acquired and the shares of RPI that we will acquire from Ultrapar in the Ipiranga Transaction. For additional information regarding the Ipiranga Transaction, see “—Ipiranga Transaction.”

Merger of Politeno into Braskem

     At an extraordinary shareholders’ meeting in April 2007, our shareholders approved our merger with Politeno and the conversion of 486,530 of our class A preferred shares into 486,530 of our common shares in order to maintain the required minimum ratio of our common shares to preferred shares in accordance with the Brazilian Corporation Law after the completion of our merger with Politeno. In connection with this merger, we issued 1,533,670 of our class A preferred shares in exchange for 412,901,157 of Politeno’s class A preferred shares and 2,126,856,433 of Politeno’s class B preferred shares.

Acquisition of Minority Interests in Ipiranga Petroquímica

     In June 2007, EDSP67 acquired the 7.6% of the total share capital of Ipiranga Petroquímica not owned by Ipiranga Química for a purchase price of R$117.9 million. In July 2007, Ipiranga Petroquímica was delisted from the São Paulo Stock Exchange, and in August 2007, EDSP67 merged with and into Ipiranga Petroquímica. As a result of these transactions, Ipiranga Petroquímica is now a wholly-owned subsidiary of Ipiranga Química.

Acquisition of Minority Interests in Copesul

     In October 2007, our subsidiary EDSP58 acquired 22.7% of the total and voting share capital of Copesul through a public tender offer for the Copesul shares not then owned by our company, Ipiranga Petroquímica, Petroquisa or Triunfo. The purchase price for these shares was R$1,294.2 million. We owned 60% of the total and voting share capital of EDSP58, and Petrobras owned the remaining share capital of EDSP58. As a result of the Copesul Tender Offer, Copesul was delisted from the São Paulo Stock Exchange in October 2007. In October 2007 and November 2007, EDSP58 purchased additional shares of Copesul at the price per share paid in the Copesul Tender Offer. In November 2007, Copesul redeemed all of its outstanding shares, other than shares held by our company, EDSP58, Ipiranga Petroquímica, Petroquisa and Triunfo at the price per share paid in the Copesul Tender Offer. The aggregate purchase price for the shares purchased and redeemed after the completion of the Copesul Tender Offer was R$124.3 million. In December 2007, EDSP58 merged with and into Copesul. Following this merger, Braskem owns 39.2% of the total and voting share capital of Copesul, Ipiranga Petroquímica owns 39.2% of the total and voting share capital of Copesul and Petroquisa and Triunfo own 21.6% of the total and voting share capital of Copesul.

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Acquisition of Additional Interest in Petroflex and Sale of Interest in Petroflex

     In October 2007, we acquired shares of Petroflex Indústria e Comércio S.A., or Petroflex, representing 13.4% of its total and voting share capital from Suzano for an aggregate purchase price of R$61.0 million as a result of our exercise of our preemptive rights in August 2007 following the announcement of the acquisition of control of Suzano by Petrobras. As a result of this acquisition, we owned 33.5% of the total share capital of Petroflex including 33.6% of its voting share capital. In April 2008, we sold all of our share capital in Petroflex to Lanxess Participações Ltda., or Lanxess, for an aggregate price of R$252.1 million. As a result of this transaction, Petroflex registered a non-operational gain of R$115.6 million.

Ipiranga Transaction

     On March 18, 2007, we entered into the Ipiranga Investment Agreement with Ultrapar and Petrobras. On the same date, Ultrapar and the controlling shareholders of RPI, CBPI and DPPI entered into the Purchase Agreement, with our company and Petrobras as intervening parties.

     Under the Ipiranga Investment Agreement, Ultrapar, as a commission agent acting on behalf of Braskem and Petrobras, acquired 100% of the share capital of Ipiranga Química. As of March 18, 2007, Ipiranga Química owned 86.9% of the voting share capital and 92.4% of the total share capital of Ipiranga Petroquímica. Ipiranga Petroquímica, in turn, owned 29.5% of the share capital of Copesul. In February 2008, Ultrapar transferred 60% of the share capital of Ipiranga Química to our company and 40% of the share capital of Ipiranga Química to Petrobras, as required by the Ipiranga Investment Agreement. In addition, under the Ipiranga Investment Agreement, Ultrapar is obligated to transfer 33.3% of the share capital of RPI to our company and 33.3% of the share capital of RPI to Petrobras. Following this transfer, we will jointly and equally control RPI with Petrobras and Ultrapar. The total purchase price to our company of the shares of Ipiranga Química that we have acquired and the shares of RPI that we will acquire from Ultrapar in the Ipiranga Transaction was R$1,489.1 million.

     As part of the Ipiranga Transaction:

• in June 2007, EDSP67 acquired the 7.6% of the total share capital of Ipiranga Petroquímica not owned by Ipiranga Química for a purchase price of R$117.9 million. In July 2007, Ipiranga Petroquímica was delisted from the São Paulo Stock Exchange, and in August 2007, EDSP67 merged with and into Ipiranga Petroquímica. As a result of these transactions, Ipiranga Petroquímica is now a wholly-owned subsidiary of Ipiranga Química.
  
  
• in October 2007, our subsidiary EDSP58 acquired 22.7% of the total and voting share capital of Copesul through a public tender offer for the Copesul shares not then owned by our company, Ipiranga Petroquímica, Petroquisa or Triunfo. The purchase price for these shares was R$1,294.2 million. At the time of the Copesul Tender Offer, we owned 60% of the total and voting share capital of EDSP58, and Petrobras owned the remaining share capital of EDSP58. As a result of the Copesul Tender Offer, Copesul was delisted from the São Paulo Stock Exchange in October 2007. In October 2007 and November 2007, EDSP58 purchased additional shares of Copesul at the price per share paid in the Copesul Tender Offer. In November 2007, Copesul redeemed all of its outstanding shares, other than shares held by our company, EDSP58, Ipiranga Petroquímica, Petroquisa and Triunfo at the price per share paid in the Copesul Tender Offer. The aggregate purchase price for the shares purchased and redeemed after the completion of the Copesul Tender Offer was R$124.3 million. In December 2007, EDSP58 merged with and into Copesul.
  Following this merger, Braskem owns 39.2% of the total and voting share capital of Copesul, Ipiranga Petroquímica owns 39.2% of the total and voting share capital of Copesul and Petroquisa and Triunfo own 21.6% of the total and voting share capital of Copesul.

Structure of the Transaction

     As of the date of the Ipiranga Transaction Agreement, RPI owned:

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• 7.7% of the total capital of DPPI, including 15.3% of its voting share capital;
  
  
• 11.4% of the total share capital of CBPI, including 24.8% of its voting share capital; and
  
  
• 58.5% of the total share capital and voting share capital of Ipiranga Química.
  

In addition, as of the date of the Ipiranga Transaction Agreement, DPPI owned 21.0% of the total share capital of CBPI, including 62.9% of its voting share capital, and CBPI owned 41.5% of the total share capital and voting share capital of Ipiranga Química. Under the Ipiranga Transaction Agreement and applicable law, Ultrapar was obligated to acquire the share capital of RPI, DPPI and CBPI that it did not own as of the date of the Ipiranga Transaction Agreement through a series of transactions as detailed below.

     First Phase of Ipiranga Transaction

     In April 2007, Ultrapar acquired from the controlling shareholders of RPI, DPPI and CBPI for a purchase price of R$2,113.1 million:

• 30.0% of the total share capital of RPI, including 66.2% of its voting share capital;
  
  
• 30.2% of the total capital of DPPI, including 69.2% of its voting share capital; and
  
  
• 1.3% of the total share capital of CBPI, including 3.8% of its voting share capital.

     Second Phase of Ipiranga Transaction

     In the second phase of the Ipiranga Transaction:

• in October and November 2007, Ultrapar acquired 88.4% of the voting share capital of RPI not then owned by Ultrapar through a public tender offer for the RPI voting shares and additional purchases of RPI voting shares. As a result, Ultrapar owned 96.0% of the voting share capital, including 32.4% of the total share capital, of RPI.
  
  
• in October and November 2007, Ultrapar acquired 82.1% of the voting share capital of DPPI not then owned by Ultrapar through a public tender offer for the DPPI voting shares and additional purchases of DPPI voting shares. As a result, Ultrapar owned 81.9% of the voting share capital, including 27.4% of the total share capital, of DPPI.
  
  
• in November 2007, Ultrapar acquired 53.9% of the voting share capital of CBPI not then owned by Ultrapar through a public tender offer for the CBPI voting shares. As a result of this tender offer, Ultrapar owned 8.3% of the voting share capital, including 2.8% of the total share capital, of CBPI.

     Third Phase of Ipiranga Transaction

     In the third phase of the Ipiranga Transaction, in December 2007 the shareholders of Ultrapar, RPI, DPPI and CBPI approved the issuance of preferred shares of Ultrapar in exchange for the outstanding shares of RPI, DPPI and CBPI that Ultrapar did not own through an exchange of shares (incorporação de ações). This exchange was completed in January 2008 and, as a result of the completion of this exchange, Ultrapar became the sole owner of the share capital of RPI, DPPI and CBPI.

     Fourth Phase of Ipiranga Transaction

     In the fourth phase of the Ipiranga Transaction, in February 2008 Ultrapar delivered:

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• shares representing 60% of the total share capital and voting share capital of Ipiranga Química to our company; and
  
  
• shares representing 40% of the total share capital and voting share capital of Ipiranga Química to Petrobras.

The fourth phase of the Ipiranga Transaction will be completed when Ultrapar delivers 33.3% of the total share capital and voting share capital of RPI to our company; and 33.3% of the total share capital and voting share capital of RPI to Petrobras. We expect that Ultrapar will deliver these shares in the third quarter of 2008.

Accounting and Financial Impact of Ipiranga Transaction

     As a result of the Ipiranga Transaction, we have fully consolidated the results of Copesul and its subsidiaries and consolidated the results of Ipiranga Química and its subsidiaries, including Ipiranga Petroquímica, into our financial statements as from April 1, 2007. We have accounted for each of Copesul, Ipiranga Química and Ipiranga Petroquímica as separate segments in our financial statements as from April 1, 2007. In addition, we have accounted for our interest in the results of RPI under the equity method in our financial statements as from April 1, 2007.

CADE Review of Ipiranga Transaction

     The Ipiranga Transaction is subject to the final approval of the Brazilian antitrust authorities. However, Brazilian law permits us to consummate these transactions prior to receiving this final approval, unless CADE issues a writ of prevention blocking a transaction or requires the parties to enter into an agreement permitting the effects of the transaction to be reversed which, by its terms, delays the consummation of the transaction. Our company, together with Ultrapar and Petrobras, submitted the terms and conditions of the Ipiranga Transaction for review by the Brazilian antitrust authorities in April 2007.

     In April 2007, CADE issued a writ of prevention relating to the Ipiranga Transaction, which, among other things, prevented our exercise of strategic management control over Ipiranga Química and Ipiranga Petroquímica. In issuing the writ of prevention, CADE stated that the purpose of the writ of prevention was to guarantee that the Ipiranga Transaction could be reversed in the event that CADE so determined following its review of the Ipiranga Transaction. In April 2007, CADE revoked this writ of prevention upon the agreement of our company to execute the Reversibility Agreement designed to preserve the reversibility of the Ipiranga Transaction. Under the Reversibility Agreement, we agreed to preserve all of the assets acquired in the Ipiranga Transaction until CADE makes a final determination with respect to the Ipiranga Transaction, and we are permitted to effectively own and manage these assets pending this final determination.

     Although the terms and conditions of the Ipiranga Transaction were submitted to the Brazilian antitrust authorities in four separate filings reflecting the separate markets affected by the Ipiranga Transaction, on September 19, 2007, CADE decided that the four fillings should be analyzed and submitted for approval together.

     The Economic Monitoring Office of the Ministry of Finance(Secretaria de Acompanhamento Econômico), or SEAE, issued a favorable opinion with respect to the Ipiranga Transaction in February 2008. Approval of this transaction by CADE remains pending. There can be no assurance that the Brazilian antitrust authorities will approve the Ipiranga Transaction as currently structured or that these authorities will not impose additional conditions on the Ipiranga Transaction. We cannot predict when CADE will take final action with respect to the Ipiranga Transaction.

Strategic Rationale

     Through our participation in the Ipiranga Transaction, we are taking an important step in the consolidation and development of the Brazilian petrochemical industry. We believe the acquisition of control of Copesul and Ipiranga Petroquímica will provide the following strategic and financial benefits to our company:

• Expand our business to achieve greater economies of scale and operational flexibility— By expanding the size and geographic scope of our business, we believe that we will attain economies of scale, including reduced costs related to maintenance services, energy, raw materials and supplies and logistics. In addition, because we will have greater production capacity for a range of resins, we will be able to utilize specific plants for longer production runs of specific resins, thus lowering our transition costs.

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• Increase our market shares in the polyethylene and polypropylene sectors— Through the expansion of our client base, we believe that we will have greater opportunities to develop innovative products and product applications and provide value-added services to these clients based on our leadership in Brazil in thermoplastic technology.
  
  
• Enhance our competitiveness through further integration of the thermoplastic production chain— Through our operation of Copesul, our principal supplier in the petrochemical complex located in Triunfo in the State of Rio Grande do Sul, which we refer to as the Southern Complex, and our operation of additional polyethylene and polypropylene plants in the Southern Complex, we anticipate that we will be able to improve the quality of our products, achieve operational and financial synergies and facilitate new investments in the productive assets of this complex.

Financing of Purchase Price

     Under the Ipiranga Investment Agreement, Braskem paid Ultrapar R$651.9 million in April 2007, R$156.7 million in October 2007, R$47.0 million in November 2007 and R$633.5 million in February 2008 for the shares of Ipiranga Química that we have acquired and the shares of RPI that we will acquire from Ultrapar in the Ipiranga Transaction.

     In April 2007, we entered into the Acquisition Credit Agreement with three financial institutions in the aggregate amount of US$1.2 billion to finance the Ipiranga Transaction. In April 2007, we received the first disbursement under the Acquisition Credit Agreement in the aggregate amount of US$330.0 million to fund the first payment due under the Ipiranga Investment Agreement. In October 2007, we received the second and third disbursements under the Acquisition Credit Agreement in the aggregate amount of US$468.8 million to fund a portion of the purchase price under the Copesul Tender Offer. In October 2007, we received the fourth and fifth disbursements under the Acquisition Credit Agreement in the aggregate amount of US$150.0 million to fund a portion of the purchase price paid by Ultrapar in tender offers for the common shares of RPI, DPPI or CBPI. In February 2008, we received the sixth and final disbursement under the Acquisition Credit Agreement in the aggregate amount of US$251.2 million to fund the final payment due as part of the Ipiranga Transaction. Each disbursement under the Acquisition Credit Agreement bears interest at the rate of LIBOR plus 0.35% per annum until the first anniversary of such disbursement and thereafter at the rate of LIBOR plus 0.55% per annum, payable in arrears. The principal amount of each disbursement under the Acquisition Credit Agreement is payable on or prior to the second anniversary of such disbursement. The Acquisition Credit Agreement includes limitations on our ability to incur liens, enter into related party transactions or merge with certain other entities.

     In June 2007, EDSP67 entered into two short-term financing transactions with Brazilian financial institutions in the aggregate amount of US$61.0 million to finance the acquisition of the 7.6% of the total share capital of Ipiranga Petroquímica not owned by Ipiranga Química.

     In September 2007, EDSP58 entered into an export prepayment credit facility with Petrobras International Finance Company – PIFCo, or PIFCo, under which EDSP58 is permitted to borrow an aggregate principal amount of up to US$323.0 million. In October 2007, EDSP58 borrowed an aggregate of US$312.5 million under this facility to fund a portion of the purchase price of the shares tendered in the Copesul Tender Offer.

     In order to lengthen the average maturity of our outstanding indebtedness and to reduce our refinancing risks, we are exploring refinancing of the Acquisition Credit Agreement in the near term. In May 2008. we used the proceeds of our offering of US$500.0 million 7.250% Notes due 2018 to repay a portion of the indebtedness outstanding under the Acquisition Credit Agreement. We are analyzing opportunities to refinance the remainder of this indebtedness through bank credit agreements, pre-export financing agreements, offerings of securities in the domestic or international markets or a combination of these instruments. The form, manner and timing of the refinancing of amounts borrowed under the Acquisition Credit Agreement will depend on market conditions.

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Shareholders Agreements

     We have entered into the shareholders agreements and memorandum of understanding described below that govern our rights with respect to Copesul, Ipiranga Química, Ipiranga Petroquímica and RPI.

Interim Shareholders Agreement

     On April 18, 2007, we entered into a shareholders agreement with Ultrapar and Petrobras, which we refer to as the Interim Shareholders Agreement, under which we obtained effective management control over Ipiranga Química and, consequently, Ipiranga Petroquímica and the interest of Ipiranga Petroquímica in Copesul. Under the Interim Shareholders Agreement, we were granted the right to nominate a majority of the board of directors of Ipiranga Química and Ipiranga Petroquímica, and the right to nominate a majority of the nominees of Ipiranga Petroquímica to the board of directors of Copesul. The Interim Shareholders Agreement terminated in February 2008 upon the transfer of the shares of Ipiranga Química to our company and Petrobras as part of the fourth phase of the Ipiranga Transaction as described above under “—Structure of the Transaction—Fourth Phase of Ipiranga Transaction.”

Ipiranga Memorandum of Understanding

     On March 18, 2007, we entered into a memorandum of understanding with Petrobras regarding the interests of Ipiranga Petroquímica in Copesul and the control of Ipiranga Química and Ipiranga Petroquímica, which we refer to as the Ipiranga Memorandum of Understanding. The Ipiranga Memorandum of Understanding granted Petrobras veto rights with respect to certain matters that are subject to the approval of the shareholders and boards of directors of Ipiranga Química, Ipiranga Petroquímica and Copesul. Upon the completion of the first phase of the Petrobras Transaction, Petrobras, Petroquisa, Odebrecht and Norquisa, with Braskem as intervening party, entered into a shareholders’ agreement with a term of 25 years, which we refer to as the Petrobras Shareholders’ Agreement. The Petrobras Shareholders’ Agreement superseded the Ipiranga Memorandum of Understanding.

RPI Shareholders Agreement

     As part of the Ipiranga Transaction, we entered into a shareholders agreement with Ultrapar and Petrobras, which we refer to as the RPI Shareholders Agreement, which gives each of Ultrapar, Petrobras and our company the right to nominate one-third of the directors of RPI and establishes that all decisions need to be taken by the unanimous vote of the shareholders.

Petrobras Transaction

     On November 30, 2007, Braskem entered into an investment agreement with Odebrecht, Petrobras, Petroquisa and Norquisa. On May 14, 2008, Braskem, Odebrecht, Norquisa, Petrobras and Petroquisa entered into an amendment to this agreement. We refer to this agreement, as amended, as the Petrobras Investment Agreement. We refer to the transactions under the Petrobras Investment Agreement as the Petrobras Transaction. Under the Petrobras Investment Agreement, the Petrobras Transaction will be completed in two phases. In the first phase, Petroquisa through its wholly-owned subsidiary Grust Holdings S.A., or Grust, contributed the following assets to Braskem:

• 36.4% of the voting and outstanding share capital of Copesul;
  
  
• 40.0% of the voting and outstanding share capital of Ipiranga Química; and
  
  
• 40.0% of the voting and outstanding share capital of Paulínia.

     In exchange for these assets, Braskem issued an aggregate of 46,903,320 common shares and 43,144,662 class A preferred shares to Petroquisa.

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     As a result of the completion of the first phase of the Petrobras Transaction, Petrobras owns, directly and indirectly, 23.1% of our total share capital, including 30.0% of our voting share capital, and Braskem owns, directly and indirectly:

• 99.2% of the outstanding share capital of Copesul;
  
  
• all of the outstanding share capital of Ipiranga Química, which in turn owns all of the outstanding share capital of Ipiranga Petroquímica; and
  
  
• all of the outstanding share capital of Paulínia.

     The first phase of the Petrobras Transaction was implemented on May 30, 2008 through an exchange of shares (incorporação de ações) in which shares of Braskem were issued to Petroquisa in exchange for shares of Grust that, directly and indirectly, owns the interests in Copesul, Ipiranga Química, Ipiranga Petroquímica and Paulínia contributed to Braskem.

     Under the Petrobras Investment Agreement, Petrobras has the option in the second phase of the Petrobras Transaction to contribute up to 100% of the share capital of Triunfo to Brasken in exchange for approximately 13,387,197 of our class “A” preferred shares. We refer to this option as the Triunfo Option. Triunfo owns 0.8% of the voting and outstanding share capital of Copesul. If Petrobras exercises this option and contributes 100% of the share capital of Triunfo to Braskem, Copesul will become a wholly-owned subsidiary of Braskem.

The following chart presents the corporate structure of our principal subsidiaries and equity investments following the transactions described above.completion of the first phase of the Petrobras Transaction. The percentages in bold italics represent the percentage of the voting share capital owned directly and indirectly by the parent company of each entity, and the percentages not in bold italics represent the percentage of the total share capital owned directly and indirectly by the parent company of each entity. All of these companies are organized under Brazilian law.

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Strategic Rationale

     Through our participation in the Petrobras Transaction, we are taking an important step in the consolidation and development of the Brazilian petrochemical industry. We believe the consolidation of Copesul, Ipiranga Química, Ipiranga Petroquímica, Paulínia and Triunfo into our company will provide the following strategic and financial benefits to our company:

• Consolidate ownership of petrochemical assets— By acquiring the minority interests in Copesul, Ipiranga Química and Paulínia held by Petrobras and Petroquisa, we believe that we will be able to achieve synergies that will lead to reductions of financial, industrial, commercial and other costs and expenses. In addition, we will substantially reduce the minority interest in our company, which we believe will result in a significant increase in our net income in future periods, and further reduce the effects of proportional consolidation in our results of operations and cash flows.
  
  
• Further enhance the strategic alignment of Petrobras and Braskem— By increasing the proportional interest of Petrobras in Braskem, we believe that Petrobras’ commitment to the success of Braskem will correspondingly increase. We expect that this commitment will yield increased synergies generated by our interaction with Petrobras’ refineries given our position as Petrobras’ largest naphtha customer and will lead to increasing access to and collaboration with Petrobras’ research centers.

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Our Principal SubsidiaryAccounting and Jointly Controlled CompaniesFinancial Impact of Petrobras Transaction