Regarding accusations supposedly made by the State Public Attorney’s Office (MPE) of Eunapolis, propagated along the past weeks, we inform herein that the Company is not aware of any open inquiry aiming at investigating administrative impropriety by civil servants for the benefit of Veracel.

Veracel disavows any and every practice of illegal acts whatsoever and has never requested any favorable decision to its activities through actions that go against its fundamental Principles and Values of Ethics and Transparency.

Corporate positioning regarding the published accusations:

1) State Public Attorney’s Office (MPE): “MPE assesses the criminal responsibility of servants working for licensing agencies who favor companies such as Veracel in suspicious businesses”.
Veracel: The Company has obtained all required environmental licenses to its activities, within all legal requirements, and was never involved in illegal actions such as corruption of any civil servant or others.

2) MPE: “Veracel has degraded a regeneration area”. “Ibama identified it, issued a report of infraction and, in order to disguise, Veracel made a so-called self-denouncement, that is, admitted the crime expecting to be “pardoned”.
Veracel: The Company has not deforested the mentioned 1,203 hectares. In the period 1992-2004, the Company used the then available resources – printed photographs – to plan for eucalyptus planting. In 2004, it adopted two new procedures: it hired FUNCATE, to evaluate soil usage and occupation in the region, and the eucalyptus planting between 1987 and 2003, and started working with geo-referenced computer images. In addition, in that same year, the Company compared the FUNCATE report results with its own database and identified that some areas had been incorrectly occupied with eucalyptus plantation (a total of 1,203 ha distributed by over 200 dispersed spots - less than 1.7% of the planted area). The fact was readily and voluntarily reported by the Company to CRA (Center of Environmental Resources, now IMA – Institute of the Environment) on November 3, 2005, through the Official Letter AMB 52/2005 and annexes;
To our surprise, on December 26, 2005, the Company was formally notified of a fine imposed by the Brazilian Institute for the Environment and Renewable Natural Resources (IBAMA). Soon after, on January 8, 2006, CRA and Veracel entered a Term of Commitment (TAC) for the environmental regularization of the 1,203 ha area. On June 18, 2007, CRA issued a Technical Opinion evidencing that, after investigation, it found that the obligations as required from Veracel had been performed and the Term of Commitment was entirely fulfilled.

3) MPE: “Veracel proposed CRA to regenerate only 50% of the area. And such illegality was certified”.
Veracel: The Company committed and fulfilled its commitment to protect 1,805 hectares, as a compensation for the inadequacy of 1,203 hectares, representing 50% in surplus of the questioned area. The commitment determined the registration of 1,203 ha of its Atlantic Forest areas as Exceeding Legal Reserve, in the respective municipalities where incorrectly occupied areas had been identified, and the reforestation of other 602 ha of its areas with Atlantic Forest native species in continuous areas, in order to form Ecological Corridors.

4) MPE: “Another investigated crime was the concealment of taxable income and corruption”.
Veracel: The Company does not conceal any taxable income whatsoever, and it holds all Municipal, State and Federal Certifications which evidence the payment of all applicable taxes.
Regarding corruption accusations involving a service supplier, Veracel, as a private owned company, has established criteria for hiring service suppliers such as quality, punctuality, price and reputation of the bidders. Such processes are systematically verified by internal and external audits.

5) MPE: “The Company supports the campaign of a number of politicians, “pocketing” them, not only during the campaign, but forever.”
Veracel: Regarding the support to electoral campaigns in past elections, Veracel fully complied with the Electoral Law, determining the form and transparency of such information to society, and does not seek to obtain any favor in particular, but contributes to strengthen the democratic electoral process in the country. When supporting candidates, the company aims at contributing with political projects for economic and social development based on sustainable development.

6) MPE: “There has been a recent case in which a city representative created a project to determine a minimum distance for eucalyptus planting from the urban center. They were already lobbying before the project was voted: Veracel envoys referred to representatives offering assistance in political campaign in case they voted against the project. This was verified through a civil inquiry for impropriety conducted by the public attorney Dinalmari Mendonça Messias”.
Veracel: The Company does not offer assistance in political campaign to any city representative in exchange for their voting. In addition, no envoy is entitled to act on behalf of the company.
Regarding the above mentioned fact, upon receiving such a denouncement, the Company investigated its suppliers for their action in that sense. No evidence was found at all.
In view of the above, the Company forwarded an Official Letter to the City Council of Eunapolis, requesting the accusation to be duly investigated. As a response, on April 4, 2008, it received from the City Council Presidency a declaration that such a fact had never occurred, and Veracel made such a document available to the local media.

7) MPE: “The Inquiry is still under investigation and will be divided into a number of procedures. But the intended kick-off is making the State to proceed with an ecological economic zoning, which is fundamental”.
Veracel: The Company understands that the ecological economic zoning is an important instrument for the State development management and, therefore, supports and expects such a procedure, which will create clear rules for soil usage and occupation by the entire agribusiness segment, including Forestry.

8) MPE: “It is an absurd to think that subsistence products and even cattle pasture areas are reduced by eucalyptus planting”.
Veracel: The Veracel’s forest activities are not a competitor to food production, and not even to cattle raising. According to IBGE, 70% of the region’s area is used for cattle raising activities. Also according to IBGE / National Confederation of Municipalities (CNM), the bovine cattle in Eunapolis accounted for 22,995 heads in 1991, and for 98,200 in 2006. Now, the estimation is 127 thousand heads according to the publication Eunapolis 20 Years – celebrating 20 years of Eunapolis Emancipation. In poultry raising, it came from 44,021 heads in 1991 to 94,607 in 2006. In 2008, with the installation of new aviaries, the total is in surplus of 250 thousand heads. Regarding food production in Eunapolis, in the period 1991-2006, IBGE/CNM identified increases in the production of cassava (from 1,378 to 2,000 tons/year), Bahia coconut (from 0.147 to 1.745 million units/year) and banana (from 92 thousand bunches to 200 thousand bunches/year), among other products.

9) MPE: “The Veracel’s planted area also includes fostered areas and even illicit fostered areas that are not yet certified for planting”... “There are some people acting as straw men to buy land, not only for planting, but for other negotiations such as reciprocation”.
Veracel: The Company does not use any illicit fostered area. Every fostered area is planted under an agreement, duly registered at the Real Estate Registry, which in turn requires the compliance with Municipal, State and Federal Environmental Laws, and the agreement is signed only upon submission of the Municipal Environmental Certificate.
All areas acquired by Veracel are registered under its own name, in the respective municipalities, and the projects are duly licensed by the State Environmental Agency.

10) MPE: “Rural Exodus – Only a few people are still living in the rural area”.
Veracel: According to IBGE, the rural exodus in the areas where the Company has activities follows exactly the same pattern as that of the national average, that is, about 30%. While adopting the Forestry Partners Program model, the company encourages people to stay in the rural area by diversifying the income possibilities for those producers.

Veracel Celulose S/A

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